DECLOUT LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number: W)

Transcription

1 CIRCULAR DATED 11 APRIL 2016 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY. This Circular (as defined herein) is issued by DeClout Limited (the Company ). If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. If you have sold or transferred all your shares in the capital of the Company held through The Central Depository (Pte) Limited ( CDP ), you need not forward this Circular with the Notice of EGM (as defined herein) and the attached Proxy Form to the purchaser or transferee as arrangements will be made by CDP for a separate Circular with the Notice of EGM and the attached Proxy Form to be sent to the purchaser or transferee. If you have sold or transferred all your shares in the capital of the Company represented by physical share certificate(s), you should at once hand this Circular with the Notice of EGM and the attached Proxy Form immediately to the purchaser or transferee or to the bank, stockbroker or agent through whom you effected the sale or transfer, for onward transmission to the purchaser or transferee. This Circular has been prepared by the Company and its contents have been reviewed by the Company s continuing sponsor, Canaccord Genuity Singapore Pte. Ltd. (the Sponsor ), for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (the SGX-ST ). The Sponsor has not independently verified the contents of this Circular. This Circular has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this Circular, including the correctness of any of the statements or opinions made or reports contained in this Circular. The contact person for the Sponsor is Ms. Lam Siew Hwa, Director, Corporate Finance, Canaccord Genuity Singapore Pte. Ltd. at 77 Robinson Road #21-02 Singapore , telephone (65) DECLOUT LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number: W) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED SPIN-OFF OF THE COMPANY S IT DISTRIBUTION AND LIFECYCLE SERVICES BUSINESSES VIA THE PROPOSED LISTING OF ITS SUBSIDIARY, PROCURRI CORPORATION PTE. LTD., ON THE MAINBOARD OF THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED Important Dates and Times: Last date and time for lodgement of Proxy Form : 26 April 2016 at 3.00 p.m. Date and time of Extraordinary General Meeting : 28 April 2016 at 3.00 p.m. (or as soon thereafter following the conclusion or adjournment of the AGM to be held at 2.00 p.m. on the same day and at the same place) Place of Extraordinary General Meeting : M Hotel, Banquet Suite, Level Anson Road, Singapore

2 CONTENTS DEFINITIONS... 3 LETTER TO SHAREHOLDERS Page 1. INTRODUCTION THE PROPOSED SPIN-OFF AND THE PROPOSED LISTING FINANCIAL EFFECTS OF THE PROPOSED SPIN-OFF AND THE PROPOSED LISTING RULE 14 OF THE TAKE-OVER CODE RULE 805(2) OF THE CATALIST RULES RULE 406(7) OF THE CATALIST RULES INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS DIRECTORS RECOMMENDATIONS EXTRAORDINARY GENERAL MEETING ACTION TO BE TAKEN BY SHAREHOLDERS DIRECTORS RESPONSIBILITY STATEMENT DOCUMENTS AVAILABLE FOR INSPECTION NOTICE OF EXTRAORDINARY GENERAL MEETING... N-1 PROXY FORM 2

3 DEFINITIONS The following definitions apply throughout in this Circular except where the context otherwise requires: AGM : The annual general meeting of the Company Board : The board of Directors of the Company as at the date of this Circular Catalist Rules : Section B: Rules of Catalist of the listing manual of the SGX-ST, as amended, modified or supplemented from time to time Constitution : The constitution of the Company, as amended, modified or supplemented from time to time CDP : The Central Depository (Pte) Limited Circular : This circular to Shareholders dated 11 April 2016 Companies Act : The Companies Act (Chapter 50) of Singapore, as amended, modified or supplemented from time to time Company or DeClout : DeClout Limited Director(s) : The director(s) of the Company as at the date of this Circular EGM : The extraordinary general meeting of the Company to be convened and held on Thursday, 28 April 2016, notice of which is set out on page N-1 of this Circular EPS : Earnings per Share FY : The financial year ended or, as the case may be, ending 31 December Group : The Company and its subsidiaries collectively IPO Documents : Has the meaning ascribed to it in Section 2.4 of this Circular IPO Price : The price per Procurri Share at which the relevant Procurri Shares will be offered to the public in connection with the Proposed Listing IT : Information technology IT Distribution : The distribution of IT hardware and equipment Lifecycle Services : Various IT hardware, equipment and software services rendered during the lifecycle of IT hardware and equipment Latest Practicable Date : 28 March 2016, being the latest practicable date prior to the printing of this Circular Listing Group : Procurri and its subsidiaries Listing Manual : Listing manual of the SGX-ST MAS : Monetary Authority of Singapore 3

4 DEFINITIONS Notice of EGM : The notice of the EGM which is set out on page N-1 of this Circular NTA : Net tangible assets Ordinary Resolutions : The ordinary resolutions set out in this Circular and in the Notice of EGM Procurri : Procurri Corporation Pte. Ltd. Procurri Shares : Ordinary shares in the capital of Procurri Proposed Listing : The proposed listing of the Company s subsidiary, Procurri, on the Mainboard of the SGX-ST Proposed Spin-Off : The proposed spin-off of the Company s IT Distribution and Lifecycle Services businesses via the Proposed Listing Proxy Form : The proxy form in respect of the EGM as set out in this Circular SFA : Securities and Futures Act (Chapter 289) of Singapore, as amended, modified or supplemented from time to time SGX-ST : Singapore Exchange Securities Trading Limited Shareholders : Persons who are registered holders of Shares in the Register of Members of the Company except where the registered holder is CDP, the term Shareholders shall, where the context admits, mean the Depositors in the Depository Register maintained by CDP and into whose securities accounts those Shares are credited Shares : Ordinary shares in the capital of the Company SIC : Securities Industry Council Spin-Off Business : The business of IT Distribution and providing Lifecycle Services Substantial Shareholder : A person who has an interest or interests in one (1) or more voting Shares in the Company, and the 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 Take-over Code : The Singapore Code on Take-over and Mergers, as modified, supplemented or amended from time to time S$ and cents : Singapore dollars and cents respectively, being the lawful currency of Singapore % or per cent. : Per cent or percentage The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them, respectively, in Section 81SF of the SFA. The term subsidiary shall have the meaning ascribed to in Section 5 of the Companies Act. 4

5 DEFINITIONS Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine shall, where applicable, include the feminine and neuter gender and vice versa. References to persons shall, where applicable, 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 Companies Act, the SFA or the Catalist Rules or any statutory modification thereof and used in this Circular shall, where applicable, have the same meaning assigned to it under the Companies Act, the SFA or the Catalist Rules or any modification thereof, as the case may be, unless otherwise provided. Any reference to a time of day and date in this Circular shall be a reference to Singapore time and date respectively, unless otherwise stated. Any discrepancy in the figures included in this Circular, the listed amounts and the totals thereof are due to rounding. Accordingly, figures shown as totals in this Circular may not be an arithmetic aggregation of the figures that precede them. 5

6 DECLOUT LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number: W) Directors: Registered Office: Mr. Wong Kok Khun (Chairman and Group Chief Executive Officer) 29 Tai Seng Avenue Ms. Kow Ya (Executive Director) #05-01 Mr. Ho Chew Thim (Lead Independent Director) Natural Cool Lifestyle Hub Mr. Hew Koon Chan (Independent Director) Singapore Ms. Ch ng Li-Ling (Independent Director) Date: 11 April 2016 To: The Shareholders of the Company THE PROPOSED SPIN-OFF OF THE COMPANY S IT DISTRIBUTION AND LIFECYCLE SERVICES BUSINESSES VIA THE PROPOSED LISTING OF ITS SUBSIDIARY, PROCURRI CORPORATION PTE. LTD., ON THE MAINBOARD OF THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED 1. INTRODUCTION 1.1 On 6 October 2015, the Company announced that it had received approval in-principle ( AIP ) from the SGX-ST for the Proposed Spin-Off of the Company s Spin-Off Business via the Proposed Listing of its subsidiary, Procurri, on the Mainboard of the SGX-ST, subject to the following conditions: (a) (b) (c) compliance with the SGX-ST s listing rules; Shareholders approval for the Proposed Spin-Off being obtained at an extraordinary general meeting to be convened; and disclosure in the circular to Shareholders in connection with the Proposed Spin-Off, the basis for the Board s assessment that the Proposed Spin-Off would bring tangible benefits to the Shareholders. The SGX-ST reserves the right to vary, amend or withdraw the AIP as it deems fit, and its confirmation is subject to changes in the SGX-ST s policies. 1.2 Further to the above, the Directors are convening the EGM to be held at M Hotel, Banquet Suite, Level 10, 81 Anson Road, Singapore on Thursday, 28 April 2016 at 3.00 p.m. (or as soon thereafter following the conclusion or adjournment of the annual general meeting to be held at 2.00 p.m. on the same day and at the same place) to seek Shareholders approval for the Proposed Spin-Off and the Proposed Listing. 1.3 This Circular has been prepared to provide Shareholders with information relating to, the rationale for and the tangible benefits of and the financial effects of, the Proposed Spin-Off and the Proposed Listing, and to seek Shareholders approval for (a) the Proposed Spin-Off and the Proposed Listing ( Ordinary Resolution 1 ); and (b) Procurri ceasing to become a subsidiary of the Company or the percentage reduction of 20.0% or more of the Company s equity interest in Procurri, being a principal subsidiary of the Company (the Reduction in Effective Interest in Procurri ) ( Ordinary Resolution 2 ) at the EGM. Please note that Ordinary Resolution 1 and Ordinary Resolution 2 are inter-conditional on each other. In other words, if Ordinary Resolution 1 is not passed by Shareholders at the EGM, Ordinary Resolution 2 will also not be passed and vice versa. 1.4 The Notice of the EGM is set out on page N-1 of this Circular. 1.5 The SGX-ST takes no responsibility for the contents of this Circular, including the accuracy or correctness of any statements or opinions made or reports contained in this Circular. 6

7 2. THE PROPOSED SPIN-OFF AND THE PROPOSED LISTING 2.1 Information on the Group As at the Latest Practicable Date, the Company, through its subsidiaries, is principally engaged in four (4) main businesses, which can be broadly categorised into two (2) business segments, as follows: Business Business Subsidiary DeClout s Segment shareholding IT Infrastructure Services IT Distribution and Lifecycle Services, being the Spin-Off Business Procurri and its subsidiaries, being the Listing Group 69.0% Cloud, Technology, Managed Internet and Managed Services Acclivis Technologies and Solutions Pte. Ltd., and its subsidaries (the Acclivis Group ) 72.1% Telecommunications and Network Solutions Beaqon Pte. Ltd., and its subsidaries (the Beaqon Group ) 85.0% Vertical Domain Clouds e-commerce Solutions Corous360 Pte. Ltd., and its subsidaries (the Corous360 Group ) 75.3% As at the Latest Practicable Date, Procurri has an issued and paid-up share capital of S$33,312, comprising 32,480 Procurri Shares, and of which approximately 69.0% is held by the Company. As at the Latest Practicable Date, there are no outstanding convertible securities which can be exercised into new Procurri Shares prior to the Proposed Listing. The current shareholders of Procurri are as follows: Shareholders No. of Procurri Shares Shareholding DeClout 22, % Irrucorp Pte. Ltd. (1) 5, % Verity Solutions Pte. Ltd. (1) % Golden Summit International Ltd. (2) 1, % Oan Chim Seng (2) 1, % Mathew George Jordan (3) % Total 32, % Notes: (1) Irrucorp Pte. Ltd. is majority owned by the Listing Group s employees, and Verity Solutions Pte. Ltd. is owned by the Listing Group s employees. (2) Golden Summit International Ltd. and Oan Chim Seng are investors independent of the board of directors and other substantial shareholders of Procurri. (3) Mathew George Jordan is an employee of the Listing Group. 7

8 Procurri has appointed DBS Bank Ltd. as the issue manager for the Proposed Listing and has commenced preparatory work for the Proposed Listing. Barring any unforeseen circumstances, the Company intends to hold a controlling stake in the Listing Group upon completion of the Proposed Spin-Off and the Proposed Listing. However, it should be noted that as at the Latest Practicable Date, the offer structure for the Proposed Listing has not yet been determined. Pursuant to the minimum public float requirements of the Listing Manual, the Company may sell vendor shares and/or Procurri may issue new Procurri Shares, and the Company s stake in the Listing Group may be reduced to less than 50.0%. In addition to the above, it should also be noted that as announced on 8 January 2016, the Company had entered into a subscription agreement with ICH Gemini Asia Growth Fund Pte Ltd ( ICH ), pursuant to which the Company had subsequently on 12 January 2016 issued an aggregate of S$6.0 million in principal amount of non interest-bearing redeemable exchangeable bonds due 2016 (the Bonds ) to ICH at a subscription price of 100.0% of the principal amount of the Bonds. The Bonds shall, immediately upon the finalisation and establishment of the IPO Price, be automatically exchanged into existing Procurri Shares owned by the Company (the Exchange Shares ) at 70.0% of the IPO Price (the Exchange Price ). The number of Exchange Shares shall be determined by dividing the aggregate principal amount of the Bonds by the Exchange Price. In the event that the Company sells vendor shares, the Company proposes to use the proceeds from such sale for, inter alia, repayment of bank loans and for working capital purposes. Where any of the relative figures of such proposed sale of vendor shares by the Company and/or issue of new Procurri Shares by Procurri (resulting in a reduction of the Group s share of Procurri s NAV and/or profits) computed on the bases set out in Rule 1006(a) to (e) of the Catalist Rules exceeds 50.0%, the Proposed Spin-Off and the Proposed Listing will be conditional upon the approval of Shareholders pursuant to Rule 1014 of the Catalist Rules, and the Company will separately seek Shareholders approval accordingly. As at the Latest Practicable Date, Procurri has 9 non-dormant subsidiaries. Details of Procurri s non-dormant subsidiaries, and their principal activities and principal place of business, are as follows: Name of subsidiary Procurri s Principal activities Principal place of business shareholding Procurri LLC 100.0% Procurri UK Limited 100.0% Procurri Asia Pacific 100.0% Pte. Ltd. Procurri Singapore 100.0% Pte. Ltd. Procurri Malaysia 100.0% Sdn. Bhd. IT Distribution and Lifecycle Services IT Distribution and Lifecycle Services IT Distribution and Lifecycle Services IT Distribution and Lifecycle Services IT Distribution and Lifecycle Services United States of America ( US ) United Kingdom of Great Britain and Northern Ireland ( UK ) Singapore Singapore Malaysia Procurri, S. de R.L % IT Distribution Mexico de C.V. Asvida UK Limited 100.0% Investment holding UK Tinglobal Holdings 100.0% Investment holding UK Limited Procurri (Beijing) 100.0% Co., Ltd. ( 北京奇益信息技术有限公司 ) IT Distribution and Lifecycle Services (1) People s Republic of China Note: (1) Has not commenced operation as the entity is newly incorporated in March

9 2.2 Rationale for and the Tangible Benefits of the Proposed Spin-Off and the Proposed Listing The basis for the Board s assessment that the Proposed Spin-Off would bring tangible benefits to the Shareholders is as follows: Different Business Mix The Listing Group is principally engaged in the Spin-Off Business, which comprises the following: (a) IT Distribution, which in turn comprises: (i) (ii) the procurement of previously owned IT hardware and equipment and repositioning/ remarketing them for sale in the secondary markets; and the management of, and assistance with, various stages of the supply chain; and (b) Lifecycle Services, which in turn comprises: (i) (ii) (iii) the provision of independent IT maintenance services for a variety of IT hardware and equipment; the provision of IT hardware and equipment on a transaction-based pricing model; and IT hardware and equipment disposition, remarketing and other related supplementary services. Following completion of the Proposed Spin-Off, the Group, excluding the Listing Group, (the Post Spin-Off Group ) will no longer be engaged in the Spin-Off Business (other than through its controlling interest in the Listing Group). In particular, the Company will, through its subsidiaries, be principally engaged in its remaining three (3) other businesses, namely: (a) Cloud, Technology, Managed Internet and Managed Services (through the Acclivis Group) the provision of end-to-end cloud, technology, managed internet and managed services solutions to enterprises in the Asia-Pacific region, covering data centre services, internet and infrastructure services, and operational support and disaster recovery services. b) Telecommunications and Network Solutions (through the Beaqon Group) the provision and delivery of high quality wired-line and wireless cable products, as well as telecommunications, data centre infrastructure and homeland security solutions to different industries, offering a full spectrum of solutions from product distribution and implementation to operations and maintenance. (c) e-commerce Solutions (through the Corous360 Group) the provision of e-commerce solutions with localised payment infrastructures such as web and mobile payment solutions and services, as well as lifestyle content and delivery services. These remaining three (3) businesses and the Spin-Off Business are currently (i) operated independently of each other, with clear differentiation of business; and (ii) maintained under separate accounting records with clear differentiation of their respective assets. Accordingly, the businesses and assets of the Post Spin-Off Group and the Listing Group are clearly differentiated with a segregation of their operational aspects. It should be noted that notwithstanding the above, to mitigate any potential conflicts of interest that may arise, the Company will be providing a non-compete undertaking to Procurri, that will be effective upon the Proposed Listing and for so long as the Company remains a controlling shareholder of Procurri. As at the Latest Practicable Date, the terms of the non-compete undertaking are not finalised, and details of the same will be made available in the prospectus to be lodged and registered with the MAS in connection with the Proposed Listing. 9

10 2.2.2 Geographical Segregation of Businesses For FY2015, the revenue of the Group, the Listing Group and the Post Spin-Off Group were mainly derived from the following geographical regions: FY2015 Revenue Country Group Listing Group Post Spin-Off Group US 21.4% 48.9% 0.0% Europe 14.9% 33.7% 0.0% Singapore 56.9% 14.2% 90.0% Malaysia 2.3% 3.2% 2.0% Other Asia-Pacific countries 4.5% 0.0% 8.0% (excluding Singapore and Malaysia) Total 100.0% 100.0% 100.0% Note: (1) Assuming no consolidation of the financial results and position of Procurri as a subsidiary of the Group. Through its direct presence and its global network of partners, the Listing Group s business covers over 80 countries worldwide, and it has offices across three (3) continents (North America, Europe and Asia), in five (5) jurisdictions (the US, the UK, Mexico, Singapore and Malaysia) providing localised, multi-country services. Based on the audited consolidated financial statements of the Listing Group for FY2015, approximately 82.6% of the Listing Group s total revenue was generated from the US and Europe (with the remaining 17.4% coming from Asia, specifically Singapore and Malaysia). The Post Spin- Off Group, on the other hand, is focused on the Asia-Pacific region, and derived all its revenue in FY2015 from the Asia-Pacific region (with Singapore accounting for approximately 90.0% of its total revenue). In view of the above, the businesses of the Post Spin-Off Group and the Listing Group are generally geographically segregated with little overlap Difference in Risk Profiles As the Listing Group and the Post Spin-Off Group operate substantially different businesses in different geographical regions, there are differences in their risk profiles. In particular, the Listing Group and the Post Spin-Off Group are subject to different governmental and trade regulations, and economic and financial market cycles in the countries within which they operate. Additionally, the Listing Group and the Post Spin-Off Group have different foreign exchange risk profiles as the Listing Group s trading currency is primarily the United States Dollar and the Euro, whereas the Post Spin-Off Group s trading currency is primarily the S$. The Proposed Spin-Off will enable the Listing Group and the Post Spin-Off Group to independently manage their respective risk profiles. 10

11 2.2.4 Increased Shareholder Value Through Financial Autonomy and Direct Access to the Capital Markets The Listing Group has in recent years experienced strong growth. Based on the audited consolidated financial statements of the Group, the Listing Group s financial performance in the past three (3) financial years are as follows: (S$ 000) FY2013 FY2014 FY2015 Revenue 28,400 76, ,814 Net Profit After Tax 1,953 3,266 8,772 The Listing Group is in a good position to further enhance its growth. However, in order to realise opportunities, it will require substantial capital, which may increase the debt level of the Group. As at 31 December 2015, the Group has net borrowings (comprising bank loans, trade facilities and finance lease obligations less cash and cash equivalents) amounting to approximately S$34.6 million which based on shareholders equity of approximately S$103.5 million, represents a net debt-equity ratio of approximately 33.4%. While the Group is presently able to meet its obligations when they fall due, as a matter of prudence, the Directors are of the view that the Listing Group should be strengthened financially via an equity injection, and by the availability of additional funding options as a separate listed entity with direct acess to the capital markets. With a stronger equity capital base from funds raised from the Proposed Listing, the Listing Group will have greater debt capacity to fund its operations and growth and to secure its own independent source of funding. Additionally, the Proposed Spin-Off and the Proposed Listing will enable the Group to unlock and increase value for Shareholders by increasing the overall financial capacity and flexibility of the Group to strengthen the continued growth of the Post Spin-Off Group. The Post Spin-Off Group will not be required to fund the expansion of the Listing Group, thus allowing the Post Spin-Off Group to concentrate its resources on expanding its own businesses and to pursue new opportunities. Meanwhile, as the Company will retain a controlling stake in the Listing Group upon completion of the Proposed Spin-Off and the Proposed Listing (please refer to Section 2.3 of this Circular for more information), the Company and its shareholders will still be able to participate in and benefit from the growth of the Listing Group. Shareholders and new investors will also benefit from the Proposed Spin-Off and the Proposed Listing as they will have the flexibility to invest in the shares of either or both listed entities, in accordance with their personal preferences and risk appetites Better Focus and Independent Management The Proposed Spin-Off will enable each of the Listing Group and the Post Spin-Off Group to establish their respective management focus, business direction and growth strategies, and the Company intends for the Listing Group to be managed by separate management, operational and accounting teams, hence improving corporate visibility, management control and accountability, and enhancing performance measurement. Additionally, the Company envisages that it will be better positioned to attract top talent from relevant fields to join the Listing Group in senior management positions and also as board members which will enhance the leadership team in the Listing Group upon the Proposed Listing. The Company also envisages that the Proposed Listing will better incentivise the employees of the Listing Group. 2.3 The Proposed Listing The Company intends to spin-off the Spin-Off Business via the Proposed Listing, which will result in a dilution or reduction of the Company s shareholding interest in Procurri and the Listing Group due to the issue of new Procurri Shares in connection with the Proposed Listing. 11

12 Under the Listing Manual, the Proposed Listing is required to meet a minimum public float of 25.0% and at least 500 public shareholders. This requirement can be met by the allotment and issuance of new Procurri Shares by Procurri and/or the sale of vendor shares by all or any of the existing shareholders of Procurri. To the extent that new Procurri Shares are to be issued in connection with the Proposed Listing, the share capital of Procurri will be enlarged, and the resultant shareholding interest of the Company in the enlarged issued share capital of Procurri will be reduced and diluted accordingly. The actual level of the reduction or dilution of the Company s shareholding interest in the enlarged issued share capital of Procurri pursuant to the Proposed Listing will depend on, inter alia, the IPO Price, total aggregate number of Procurri Shares to be offered in connection with the Proposed Listing, and whether such Procurri Shares will comprise any vendor shares sold by all or any of the existing shareholders of Procurri. Shareholders should note that the actual changes to the shareholding interests of the Company in Procurri as a result of the Proposed Spin-Off and the Proposed Listing is yet to be determined and will depend on, inter alia, the IPO Price, and the total aggregate number of Procurri Shares to be offered in connection with the Proposed Listing. Accordingly, the actual extent of the reduction or dilution of the Company s resultant shareholding interest in Procurri is not fixed as at the Latest Practicable Date, and will vary according to the offer structure. The Company reserves the right to determine the offer structure for the Proposed Listing. As at the Latest Practicable Date, the offer structure is not finalised and hence the amount of proceeds to be raised from the Proposed Listing has not finalised. The amount of proceeds to be raised in connection with the Proposed Listing will be dependent on, inter alia, the IPO Price, and the total aggregate number of new Procurri Shares to be issued in connection with the Proposed Listing. Subject to finalisation of the IPO Documents and the terms of the Proposed Listing, it is currently contemplated that the net proceeds raised from the Proposed Listing will be used for: (1) Procurri s mergers and acquisitions, joint ventures and partnerships strategy; (2) enhancement of Procurri s infrastructure; (3) repayment of a loan from the Company; and (4) working capital. While the Proposed Listing, if proceeded with, will result in a reduction or dilution of the Company s shareholding interest in Procurri, it is currently contemplated that the Company will continue to hold a controlling stake in the enlarged issued share capital of Procurri immediately after completion of the Proposed Spin-Off and the Proposed Listing. It should however be noted that pursuant to the minimum public float requirements of the Listing Manual, the Company may decide to sell vendor shares and/or Procurri may decide to issue new Procurri Shares, and if the Company s stake in the Listing Group is reduced to less than 50.0%, Procurri will cease to be a subsidiary of the Company. The Company will make the relevant announcement(s) in due course via SGXNET at the appropriate stage regarding any material developments or updates in relation to the Proposed Spin-Off and the Proposed Listing, including any approvals of the SGX-ST in connection with the Proposed Spin-Off and the Proposed Listing. 2.4 Material Conditions of the Proposed Listing Shareholders should also note that the Proposed Listing will be conditional upon, inter alia, the following: (a) Shareholders approval for the Proposed Spin-Off to be undertaken via the Proposed Listing being obtained at the EGM; 12

13 (b) (c) (d) (e) the receipt of the eligibility-to-list letter from the SGX-ST in connection with the admission of Procurri to the Mainboard of the SGX-ST, the listing of and quotation for Procurri Shares on the Mainboard of the SGX-ST and the eligiblity-to-list letter not being subsequently terminated or revoked prior to the commencement of dealings in Procurri Shares on the Mainboard of the SGX-ST; such other approvals, authorisations, consents and confirmations from the regulatory authorities as may be required or advisable in connection with the Proposed Listing being obtained on terms acceptable to the Company and Procurri and the same remaining in full force and effect; the underwriting agreement, placement agreement(s) and all other relevant agreements in connection with the Proposed Listing being entered into by the underwriter(s), Procurri and (if applicable) any shareholders of Procurri selling vendor shares and all other relevant persons (such agreements and related documents, together with the prospectus referred to in paragraph (e) below to be referred to collectively as the IPO Documents ) and the terms of the Proposed Listing, including but not limited to the IPO Price, being on terms acceptable to and agreed by, inter alia, the Company; and the lodgement with and registration by the MAS of the prospectus in connection with the Proposed Listing in compliance with all applicable laws and regulations. The Company wishes to highlight that there can be no assurance that approval for the Proposed Listing will be granted by the SGX-ST, or that the IPO Documents can be finalised or agreed or the Proposed Listing can materialise, or otherwise proceed in a timely fashion. In the event that any of the foregoing is not achieved or fulfilled, Procurri will not be able to proceed with the Proposed Listing. 3. FINANCIAL EFFECTS OF THE PROPOSED SPIN-OFF AND THE PROPOSED LISTING 3.1 Bases and Assumptions The pro forma financial effects are presented for illustration only and are not intended to reflect the actual future financial situation of the Company after the completion of the Proposed Spin-Off. These illustrative pro forma financial effects have been computed based on (a) the Group s latest audited consolidated financial statements for FY2015; and (b) audited consolidated financial statements of Procurri for FY2015, as well as the following key assumptions: (a) (b) (c) the market capitalisation of Procurri will be S$150.0 million at the point of completion of the Proposed Listing; the Company will transfer 2,442 Procurri Shares (or approximately 7.5% of the existing issued share capital of Procurri) to ICH pursuant to the terms of the Bonds, and accordingly the shareholding interest of the Company in Procurri will be reduced from approximately 69.0% to approximately 61.5% and the loan amounting to S$6.0 million owing by the Company to ICH will be extinguished; in connection with the Proposed Listing, the Company will sell 2,849 Procurri Shares (or approximately 8.8% of the existing issued share capital of Procurri) as vendor shares for S$10.0 million, and Procurri will issue and allot 10,257 new Procurri Shares (representing approximately 24.0% of the enlarged share capital of 42,737 Procurri Shares) to the public for total proceeds of S$36.0 million. Accordingly, the shareholding interest of the Company in Procurri will be further reduced and diluted from approximately 61.5% to approximately 40.0% pursuant to the Proposed Listing; 13

14 (d) (e) (f) although the shareholding interest of the Company in Procurri will be further reduced and diluted from approximately 61.5% to approximately 40.0% pursuant to the Proposed Listing such that Procurri will cease to be a subsidiary of the Company, the Company will continue to consolidate the financial results of Procurri assuming it fulfills the relevant Financial Reporting Standards for such consolidation. The relevant Financial Reporting Standards establish principles for the presentation of consolidated financial statements when an entity controls another entity, and provides that an investor controls an investee when it is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. If the Company loses control of Procurri pursuant to the relevant Financial Reporting Standards and retains at least a 20% shareholding interest in Procurri, Procurri will be accounted for as an associate of the Company. In the event that the Company ceases to consolidate the financial results of Procurri pursuant to the relevant Financial Reporting Standards, the Company will make the relevant announcement(s) as and when is appropriate; expenses incurred in relation to the Proposed Listing is approximately S$3.8 million; and the Company will use proceeds from the sale of vendor shares to repay bank loans and for working capital purposes. 3.2 Share Capital As no new Shares will be issued by the Company in connection with the Proposed Spin-Off and the Proposed Listing, the Proposed Spin-Off and the Proposed Listing will have no impact on the Company s issued share capital. 3.3 NTA per Share Assuming that the Proposed Spin-Off and the Proposed Listing had been completed on 31 December 2015, the effect of the Proposed Spin-Off and the Proposed Listing on the Group s NTA per Share as at 31 December 2015 will be as follows: Before the Proposed Spin-Off and the Proposed Listing After the Proposed Spin-Off and the Proposed Listing NTA (1) attributable to Shareholders 29,050 52,899 of the Company (S$ 000) Number of Shares 538,617, ,617,530 NTA per Share (cents) (2) Notes: (1) NTA means total assets less the sum of total liabilities, non-controlling interest and intangible assets (net of noncontrolling interest). (2) The increase in NTA per Share is mainly due to the effect of the cash proceeds raised pursuant to the Proposed Spin-Off and the Proposed Listing. 3.4 EPS Assuming that the the Proposed Spin-Off and the Proposed Listing had been completed on 1 January 2015, the effect of the Proposed Spin-Off and the Proposed Listing on the Group s EPS for FY2015 will be as follows: Before the Proposed Spin-Off and the Proposed Listing After the Proposed Spin-Off and the Proposed Listing Profit after taxation and non- 4,978 1,502 controlling interests (S$ 000) Weighted average number of 460,706, ,706,294 Shares EPS (cents)

15 3.5 Gearing The financial effects of the Proposed Spin-Off and the Proposed Listing on the Group s gearing as at 31 December 2015 will be as follows: Before the Proposed Spin-Off and the Proposed Listing After the Proposed Spin-Off and the Proposed Listing Net borrowings/ (cash) (1) as at 34,631 (13,571) 31 December 2015 (S$ 000) Shareholder s equity (S$ 000) 103, ,739 Gearing (times) 0.33 NM (2) Notes: (1) Net borrowing means total borrowings less cash and bank balances. Net cash means cash and bank balances are more than total borrowings. (2) Not meaningful as the Group will be in a net cash position after the Proposed Spin-off and the Proposed Listing. 4. RULE 14 OF THE TAKE-OVER CODE It should be noted that the Company will be subject to Rule 14 of the Take-over Code following the completion of the Proposed Listing if its shareholding interest in Procurri is reduced to below 50.0%. Under Rule 14 of the Take-over Code, except with the consent of the SIC, where: (a) any person acquires whether by a series of transactions over a period of time or not, shares which (taken together with shares held or acquired by persons acting in concert with him) carry 30% or more of the voting rights of a company; or (b) any person who, together with persons acting in concert with him, holds not less than 30% but not more than 50% of the voting rights in a company and such person, or any person acting in concert with him, acquires in any period of six (6) months additional shares carrying more than 1% of the voting rights, such person shall extend immediately an offer to the holders of any class of shares in the capital of the Company which carries votes and in which such person or persons acting in concert with him hold shares. In addition to such person, each of the principal members of the group of persons acting in concert with him may, according to the circumstances of the case, have the obligation to extend an offer. In the event that the Company s shareholding interest in Procurri is reduced to between 30% and not more than 50.0% after completion of the Proposed Listing, and following which the Company and its concert parties increases their aggregate shareholdings in Procurri by 1% or more within a period of six (6) months, they will incur an obligation to make a mandatory general offer for Procurri under Rule 14 of the Take-over Code unless such obligation to make a mandatory general offer for Procurri is waived by the SIC. 5. RULE 805(2) OF THE CATALIST RULES Rule 805(2)(b) of the Catalist Rules requires an issuer to obtain the prior approval of shareholders in general meeting if a principal subsidiary issues shares or convertible securities or options that will or may result in a percentage reduction of 20.0% or more of the issuer s equity interest in the principal subsidiary. The Catalist Rules defines a principal subsidiary as a subsidiary whose latest audited consolidated pre-tax profits (excluding the minority interest relating to that subsidiary) as compared with the latest audited pre-tax profits of the group (excluding minority interest relating to that subsidiary) accounts for 20.0% or more of such pre-tax profits of the group. In determining profits, exceptional and extraordinary items are to be excluded. 15

16 The audited consolidated pre-tax profit of the Listing Group (excluding minority interests) for FY2015 was S$9,997, whilst the audited consolidated pre-tax profit of the Group (excluding minority interests) was S$7,960, Accordingly, the Listing Group accounted for 125.6% of the Group s pre-tax profit and hence is considered a principal subsidiary of the Company. Following the Proposed Spin-Off and the Proposed Listing, the Company s shareholding in Procurri may result in (a) Procurri ceasing to be a subsidiary of the Company as contemplated under Rule 805(2)(a) of the Catalist Rules; or (b) a percentage reduction of 20.0% or more of the Company s equity interest in Procurri, being a principal subsidiary of the Company as contemplated under Rule 805(2)(b) of the Catalist Rules. Barring any unforeseen circumstances, the Company intends to hold a controlling stake of at least 30.0% in the Listing Group immediately upon completion of the Proposed Spin-Off and the Proposed Listing. Accordingly, the Company is seeking Shareholders approval for (i) the Proposed Spin-Off and the Proposed Listing; and (ii) the Reduction in Effective Interest in Procurri, at the EGM. Please note that Ordinary Resolution 1 and Ordinary Resolution 2 are inter-conditional on each other. In other words, if Ordinary Resolution 1 is not passed by Shareholders at the EGM, Ordinary Resolution 2 will also not be passed and vice versa. 6. RULE 406(7) OF THE CATALIST RULES In the Company s announcement dated 6 October 2015, Shareholders were informed that further to a submission made by the Sponsor (for and on behalf of the Company), and based on the representations made, the SGX-ST had, subject to certain conditions, no objections to the Proposed Spin-Off. Accordingly, the Proposed Spin-Off complies with Rule 406(7) of the Catalist Rules and does not constitute a chain listing. 7. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS The interests of the Directors and Substantial Shareholders in the Shares, based on the register of Directors interests in Shares and Substantial Shareholders interests in Shares respectively, as at the Latest Practicable Date, are as follows: Direct Interest Deemed Interest Number of Shares % (1) Number of Shares % (1) Directors Wong Kok Khun (2) 18,877, ,019, Kow Ya 16,800, Ho Chew Thim 550, Hew Koon Chan 250, Ch ng Li-Ling 250, Substantial Shareholders (other than Directors) Wong Poh Leng (3) 81,060, rd Space Pte. Ltd. 55,019, Notes: (1) Based on the issued share capital of 618,850,590 Shares. 16

17 (2) Wong Kok Khun is deemed to have an interest in the Company s Shares held by 3rd Space Pte. Ltd. by virtue of Section 7 of the Companies Act. (3) The Shares are held in the names of Citibank Nominess Singapore Pte. Ltd. and UOB Kay Hian Pte. Ltd. Save for their respective interests in the Shares as disclosed above, none of the Directors or Substantial Shareholders or their respective associates, has any interest, direct or indirect, in the Proposed Spin-Off and the Proposed Listing. 8. DIRECTORS RECOMMENDATIONS Having reviewed, inter alia, the rationale for and the tangible benefits of the Proposed Spin-Off and the Proposed Listing, the Directors are of the view that the Proposed Spin-Off and the Proposed Listing is in the best interests of the Company, and they recommend that Shareholders vote in favour of Ordinary Resolution 1 and Ordinary Resolution 2 at the EGM. The Directors, in rendering their recommendation, have not had regard to the specific investment objectives, financial situation, tax position or unique needs and constraints of any individual Shareholder. As different Shareholders would have different investment objectives and profiles, the Directors recommend that any individual Shareholder who may require advice in the context of his specific investment portfolio, should consult his stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. 9. EXTRAORDINARY GENERAL MEETING The EGM, notice of which is set out on page N-1 of this Circular, will be held at M Hotel, Banquet Suite, Level 10, 81 Anson Road, Singapore on Thursday, 28 April 2016 at 3.00 p.m. (or as soon thereafter following the conclusion or adjournment of the annual general meeting to be held at 2.00 p.m. on the same day and at the same place) for the purpose of considering and, if thought fit, passing with or without modification the Ordinary Resolutions set out in the Notice of EGM. 10. ACTION TO BE TAKEN BY SHAREHOLDERS Shareholders who are unable to attend the EGM and wish to appoint a proxy to attend and vote on their behalf, 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 arrive at the Company s Share Registrar s office at 80 Robinson Road, #11-02, Singapore not later than 48 hours before the time set for the EGM. The completion and return of the proxy form by a Shareholder will not prevent him from attending and voting at the EGM, if he wishes to do so, in place of his proxy. A Depositor shall not be regarded as a Shareholder entitled to attend the EGM and to speak and vote thereat unless Shares are entered against his name on the Depository Register at least 72 hours before the time fixed for the EGM. Shareholders and other investors are reminded to exercise caution when dealing in the Shares. In the event that Shareholders and other investors are in doubt about the actions they should take, they should consult their stockbrokers, bank managers, solicitors, accountants or other professional advisers. 11. DIRECTORS RESPONSIBILITY STATEMENT The Directors collectively and individually accept full responsibility for the accuracy of the information given in this Circular and confirm after making all reasonable enquiries, that to the best of their knowledge and belief, this Circular constitutes full and true disclosure of all material facts about the Proposed Spin-Off, the Proposed Listing, the Company and its subsidiaries, and the Directors are not aware of any facts the omission of which will make any statement in this Circular misleading. 17

18 Where information in this 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 this Circular in its proper form and context. 12. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents are available for inspection during normal business hours at the Company s registered office at 29 Tai Seng Avenue, #05-01 Natural Cool Lifestyle Hub, Singapore from the date of this Circular up to and including the date of the EGM: (a) (b) the Constitution of the Company; and the annual report of the Company for FY2015. Yours faithfully For and on behalf of the Board DECLOUT LIMITED Wong Kok Khun Chairman and Group Chief Executive Officer 18

19 NOTICE OF EXTRAORDINARY GENERAL MEETING DECLOUT LIMITED (Company Registration Number: W) (Incorporated in the Republic of Singapore) Unless otherwise defined or the context otherwise requires, all capitalised terms herein shall bear the same meaning as used in the circular dated 11 April 2016 issued by the Company (the Circular ). NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the EGM ) of DeClout Limited (the Company ) will be held at M Hotel, Banquet Suite, Level 10, 81 Anson Road, Singapore on Thursday, 28 April 2016 at 3.00 p.m. (or as soon thereafter following the conclusion or adjournment of the annual general meeting to be held at 2.00 p.m. on the same day and at the same place) for the purposes of considering and, if thought fit, passing (with or without modifications) the following ordinary resolutions: ORDINARY RESOLUTION 1: THE PROPOSED SPIN-OFF AND THE PROPOSED LISTING That: (a) (b) approval be and is hereby given for the Company to carry out and implement the Proposed Spin- Off and the Proposed Listing, as well as any other transactions contemplated thereunder; and the Directors and/or each of them be and are hereby authorised to do all acts and things as they or each of them deem desirable, necessary or expedient to give effect to the matters referred to in the above paragraph of this ordinary resolution as they or each of them may in their or each of their absolute discretion deem fit in the interests of the Group. ORDINARY RESOLUTION 2: THE REDUCTION IN EFFECTIVE INTEREST IN PROCURRI That: (a) (b) approval be and is hereby given for the Company s proposed reduction of its effective interest in the shareholding of Procurri (i) such that Procurri ceases to be a subsidiary of the Company as contemplated under Rule 805(2)(a) of the Catalist Rules; or (ii) a percentage reduction of 20.0% or more of the Company s equity interest in Procurri, being a principal subsidiary of the company as contemplated under Rule 805(2)(b) of the Catalist Rules, as a result of the Proposed Listing; and the Directors and/or each of them be and are hereby authorised to do all acts and things as they or each of them deem desirable, necessary or expedient to give effect to the matters referred to in the above paragraph of this ordinary resolution as they or each of them may in their or each of their absolute discretion deem fit in the interests of the Group. Please note that Ordinary Resolution 1 and Ordinary Resolution 2 are inter-conditional on each other. In other words, if Ordinary Resolution 1 is not passed by Shareholders at the EGM, Ordinary Resolution 2 will also not be passed and vice versa. BY ORDER OF THE BOARD DECLOUT LIMITED Lee Bee Fong Company Secretary 11 April 2016 N-1

20 NOTICE OF EXTRAORDINARY GENERAL MEETING Notes: 1. Except for a member who is a Relevant Intermediary as defined under Section 181(6) of the Companies Act, a member is entitled to appoint not more 2 proxies to attend, speak and vote at the EGM. A proxy need not be a member of the Company. Where a member appoints more than 1 proxy, the proportion of his concerned shareholding to be represented by each proxy shall be specified in the proxy form (expressed as a percentage of the whole). 2. Pursuant to Section 181(1C) of the Companies Act, a member who is a Relevant Intermediary is entitled to appoint more than 2 proxies to attend, speak and vote at the EGM, but each proxy must be appointed to exercise the rights attached to a different share or shares held by such member. Where such member appoints more than 2 proxies, the number and class of shares in relation to which each proxy has been appointed shall be specified in the proxy form. 3. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the hand of its attorney or duly authorised officer. 4. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the EGM, in accordance with the Company s Constitution and Section 179 of the Companies Act. 5. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) under which it is signed, or notarially certified copy thereof, must be deposited at the Company s Share Registrar s office at 80 Robinson Road, #11-02, Singapore not later than 48 hours before the time set for the EGM. 6. A Depositor shall not be regarded as a member of the Company entitled to attend the EGM and to speak and vote thereat unless his name appears on the Depository Register 72 hours before the time set for the EGM. 7. A member should insert the total number of shares held. If the member has shares entered against his name in the Depository Register as defined under the Securities and Futures Act, Chapter 289 of Singapore, he should insert that number of shares. If the member has shares registered in his name in the Register of Members of the Company, he should insert the number of shares. If the member has shares entered against his name in the Depository Register and shares registered in his name in the Register of Members of the Company, he should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by the member of the Company. 8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members of the Company whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their names in the Depository Register 72 hours before the time appointed for holding the EGM as certified by The Central Depository (Pte) Limited to the Company. PERSONAL DATA PRIVACY By submitting a proxy form appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the EGM and/or any adjournment thereof, a shareholder of the Company (i) consents to the collection, use and disclosure of the shareholder s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the EGM (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to the EGM (including any adjournment thereof), and in order for the Company (or its agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the Purposes ), (ii) warrants that where the shareholder discloses the personal data of the shareholder s proxy(ies) and/or representative(s) to the Company (or its agents), the shareholder has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that the shareholder will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the shareholder s breach of warranty. N-2