THE INNOVATIVE F&B PEOPLE

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1 PROSPECTUS DATED 18 AUGUST 2003 (registered by the Monetary Authority of Singapore on 18 August 2003) This document is important. 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. We have made an application to the Singapore Exchange Securities Trading Limited ( SGX-ST ) for permission to deal in and for quotation of all the ordinary shares of $0.04 each (the Shares ) in the capital of Apex-Pal International Ltd. (the Company ) already issued, the new Shares which are the subject of this Invitation (the New Shares ) and the Shares which may be issued upon the exercise of the options to be granted under the Apex-Pal Employee Share Option Scheme (the Option Shares ). Such permission will be granted when we have been admitted to the Official List of The Stock Exchange of Singapore Dealing and Automated Quotation System ( SGX-SESDAQ ). The dealing in and quotation of the Shares will be in Singapore dollars. Acceptance of applications will be conditional upon, inter alia, permission being granted to deal in, and for quotation of, all of the issued Shares, the New Shares and the Option Shares. If the completion of the Invitation does not occur because the SGX-ST s permission is not granted or if the Monetary Authority of Singapore (the Authority ) refuses to register this Prospectus or for any other reasons, moneys paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefit arising therefrom and you will not have any claims whatsoever against us or the Manager. The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made or reports contained in this Prospectus. Admission to the Official List of the SGX-SESDAQ is not to be taken as an indication of the merits of the Invitation, our Company, our Shares, the New Shares or the Option Shares. A copy of this Prospectus has been lodged with and registered by the Authority. The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act (Cap. 289) of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares or the Option Shares, as the case may be, being offered or in respect of which an invitation is made, for investment. Investing in our Shares involves risks which are described in the section entitled RISK FACTORS beginning on page 22 of this Prospectus. No Shares will be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus. We have not lodged or registered this Prospectus in any other jurisdiction. THE INNOVATIVE F&B PEOPLE (Incorporated in the Republic of Singapore on 2 July 1996) Invitation in respect of 16,500,000 New Shares of $0.04 each, comprising: (i) 800,000 Offer Shares at $0.26 for each Offer Share by way of public offer; and (ii) 15,700,000 Placement Shares by way of placement, comprising: (a) 12,550,000 Placement Shares at $0.26 for each Placement Share; (b) 1,500,000 Internet Placement Shares at $0.26 for each Internet Placement Share reserved for applications through the IPO website and (c) 1,650,000 Reserved Shares at $0.26 for each Reserved Share reserved for our Non-executive Director, employees, customers, suppliers and persons who have contributed to the success of our Company, payable in full on application. Manager SBI E2-Capital Pte Ltd Joint Lead Placement Agents and Underwriters SBI E2-Capital Securities Pte Ltd UOB Kay Hian Private Limited Sub-Placement Agents Nomura Singapore Limited The Bank of East Asia, Limited

2 WHO WE ARE Our Company was incorporated in 1996 and currently operates the following businesses: OUR COMPANY HAS RECEIVED THE FOLLOWING AWARDS: Enterprise 50 Award for 2002 Singapore Promising Brand Award 2003 for Sakae Sushi owning and operating restaurants, cafés and kiosks under our F&B brands such as "Sakae Sushi", "Sakae Express" and "Crepes & Cream"; operating Nouvelle Events, a division which carries on: i. a vertically and horizontally integrated operation for the processing of finished and semi-finished food products and related logistic services; ii. an events catering business; iii. the operation of F&B facilities at clubhouses; and iv. the trading of food products; engaging in the franchising of our F&B brands; and providing IT services through Innotech Consulting. OUR CEO, MR DOUGLAS FOO, HAS, AS A TESTIMONY TO HIS ENTREPRENEURSHIP SKILLS AND ACHIEVEMENTS, RECEIVED THE FOLLOWING AWARDS: Rotary-ASME Entrepreneur of the Year 2002 Top Outstanding Young Person Award 2002 by the Junior Chamber of Singapore Singapore Youth Award Entrepreneurship from the National Youth Council CORE BUSINESS F&B Business SAKAE SUSHI We believe that we are the largest kaiten sushi restaurant operator in Singapore with 17 outlets as at 30 June SAKAE EXPRESS Sakae Express was launched in July 2003 by the setting up of our first outlet at Scotts Shopping Centre. CREPES & CREAM We own and operate 4 Crepes & Cream outlets as at 30 June NOUVELLE EVENTS We operate a central kitchen and food processing facility to process finished and semi-finished food products, food distribution and related logistics services. We are able to provide multi cuisine for events and functions for more than 1,000 people. We operate F&B facilities at 3 clubhouses, which procure food and beverages from the food processing facility of Nouvelle Events. We have been the sole distributor of low fat skim milk Bud s Ice Cream of San Francisco in Singapore since February F&B Franchising We were awarded the Singapore Franchise Mark by IE Singapore, SPRING Singapore and FLA at the Global Franchise Show in We entered into franchise agreements for Sakae Sushi in Indonesia, Thailand and the Philippines and a technical assistance and licence agreement in the PRC.

3 COMPETITIVE STRENGTHS Our Ability To Innovate We have exhibited the ability to innovate our businesses to distinguish us from our competitors over the years. This process of innovation generates interest among customers to visit our F&B outlets. Our Ability To Implement Technology In Our F&B Business We have implemented the use of technology in our F&B business by installing interactive menu systems which have increased efficiency by reducing ordering time. The installation of point-of-sales systems in our Sakae Sushi restaurants to integrate our front-end and back-end operations have also reduced our operating costs. Our Ability To Respond Rapidly To Business Opportunities And Market Needs We are quick to identify and respond to changes in market demands and business opportunities. We are able to develop food and franchise concepts that appeal to customers and potential franchisees across different countries. We are able to expand our other businesses by venturing into synergistic businesses. Our Ability To Create Scalable F&B Franchising Concepts We are able to create scalable F&B franchising concepts that can be easily replicated and franchised to parties in many countries and territories. We believe that the scalability of these concepts contributes to their popularity. FINANCIA HIGHLIGH GROUP REVENUE (S$ million) 25 GROUP PROFIT BEFORE TAX (S$ million) CAGR*: 51% CAGR*: 82% FY: Financial year ended 31 December 0 FY2000 FY2001 FY2002 FY2000 FY2001 FY2002 *Compounded Annual Growth Rate 0

4 CHINA THAILAND SINGAPORE INDONESIA FUTURE PLANS L TS Increased Penetration and Geographical expansion of Sakae Sushi, Sakae Express and Crepes & Cream We plan to increase penetration and geographic expansion through direct investments, joint ventures and franchise operations in the Asia- Pacific region (including the US). We intend to actively promote our F&B franchise concepts to potential franchisees in the Asia-Pacific region (including the US). Enhancing existing and developing new F&B businesses and concepts We will continue to create varied menus for Sakae Sushi, Sakae Express and Crepes & Cream to suit the preferences of our customers and to provide fresh dining experiences for both new and regular customers. We plan to implement a service enhancement strategy, develop merchandise for our Sakae Sushi, Sakae Express and Crepes & Cream brands and implement a Customer Loyalty Program for clients of Nouvelle Events. Developing our trading operations with franchisees overseas We are currently exploring opportunities to increase the supply chain of Nouvelle Events by extending our trading operations of food products and equipment to our franchisees overseas.

5 NORTHPOINT WEST MALL HOUGANG BISHAN TOA PAYOH SCOTTS TAMPINES THE HEEREN WHEELOCK EAST POINT BUGIS KAMPONG AMPAT CAPITOL SUNTEC CITY PARKWAY PARADE LIANG COURT MARINA SQUARE TIONG BAHRU OUB WTC Wide network in Singapore Locations of Sakae Sushi, Sakae Express, Crepes & Cream and Nouvelle Events. SAKAE SUSHI SAKAE EXPRESS CREPES & CREAM NOUVELLE EVENTS BRINGING MORE CONCEPTS TO YOU Printed by Xpress Print Pte Ltd (65)

6 CORPORATE HEADQUARTERS Apex-Pal International Ltd. 1 Raffles Place #49-00 OUB Centre Singapore TEL FAX WEBSITE

7 TABLE OF CONTENTS CORPORATE INFORMATION... 1 DEFINITIONS... 3 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS... 8 SELLING RESTRICTIONS... 9 DETAILS OF THE INVITATION - Listing on the SGX-SESDAQ Indicative Timetable for Listing PROSPECTUS SUMMARY THE INVITATION PLAN OF DISTRIBUTION ISSUE STATISTICS RISK FACTORS USE OF PROCEEDS SELECTED FINANCIAL INFORMATION - Operating Results of our Company Financial Position of our Company REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION - Overview Review of Past Performance Review of Financial Position LIQUIDITY AND CAPITAL RESOURCES DIVIDEND POLICY CREDIT POLICY CAPITALISATION AND INDEBTEDNESS DILUTION STRUCTURE OF OUR COMPANY GENERAL INFORMATION ON OUR COMPANY - Restructuring Exercise Our History Our Business i

8 TABLE OF CONTENTS - Our Suppliers Our Customers Seasonality Research and Development Trade Marks and Patents Properties and Fixed Assets Capital Investments and Divestments Quality Control Staff Training Government Regulations Our Sales and Marketing Competition Our Competitive Strengths Our Prospects and Future Plans DIRECTORS, MANAGEMENT AND STAFF - Management Structure Directors Management Remuneration Employees Service Agreements Corporate Governance Apex-Pal Employee Share Option Scheme INTERESTED PERSON TRANSACTIONS - Past Interested Person Transactions Review by Audit Committee Potential Conflict of Interests ii

9 TABLE OF CONTENTS SHARE CAPITAL - Share Capital Shareholders Moratorium GENERAL AND STATUTORY INFORMATION - Information on Directors and Executive Officers Share Capital Material Contracts Litigation Management and Underwriting and Placement Arrangements Miscellaneous Consents Documents Available for Inspection Statement by Directors of the Company Statement by the Manager APPENDIX A INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENTS OF THE COMPANY FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2000, 2001 AND A-1 APPENDIX B TAXATION... B-1 APPENDIX C EXCHANGE CONTROLS... C-1 APPENDIX D SUMMARY OF THE CONSTITUTION OF THE COMPANY... D-1 APPENDIX E RULES OF THE APEX-PAL EMPLOYEE SHARE OPTION SCHEME... E-1 APPENDIX F TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION... F-1 iii

10 CORPORATE INFORMATION BOARD OF DIRECTORS : Douglas Foo Peow Yong (Chief Executive Officer) Foo Lilian (Executive Director / Executive Vice President) Andy Ong Siew Kwee (Non-executive Director) Ng San Tiong (Independent Director) Lim Chee Yong (Independent Director) COMPANY SECRETARIES : Phyllis Phua Lee Boon (CPA, Singapore) Rachel Eng Yaag Ngee (LLB. Hons) REGISTERED OFFICE : 1 Raffles Place #49-00 OUB Centre, Singapore SHARE REGISTRAR : Lim Associates (Pte) Ltd 10 Collyer Quay #19-08 Ocean Building Singapore MANAGER : SBI E2-Capital Pte Ltd 5 Shenton Way #09-07 UIC Building Singapore JOINT LEAD PLACEMENT AGENTS : AND UNDERWRITERS SBI E2-Capital Securities Pte Ltd 5 Shenton Way #09-08 UIC Building Singapore UOB Kay Hian Private Limited 80 Raffles Place #30-01 UOB Plaza 1 Singapore SUB-PLACEMENT AGENTS : Nomura Singapore Limited Six Battery Road #34-01 Singapore The Bank of East Asia, Limited 137 Market Street Bank of East Asia Building Singapore SOLICITORS TO THE INVITATION : WongPartnership 80 Raffles Place #58-01 UOB Plaza 1 Singapore

11 CORPORATE INFORMATION AUDITORS AND REPORTING : Deloitte & Touche ACCOUNTANTS Certified Public Accountants 6 Shenton Way #32-00 DBS Building Tower Two Singapore RECEIVING BANKER : The Bank of East Asia, Limited 137 Market Street Bank of East Asia Building Singapore PRINCIPAL BANKER : Standard Chartered Bank 6 Battery Road #05-00 Singapore

12 DEFINITIONS In this Prospectus and the accompanying Application Forms, the following definitions apply where the context so admits: Our Company Company or Apex-Pal : Apex-Pal International Ltd., a company incorporated in Singapore with limited liability. The terms we, our, our Company or us have correlative meanings Our Business Divisions Crepes & Cream : Crepes & Cream Innotech Consulting : Innotech Consulting Nouvelle Events : Nouvelle Events Sakae Sushi : Sakae Sushi Other Companies / Organisations AVA : Agri-Food and Veterinary Authority of Singapore Brezo : Brezo Pte Ltd BTB : Black Tea Box Pte Ltd (now known as Fusion Tea Pte. Ltd.) CDP : The Central Depository (Pte) Limited COMPASS : Composers and Authors Society of Singapore ENV : Ministry of Environment FLA : Franchising and Licensing Association (Singapore) (formerly known as Singapore International Franchise Association) IE Singapore : International Enterprise Singapore Board (formerly known as the Singapore Trade Development Board) ITE : Institute of Technical Education NEA : National Environment Agency (an agency of ENV) SPRING Singapore : Standards, Productivity and Innovation Board (formerly known as Singapore Productivity and Standards Board) Trivest : Trivest Ventures Pte Ltd General Application Forms : The printed application forms to be used for the purpose of the Invitation and which form part of this Prospectus Application List : The list of applications for subscription of the New Shares Articles : Articles of Association of the Company 3

13 DEFINITIONS associates : In relation to any director, chief executive officer, substantial shareholder or controlling shareholder of a corporation who is an individual, means: (i) (ii) (iii) his immediate family; a trustee, acting in his capacity as such trustees, 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 any corporation in which he and his immediate family together (directly or indirectly) have an interest of not less than 30% of the aggregate of the nominal amount of all the voting shares. ATM : Automated teller machines of a Participating Bank ATM Application : An application for the Offer Shares made through an ATM of one of the Participating Banks, in accordance with the terms and conditions of this Prospectus Audit Committee : The audit committee of our Company Authority : The Monetary Authority of Singapore Board : Board of Directors of our Company CEO : Chief Executive Officer Companies Act : The Companies Act, Chapter 50 of Singapore controlling shareholder : A person who holds directly or indirectly 15% or more of the nominal amount of all voting shares in our Company (the SGX-ST may determine that a person who satisfies this definition is not a controlling shareholder) or a person who in fact exercises control over our Company CPF : The Central Provident Fund Directors : The directors of our Company as at the Latest Practicable Date Douglas Foo : Douglas Foo Peow Yong Electronic Application : An ATM Application, IB Application or Internet Offer Application EPS : Earnings per Share ESOS : Apex-Pal Employee Share Option Scheme Executive Directors : The executive Directors of our Company as at the Latest Practicable Date Executive Officers : The executive officers of our Company as at the Latest Practicable Date 4

14 DEFINITIONS FY : Financial year ended or, as the case may be, ending 31 December F&B : Food and beverage F&B outlets : Restaurants, cafés and kiosks set up by our Company IB : Internet Banking IB Application : An application for Offer Shares made through an IB website of one of the relevant Participating Banks, in accordance with the terms and conditions of this Prospectus Independent Directors : The independent Directors of our Company as at the Latest Practicable Date "Internet Placement Application" : An application by a Qualifying User for the Internet Placement Shares through the IPO website, in accordance with the terms and conditions of this Prospectus "Internet Placement Shares" : The 1,500,000 Placement Shares available for application through the IPO website, upon the terms of and subject to the conditions in this Prospectus Invitation : The invitation by our Company to the public to subscribe for the New Shares upon the terms of and subject to the conditions set out in this Prospectus "IPO website" : The Internet website at of the IPO Website Operator "IPO Website Operator" : SBI E2-Capital Securities Pte Ltd Issue Price : $0.26 for each New Share Joint Lead Placement Agents and : SBI E2-Capital Securities Pte Ltd and UOB Kay Hian Private Underwriters Limited kaiten : Conveyor belt Latest Practicable Date : 31 May 2003, being the latest practicable date prior to the lodgement of this Prospectus Listing Manual : Listing Manual of the SGX-ST Manager : SBI E2-Capital Pte Ltd Market Day : A day on which the SGX-ST is open for trading in securities MRT : Mass Rapid Transit New Shares : The 16,500,000 new Shares for which our Company invites applications to subscribe for pursuant to the Invitation, subject to and on the terms and conditions of this Prospectus 5

15 DEFINITIONS Non-executive Directors : Non-executive Directors of our Company (including Independent Directors) as at the Latest Practicable Date NTA : Net Tangible Assets Offer or Offer Tranche : The offer by our Company of the Offer Shares to the public in Singapore for subscription of the Offer Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus Offer Shares : 800,000 of the New Shares which are the subject of the Offer Participating Banks : United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited ( UOB Group ), DBS Bank Ltd (including POSB) ( DBS ), and Oversea-Chinese Banking Corporation Limited ( OCBC ) Qualifying Internet Applicant or : Any member of the public (being an individual) in Singapore Qualifying Users who registered for and holds a valid membership account with the IPO website, subject to the terms and conditions for the membership and use of the IPO website PAT : Profit after income tax PBT : Profit before income tax PER : Price earnings ratio Placement : The placement by the Joint Lead Placement Agents on behalf of our Company of the Placement Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus Placement Shares : 15,700,000 of the New Shares (including 1,650,000 Reserved Shares and 1,500,000 Internet Placement Shares) which are the subject of the Placement PRC or China : People s Republic of China, excluding Macau and Hong Kong for the purposes of this Prospectus and for geographical reference only Reserved Shares : The 1,650,000 Placement Shares reserved for our Nonexecutive Director, employees, customers, suppliers and persons who have contributed to the success of our Company Securities Account : The securities account maintained by a Depositor with CDP Securities and Futures Act : The Securities and Futures Act, Chapter 289 of Singapore SGX-SESDAQ : The Stock Exchange of Singapore Dealing and Automated Quotation System SGX-ST or Singapore Exchange : Singapore Exchange Securities Trading Limited 6

16 DEFINITIONS Shareholders : Registered holders of Shares, except where the registered holder is CDP, the term Shareholders shall, in relation to such Shares, mean the Depositors whose Securities Accounts are credited with Shares Sub-Placement Agents : Nomura Singapore Limited and The Bank of East Asia, Limited Shares : Ordinary shares of $0.04 each in the capital of our Company $ or S$ and cents : Singapore dollars and cents respectively US or United States : United States of America US$ and US cents : United States dollars and cents respectively and Yen : Japanese Yen % or per cent. : Per centum The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Companies Act. 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. References to persons shall include corporations. Any reference in this Prospectus and the Application Forms to any statute or enactment is a reference to that statute or enactment for the time being amended or re-enacted. Any word defined under the Companies Act, the Securities and Futures Act or any statutory modification thereof and used in this Prospectus and the Application Forms shall have the meaning assigned to it under the Companies Act, the Securities and Futures Act or such statutory modification, as the case may be. Any reference in this Prospectus and the Application Forms to Shares being allotted to an applicant includes allotment to CDP for the account of that applicant. Any reference to a time of day in this Prospectus is a reference to Singapore time. 7

17 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS All statements contained in this Prospectus, statements made in the press releases and oral statements that may be made by our Company or our officers, Directors or employees acting on our behalf, that are not statements of historical fact, constitute forward-looking statements. Some of these statements can be identified by words such as anticipate, believe, could, estimate, expect, forecast, if, intend, may, plan, possible, probable, project, should, will and would or similar words. These words are however not the exclusive means of identifying forward-looking statements. All statements regarding our Company s expected financial position, business strategy, plans and prospects, and future prospects of our Company s industry are forward-looking statements. These forward-looking statements, including, but not limited to statements as to our Company s revenue and profitability, prospects, future plans and other matters discussed in this Prospectus 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 our Company s actual future results, performance or achievements to be materially different from any future results, performance or achievements expected, expressed or implied by such forward-looking statements. These risk factors and uncertainties are discussed in more detail in this Prospectus, in particular, but not limited to, discussions under the section entitled Risk Factors. You should also be aware that the forecasts in respect of our Company s industry which we refer to in this Prospectus are forward-looking statements based on factors and assumptions that may be subject to a high degree of uncertainty and are beyond our control. Given the risks and uncertainties that may cause our Company s future results, performance or achievements to be materially different from that expected, expressed or implied by the forward looking statements in this Prospectus, undue reliance must not be placed on these statements. Neither our Company, the Manager, the Joint Lead Placement Agents and Underwriters nor any other person represents or warrants that our Company s actual future results, performance or achievements will be as discussed in those statements. Our actual future results may differ materially from those anticipated in these forward-looking statements as a result of the risks faced by us. We and the Manager disclaim any responsibility to update any of those forward-looking statements or publicly announce any revisions to those forward-looking statements to reflect future developments, events or circumstances. We are, however, subject to the provisions of the SGX-ST Listing Manual regarding corporate disclosure and the requirements of the Securities and Futures Act. In particular, pursuant to Section 241 of the Securities and Futures Act, if after the Prospectus is registered but before the close of the Offer, the Company becomes aware of: (a) a false or misleading statement or matter in the Prospectus; (b) an omission from the Prospectus of any information that should have been included in it under Sections 243 or 244 of the Securities and Futures Act; or (c) a new circumstance that has arisen since the Prospectus was lodged with the Authority and would have been required by Sections 243 or 244 of the Securities and Futures Act to be included in the Prospectus, if it had arisen before the Prospectus was lodged and that is materially adverse from the point of view of an investor, the Company may lodge a supplementary or replacement prospectus with the Authority. 8

18 SELLING RESTRICTIONS This Prospectus does not constitute an offer, solicitation or invitation to subscribe for our Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. No action has been or will be taken under the requirement of the legislation or regulations of, or of the legal or regulatory authorities of, any jurisdiction, except for the filing and/or registration of this Prospectus in Singapore in order to permit a public offering of our Shares and the public distribution of this Prospectus in Singapore. The distribution of this Prospectus and the offering of our Shares in certain jurisdictions may be restricted by the relevant laws in such jurisdiction. Persons who may come into possession of this Prospectus are required by us, the Joint Lead Placement Agents and Underwriters to inform themselves about, and to observe and comply with, any such restrictions. 9

19 DETAILS OF THE INVITATION LISTING ON THE SGX-SESDAQ We have applied to the SGX-ST for permission to deal in, and for quotation of, all our Shares already issued, the New Shares as well as the Option Shares on the Official List of the SGX-SESDAQ. Such permission will be granted when our Company has been admitted to the Official List of the SGX- SESDAQ. Acceptance of applications for the New Shares will be conditional upon permission being granted by the SGX-ST to deal in and for the quotation of all our issued Shares, the New Shares and the Option Shares. If the said permission is not granted, moneys paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefit arising therefrom, and you will not have any claim against us or the Manager. The SGX-ST assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Prospectus. Admission to the Official List of the SGX-SESDAQ is not to be taken as an indication of the merits of the Invitation, our Company or our Shares. A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the Authority ). The Authority assumes no responsibility for the contents of this Prospectus. Registration of the Prospectus by the Authority does not imply that the Securities and Futures Act, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares or the Option Shares, as the case may be, being offered or in respect of which an invitation is made, for investment. Where the Authority issues a stop order pursuant to Section 242 of the Securities and Futures Act, and (a) (b) in the case where the New Shares have not been issued to the applicants, the applications of the New Shares pursuant to the Invitation shall be deemed to have been withdrawn and cancelled and our Company shall, within 14 days from the date of the stop order, pay to the applicants all moneys the applicants have paid on account of their applications for the New Shares; or in the case where the New Shares have been issued to the applicants, the issue of the New Shares pursuant to the Invitation shall be deemed to be void and our Company shall, within 14 days from the date of the stop order, pay to the applicants all moneys paid by them for the New Shares. This Prospectus has been seen and approved by our Directors and they individually and collectively accept full responsibility for the accuracy of the information given in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Prospectus are fair and accurate in all material respects as at the Latest Practicable Date and that there are no material facts the omission of which would make any statements in the Prospectus misleading, and that the profit forecast (if any) has been stated by the Directors after due and careful enquiry. No person has been or is authorised to give any information or to make any representation not contained in this Prospectus in connection with the Invitation and, if given or made, such information or representation must not be relied upon as having been authorised by us or the Manager. Neither the delivery of this Prospectus and the Application Forms nor the Invitation shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in our affairs or in the statements of fact or information contained in this Prospectus since the Latest Practicable Date. Where such changes occur, we may make an announcement of the same to the SGX-ST and will comply with the requirements of the Securities and Futures Act. All applicants should take note of any such announcement and, upon release of such an announcement, shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies. 10

20 DETAILS OF THE INVITATION This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon by any persons other than the applicants in connection with their application for the New Shares for any other purpose. This Prospectus does not constitute an offer, solicitation or invitation to subscribe for the New Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability, from: SBI E2-Capital Securities Pte Ltd UOB Kay Hian Private Limited 5 Shenton Way 80 Raffles Place #09-08 UIC Building #30-01 UOB Plaza 1 Singapore Singapore and from members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available on the SGX-ST website The Application List will open at a.m. on 26 August 2003 and will remain open until noon on the same day or for such further period or periods as our Directors may, in consultation with the Manager, in their absolute discretion decide, subject to any limitation under all applicable laws. In the event a supplementary prospectus or replacement prospectus is lodged, the Application List will remain open for at least 14 days after the lodgement of the supplementary or replacement prospectus. Where applications have been made for the New Shares prior to the lodgement of the supplementary or replacement prospectus, we shall, within seven days from the date of lodgement of the supplementary or replacement prospectus, either (a) (b) provide the applicants with a copy of the supplementary or replacement prospectus and provide the applicants with an option to withdraw their applications, or treat the applications as withdrawn and cancelled and return all moneys paid, without interest or any share of revenue or other benefit arising therefrom, in respect of any application accepted within seven days from the date of lodgement of the supplementary or replacement prospectus. Any applicant who wishes to exercise his option to withdraw his application shall, within 14 days from the date of lodgement of the supplementary or replacement prospectus, notify us whereupon we shall, within seven days from the receipt of such notification, return the application moneys without interest or any share of revenue or other benefit arising therefrom and at the applicant s risk. 11

21 DETAILS OF THE INVITATION INDICATIVE TIMETABLE FOR LISTING In accordance with the SGX-ST News Release of May 28, 1993 on the trading of initial public offering shares on a when issued basis, an indicative timetable is set out below for your reference: Indicative date/time Event noon on 26 August 2003 Close of Application List 27 August 2003 Balloting of applications, if necessary (in the event of oversubscription for the Offer Shares) 9.00 a.m. on 28 August 2003 Commence trading on a when issued basis 4 September 2003 Last day of trading on a when issued basis 9.00 a.m. on 5 September 2003 Commence trading on a ready basis 9 September 2003 Settlement date for all trades done on a when issued basis and for trades done on a ready basis on 5 September 2003 The above timetable is only indicative as it assumes that the date of closing of the Application List is 26 August 2003, the date of admission of our Company to the Official List of the SGX-SESDAQ is 28 August 2003, the SGX-ST s shareholding spread requirement will be complied with and the New Shares will be issued and fully paid-up prior to 28 August The actual date on which our Shares will commence trading on a when issued basis will be announced when it is confirmed by the SGX-ST. The above timetable and procedure may be subject to such modifications as the SGX-ST may in its discretion decide, including the decision to permit trading on a when issued basis and the commencement date of such trading. All persons trading in the Shares on a when issued basis do so at their own risk. In particular, persons trading in the Shares before their Securities Accounts with CDP are credited with the relevant number of Shares do so at the risk of selling Shares which neither they nor their nominees, as the case may be, have been allotted or are otherwise beneficially entitled to. Such persons are also exposed to the risk of having to cover their net sell positions earlier if when issued trading ends sooner than the indicative date mentioned above. Persons who have a net sell position traded on a when issued basis should close their position on or before the first day of ready basis trading. The Invitation will be open from 19 August 2003 to 26 August In the event of any changes in the closure of the Application List or the time period during which the Invitation is open, we will publicly announce the same: (i) (ii) through a MASNET announcement to be posted on the Internet at the SGX-ST website and in a local English newspaper, namely, The Straits Times. Investors should consult the SGX-ST announcement of the ready listing date on the Internet (at the SGX-ST website INTV or newspapers, or check with their brokers on the date on which trading on a ready basis will commence. We will provide details of the results of the Invitation through the channels in (i) and (ii) above. 12

22 PROSPECTUS SUMMARY This summary highlights certain information found in greater detail elsewhere in this Prospectus. In addition to this summary, we urge you to read the entire Prospectus carefully, especially the discussion of risk of investing in our shares under Risk Factors, before deciding to buy our Shares. References in this Prospectus to Apex-Pal, Company, we, our and us refer to Apex-Pal International Ltd. and its businesses. OVERVIEW OF OUR COMPANY Our Company was incorporated in Singapore on 2 July 1996 under the Companies Act as a private limited company, under the name of Apex-Pal International Pte Ltd. Our Company was converted into a public limited company on 16 July The name of our Company was changed to Apex-Pal International Ltd. on 16 July Our Company (a) owns and operates restaurants, cafés and kiosks and (b) operates Nouvelle Events, a division which carries on (i) a vertically and horizontally integrated operation for the processing of finished and semi-finished food products and related logistic services, (ii) an events catering business, (iii) the operation of F&B facilities at clubhouses and (iv) the trading of food products ( F&B Business ). Aside from these, we also engage in the franchising of our F&B brands ( F&B Franchising Business ) and the provision of IT services ( IT Services ) through Innotech Consulting. We derive our revenue mainly from our F&B Business, which constituted 100%, 98.1% and 96.7% of our revenue for FY 2000, FY 2001 and FY 2002 respectively. Revenue is also derived from our other business activities in the form of franchise and royalty fees. Further details are set out under the section Our Business on pages 55 to 59 of this Prospectus. OUR COMPETITIVE STRENGTHS We believe that the following are our competitive advantages in relation to our operations: We have exhibited the ability to innovate our businesses to distinguish us from our competition over the years. This process of innovation generates interest among customers to visit our F&B outlets. We have implemented the use of technology in our F&B business by installing interactive menu systems which has increased efficiency by reducing ordering time. We are able to respond to business opportunities and market needs and maximise local and overseas growth potential in a timely fashion. We are able to create scalable F&B franchising concepts, which can be easily replicated and franchised to parties in many countries and territories. We believe that the scalability of these concepts contributes to their popularity. For more details, please refer to Our Competitive Strengths on pages 70 and 71 of this Prospectus. PROSPECTS AND FUTURE PLANS Our Directors believe that our prospects will lie in the following areas: Local growth of our F&B business is expected to remain strong if we continue to promote our brand names and increase local awareness as well as to increase the number of our F&B outlets in strategic business locations in Singapore. Moreover, the largely healthy cuisines served by us is compatible with Singaporeans increasing awareness of the importance of healthy living. This will contribute towards enhancing and consolidating the market share of our F&B Business in Singapore. 13

23 PROSPECTUS SUMMARY The varied menus offered by us are tailored to suit a broad range of customers regardless of their nationality, thereby enabling the Company to enter the overseas markets in countries in the Asia- Pacific region (including the US). In addition, with the Free Trade Agreement ( FTA ) between Singapore and the US, our established franchise concepts and systems will position us well to take advantage of this FTA which is expected to provide ease of access to the US. The expansion of Crepes & Cream is not curtailed by space constraints since it embraces a versatile F&B concept and may be established as a restaurant, café or kiosk depending on the retail space available and to suit the differing demands of customers. There is potential in expanding our food processing facility of Nouvelle Events due to the expected increase in demand for our food processing services as more F&B establishments embrace the concept of out-sourcing such services which we believe is more cost-efficient. There is potential for an increase in demand for the catering services of Nouvelle Events given our proven track record for providing highly personalised services to suit the specific needs of our customers. There is potential for the trading operations of Nouvelle Events to expand as a result of our favourable market position and our ability to procure food products at lower costs due to economies of scale. There is growth potential for overseas F&B franchising as the largely healthy and unique menus offered and the maintenance of high franchise standards will continue to attract potential franchisees. Our future plans include: Increased penetration and geographic expansion of Sakae Sushi, Sakae Express and Crepes & Cream in the various overseas markets via direct investments, joint ventures and franchise operations in countries in the Asia-Pacific region (including the US) and the active promotion of our F&B franchise concepts in the countries in the Asia-Pacific region (including the US). Enhancing existing and developing new F&B businesses and concepts, through the creation of varied menus for Sakae Sushi, Sakae Express and Crepes & Cream and the development of our interactive menu system for Sakae Sushi. We also intend to implement a service enhancement strategy, developing merchandise for our Sakae Sushi, Sakae Express and Crepes & Cream brands and implementing a customer loyalty program for the clients of Nouvelle Events. Exploring opportunities to increase the supply chains of Nouvelle Events by extending our trading operations of food products and equipment to our franchisees overseas. For more details, please refer to Our Prospects and Our Future Plans on pages 71 to 73 of this Prospectus. WHERE YOU CAN FIND US Our registered office is at 1 Raffles Place, #49-00 OUB Centre, Singapore Our telephone number is and our facsimile number is Our Internet address is Information contained on our website does not constitute part of this Prospectus. 14

24 THE INVITATION Size : The 16,500,000 New Shares comprising 800,000 Offer Shares and 15,700,000 Placement Shares. The New Shares will, upon issue and allotment, rank pari passu in all respects with the existing issued Shares. Issue Price : $0.26 for each New Share. Purpose of the Invitation : The purpose of the Invitation is to secure admission of our Company to the Official List of the SGX-SESDAQ. Our Directors believe that the listing of our Company and the quotation of our Shares on the SGX-ST will enhance the public image of our Company locally and overseas and enable us to tap the capital markets for the expansion of our operations. The Invitation will also provide members of the public, our management, employees and business associates as well as those who have contributed to our success with an opportunity to participate in the equity of our Company. The Offer : The Offer comprises an invitation by our Company to the public in Singapore to subscribe for the 800,000 Offer Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus. In the event of an under-subscription of the Offer Shares, that number of Offer Shares not subscribed for shall be used to satisfy applications for Placement Shares to the extent that there is an over-subscription of Placement Shares. The Placement : The Placement comprises a placement of 14,050,000 Placement Shares (excluding Reserved Shares) at the Issue Price. In the event of an under-subscription of the Placement Shares, the number of Placement Shares not subscribed for shall be used to satisfy applications for Offer Shares to the extent that there is an over-subscription of Offer Shares. Reserved Shares : 1,650,000 Placement Shares at the Issue Price will be reserved for our Non-executive Director, employees, customers, suppliers and persons who have contributed to the success of our Company. The number of Reserved Shares that have been reserved for subscription by our Non-executive Director is as follows: Name Number of Reserved Shares Andy Ong Siew Kwee 100,000 In the event that any of the Reserved Shares are not taken up, they will be made available to satisfy excess applications for the Placement Shares or in the event of an under-subscription for the Placement Shares, to satisfy excess applications made by members of the public in Singapore for the Offer Shares. Listing Status : Our Shares will be quoted on the Official List of the SGX-SESDAQ in Singapore dollars, subject to admission of our Company to the Official List of the SGX-SESDAQ and permission for dealing in and for quotation of our Shares being granted by the SGX-ST. 15

25 PLAN OF DISTRIBUTION This section should be read in conjunction with, and is qualified in its entirety by reference to, the section entitled Terms and Conditions And Procedures for Application in Appendix F of this Prospectus. Investors may apply to subscribe for any number of New Shares in integral multiples of 1,000 Shares. In order to ensure a reasonable spread of shareholders, we have the absolute discretion to prescribe a limit to the number of Invitation Shares to be allotted to any single applicant and/or to allot New Shares above or under such prescribed limit as we shall deem fit. Application for the Invitation Shares may be made by one of the following methods : 1) Public Offer Pursuant to the terms and conditions contained in the Management and Underwriting Agreement signed between our Company, the Manager and the Underwriters dated 18 August 2003, the Underwriters have agreed to underwrite our Offer Shares. In the event of an under-subscription for the Offer Shares as at the close of the Application List, that number of Offer Shares not subscribed for shall be made available to satisfy excess applications for the Placement Shares to the extent there is an over-subscription for the Placement Shares as at the close of the Application List. In the event of an over-subscription for the Offer Shares as at the close of the Application List and/or the Placement Shares are fully subscribed as at the close of the Application List, the successful applications for the Offer Shares will be determined by ballot or otherwise as determined by our Directors and approved by the SGX-ST. Offer Shares The Public Offer is open to members of the public in Singapore. Investors may apply for New Shares under the Public Offer Tranche by way of printed Application Forms or IB websites or ATMs belonging to the Participating Banks. An applicant (other than an approved nominee company) who has made an application for Offer Shares in his own name may not submit another separate application for Offer Shares whether by way of an Application Form or by way of an IB or ATM Application, for any other person. Such separate applications shall be deemed to be multiple applications and shall be rejected. An applicant who has made an application for Offer Shares by way of an Offer Shares Application Form may not make another separate application for Offer Shares by way of an IB/ATM Application and vice versa. Such separate applications shall be deemed to be multiple applications and shall be rejected. 16

26 PLAN OF DISTRIBUTION An applicant who has made an application for Offer Shares either by way of an Offer Shares Application Form or by way of an IB/ATM Application shall not make any separate application for Placement Shares by way of a Placement Shares Application Form or by way of application through the IPO website. Such separate application shall be deemed to be multiple applications and shall be rejected. Additional terms and conditions of and the procedures for the application for Offer Shares by way of Application Forms and IB/ATM Applications are set out in Appendix F of this Prospectus. 2) Placement Tranche Pursuant to the terms and conditions in the Placement Agreement signed between our Company and the Joint Lead Placement Agents dated 18 August 2003, the Joint Lead Placement Agents agreed to subscribe for and/or procure subscribers for the Placement Shares (inclusive of the Reserved Shares at the Issue Price. In the event that any of the Reserved Shares are not taken up, they will be made available to satisfy applications for the Placement Shares (excluding Reserved Shares) to the extent there is an over-subscription for the Placement Shares (excluding Reserved Shares) and to satisfy applications for Offer Shares to the extent that there is an over-subscription for Offer Shares as at the close of the Application List. In the event of an under-subscription for the Placement Shares as at the close of the Application List, that number of Placement Shares not subscribed for shall be made available to satisfy excess applications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List. In the event of an under-subscription for the Internet Placement Shares to be applied for through the IPO website as at the close of the Application List, that number of Internet Placement Shares not subscribed for shall be made available to satisfy excess applications for the Placement Shares by way of Placement Shares Application Forms to the extent there is an over-subscription for the Placement Shares as at the close of the Application List or to satisfy excess applications for the Offer Shares to the extent there is an over-subscription for the Offer Shares as at the close of the Application List. a) Placement Shares (excluding Reserved Shares) The Placement Shares (excluding Reserved Shares) are reserved for placement to members of the public and institutional investors in Singapore at the Issue Price. Application for the Placement Shares (excluding Reserved Shares) under the Placement Tranche may only be made by way of application forms or through the IPO website. An applicant who applies for the Placement Shares (other than Reserved Shares and Internet Placement Shares) must complete a Placement Shares Application Form, and shall not make any separate application for the Placement Shares (other than Reserved Shares) using another Placement Shares Application Form, or by way of application through the IPO website or for the Offer Shares (either using an Offer Share Application Form or by way of an IB/ATM Application). Such separate applications will be deemed to be multiple applications and shall be rejected. 17

27 PLAN OF DISTRIBUTION Additional terms and conditions of and the procedures for the application for Placement Shares are set out in Appendix F of this Prospectus. Subscribers of Placement Shares (excluding Reserved Shares) may be required to pay a brokerage of up to one per cent. of the Issue Price to the Joint Lead Placement Agents. b) Internet Placement Shares The Internet Placement Shares are reserved for placement to Qualifying Internet Applicants. Qualifying Internet Applicants may apply for the Internet Placement Shares though the IPO website. The offer of the Internet Placement Shares through the IPO website will be on a firstcome-first-served-basis, and is subject to availability at the time of application. A Qualifying Internet Applicant who has made an application for Internet Placement Shares through the IPO website shall not make any separate application for Placement Shares by way of a Placement Shares Application Form or by way of another application through the IPO website, or for the Offer Shares (either using an Offer Share Application Form or by way of an IB/ATM Application). Such separate applications will be deemed to be multiple applications and shall be rejected. Additional terms and conditions of and the procedures for the application for Internet Placement Shares through the IPO website are set out in Appendix F of this Prospectus. c) Reserved Shares To recognise contributions to our Company, we have reserved up to 1,650,000 Placement Shares for subscription by our Non-executive Director, employees, customers, suppliers and persons who have contributed to our success at the Issue Price. These Reserved Shares (excluding the Reserved Shares reserved for our Non-Executive Director) are not subject to any moratorium and may be disposed of after the admission of our Company to the Official List of the SGX-ST. Application for the Reserved Shares may only be made by way of application forms. Additional terms and conditions of and the procedures for the application for Reserved Shares are set out in Appendix F of this Prospectus. 18

28 PLAN OF DISTRIBUTION Other than our Non-executive Director, Mr Andy Ong Siew Kwee, none of our Shareholders or Directors intends to subscribe for Shares in the Invitation. None of the members of our Company s management or employees intend to subscribe for Shares in the Invitation amounting to more than 5% of the Invitation Shares. Subscribers of Placement Shares (excluding the Reserved Shares) may be required to pay a brokerage of up to 1.0% of the Issue Price to the Joint Lead Placement Agents. We are not aware of any person who intends to subscribe for Shares in the Invitation amounting to more than 5% of the Invitation Shares. Further, no Shares shall be allocated or allotted on the basis of this Prospectus later than six months after the date of registration of this Prospectus. 19

29 ISSUE STATISTICS Issue Price for each Offer Share $0.26 Net Tangible Assets The NTA per Share based on the balance sheet of our Company as at 31 December 2002 and after adjusting for the dividend payout in respect of FY 2002, the Bonus Issue, the Stock Split and the Stock Consolidation referred to on pages 98 and 99 of this Prospectus (the Adjusted NTA ): (a) (b) before adjusting for the estimated net proceeds of the Invitation and based on the pre-flotation share capital of 90,000,000 Shares after adjusting for the estimated net proceeds of the Invitation and based on the post-flotation enlarged share capital of 106,500,000 Shares 4.36 cents 6.88 cents Premium of Issue Price over the Adjusted NTA per Share: (a) (b) before adjusting for the estimated net proceeds of the Invitation and based on the pre-flotation share capital of 90,000,000 Shares after adjusting for the estimated net proceeds of the Invitation and based on the post-flotation enlarged share capital of 106,500,000 Shares 496% 278% Earnings Historical net EPS of our Company for FY 2002 based on the pre-flotation share capital of 90,000,000 Shares Adjusted historical net EPS of our Company for FY 2002 based on the preflotation share capital of 90,000,000 Shares, assuming that the Service Agreements (as set out on page 83 of this Prospectus) had been in place from the beginning of FY 2002 (1) Price Earnings Ratio Historical net PER based on the Issue Price of $0.26 and the historical net EPS of our Company for FY 2002 Adjusted historical net PER based on the Issue Price of $0.26 and the historical net EPS of our Company for FY 2002 assuming that the Service Agreements (as set out on page 83 of this Prospectus) had been in place from the beginning of FY 2002 (1) Net Operating Cash Flow (2) Historical net operating cash flow per Share of our Company for FY 2002 based on the pre-flotation share capital of 90,000,000 Shares Adjusted historical net operating cash flow per Share for FY 2002 had the Service Agreements been in place from the beginning of FY 2002 and based on the pre-flotation share capital of 90,000,000 Shares 2.86 cents 2.84 cents 9.09 times 9.15 times 4.55 cents 4.53 cents 20

30 ISSUE STATISTICS Issue Price to Cash Flow Ratio Historical price to net operating cash flow based on the historical net operating cash flow per Share (using the pre-flotation share capital of 90,000,000 Shares) for FY 2002 Adjusted price to net operating cash flow based on the adjusted historical net operating cash flow per Share for FY 2002 had the Service Agreements been in place from the beginning of FY 2002 Market Capitalisation Based on the Issue Price of $0.26 per Share and our post-flotation share capital of 106,500,000 Shares 5.71 times 5.74 times $27.69 million Notes: (1) Had the Service Agreements set out on page 83 of this Prospectus been effected in FY 2002, the estimated total remuneration for our Directors would have been $0.71 million instead of $0.69 million, and profit after income tax in respect of FY 2002 would have been $2.55 million, instead of $2.57 million. The adjusted net earnings per Share for FY 2002 based on the pre-flotation share capital of 90,000,000 Shares would have been 2.84 cents instead of 2.86 cents. The adjusted price earning ratio in FY 2002 would have been 9.15 times instead of 9.09 times. (2) Net operating cash flow for FY 2002 is defined as profit before income tax, adding back: (a) provision for depreciation of fixed assets of $780,000; and (b) intangible asset amortisation of $14,

31 RISK FACTORS Prospective investors should carefully consider and evaluate the following considerations and all the other information contained in this Prospectus before deciding to invest in our Shares. Some of the following risk factors relate principally to the industry in which our Company operates and the business of our Company in general. Other considerations relate principally to general economic and political conditions and the securities market and ownership of our Shares, including possible future sales of our Shares. If any of the following considerations and uncertainties develops into actual events, our business, results of operations and financial condition could be materially and adversely affected. In such cases, the trading price of our Shares could decline due to any of these considerations and uncertainties, and you may lose all or part of your investment in our Shares. RISKS RELATING TO OUR BUSINESS We are susceptible to changes in raw materials costs Our profitability depends, in part, on our ability to anticipate and react to changes in raw materials costs. These raw materials accounted for approximately 33.1% of our revenue for FY 2002 and consist mainly food ingredients, including seafood, for example, salmon, tuna and ebi (prawns). Our suppliers import the food ingredients from the Asia-Pacific region, except for the salmon which is imported from Europe. The prices of these raw materials are subject to price fluctuations due to various factors beyond our control, including severe climatic conditions and governmental regulations, which might reduce supply, leading to increases in food and supply costs. Based on our past experience, the prices of these raw materials may fluctuate up to an average of 7% from year to year. We cannot predict whether we will be able to anticipate and react to changing food and supply costs by adjusting our purchasing practices. We have no assurance that any increase in such costs can be passed on to our customers. Thus, increases in food and supply costs could materially and adversely affect our business, profitability and financial performance. We will be affected by any rent hikes in our restaurant premises or any inability to renew existing leases or procure new leases All of our F&B outlets are housed in leased premises. In FY 2000, FY 2001 and FY 2002, rental expenses of our F&B outlets accounted for 13.1%, 13.3% and 15.9% of our operating expenses respectively. Upon expiry of such leased tenures, the landlords have the right to review and alter the terms and conditions of the lease agreements. We face the possibility of an increase in the rental prices by the landlords or not being able to renew the leases on terms and conditions that are favourable to us. Any increase in the rentals would inevitably increase our operating expenses, thereby adversely affecting our business, profitability and financial performance. From the Latest Practicable Date to 31 December 2003, four of our current leases are up for renewal. Two of these leases have been successfully negotiated with our landlords for renewal and we do not foresee any difficulties in renewing the other two leases. Our business volume is to a large extent dependent on our ability to continue operating our F&B outlets at our existing locations which are strategic and procuring new strategic locations for our business operations. There is no assurance that we will be able to maintain our leases or secure new leases over strategic locations, and this will limit our growth. We may be affected by the spread of severe acute respiratory syndrome ( SARS ) or an outbreak of any other contagious or virulent disease A resurgence of the recent outbreak of SARS in various countries around the world, including Singapore where our F&B outlets are located and Indonesia and Thailand, the territories for which we have granted rights to set up Sakae Sushi restaurants, could have a material adverse effect on our business. In the event that the disease resurfaces, consumer sentiment may be adversely affected, leading to a reduced willingness of our customers to dine at our F&B outlets and the outlets set up by our business partners in the abovementioned countries. In addition, if any of our employees in any of our F&B outlets, food processing facility or catering division becomes infected with SARS, we may be required to shut down the relevant outlet or facility to prevent the spread of the disease. Furthermore, our expansion into 22

32 RISK FACTORS overseas markets was delayed because of travel advisories discouraging travel to certain SARS affected regions during the first half of A recurrence of the SARS epidemic could have a material adverse impact on our business and our financial performance. Similarly if there are outbreaks of any other contagious and virulent diseases, then such outbreaks may have a material adverse impact as our business, profitability and our financial performance. We may be affected by changes in economic and political conditions, consumer preferences or discretionary consumer spending Our F&B Business is subject to prevailing economic conditions in Singapore where our F&B outlets are located and where our catering events are held. Any changes in market and economic conditions may affect consumers disposable income, consumer confidence and hence discretionary consumer spending. In the event of an economic downturn, consumers will tend to become more budget conscious and price sensitive to the amount they are willing to spend on food. Any adverse changes in discretionary consumer spending will have a negative impact on our turnover and our financial performance would be affected. Our performance is also subject to social stability, developments in government policies with respect to taxation, regulations or other policies and other economic developments such as inflation and interest rates in Singapore. For example, an increase in the current level of GST to 4% may reduce consumer spending and may adversely affect our financial performance. The present global economic slowdown and the effect it may have on our business is exacerbated by the September 11 terrorist attacks in the United States, the recent terrorist attacks in South-East Asia, the recent war on Iraq and the potential conflict which may arise between North Korea and the United States and could be further affected by the developments which may arise as a result. In the event of any further adverse economic or political changes or shifts in consumer preferences away from our F&B Business, our future financial performance could be materially and adversely affected. Changes in consumer taste, political and economic conditions are unpredictable and beyond our control. Therefore, we cannot provide any assurance that such changes in the above conditions and developments will not occur. Similarly, our F&B Franchising Business is also subject to all the above-mentioned risks in the respective countries that they are located. As our royalties from the franchisees are usually a percentage of their turnover, a decrease in the turnover of our various franchisees would adversely affect our business, profitability and financial performance. We may be materially affected by suspension or revocation of our governmental licences as a result of non-compliance with hygiene standards In the F&B industry, food hygiene is critical. The NEA imposes high standards of hygiene on cooked food served by all licensed F&B operators in Singapore. F&B operators are required to maintain high standards of hygiene and are subject to periodic hygiene inspections by the NEA. All F&B operators are graded from A to D in descending order of merit. As at Latest Practicable Date, most of our F&B outlets that have been inspected have been awarded the A grade, corresponding to the excellent grade for the areas assessed. However, in the event that we fail to comply with the standards imposed by the NEA, our foodshop licence to operate that F&B outlet may be revoked or suspended by the Environmental Health Department. A revocation or suspension of the foodshop licence of any of our F&B outlets will affect our business and our financial performance. In addition, our catering business is required to possess licences issued by the Agri-Food and Veterinary Authority of Singapore ( AVA ) for the import and export of food products. Such licences are valid for a one-year period. All food imports are subject to inspection and must comply with the prevailing regulations of the AVA. In the event that any food imports do not comply with the prevailing regulations, such licences may be revoked or suspended by the AVA. A revocation or suspension of any of our import and export licences will affect our business and our financial performance. Please refer to the section titled Government Regulations in this Prospectus for more details of licences held by our Company. 23

33 RISK FACTORS We may be adversely affected if our expansion plans are not successful We intend to expand our presence in new overseas markets, through direct investments, joint ventures and franchise operations. Please see the section titled Our Future Plans for more details. Our expansion plans involve a number of risks, including but not limited to the costs of setting up our business overseas, investment in fixed assets, costs of working capital tied up in inventories as well as other working capital requirements. If we fail to achieve a sufficient level of revenue or if we fail to manage our expansion efficiently, then our business, profitability and financial performance may be adversely affected. We will be affected by any failure to maintain the quality of the food offered and proper maintenance of our F&B outlets It is essential in the food industry that the quality of food served must be consistent. Inconsistency in the quality of food served would result in customers dissatisfaction and hence a reduction in their patronage. A high staff turnover and shortage of staff or the lack of proper supervision may affect the quality of food served in our F&B outlets. In addition to the quality of food served, it is important that the furniture and fixtures in our F&B outlets are properly maintained in order to uphold our image and branding and encourage repeat patronage by customers. Failure to do so would adversely affect our business, profitability and thus affect our financial performance. We may be affected by changes in government regulations The F&B, food processing and catering industries in Singapore are subject to government rules and regulations, including but not limited to those relating to the processing of food, sale of food and alcoholic beverages, sanitation, building and zoning requirements. Any changes in such government regulations might have a negative impact on our business. The failure to maintain or renew governmental licences, permits and approvals, including food and liquor licences, could have a material adverse effect on our operating results. Difficulties or failure in obtaining the required licences and approvals could delay, or result in our decision to cancel the opening of new F&B outlets. Local authorities may suspend or deny renewal of our food and liquor licences if they determine that our conduct does not meet applicable standards. Although we have satisfied foodshop and liquor licensing requirements for our existing F&B outlets, we cannot predict whether we will be able to maintain these approvals or obtain these approvals at future locations. We are also subject to local health code requirements, including regulations relating to food safety and food handling and storage. Please refer to the section titled Government Regulations in this Prospectus for more details of licences held by our Company. Changes in labour laws could affect our operations and profits. In addition, we are subject to labour laws that govern the employment of our local and foreign employees. These requirements amongst others include foreign worker levies, minimum wage requirements and overtime pay. Foreign workers constitute approximately 24.8% of our full-time employees as at the Latest Practicable Date and should there be any tightening of foreign employee content or laws, our operations will be affected. Other changes in labour laws, such as imposition of minimum wages, increases in overtime pay, increase in the employers contribution for CPF, paid leave of absence and mandated health benefits and issues concerning the employment of foreign workers would increase our labour costs and adversely affect our profitability and financial performance. We would be affected by any outbreak of disease in livestock or food scares Any outbreak of diseases in livestock and food scares in the region and around the world may have a material adverse impact on our business as it may lead to a loss in consumer confidence in the particular food concerned. For example, an outbreak of toxic plankton (a phenomenon known as red tide ) may result in a reduction in consumption of seafood by consumers and may also have a material adverse effect on the sources of supply of seafood. In addition, efforts to source for alternative sources for that particular food may be more costly. Any such increase in cost or loss of business faced by our F&B Business will adversely affect our business, profitability and financial performance. 24

34 RISK FACTORS Our nature of business is highly competitive Competition in the F&B industry is intense and there is constant pressure on our F&B outlets. In FY 2000, FY 2001 and FY 2002, our F&B outlets accounted for 100%, 93.5% and 87.4% of our Company s turnover respectively and we compete on the basis of taste, quality, price of food offered, customer service, ambience and the overall dining experience. While we attempt to differentiate our F&B outlets in terms of concepts, themes and designs, we are aware that there are other F&B establishments that operate on similar concepts. Our competitors include a large and diverse group of restaurant chains and individual restaurants such as independent operators (both local and foreign) that have set up F&B establishments in Singapore. In addition, we compete with other F&B establishments for site locations and employees. The entrance of new competitors into our markets or into the immediate areas surrounding our existing restaurants could affect the turnover and profitability of our F&B outlets, thus affecting the financial performance of our Company. Our business will be adversely affected by complaints from customers and bad publicity Like any operator in the F&B industry, we can be adversely affected by negative publicity concerning food quality, illness, injury, publication of government or industry findings concerning food products served by us, or other health concerns or operating issues arising from one F&B establishment, a limited number of F&B establishments, food processing facilities or any catering companies. At any instance, our F&B outlets, food processing facility and catering division can be subject to negative allegations from our customers, complaints of illnesses and injuries incurred on our premises, food quality and operational inefficiency. In addition, we may also be the subject of malicious groundless rumours which may be easily transmitted and spread through the increased use of the Internet and the increasingly popular SMS messaging. Such bad publicity will materially affect the business of our F&B outlets, food processing facility and catering division regardless of whether these allegations are genuine. If there are incidences of poor hygiene with regard to food preparation or lack of cleanliness of our F&B outlets, food processing facility and catering division, the bad publicity arising from such incidences would damage our image, reduce customers confidence in our products and result in reduced patronage of our F&B outlets, food processing facility and catering division and thus, have an adverse impact on our business, profitability and financial performance. Pilferage and theft by our employees and outsiders will harm our operating results, profits, reputation and branding In the F&B industry, our employees handle the cash sales and food items and lapses in internal controls may possibly occur. Should we fail to impose strict monitoring on our staff for possible practices of pilferage and theft of raw materials by employees and outsiders, we will not be able to prevent such misdeeds from happening. These wrongdoings will not only harm our financial performance, but also our reputation and branding. We rely heavily on our senior management staff and the inability to retain or attract staff will adversely affect our business and financial performance We are highly dependent on our senior management staff, in particular, our founder and CEO, Douglas Foo. Douglas Foo plays a vital role in the continual expansion of our businesses, as Douglas Foo is responsible for our business development and overall business strategy. Although Douglas Foo has executed a service agreement with our Company for an initial period of three years from the date of listing of our Company on the SGX-SESDAQ, he is entitled to voluntarily terminate his service agreement by giving us six months notice in writing (details of his service agreement is set out in the section titled Directors, Management and Staff in this Prospectus). In addition, our CEO is assisted by our Executive Officers. The loss of the services of any of our Executive Officers and that of other key personnel without adequate replacements could adversely affect our business. We also believe that our future success will depend upon our ability to attract, retain and motivate senior management staff. Our inability to do so would adversely affect our business and financial performance. 25

35 RISK FACTORS Our business is largely service oriented and our employees are important to us Our continued success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified and skilled employees. Qualified individuals of the requisite calibre are in short supply in the F&B industry. In particular, experienced and skilled chefs are scarce and difficult to attract. Any failure to recruit skilled personnel and to retain our key staff might adversely impact our operations and expansion plans. Any material increases in employee turnover rates in any of our existing F&B outlets could have a material adverse effect on our business operations, financial condition, operating results or cash flows. Additionally, competition for qualified employees would require us to pay higher wages to attract and retain sufficient employees, which could result in higher labour costs and adversely affect our business, profitability and financial performance. We are dependent on our intellectual property We believe that our trademarks have significant value and are important to our brand-building efforts and the marketing of our F&B concepts. As at 30 June 2003, we have made applications to register our trademarks in Singapore. Please see the section titled Trade Marks and Patents in this Prospectus for more details of our trademarks. Even though we have made applications for the registration of our trademarks, we cannot ensure that our trademarks will not be infringed upon. Unauthorised use of our trademarks may harm our reputation and consequently our business, profitability and financial performance would be adversely affected. Our portable kaiten conveyor belt system and our interactive menu system are patent pending in Singapore. We have also made applications in Australia, Indonesia and the US for the registration of a patent for our portable kaiten conveyor belt system. As the patents have a limited effective period of typically twenty years, we cannot ensure that our competitors will not create duplicates once the patents expire. This would reduce the uniqueness of our F&B concepts and could materially and adversely affect our business, profitability and financial performance. Our F&B Franchising Business would be adversely affected by the unavailability of suitable franchisees or the failure by our franchisees to perform Our franchise system is dependent on the quality and ability of suitable franchisees, and their financial strength and ability to penetrate new markets. As described under F&B Franchising Business on pages 58 to 59 of this Prospectus, our management carefully evaluates potential franchisees and conducts regular quarterly reviews on the franchisee outlets, so as to maintain the high standards required of our franchisees. However, we cannot give any assurance that we will be able to continually attract suitable franchisees or that such franchisees will continue with our franchise. The loss of our franchisee in any particular market will result in a decrease of our revenues in that market while we seek alternative franchisees or undertake to carry on the business ourselves if the domestic regulations permit. The loss of our franchisee may also present an opportunity to competitors to increase their market share in that market at our expense. As at the Latest Practicable Date, we have not experienced any loss of franchisee in any particular market since the implementation of our franchise system. In addition, where our existing franchisees fail to perform, our revenue generated by such royalties will be adversely affected. This will affect our profitability and financial performance. We have entered into a franchise agreement with a third party in Indonesia. Please see the section titled Our History in this Prospectus for more details. Under Indonesian law as at the Latest Practicable Date, we understand that a franchise agreement must be executed in the Indonesian language and must be governed by Indonesian law. In addition, under Indonesian law as at the Latest Practicable Date, we understand that our franchisee in Indonesia is required to register the franchise agreement between ourselves and themselves ( Franchise Agreement ) with the relevant Indonesian regulatory authorities within thirty days of the effective date of the Franchise Agreement. As far as we are aware, such registration has not been effected by our Indonesian franchisee. Further, the Franchise Agreement is governed by Singapore law. Accordingly, under Indonesian law as at the Latest Practicable Date, it is possible that the Franchise Agreement may not be legal, valid and enforceable against our Indonesian franchisee in the Indonesian courts. The contribution by our Indonesian franchisee to the revenue of our Company for FY 2001 and FY 2002 arising from the Franchise Agreement is $8,108 (comprising approximately 0.1% of the total revenue of the Company) and $211,099 (comprising 0.9% of the total revenue of the Company) respectively. In the event that our Indonesian franchisee defaults in the payments due to us under the Franchise Agreement, we may not be able to enforce the terms of the Franchise Agreement against our Indonesian franchisee. Accordingly, the business, profitability and financial performance of our Company will be affected. Our Indonesian franchisee has undertaken to take the necessary action to register the Franchise Agreement with the relevant Indonesian authorities. 26

36 RISK FACTORS We may be subject to public liability risk We may, from time to time, be the subject of complaints from customers alleging illnesses after consuming our food or injuries suffered at our premises. Some of these complaints may escalate to become lawsuits against our Company. Such lawsuits would give rise to negative publicity, which would materially and adversely affect our businesses and financial performance, regardless of the verdict passed. Also, resources (including, but not limited to time and legal costs) would have to be utilised to contest the lawsuits, further adversely affecting our financial performance. Save as disclosed in the section titled General and Statutory Information Litigation in this Prospectus, there have been no material litigation brought against our Company in the past three financial years, however, we cannot guarantee that there will be no material litigation brought against our Company in the future. We are exposed to foreign exchange risks Our revenue and costs are mainly denominated in Singapore dollars. However, some of our purchases are procured from overseas suppliers in United States Dollars and Japanese Yen. We are exposed to foreign exchange risks principally as a result of such foreign exchange purchases. Fluctuations in foreign exchange rates affect the costs of supplies purchased when these are converted into Singapore dollars. For FY 2000, FY 2001 and FY 2002, the quantum of such purchases accounted for approximately 3.6%, 9.3% and 8.8% of our total purchases respectively. We do not hedge our foreign exchange exposure and our results are therefore exposed to foreign exchange fluctuations. We will be affected by any unexpected closure or plans to demolish buildings in which our restaurants are located There is no assurance that the buildings in which our F&B outlets are located will continue to be in operation and will not be closed down or demolished. In the event that such closure or demolition happens, we will need to write-off all the fixed assets of those particular F&B outlets. Furthermore, we may not be able to find suitable alternative locations and there will be a loss in income for our Company. The compensation that we may receive from the owners of the building may not be sufficient to offset the loss of income and the write-off in fixed assets. Accordingly, our business, profitability and financial performance would be adversely affected. Our suppliers may provide us with genetically modified food ingredients The introduction of genetically modified food has been received with much controversy and there are certain groups of people who are very averse to the concept of genetically modified food for various reasons, including environmental dangers and health dangers. In the event that our suppliers do provide us with genetically modified food products without our knowledge, we may be serving food derived from genetically modified ingredients to our customers and when it is subsequently discovered and publicised that our F&B outlets serve genetically modified food, some of our customers may choose not to patronise our F&B outlets, which would materially and adversely affect our financial performance. We are liable without limit for the debts and obligations of our sole-proprietorships Our Company currently carries out business in Singapore through sole-proprietorships. Please see the section titled Structure of our Company in this Prospectus for further details. Our Company is the sole proprietor of these sole proprietorships and accordingly our Company is liable without limit for all the liabilities and obligations of these sole proprietorships. Accordingly, a potential claimant would be able to enforce its claims against our sole proprietorships against the assets of our Company. This may have an adverse effect on our Company, our business, our operations and our financial performance. 27

37 RISK FACTORS RISKS RELATING TO AN INVESTMENT IN SHARES Future sale of Shares could adversely affect the Share price Any future sale or availability of Shares can have a downward pressure on our Share price. The sale of a significant amount of Shares in the public market after the Invitation, or the perception that such sales may occur, could materially affect the market price of Shares. These factors also affect our ability to sell additional equity securities. Except as otherwise described in the section titled Moratorium in this Prospectus, there will be no restriction on the ability of the substantial shareholders to sell their Shares either on the SGX-ST or otherwise. Our Share price may fluctuate following this Invitation The market price of the Shares may fluctuate significantly and rapidly as a result of, among others, the following factors, some of which are beyond our control: variations of our operating results; changes in securities analysts estimates of our financial performance; announcements by us of significant acquisitions, strategic alliances or joint ventures; additions or departures of key personnel; fluctuations in stock market prices and volume; involvement in litigation; and general economic and stock market conditions. No prior market for the Shares Prior to this Invitation, there has been no public market for the Shares. The Issue Price may not be indicative of the market price for the Shares after the completion of this Invitation. We have applied to the SGX-ST for the listing and quotation of the Shares on the Official List of the SGX-SESDAQ. However, no assurance can be given that an active trading market for the Shares will develop or, if developed, will be sustained. Control by existing Shareholders may limit your ability to influence the outcome of decisions requiring the approval of shareholders Upon the completion of the Invitation, our Company s CEO, Mr Douglas Foo, will beneficially own approximately 84.5% of the issued Shares. As a result, Mr Douglas Foo will be able to exercise significant influence over all matters requiring shareholder approval, including the election of directors and the approval of significant corporate transactions. He will also have veto power, with respect to any shareholder action or approval requiring a majority vote except where he is required by the rules of the Listing Manual to abstain from voting. Such concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our Company which may benefit our Company s shareholders. New investors will incur immediate dilution and may experience further dilution Our Issue Price of $0.26 per Share is substantially higher than our Company s NTA per Share of 6.88 cents based on the post-invitation issued share capital. If we were liquidated immediately following this Invitation, each investor subscribing to this Invitation would receive less than the price paid for their Shares. In addition, we intend to grant our employees share options to acquire our Shares under the Apex-Pal Employee Share Option Scheme. To the extent that such outstanding options are exercised, there will be further dilution to Investors in this Invitation. See the section titled Dilution in this Prospectus for more details. 28

38 USE OF PROCEEDS The net proceeds from the issue of the New Shares (after deducting estimated issue expenses) is approximately $3.40 million, which we intend to use in the following manner: (a) (b) (c) approximately $1.02 million for the establishment of new F&B outlets locally and overseas. Please see the section titled Future Plans in this Prospectus; approximately $1.02 million for the development of new concepts and brands. Please see the section titled Future Plans in this Prospectus; and the balance for our general corporate and working capital requirements. Pending the deployment of the net proceeds from the issue of New Shares as aforesaid, the funds will be placed in short-term deposits with banks and financial institutions or invested in money market instruments or used for our working capital requirements as our Directors deem fit in their absolute discretion. In the opinion of the Directors, no minimum amount must be raised by the Invitation. 29

39 SELECTED FINANCIAL INFORMATION The following selected financial information should be read in conjunction with the full text of the Prospectus, including the section Review of Past Operating Performance and Financial Position and the Independent Auditors Report on Financial Statements of the Company for the Financial Years ended 31 December 2000, 2001 and 2002 set out in Appendix A of this Prospectus. The financial statements of our Company are prepared and presented in accordance with the Singapore Statements of Accounting Standards. OPERATING RESULTS OF OUR COMPANY Audited $ 000 FY 2000 FY 2001 FY 2002 Revenue 10,303 15,251 23,481 Cost of sales (3,292) (4,837) (7,761) Gross Profit 7,011 10,414 15,720 Other operating income Staff costs (3,689) (4,442) (7,146) Rental expenses (841) (1,232) (2,178) Depreciation (390) (567) (780) Administrative expenses (558) (977) (1,178) Other operating expenses (526) (936) (1,283) Profit from operations 1,027 2,386 3,335 Finance costs (1) (5) (30) Profit before income tax 1,027 2,381 3,305 (2) Income tax expense (295) (594) (735) Profit after income tax and attributable to shareholders 732 1,787 2,570 (2) EPS (cents) (3) Notes: (1) These were mainly due to interest expenses incurred for bank loans obtained by our Company in respect of two investment properties. The investment properties have been transferred to our CEO, Mr Douglas Foo, and our Executive Officer, Ms Koh Yen Khoon, prior to this Invitation. Please refer to the section Restructuring Exercise of this Prospectus for more details. (2) Had the Service Agreements (as set out in Service Agreements of this Prospectus) been in place from the beginning of FY 2002, the profit before taxation and profit after taxation would have been $3.28 million and $2.55 million, instead of $3.31 million and $2.57 million respectively. (3) For comparative purposes, the EPS has been calculated based on profits attributable to shareholders and on the pre- Invitation share capital of 90,000,000 Shares. 30

40 SELECTED FINANCIAL INFORMATION FINANCIAL POSITION OF OUR COMPANY Audited as at 31 December 2002 $ 000 Non-current assets Plant and equipment 2,490 Investment properties (1) 2,126 Intangible asset 46 4,662 Current assets Cash and bank balances 2,221 Fixed deposits 221 Due from related parties (2) 1,242 Other receivables and prepayments 1,194 Trade receivables 1,091 Inventories 402 6,371 Current liabilities Trade payables 1,546 Due to related parties (3) 306 Due to a shareholder 120 Other payables 797 Current portion of bank loans 99 Income tax payable 1,094 3,962 Net current assets 2,409 Non-current liabilities Bank loans (4) 1,440 Deferred taxation 160 Total equity 5,471 NTA per Share (cents) (5), (6) 4.36 Notes: (1) Pursuant to the Restructuring Exercise, our Company has transferred the investment properties to our CEO, Mr Douglas Foo, and our Executive Officer, Ms Koh Yen Khoon. Please refer to the section Restructuring Exercise on pages 51 and 52 of this Prospectus for more details. (2) This refers to both non-trade related amounts (mainly comprising advances to and payments on behalf of BTB, Brezo and Trivest) and trade related amounts (mainly for purchases of food products from our food processing facility by BTB and Brezo). These amounts have been settled prior to the Invitation and such related parties transactions are not expected to continue after the Invitation. Please refer to the section Past Interested Person Transactions of this Prospectus for more details. (3) This refers to both non-trade related amounts (mainly comprising advances from Trivest) and trade related amounts (mainly for purchases of food products from Brezo and BTB by our Company). These amounts have been settled prior to the Invitation and such related parties transactions are not expected to continue after the Invitation. Please refer to the section Past Interested Person Transactions of this Prospectus for more details. (4) The bank loans are obtained by our Company for the purpose of acquiring the two investment properties. For more information on the sale of the investment properties, please refer to the section on Restructuring Exercise on pages 51 and 52 of this Prospectus. (5) Pursuant to the Restructuring Exercise, a proposed dividend of $1.5 million was declared in respect of FY The dividend was paid out on 16 May 2003 and the adjusted equity of our Company, net of the dividend was $3,971,000 as at 31 December (6) For comparative purposes, the NTA per Share is computed based on the pre-invitation share capital of 90,000,000 Shares. 31

41 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes elsewhere in this Prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our 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 not limited to, those discussed below and elsewhere in this Prospectus, particularly in Risk Factors. OVERVIEW For the purpose of our review of past operating performance and financial position, we have segmented our revenue, profit before income tax ( PBT ) and profit before income tax margin ( PBT Margin ) for the past three financial years into two business segments, namely, F&B Business and F&B Franchising Business. The past operating performance for F&B Business included the results of Nouvelle Events that had commenced operations in April The revenues for Nouvelle Events were approximately $694,000 in FY 2001 and $2.18 million in FY 2002, contributing 4.6% and 9.3% to our total revenue for the respective financial years. As Innotech Consulting had mainly provided services internally to our Company and revenue for services rendered to third parties was not significant, an additional segment for IT Services would not add any material information to our review of past operating performance and financial position. As Sakae Express had only commenced operations in July 2003, it did not contribute to our financial performances in FY 2000 to FY We derive our revenue primarily from the operations of our F&B Business in Singapore. In addition, we also derived some revenue from our F&B Franchising Business. Our franchisees have been operating Sakae Sushi restaurants in Indonesia and Thailand since In FY 2001, we generated approximately 1.9% of our total revenue from overseas but incurred losses before income tax of approximately $44,000 (mainly due to one-time administrative expenses incurred). In FY 2002, franchise operations accounted for approximately 3.3% of our total revenue and 16.9% of our PBT. Revenue Our sources of revenue are derived from: (a) F&B Business Sakae Sushi, Sakae Express and Crepes & Cream This relates to dine-in and take-away sales of food and beverages (including, but not limited to, appetizers, main courses, desserts and non-alcoholic and alcoholic beverages) at our F&B outlets, presently located within Singapore. Revenue is derived mainly from the sale of food and beverages and the service charge implemented. The business at our F&B outlets can be affected by many factors, both external and within Singapore. In particular, the business at our F&B outlets is affected by the health of the Singapore economy, which in turn, is closely linked to the world economy. Any changes in the economic conditions may affect consumer confidence, consumers disposable income and hence spending which is discretionary. An economic downturn will cause consumers to be more budget conscious and to spend less on food, thus reducing the demand for our F&B products. Our Sakae Sushi, Sakae Express and Crepes & Cream outlets target customers in the middle-income bracket. We believe that customers in this segment are more resilient to the potential economic uncertainties and would provide a relatively stable revenue stream for our Company. Despite the uncertainty faced by the Singapore economy for the past few years, our F&B outlets achieved year-on-year revenue growth of approximately 38.4% in FY 2001 and 43.9% in FY The businesses at our F&B outlets tend to experience a slight decrease in the month of April and an increase in the month of December. The decrease and increase in turnover correspond to the mid-year exam period for students and the year-end holidays respectively. Based on past experience, the fluctuations averaged approximately 10% to 15% of the monthly revenue of the F&B outlets. 32

42 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION Nouvelle Events This relates to the sale of finished and semi-finished food products processed at our food processing facility (for example, salmon fillets, sushi and pastries) to third party F&B establishments (including hotels, cafés and restaurants). Revenue is derived from the sale of the processed food products to third party F&B establishments. In addition to the sale of processed food products, Nouvelle Events also provides catering services for various events and functions. These events and functions range from simple caterings for private parties to large public functions of up to a thousand or more guests. Such large functions may also utilise our portable conveyor belt delivering the kaiten experience to the guests. For larger scale events or functions, we are usually invited by potential customers to pitch and tender for the provision of catering services for these functions. We also have a chef-for-hire service where our chef is personally present at such events to prepare the meal. Revenue for both the basic catering and chef-for-hire services is usually derived by charging customers on a per head basis for these events or functions, and the unit price depends on the specific requirements (including the scale of the event or function) of the customers as well as the type and quality of the food and beverages to be served. Nouvelle Events is also in the business of operating certain F&B facilities of clubhouses. Currently, we are involved in the operation of certain F&B facilities of three clubhouses - two for the Ministry of Education and one for the Singapore Polytechnic Graduate Guild. The food and beverages served at the F&B facilities of the three clubhouses operated by us are procured from the food processing facility of Nouvelle Events. Revenue is derived from such sale of the food and beverages. The economies of scale enjoyed by Nouvelle Events allows for the food and beverages to be sold at competitive prices, contributing to the success of our business in this area. Through Nouvelle Events, we are also involved in the trading of food products (this includes the sole distributing activity relating to Bud s Ice Cream and the trading in dory fillet, salmon, and various food sauces). Revenue is derived from the trading in the various food and food ingredients. The businesses of Nouvelle Events are generally not seasonal in nature although the turnover of our food processing facility and the catering services usually experience a slight increase during the festive seasons at the end and beginning of each calendar year. Details of our F&B Business are set out in the section Our Business of this Prospectus. As our F&B Business operates mainly on a cash basis, there are no advance orders from customers. (b) F&B Franchising Business This relates to the rights, management expertise and supplies of equipment and materials we offer to our franchisee to operate F&B outlets under our Sakae Sushi and Crepes & Cream brand names. Revenue is derived from the initial franchise fees, monthly royalties (these are either a fixed amount or a percentage of the monthly gross turnover of the franchised outlet) and the sale of materials and equipment to the franchisees. The sale of materials refers mainly to various types of food containers and cutlery. These are usually provided as and when they are required by the franchisees. The sale of equipment includes, amongst others, conveyor belts and rice-ball making machines. These are usually required prior to the opening of any new outlets. Details of this business are set out in the section Our Business of this Prospectus. 33

43 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION Costs of Sales (a) F&B Business Sakae Sushi, Sakae Express and Crepes & Cream Our cost of sales comprises cost of beverages and food ingredients needed for the preparation of the food items sold at our F&B outlets. Some examples of the food ingredients include sushi rice, various types of seafood (for example, salmon, tuna and ebi) and an assortment of vegetables. Most of the aforesaid food ingredients are procured from Nouvelle Events. Nouvelle Events Our cost of sales for our food processing facility comprises cost of food ingredients for the processing of finished food products (for example, rice grains and flour, butter and eggs) and other food ingredients (including salmon, tuna, ebi and various food sauces) that are needed for the preparation of the semi-finished food products. The food processing facility provides most of the food and beverages required by the catering services and the operation of certain F&B facilities at the clubhouses. Our cost of sales for our trading activities relates to the cost of the food and food ingredients which we trade in, including Bud s Ice Cream, dory fillet, salmon and various food sauces. (b) F&B Franchising Business Our cost of sales comprises cost of materials (mainly food containers and cutlery) and equipment (including, amongst others, conveyor belts and rice-ball making machines) sold to our franchisees. We purchase the various food ingredients, beverage and food sauces from both local and overseas suppliers. Our suppliers, in turn, import the various food ingredients, beverage and food sauces from other sources in the Asia-Pacific region except for salmon which is procured from Europe. Cost of sales accounted for 32.0%, 31.7% and 33.1% of our revenue for FY 2000, FY 2001 and FY 2002 respectively. Other operating income Other operating income consists mainly grants awarded by various government agencies and foreign currency exchange adjustment gains. Government grants accounted for 5.0%, 79.4% and 95.6% of other operating income in FY 2000, FY 2001 and FY 2002 respectively. In FY 2000, FY 2001 and FY 2002, other operating income contributed approximately 1.9%, 5.3% and 5.4% respectively to PBT. Staff costs Staff costs consist of salaries (including CPF contributions and bonuses) of our full-time employees, directors remuneration (comprising directors salaries and directors fees) and wages for our part-time service crew. For each of the past three financial years ended 31 December 2002, directors remuneration accounted for 26.9%, 12.9% and 10.2% respectively of the total staff costs. The main factors affecting our staff costs include the supply and demand conditions of the labour market, the employer s CPF contribution rate and the number of full-time employees and service crew employed by our Company. As at the end of each of FY 2000, FY 2001 and FY 2002, we had 119, 183 and 344 fulltime employees and 53, 75 and 104 part-time service crew respectively. Accordingly, our staff costs rose from $3.69 million in FY 2000 to $4.44 million in FY 2001 and to $7.15 million in FY Staff costs accounted for approximately 61.4%, 54.5% and 56.9% of our total operating expenses for FY 2000, FY 2001 and FY 2002 respectively. The higher percentage of total operating expenses attributed to staff cost in FY 2000 was due mainly to the payment of directors fees by our Company which amounted to $400,000. We did not pay directors fees in FY 2001 and FY

44 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION Rental expenses Rental expenses consist rental paid for our office premises, F&B outlets and food processing facility. Details of our rented properties are set out in the section Properties and Fixed Assets of this Prospectus. Rental expenses accounted for 14.0%, 15.1% and 17.3% of our total operating expenses for FY 2000, FY 2001 and FY 2002 respectively. The majority of the rental expenses can be attributed to the rental for the F&B outlets, accounting for 93.4%, 87.9% and 91.7% of the rental expenses for each of the past three financial years ended 31 December respectively. As at 31 December 2002, our rented properties included office premises, 12 Sakae Sushi restaurants, a Crepes & Cream restaurant, one Crepes & Cream café, one Crepes & Cream kiosk and a food processing facility. Administrative expenses Administrative expenses consist mainly transport expenses, printing expenses, travel expenses, advertisement and promotional expenses, professional fees, insurance and medical expenses, and sundries. Transport expenses refer to transport related costs (for example, costs for transporting processed, finished and semi-finished food products and distributing trade-related food products) incurred by our Company. Transport expenses accounted for approximately 9.0%, 14.0% and 16.1% of our administrative expenses for FY 2000, FY 2001 and FY 2002 respectively. Printing expenses consist of expenses incurred mainly for the printing of our in-house newsletter and marketing materials. Printing expenses accounted for approximately 6.5%, 15.6% and 14.4% of our administrative expenses for each of the past three financial years ended 31 December respectively. Travel expenses refer to costs due mainly to overseas marketing activities by our management and it accounted for 6.8%, 8.5% and 9.6% of our administrative expenses for each the past three financial years respectively. Advertisement expenses were incurred mainly for recruitment advertisements placed in the various newsprints and promotional expenses were for activities to promote our franchise overseas and local marketing activities. Collectively, advertisement and promotional expenses accounted for 4.9%, 9.9% and 10.8% of our adminstrative expenses for FY 2000, FY 2001 and FY 2002 respectively. Professional fees include mainly audit, legal, secretarial, consultancy and other professional fees. Professional fees accounted for 33.1%, 11.2% and 13.1% of our administrative expenses for FY 2000, FY 2001 and FY 2002 respectively. Insurance expenses are incurred as we insure our assets against damages and spoilage. Insurance and medical expenses accounted for 5.3%, 5.7% and 6.2% of our administrative expenses for FY 2000, FY 2001 and FY 2002 respectively. Sundries accounted for 11.4%, 5.6% and 8.4% of our administrative expenses for FY 2000, FY 2001 and FY 2002 respectively. In addition, we also provided doubtful debts of $68,000 (7.0%) in FY We did not provide for any doubtful debts in FY 2000 and FY Administrative expenses accounted for 9.3%, 12.0% and 9.4% of our total operating expenses for FY 2000, FY 2001 and FY 2002 respectively. Other operating expenses Other operating expenses comprise mainly dishwashing charges, utility charges and credit card commissions. Dishwashing charges accounted for 26.8%, 28.1% and 33.6% of our other operating expenses in FY 2000, FY 2001 and FY 2002 respectively. For each of the past three financial years, 19.0%, 34.6% and 32.8% of our other operating expenses was attributed to utility charges. Other operating expenses accounted for 8.8%, 11.5% and 10.2% of our total operating expenses for FY 2000, FY 2001 and FY 2002 respectively. 35

45 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION Analysis of Past Performance by Businesses Revenue Audited FY 2000 FY 2001 FY 2002 S$ 000 % S$ 000 % S$ 000 % F&B Business 10, , , F&B Franchising Business Revenue 10, , , Profit / (Loss) Before Income Tax Audited FY 2000 FY 2001 FY 2002 S$ 000 % S$ 000 % S$ 000 % F&B Business 1, , , F&B Franchising Business (44) (1.8) Others (1) (26) (0.8) Profit before income tax 1, , , Note: (1) Net of finance costs and interest income which include the interest incurred for the two investment properties which have been transferred out of the listing group pursuant to the Restructuring Exercise. Profit / (Loss) Before Income Tax Margins Audited FY 2000 FY 2001 FY 2002 % % % F&B Business F&B Franchising Business (14.9)

46 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION REVIEW OF PAST PERFORMANCE FY 2000 vs FY 2001 Revenue In FY 2001, we recorded revenue of $15.25 million, an increase of approximately $4.95 million or 48.0% compared to $10.30 million in FY This increase was attributed mainly to an increase in revenue of approximately $4.65 million from our F&B Business and approximately $295,000 from our F&B Franchising Business. The increase in revenue of approximately $4.65 million from our F&B Business was due mainly to the following: (a) (b) (c) The increase of approximately $2.50 million in F&B sales was attributed to our five existing Sakae Sushi restaurants, mainly due to full year contributions from our Sakae Sushi restaurants at EastPoint Mall (February 2000) and Marina LeisurePlex (June 2000) and increase in F&B sales from our Sakae Sushi restaurant at Wheelock Place which expanded its operations to include additional retail space in June 2001; New revenue contributions of approximately $1.46 million from F&B sales from our two new Sakae Sushi restaurants located at Liang Court (March 2001) and Northpoint Shopping Centre (July 2001) and our first Crepes & Cream restaurant which commenced operations at The Heeren (September 2001); and Revenue of approximately $694,000 from Nouvelle Events which commenced operations in April Our F&B Franchising Business, in its first year of operations, contributed approximately $295,000 to our revenue in FY The revenue was mainly from the franchise fees, royalties and sale of materials and equipment to our Indonesian and Thai franchisees. The franchise agreements with the Indonesian and Thai franchisees were entered into in March 2001 and May 2001 respectively. In FY 2001, our franchisees in Indonesia and Thailand set up one Sakae Sushi restaurant each in August 2001 and May 2001 respectively. Cost of sales The cost of sales increased by approximately $1.55 million or 46.9%, from $3.29 million in FY 2000 to $4.84 million in FY This increase in cost of sales was in line with the increase in our revenue. Gross profit increased correspondingly from $7.01 million in FY 2000 to $10.41 million in FY 2001, an increase of approximately $3.40 million or 48.5%. Operating expenses Operating expenses increased 35.8% or $2.15 million from $6.00 million in FY 2000 to $8.15 million in FY Staff costs increased 20.3% or $0.75 million from $3.69 million in FY 2000 to $4.44 million in FY The increase in staff costs is due mainly to the increase in salaries for our full-time staff and wages for our part-time service crew of $1.17 million or 43.6% from $2.70 million in FY 2000 to $3.87 million in FY 2001 as we hired more employees and service crew to operate our two new restaurants and to cater to the increase in the turnover from our five existing restaurants. The less than proportionate increase in staff salaries as compared to the increase in turnover can be attributed to the better economies of scale achieved from our existing Sakae Sushi restaurants (the increase in sales without the corresponding increase in employees and part-time crew). In addition, Directors remuneration also decreased by $423,000 from $994,000 in FY 2000 to $571,000 in FY 2001 as we did not declare Directors fees in FY

47 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION In line with the increase in turnover, rental expenses and depreciation increased by 46.5% and 45.4% to $1.23 million and $567,000 in FY 2001 respectively. The increase in rental expenses can be attributed to the additional spaces we leased for our two new restaurants in Liang Court and Northpoint Shopping Centre. Similarly, the increase in depreciation is due mainly to the additional plant and equipment purchased for our new restaurants. Administrative expenses increased $419,000 or 75.1% from $558,000 in FY 2000 to $977,000 in FY The increase in administrative expenses was mainly due to an increase in marketing-related expenses (due mainly to the printing of our in-house newsletter, and marketing materials for our Sakae Sushi franchise), an increase in advertisement cost (due mainly to recruitment advertisements placed in newsprints) and an increase in transport expenses (due mostly to transport costs incurred by Nouvelle Events) which collectively increased by $267,000 from $88,000 in FY 2000 to $355,000 in FY In addition, in FY 2001, we also incurred entertainment and travelling expenses and professional fees of $190,000, an increase of $118,000 as compared to the $72,000 incurred in FY The increase in entertainment and travelling expenses and professional fees was due mainly to the efforts by our management to promote our newly started F&B Franchising Business and brand names in overseas markets. Other operating expenses increased $410,000 or 77.9% from $526,000 in FY 2000 to $936,000 due to increases in utility bills, dishwashing bills and credit card commissions paid. The higher rate of increase in operating expenses can be mainly attributed to the 223.0% or $223,000 increase in utility bills from $100,000 in FY 2000 to $323,000 in FY This is due primarily to the increase in the number of F&B outlets that we own and operate and the corresponding increase in utility tariffs imposed by the service providers. The increase in other operating expenses was also due to certain costs attributed to the commencement of operations of Nouvelle Events. For example, costs of repair and maintenance increased approximately $45,000 or 150.0%, from $30,000 in FY 2000 to $75,000 in FY 2001, mainly due to repair costs for the food processing facility and the chiller trucks. We also incurred costs of approximately $27,000 for the purchase of catering materials required for Nouvelle Events. As a result of the above mentioned, operating expenses increased at a less than proportional rate of 35.8%, as compared to the increase in the rate of our turnover of 48.0%. This can be attributed mainly to staff costs increasing at a slower rate of 20.4% which was partially offset by higher rates of increase in administrative expenses and other operating expenses of 75.1% and 77.9% respectively. Profit before income tax PBT increased by $1.35 million or 131.8%, from $1.03 million in FY 2000 to $2.38 million in FY Overall PBT Margin increased by 5.6 percentage points from 10.0% in FY 2000 to 15.6% in FY The increase in overall PBT Margin can be attributed to the less than proportionate increase in our operating expenses in FY 2001 and to the increase in other operating income which increased by $106,000, from $20,000 in FY 2000 to $126,000 in FY This was due mainly to the receipt of government grants in support of the usage of high-tech equipment in our F&B outlets. PBT Margin for our F&B Business increased 6.3 percentage points from 9.9% in FY 2000 to 16.2% in FY 2001 due mainly to the reasons described in the paragraph above. However, we suffered a loss before income tax of 14.9% for our F&B Franchising Business in FY 2001 which was also in its first year of business operations. The loss can be attributed to the large amount of administrative expenses incurred (including the professional fees, travelling and entertainment expenses, as described in the paragraph above), many of which are one-time expenses. FY 2001 vs FY 2002 Revenue Revenue for FY 2002 increased by approximately $8.23 million or 54.0%, from $15.25 million in FY 2001 to $23.48 million in FY This increase was due to additional revenue of $7.74 million from F&B Business and $491,000 from F&B Franchising Business. 38

48 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION The increase of $7.74 million or 51.7% in F&B Business revenue was mainly due to: (a) (b) (c) The increase in F&B sales from our existing Sakae Sushi and Crepes & Cream restaurants of $1.65 million, mainly due to the full-year contributions of our Sakae Sushi restaurants at Liang Court and Northpoint Shopping Centre and our Crepes & Cream restaurant at The Heeren; Revenue of $4.61 million from the five new Sakae Sushi restaurants located at West Mall (April 2002), Toa Payoh Entertainment Centre (April 2002), Parco Bugis Junction (September 2002), Parkway Parade (October 2002) and WTC Singapore Cruise Centre (December 2002) and the Crepes & Cream kiosk at Junction 8 Shopping Centre (March 2002) and the Crepes & Cream café at OUB Centre (October 2002); and The increase in revenue of $1.48 million from Nouvelle Events. This was mainly due to the full-year contribution of Nouvelle Events and the commencement of operations of F&B facilities of the MOE clubhouse at North Buona Vista (January 2002). Revenue from F&B Franchising Business increased by 166.4% or $491,000 from $295,000 in FY 2001 to $786,000 in FY The percentage increase in revenue from F&B Franchising Business was mainly due to the percentage increase in franchise fees for our Sakae Sushi franchisees in Indonesia (six new restaurants commenced operations between January and November 2002) and Thailand (one new restaurant was opened in March 2002) as well as the sales of equipment and materials to and royalties from our franchisees. Cost of sales The cost of sales increased by approximately $2.92 million or 60.5%, from $4.84 million in FY 2001 to $7.76 million in FY The increase was slightly higher than the increase in our revenue and was due to the marginally higher costs of food ingredients used by Nouvelle Events. This resulted in the gross profit growing at a marginally less than proportional rate of increase of approximately 51.0%, from $10.41 million in FY 2001 to $15.72 million in FY Operating expenses Operating expenses increased by approximately $4.41 million or 54.1%, from $8.15 million in FY 2001 to $12.57 million in FY The increase in operating expenses was relatively proportional with the increase in our revenue. Staff costs increased by 60.9%, from $4.44 million in FY 2001 to $7.15 million in FY This was attributed to an increase in full-time operations staff (from 156 in FY 2001 to 306 in FY 2002) and an increase in temporary service crew (from 75 in FY 2001 to 104 in FY 2002). Rental expenses increased from $1.23 million in FY 2001 to $2.18 million in FY This was mainly due to the rental charges for the five new Sakae Sushi restaurants and the new Crepes & Cream café and kiosk, the full year rental charge for Nouvelle Events food processing facility and the rental for our previous office premises located at Straits Trading Building, 13 th floor. Administrative expenses increased by $201,000 or 20.6%, from $977,000 in FY 2001 to $1.18 million in FY The increase in other operating expenses was 37.1%, relatively lower than the rate of increase in revenue. This was mainly because of the start-up expenses incurred for Nouvelle Events (many of which were one-time expenses) in FY 2001 and there were no such purchases in FY 2002 as the operations for Nouvelle Events stabilised. Profit before income tax PBT increased by approximately $924,000 or 38.8%, from $2.38 million in FY 2001 to $3.31 million in FY However, overall PBT Margin declined by 1.5 percentage points from 15.6% in FY 2001 to 14.1% in FY The decrease in overall PBT Margin is attributable mainly to the increase in cost of sales as discussed above. Our F&B Franchising Business recovered from a loss of approximately $44,000 in FY 2001 to a record a contribution to PBT of approximately $559,000 in FY This was mainly due to the full year contributions of the business and the absence of the administrative expenses incurred during the start-up of the franchise concepts and systems (many of which were one-time expenses). 39

49 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION REVIEW OF FINANCIAL POSITION AS AT 31 DECEMBER 2002 Current Assets Current assets consists cash and bank balances, fixed deposits, amount due from related parties, other receivables and prepayments, trade receivables and inventories. As at 31 December 2002, our current assets amounted to $6.37 million. Cash, bank balances and fixed deposits As at 31 December 2002, our Company had cash, bank balances and fixed deposits of $2.44 million representing 38.3% of our total current assets. Cash and bank balances and fixed deposits increased by $0.88 million from $1.56 million as at 31 December Given that our Company derived most of our sales through retail F&B outlets which are operated on cash basis, the increase in our cash and bank balances and fixed deposits can be attributed to the increase in profits derived from our sales. Trade receivables Trade receivables accounted for $1.09 million or 17.1% of our total current assets. As our F&B outlets operations are conducted on cash basis, our trade debtors are mainly our customers from Nouvelle Events as well as our F&B Franchising Business. Our Company has not experienced any material bad debts for the past three financial years ending 31 December Given the nature of our business, which is mainly transacted on cash terms, we presently do not have a specific policy for the provision of doubtful debts. Our management reviews and provides for doubtful debts (if any) for specific debts when considered necessary. Our management would also implement bad debt policy, if necessary. Please refer to Credit Policy of this Prospectus for more details. Other receivables and prepayments Other receivables and prepayments consist mainly of prepayments to professionals for services rendered with respect to our initial public offering exercise and rental deposits for rental of retail space for our F&B outlets. Other receivables and prepayments amounted to $1.19 million or 18.7% of total current assets as at 31 December This was mainly due to the rental deposits paid for our Sakae Sushi and Crepes & Cream restaurants which accounted for $1.00 million. Inventories Inventories comprise mainly food ingredients and other raw materials required for the preparation of processed finished and semi-finished food products. Inventories are necessary for our business as raw food ingredients are required to be processed prior to sale to third parties or be transported to our F&B outlets. As at 31 December 2002, our inventories amounted to $402,000 or 6.3% of total current assets. Amount due from related parties Amount due from related parties amounted to $1.24 million or 19.5% of total current assets. These comprise non-trade related amounts aggregating $810,000 and trade related amounts aggregating $432,000. Non-trade amounts are due to advances to and payments on behalf of BTB and Brezo whereas the trade related amount is mainly for the purchases of food products and food ingredients from Nouvelle Events by BTB and Brezo. All outstanding amounts due from related parties were repaid prior to the Invitation. For more information of these transactions, please refer to the section on Interested Person Transactions from pages 90 to 97 of this Prospectus. Such interested person transactions are not expected to continue after the Invitation. 40

50 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION Non-Current Assets As at 31 December 2002, our non-current assets amounted to $4.66 million. Our non-current assets consist fixed and intangible assets. Fixed assets include mainly restaurant and catering equipment, furniture and fittings and motor vehicles, amongst others, which amounted to $2.49 million. Our intangible assets are mainly our capitalised development costs for the Sakae Sushi franchise system which amounted to $46,000 as at 31 December In addition to the above mentioned, as at 31 December 2002, our Company has two investment properties having an aggregate cost of $2.13 million. The two investment properties have been transferred to our CEO, Mr Douglas Foo, and our Executive Officer, Ms Koh Yen Khoon prior to this Invitation. Please refer to the section titled Restructuring Exercise in this Prospectus for more details. Current Liabilities Current liabilities comprise trade payables, amounts due to related parties, other payables and income tax payables. As at 31 December 2002, our current liabilities were approximately $3.96 million. Trade payables Trade payables accounted for $1.55 million or 39.0% of total outstanding current liabilities as at 31 December Trade payables are mainly amounts due to our suppliers of food ingredients. Due to related parties Amounts due to related parties accounted for $306,000 or 7.7% of total current liabilities. These are mainly for the purchase of food products from a related company, Brezo. Such purchases from Brezo will not continue after the Invitation. All outstanding amounts due to Brezo has been repaid prior to the Invitation. For more information of our transactions with Brezo, please refer to the section on Interested Person Transactions on pages 90 to 92 of this Prospectus. Amounts due to a shareholder Amounts due to a shareholder amounted to $0.12 million. This represents amounts paid by the shareholder for the purchase of fixed assets on behalf of the Company. Other payables Other payables consist mainly accruals (employer s CPF contributions by our Company) and provision for employees bonuses (for FY 2002). Other payables accounted for $797,000 or 20.1% of total current liabilities as at 31 December Provision for taxation Provision for taxation have been made in respect of our Company s earnings for FY 2000, FY 2001 and FY Provision for taxation accounted for $1.09 million or 27.6% of total current liabilities as at 31 December Of this amount, approximately $398,000 was attributed to taxation in respect for our Company s earnings in FY Non-Current Liabilities Our non-current liabilities amounted to $1.60 million as at 31 December Non-current liabilities comprise bank loans and deferred taxation. Long-term bank loans which amounted to $1.44 million are mainly for the financing of the purchase of the two investment properties which have been transferred to our CEO, Mr Douglas Foo, and our Executive Officer, Ms Koh Yen Khoon prior to this Invitation. The longterm bank loans have been wholly paid up and discharged subsequent to the transfer of the investment properties. For more information of the transfer of the investment properties, please refer to the section Restructuring Exercise on pages 51 and 52 of this Prospectus. 41

51 REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION Shareholders Equity Total shareholders equity amounted to $5.47 million as at 31 December 2002, comprising paid-up capital and accumulated profits of $300,000 and $5.17 million respectively. On 16 May 2003, our Company paid the proposed dividend in respect of FY 2002 amounting to $1.5 million. Our total shareholders equity amounted to $3.97 million after adjusting for this dividend payment. 42

52 LIQUIDITY AND CAPITAL RESOURCES The growth of our Company has been financed mainly through a combination of paid-up capital and retained earnings. As at 31 December 2002, our shareholders equity amounted to $5.47 million. For the last three financial years ended 31 December 2002, we incurred major investments in the purchase of restaurant equipment, renovations and furniture and fittings mainly for the setting up of our restaurants and food processing facility. Total purchase of restaurant and office equipment, renovations, furniture and fittings, computers and motor vehicles amounted to $835,000, $1.24 million and $1.67 million in FY 2000, FY 2001 and FY 2002 respectively. For the five months ended 31 May 2003, we purchased non-current assets aggregating approximately $811,379, consisting mainly purchases of restaurant equipment, renovations, furniture and fittings, computers, motor vehicles and office equipment. Aside from the above, we had also invested in two investment properties which cost $2.13 million as at 31 December The two investment properties have been transferred to our CEO, Mr Douglas Foo, and our Executive Officer, Ms Koh Yen Khoon prior to this Invitation. Please see the section on Restructuring Exercise in this Prospectus for further details. We have cash, bank balances and fixed deposits of $2.44 million as at 31 December We have also secured banking facilities at commercial rates (which are typically floating rates) for our business requirements. As at 31 May 2003, we have cash and bank balances of approximately S$1.98 million. In addition, we have an overdraft facility of $100,000 which has not been utilised. In addition, we have total banking facilities of $500,000 (consisting of letters of credit, trust receipts, import loans, shipping guarantees and customs and non-shipping guarantees) of which approximately $89,118 have been utilised as at 31 May Our Directors are of the opinion that, after taking into account the paid-up capital, retained earnings, cash generated from operating activities, present banking facilities and net proceeds from the Invitation, we have adequate capital for our capital expenditures and working capital requirements for the 12 to 18 months following the Latest Practicable Date. The following table sets forth a summary of our cash flow statement for FY 2002: FY 2001 FY 2002 ($ 000) ($ 000) Net cash from operating activities 1,994 3,939 Net cash used in investing activities (1,679) (2,665) Net cash from (used in) financing activities 416 (387) Net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial period 824 1,555 Cash and cash equivalents at the end of the financial period 1,555 2,442 FY 2001 In FY 2001, net cash generated from operating activities amounted to approximately $2.00 million. Net cash generated from operating activities before changes in working capital was approximately $2.95 million. The net decrease in cash used for working capital purposes amounted to approximately $596,000. There was a decrease in amounts owing from a shareholder and an increase in trade payables of $618,000 and $398,000 respectively. These were offset by increases in amounts due from related parties, other receivables and prepayments, trade receivables, inventories and other payables of $715,000, $181,000, $235,000, $129,000 and $352,000 respectively. Net interest and income tax paid was approximately $358,000. Therefore the net cash generated from operating activities in FY 2001 was approximately $2.00 million. 43

53 LIQUIDITY AND CAPITAL RESOURCES Our Company recorded a net cash outflow from investing activities of approximately $1.68 million. This was mainly due to the purchase of new equipment to cater to the increase of restaurants and the instalment payments of the two investment properties of approximately $1.24 million and $423,000 respectively. A net cash inflow of approximately $416,000 was due to bank loans for the two investment properties. As a result of the above-mentioned cash flow activities, our Company experienced a net increase in cash of approximately $731,000 as at the end of FY Together with the cash at the beginning of FY 2001 of approximately $824,000, net cash as at 31 December 2001 amounted to approximately $1.56 million. FY 2002 In FY 2002, net cash generated from operating activities amounted to $3.94 million. Net cash generated from operating activities before changes in working capital was approximately $4.12 million. The net decrease in cash used for working capital purposes amounted to approximately $26,000. This was mainly attributed to the decrease in amounts owing from a shareholder, increase in trade payables and increase in other payables amounting to $722,000, $479,000, and $444,000 respectively. These were offset by increases in amounts due from related parties, other receivables and prepayments, trade receivables and inventories of $29,000, $774,000, $702,000 and $166,000 respectively. Net interest and income tax paid was approximately $160,000. As a result, the net cash generated from operating activities for FY 2002 was approximately $3.94 million. We recorded a net cash outflow from investing activities of approximately $2.67 million. This was due to the purchase of new equipment to cater to the increase in the number of restaurants as well as the instalment payments for the two investment properties of approximately $1.67 million and $1.03 million respectively. A net cash outflow of $387,000 was due to a dividend payout of approximately $1.40 million that was offset by an inflow from bank loans of approximately $1.02 million for the investment properties. As a result of cash flow activities mentioned above, we experienced a net increase in cash of $0.89 million at the end of FY Together with the cash at the beginning of FY 2002 of $1.55 million, net cash as at 31 December 2002 amounted to $2.44 million. MATERIAL COMMITMENT FOR CAPITAL EXPENDITURE Save as disclosed in the section on Future Plans in this Prospectus, we have no other material plans on capital expenditure and investments as at the Latest Practicable Date. 44

54 DIVIDEND POLICY Our Company has paid interim dividends of $1.4 million on 18 June 2002 in respect of FY Our Company declared a proposed dividend of $1.5 million on 28 February 2003 on our Shares in respect of FY 2002 payable to our shareholders existing as at 31 December On 16 May 2003, this dividend has been paid to our shareholders existing as at 31 December Presently, we do not have any fixed dividend policy. The form, frequency and amount of future dividends on our Shares will depend on our earnings and financial position, our results of operations, our capital needs, our plans for expansion and other factors as our Directors may deem appropriate. We may declare annual dividends with the sanction of the shareholders in a general meeting, but the amount of such dividend shall not exceed the amount recommended by the Directors. The Directors may also declare an interim dividend. The declaration and payment of dividends will be determined at the sole discretion of our Directors and subject to the approval of our shareholders. Information relating to taxes payable on dividends is set out in Appendix B of this Prospectus. 45

55 CREDIT POLICY F&B Business In connection with our F&B outlets, all our sales to customers are made on cash terms. For transactions relating to our trading activities, credit terms of 30 days are usually given. For the catering business, we usually accept only cash on delivery. However, for major events, a 30% to 50% deposit is taken by us upon confirmation of our services by the client. We require the remaining 50% to 70% to be paid upon delivery. The deposit we require our clients to place is assessed on a case-by-case basis. F&B Franchising Business The credit terms available on our F&B Franchising Business is normally for a period of 30 days except for sales of equipment to our franchisees which are paid in advance. Our Company did not experience any material bad debts for the past three financial years ended 31 December Given the nature of our businesses, which are mainly transacted on cash terms, we presently do not have a specific policy for the provision of doubtful debts. Our management reviews and provides for specific bad debts when considered necessary. The provision for doubtful debts for the last three financial years are as follows: Provision for doubtful debts expense Percentage of Amount Trade Debtors ($ 000) (%) FY 2000 FY FY 2002 There were no bad debts written off in the last three financial years. 46

56 CAPITALISATION AND INDEBTEDNESS You should read the following table in conjunction with the Independent Auditors Report on the Financial Statements of the Company for the Financial Years ended 31 December 2000, 2001 and 2002 set out in Appendix A of this Prospectus and the section titled Review of Past Operating Performance and Financial Position beginning on page 32 of this Prospectus. The following table shows the cash and cash equivalents, debt and capitalisation of our Company as at 31 May 2003: (i) (ii) on an actual basis; and as adjusted to give effect to the Restructuring Exercise, the issue of 16,500,000 Shares pursuant to the Invitation and the application of net proceeds, at an issue price of $0.26 per Share, after deducting underwriting commissions and estimated issue expenses related to the Invitation. As at 31 May 2003 Unaudited As Adjusted (S$ 000) (S$ 000) Cash, bank balances and fixed deposits 1,979 5,382 Short term debt - Secured term loans 99 - Secured bank overdraft - Unsecured and guaranteed trade facilities - Unsecured hire-purchase creditors 99 Long term debt - Secured term loans 1,586 - Secured hire-purchase creditors 1,586 Total Indebtedness 1,685 Shareholders equity: - Share capital 300 4,260 - Share Premium 2,743 - Accumulated profits 4,740 1,510 Total shareholders equity 5,040 8,513 Total capitalisation and indebtedness 6,725 8,513 Save as disclosed in the section on our Future Plans in this Prospectus, there are no material commitments for capital expenditure from 1 January 2003 until the Latest Practicable Date. We have cash and cash equivalents of $2.44 million as at 31 December We have also secured banking facilities at commercial rates for our business requirements. 47

57 CAPITALISATION AND INDEBTEDNESS As at the end of FY 2002, we had outstanding bank loans of approximately $1,538,639 owing to Standard Chartered Bank (the Bank ), comprising two term loans granted to our Company for the purpose of financing the purchase of the investment properties, details of which are disclosed in the section Restructuring Exercise. As at 31 May 2003, the aggregate amount of outstanding term loans utilised to finance the purchase of the investment properties amounted to approximately $1,685,095. The interest rate on these term loans is 0.50% below the Bank s prevailing Business Financial Rate. These loans are secured by two deeds of assignment granted by our Company in favour of the Bank of all its rights, title and interest in and to the investment properties. These investment properties have been transferred to our CEO, Mr Douglas Foo, and our Executive Officer, Ms Koh Yen Khoon prior to this Invitation. In addition, the term loans taken by our Company to finance the purchase of the investment properties have been discharged by Mr Douglas Foo on 19 July Please refer to the section titled Restructuring Exercise in this Prospectus for more details. As at 31 May 2003, we have cash and bank balances of approximately S$1.98 million. In addition, we have an overdraft facility of $100,000 which has not been utilised. In addition, we have total banking facilities of $500,000 (consisting of letters of credit, trust receipts, import loans, shipping guarantees and customs and non-shipping guarantees) of which approximately $89,118 have been utilised at at 31 May Save for the foregoing, as at 31 May 2003, our Company has no other borrowings or indebtedness and liabilities under acceptances (other than normal trading bills) or acceptance credits, mortgages, charges, obligations under finance leases, guarantees or other material contingent liabilities. 48

58 DILUTION Dilution is the amount by which the Issue Price paid by subscribers of our Shares in this Invitation exceeds our NTA per Share after the Invitation. The NTA of our Company as of 31 December 2002 was 4.36 cents per Share. NTA per Share is determined by dividing our NTA (total tangible assets less total liabilities) as of 31 December 2002 after adjusting for the dividend paid by the Company on 16 May 2003 (as described in the section titled Restructuring Exercise in this Prospectus), by the 90,000,000 Shares prior to the Invitation. Based on the issue of 16,500,000 New Shares at an Issue Price of 26 cents per Share pursuant to the Invitation and after deducting estimated issue expenses, the NTA of our Company as at 31 December 2002 would have been 6.88 cents per Share. This represents an immediate increase in NTA of 2.52 cents per Share to our existing shareholders and an immediate dilution in NTA of cents per Share to the public investors. The following table illustrates this per Share dilution: Cents Issue Price per Share 26 NTA per Share as of 31 December 2002, after adjusting for the dividend paid by the Company on 16 May 2003 but before adjusting for the Invitation 4.36 Increase in NTA per Share attributable to the Invitation 2.52 NTA per Share after the Invitation 6.88 Dilution in NTA per Share to the public investors Dilution in NTA per Share to the public investors as a percentage of Issue Price 73.5% Our Directors and existing Shareholders did not in the last three years before the date of this Prospectus pay any consideration for the issue and allotment of Shares by our Company, as the only issue and allotment of Shares to our existing Shareholders was by way of bonus issue, details of which are described in the section titled Share Capital in this Prospectus. 49

59 STRUCTURE OF OUR COMPANY The structure of our Company is shown as follows: APEX-PAL INTERNATIONAL LTD. (1) SAKAE SUSHI (2) CREPES & CREAM NOUVELLE EVENTS (2) (2) INNOTECH CONSULTING (2) SAKAE SKAL EXPRESS (2) RESTAURANT (2) We are in the process of establishing and incorporating a 99% owned subsidiary in Indonesia, known as PT Apex Pal Indonesia. The other one per cent is held by our CEO, Mr Douglas Foo. As at the date of lodgement of this Prospectus, we have executed the Deed of Establishment in relation to this company. We have also obtained approval from The Investment Co-ordinating Board (BKPM) in Jakarta. This subsidiary will be duly incorporated as a limited liability company once the approval from the Ministry of Justice and Human Rights to the Deed of Establishment is obtained. Such approval has not been obtained at as the date of lodgement of this Prospectus. Notes: (1) We do not have any associated company whose NTA or profit accounted for 10% or more of our Group NTA or profit for the financial years ending 31 December 2000, 2001 and (2) Sole Proprietorships in which our Company is the sole proprietor. Sakae Express and Skal Restaurant were registered as sole proprietorships on 25 July 2003 and 23 July 2003 respectively for the purpose of operating (i) fast food and beverage outlets serving Japanese food, and (ii) a restaurant serving Scandinavian cuisine respectively. Further details of Sakae Express are found on pages 55 and 66 of the Prospectus and further details of our future plans relating to the establishment of a Scandinavian restaurant are set out on page 73 of the Prospectus. We intend to incorporate subsidiary companies to undertake the businesses currently undertaken by our sole proprietorships. 50

60 GENERAL INFORMATION OF OUR COMPANY Restructuring Exercise Purchase of assets by our Company from BTB On 16 May 2003, our Company entered into a sale and purchase agreement with BTB (the Sale and Purchase Agreement ), pursuant to which our Company acquired from BTB, some of its movable assets including fixtures, furnishings and kitchen equipment for a total consideration of approximately $177,037 which was equivalent to the carrying book value of such assets as at 30 April The amount due to BTB for the purchase of assets has been fully settled by our Company. Pursuant to the Sale and Purchase Agreement, BTB agreed to transfer the leases entered into by BTB over the premises located at 1 Raffles Link, #B1-63A CityLink Mall, Singapore and 238 Thomson Road, #01-01 & #01-02 Novena Square, Singapore The lease over 238 Thomson Road, #01-01 & #01-02 Novena Square, Singapore has been novated by BTB to our Company on 29 May BTB did not novate its lease over 1 Raffles Link, #B1-63A CityLink Mall, Singapore to us as this lease was due to expire on 30 June Instead our Company entered into a supplemental agreement with BTB on 25 June 2003 whereby BTB authorised our Company to occupy the premises at 1 Raffles Link, #B1-63A CityLink Mall, Singapore from 16 May 2003 until 30 June 2003, the date of expiry of BTB's lease over these premises. Declaration and Payment of Proposed Dividend for FY 2002 Our Company declared a proposed dividend of $1.5 million on 28 February 2003 on our Shares in respect of FY 2002 payable to the shareholders existing as at 31 December The dividend was paid on 16 May Sale of Investment Properties to Mr Douglas Foo and Ms Koh Yen Khoon On 18 August 2000 and 27 April 2000, the Company purchased the following investment properties : (i) (ii) Residential freehold property situated at 781 Upper Changi Road East, Sunhaven, Singapore ; and Residential freehold property situated at 150 Thomson Road, Thomson Euro-Asia, Singapore On 30 June 2003, our Company entered into sale and purchase agreements with our CEO, Mr Douglas Foo, and our Executive Officer, Ms Koh Yen Khoon, to transfer the investment properties described above to them. The aggregate consideration payable by Mr Douglas Foo and Ms Koh Yen Khoon to our Company for the purchase of these investment properties is $2,441,079 comprising the purchase cost for the investment properties paid up by our Company as at the date of the sale and purchase agreements and the stamp duties paid by our Company in relation to the purchase of the investment properties. The transfers of the investment properties by our Company to Mr Douglas Foo and Ms Koh Yen Khoon have been completed on 18 July The Company has received the total aggregate purchase consideration of $2,441,079 from Mr Douglas Foo, of which approximately $1,851,316 has been paid by Mr Douglas Foo on 19 July 2003 to discharge the bank loans taken by our Company to finance the acquisition of the investment properties, while the remaining amount of approximately $589,763 has been paid directly by Mr Douglas Foo to our Company prior to this Invitation. In relation to the bank loans taken by our Company to finance the acquisition of the investment properties, our Company had expended an aggregate amount of approximately $77,148, being the interest accrued up to 30 June In addition, our Company has incurred an aggregate amount of approximately $19,383 being various miscellaneous expenses relating to the investment properties comprising the costs of purchase of furniture and appliances and maintenance charges for the investment properties. As at the Latest Practicable Date, one of the investment properties is being leased to a third party. Our Company has received an aggregate amount of approximately $17,897 being the rental deposit and rental fees for the period from 10 May 2003 until 31 July 2003 from the third party lessee. Prior to the date of lodgement of this Prospectus, Mr Douglas Foo has reimbursed our Company a total sum of approximately $78,634 being the aggregate amount of interest accrued up to 30 June 2003 on the bank loans to finance the acquisition and the amount of the miscellaneous expenses incurred by our Company after deducting the amount of the rental deposit and rental fees retained by our Company. 51

61 GENERAL INFORMATION OF OUR COMPANY Mr Douglas Foo and Ms Koh Yen Khoon have on 16 July 2003 given an undertaking to our Company to reimburse our Company (a) the total amount of interest payable by our Company from 1 July 2003 until the date of completion of the transfers in relation to the bank loans to finance the acquisition of the investment properties and (b) all other costs incidental to the transfers of the investment properties to them. As at the date of this Prospectus, Mr Douglas Foo and Ms Koh Yen Khoon have reimbursed to the Company the sum of approximately $12,243, being the aggregate amount of interest paid by the Company from 1 July 2003 until 18 July 2003 (being the date of completion of the transfers) and all other costs incidental to the transfers of the investment properties to them. Effects of the Restructuring Exercise Effects on the Operating Results of our Company Had the transfer of the investment properties (pursuant to the Restructuring Exercise) been completed and there were no bank loans taken up by our Company to finance these properties, our finance cost would have been nil and $2,000 instead of $5,000 and $30,000 for FY 2001 and FY 2002 respectively. In addition, our PBT would have been $2.39 million and $3.33 million instead of $2.38 million and $3.31 million for FY 2001 and FY 2002 respectively. Effects on the Financial Position of our Company Had the transfer of the investment properties (pursuant to the Restructuring Exercise) been completed and there were no bank loans taken up by our Company to finance these properties, and assuming that the equipment and deposits from BTB had been purchased/transferred (pursuant to the Restructuring Exercise) at 31 December 2002, our financial position would have been: Audited as at 31 December 2002 $ 000 Non-current assets Plant and equipment 2,563 Intangible asset 46 2,609 Current assets Cash and bank balances 2,221 Fixed deposits 221 Due from related parties 1,242 Amount due from a shareholder 500 Other receivables and prepayments 1,298 Trade receivables 1,091 Inventories 402 6,975 Current liabilities Trade payables 1,546 Due to related parties 483 Other payables 797 Income tax payable 1,094 3,920 Net current assets 3,055 Non-current liabilities Deferred taxation 160 Total equity 5,504 52

62 GENERAL INFORMATION OF OUR COMPANY OUR HISTORY Our Company was incorporated on 2 July 1996 under the Companies Act as a private limited company under the name Apex-Pal International Pte Ltd. On 16 July 2003, pursuant to our conversion into a public limited company, we changed our name to Apex-Pal International Ltd.. Upon establishment, the business of our Company centered around the import and export of garments. Capitalising on the network of business associates developed through the garment business, our CEO, Mr Douglas Foo, diversified the business of our Company in 1997 by venturing into F&B. The sushi business was chosen as Mr Foo saw the growing health awareness of Singaporeans which could be met through the sushi diet which promotes and embodies a healthy lifestyle. The first Sakae Sushi restaurant opened its doors in September 1997 at OUB Centre, serving sushi kaiten style. We sought to bring quality sushi cuisine, once associated only with fine dining, to the masses through our competitive prices and efficient service, achieved through our ability to maximise the use of space and our innovative use of technology within our restaurants. Encouraged by the success of our first Sakae Sushi restaurant, we opened our second restaurant, at The Heeren in January Its location in the heart of Orchard Road was important as the high human traffic in the area meant greater exposure for our home-grown brand of Sakae Sushi s kaiten sushi. The performance of our Sakae Sushi restaurant at The Heeren inspired us to commence operations at Wheelock Place, also located in Orchard Road, in February In order to accommodate the increasing volume of customers, we expanded our premises from 1,496 square feet to 2,626 square feet, in June Our restaurant at Wheelock Place has become the flagship restaurant for our Company. Our Wheelock Place restaurant was also the first of our restaurants to be equipped with our interactive menu, an original menu system developed by our Company and upgraded and maintained by our IT division, Innotech Consulting. The interactive menu contains illustrations and descriptions of the dishes served at the restaurant and allows customers to surf these pages and place their orders directly with the kitchen. This has enabled us to increase our efficiency and reduce serving time. Our Directors believe that this is the first restaurant to have an interactive menu system and to date, most of our Sakae Sushi restaurants are fitted with the interactive menu system. In February 2000, we were awarded the exclusive distributorship rights in Singapore for Bud s Ice Cream of San Francisco. Bud s Ice Cream was selected by our management as the dessert of choice as the use of skim milk in this ice-cream rather than the normal full cream milk promotes our drive towards health awareness. Bud s Ice Cream is now sold at all our restaurants and cafés, and we have also distributed it to various hotels and restaurants in Singapore and to the hypermarket, CarreFour. In February 2000, we established a Sakae Sushi restaurant at Eastpoint Mall, near the Simei MRT station. This branch marked the beginning of our expansion into the suburban market, in order to cater to customers working and living in the suburban housing estates so as to establish Sakae Sushi as a recognisable household brand. The increasing popularity and rising recognition of Sakae Sushi in the city area prompted us to establish another Sakae Sushi restaurant at Marina LeisurePlex in June This was followed by a branch at Liang Court in March Our expansion of Sakae Sushi into the suburban areas of Singapore continued in July 2001 with the opening of a restaurant at Northpoint Shopping Centre, to cater to the increasing number of customers by bringing Sakae Sushi into their neighbourhood for greater accessibility. In April 2002, we set up Sakae Sushi restaurants at Toa Payoh Entertainment Centre and West Mall. 53

63 GENERAL INFORMATION OF OUR COMPANY In order to capitalise on the high level of human traffic in the city area, we set up our next Sakae Sushi restaurant at Parco Bugis Junction in September Our rapid expansion of our Sakae Sushi business can be seen in outlets opened at Parkway Parade, Hougang Heartland Mall and Junction 8 Shopping Mall in quick succession of each other. The restaurant at Parkway Parade was established in October 2002, while our restaurant at Hougang Heartland Mall was set up in January 2003 and our Junction 8 Shopping Mall branch was set up in March The expansion of our chain of Sakae Sushi restaurants continued with the opening of an outlet in Capitol Building in April Capitol Building is located in the city area and benefits from the high level of human traffic in the vicinity. The month of April 2003 also saw the establishment of our Sakae Sushi restaurant at Suntec City, which apart from housing a shopping mall, is strategically located amongst several shopping malls and hotels. In line with our vision to promote Sakae Sushi as a household brand throughout the region, we set up a Sakae Sushi restaurant at the WTC Singapore Cruise Centre in December The strategic position of our branch at the WTC Singapore Cruise Centre serves the dual function of catering both to the human traffic generated through the north-east MRT line, as well as to introduce the Sakae Sushi brand to our regional visitors arriving or departing at the WTC Singapore Cruise Centre. In June 2003, we commenced operations of a new Sakae Sushi restaurant at Tiong Bahru Plaza. With the success of our chain of Sakae Sushi restaurants, the brand associated with Sakae Sushi also grew in terms of popularity and profile. This encouraged us to regionalise and franchise the brand and concept of our Sakae Sushi restaurants, effectively creating a new business segment for our Company. Our foray into the franchise business received the support from various governmental agencies. IE Singapore provided us with financial support under the International Franchise Enterprise Programme (IFEP) in January 2001 and also assisted us in our search for interested partners. SPRING Singapore also provided us with much assistance in our venture into the franchise business. On 20 September 2001, we were awarded the Singapore Franchise Mark by IE Singapore, SPRING Singapore and FLA at the Global Franchise Show. On 7 March 2001, we entered into our first franchise agreement with an Indonesian company for the exclusive right to set up Sakae Sushi restaurants in Java, Indonesia. Pursuant to this franchise agreement, our franchisee has set up and is currently operating six Sakae Sushi restaurants in Java, Indonesia. We have further expanded our franchising activities through a franchise agreement entered into on 13 May 2001 with a Thailand company, granting exclusive franchising rights to the franchisee in Thailand, pursuant to which two Sakae Sushi restaurants have been set up in Thailand. On 6 August 2002, a franchise agreement was signed with a Singapore-incorporated company for exclusive franchise rights in Metro Manila, Philippines. Our Company has also proceeded to introduce our Sakae Sushi brand to the vast PRC market by entering into a technical assistance and licence agreement with a company incorporated in the PRC. The technical assistance and licence agreement granted our PRC business partner the exclusive right to initially set up three Sakae Sushi outlets in Beijing, PRC. The first Sakae Sushi Restaurant in Beijing is expected to ready by the fourth quarter of With the rapidly increasing number of restaurants owned and operated by our Company, Nouvelle Events was set up in April 2001 to capitalise on the economies of scale generated from a central kitchen which supplied and processed food ingredients for all our restaurants. Nouvelle Events has since evolved to carry on the diversified businesses of catering, trading in food products and the operation of F&B facilities of clubhouses. We believe that Nouvelle Events is a synergistic division of our Company and complements our F&B business, while providing us with sufficient flexibility to innovate and branch out into a varied range of businesses. 54

64 GENERAL INFORMATION OF OUR COMPANY Nouvelle Events also operates our portable conveyor belt, which allows kaiten style sushi to be brought into private events. We are able to handle events of more than one thousand people and some of the events that we were involved in include the press conference for Kit Chan s debut concert in Singapore in June 2001 and Singapore s first Adventure Quest held in July 2001 which was attended by various dignitaries. For further information on our portable conveyor belt, please see the section titled Trademarks and Patents on pages 62 and 63 of this Prospectus. In order to cater to the varied tastebuds of Singaporeans, our creative management team set up the first Crepes & Cream restaurant in September 2001 at The Heeren, in close proximity to our Sakae Sushi restaurant. Crepes & Cream specialises in serving Western food and crepes both as an entreé and as a dessert. Its clean and modern look appeals to the younger and trendier customers. Encouraged by the response to our Crepes & Cream restaurant at The Heeren, we opened a second Crepes & Cream café at OUB Centre in October 2002, also located close to one of our Sakae Sushi restaurants. In line with our Company s policy to set up more F&B outlets to the suburban areas to cater to our customers living and working in those areas, a Crepes & Cream kiosk was set up at Junction 8 Shopping Centre in March The Crepes & Cream concept was franchised through an agreement entered into on 30 December 2002 with a Singapore-incorporated company, for the setting up of a Crepes & Cream kiosk in This Fashion Mall in January Building on the success and popularity of Sakae Sushi, we launched Sakae Express in July 2003 by setting up our first outlet at Scotts Shopping Centre. A natural extension from our core expertise as the market leader in Japanese kaiten sushi, our Sakae Express introduces an artful blending of traditional Japanese food at affordable prices in a quick service environment which allows dine in and take away. Sakae Express also seeks to introduce a fun concept by allowing customers to create their own dishes, based on a mix and match concept. As testimony to his entrepreneurship skills and achievements in leading our Company to its current success, the Association of Small and Medium Enterprises and the Rotary Club of Singapore conferred upon our CEO, Mr Douglas Foo, the award of Rotary-ASME Entrepreneur of the Year Mr Foo was also awarded the Top Outstanding Young Person Award 2002 by the Junior Chamber of Singapore. In 2003, Mr Foo received the Singapore Youth Award Entrepreneurship, from the National Youth Council. In addition, our Company was also among the winners of the Enterprise 50 Award for Our Company was also awarded the Singapore Promising Brand Award for Sakae Sushi, by the Association of Small and Medium Enterprises and Singapore Press Holdings Ltd in OUR BUSINESS Our Company (a) owns and operates restaurants, cafés and kiosks and (b) operates Nouvelle Events, a division which carries on (i) a vertically and horizontally integrated operation for the processing of finished and semi-finished food products and related logistic services, (ii) an events catering business, (iii) the operation of F&B facilities at clubhouses and (iv) the trading of food products ( F&B Business ). Aside from these, we also engage in the franchising of our F&B brands ( F&B Franchising Business ) and the provision of IT services ( IT Services ) through Innotech Consulting. We derive our revenue mainly from our F&B Business, which constituted 100%, 98.1% and 96.7% of our revenue for FY 2000, FY 2001 and FY 2002 respectively. Revenue is also derived from our other business activities in the form of franchise and royalty fees. 55

65 GENERAL INFORMATION OF OUR COMPANY F&B Business Sakae Sushi Our Sakae Sushi chain of modern kaiten sushi restaurants serves a wide variety of Japanese delicacies at competitive prices. As at 30 June 2003, we own and operate 17 Sakae Sushi restaurants in Singapore. We believe that the success of our Sakae Sushi restaurants lies in its ability to provide high quality cuisine that is both healthy and affordable. The efficient service and clean environment also adds to the satisfaction experienced by our customers. As growing numbers of Singaporeans have become more discerning about their diets and seek healthy cuisine, sushi has become the natural choice for many Singaporeans as it is able to fulfil such needs. The rice used for the sushi served in our Sakae Sushi restaurants, unlike most conventional sushi restaurants, is enriched with Vitamin E. Our experienced chefs are able to produce a consistent level of quality for all dishes served in Sakae Sushi, thus raising the level of confidence our customers have in our restaurants. To maintain a high level of quality and freshness, we do not allow raw food to be rotated on the kaiten for more than an hour, and cooked food for more than two hours. This standard of freshness is maintained through a colour-coding system. For our regular dishes, our staff can immediately identify plates which have been on the kaiten for too long using our colour-coded system. In relation to our premium red plate dishes, as the quantity of such premium dishes is much smaller compared to the regular dishes, our chefs personally monitor these dishes using our colour-coded system. We aim to provide our customers with a unique, hassle-free dining experience at our Sakae Sushi restaurants. The dual-directional conveyor belt upon which the sushi dishes are displayed was designed to both maximise the seating space available and to provide customers with efficient service. Self-service hot water dispensers are located at each table and at each station of the kaiten for customers to fill their complimentary cups of green tea. We have installed the interactive menu system at most of our restaurants from which customers can surf the menu containing both illustrations and descriptions of the dishes before placing their orders directly with the kitchen through the ordering system on the interactive menu. Where logistical difficulties preclude us from installing the interactive menu system at any booth or table, the intercom ordering system is installed instead, thus maintaining the high level of efficiency in service. We adopt a simple two-tier pricing structure in relation to our kaiten sushi. Apart from kaiten sushi, our restaurants also serve ala carte dishes. All members of our service staff are trained with the necessary skills and menu knowledge to provide a consistent level of customer service and to assist our customers in food selection when called upon to do so. For more information on our staff training programme, please refer to the section titled Staff Training in this Prospectus. We have installed point-of-sales systems in our Sakae Sushi restaurants to integrate our front-end and back-end operations which also allows us to keep track of our sales and inventories. Our Directors believe that with our Sakae Sushi chain of 17 restaurants, we are the largest operator of kaiten sushi restaurants in Singapore as at 30 June

66 GENERAL INFORMATION OF OUR COMPANY Crepes & Cream Our Crepes & Cream restaurant, café and kiosks offer a range of interesting and unique dishes at affordable prices in a modern and trendy atmosphere. The menu served at our Crepes & Cream outlets consists a large variety of Western appetisers, main courses and desserts, and accompanied by the fashionable and stylish theme that resonates through our Crepes & Cream outlets, appeals to the young and hip customers. As at 30 June 2003, we own and operate a Crepes & Cream restaurant, a café and two kiosks in Singapore. Our innovative team of chefs are able to create new crepes and desserts, which are only available at Crepes & Cream, on a regular basis. The nature of the food served at our Crepes & Cream restaurants gives it much versatility with respect to the Crepes & Cream concept of dining. Crepes & Cream outlets can operate either as a restaurant, café or kiosk, depending on the locality and demand in the area. At every Crepes & Cream outlet, we have a dual function counter that serves beverages and ice-cream and features our crepes-making stations. We have installed point-of-sales systems in our Crepes & Cream outlets to integrate our front-end and back-end operations which allows us to keep track of our sales and inventories. Nouvelle Events Food Processing Nouvelle Events operates a food processing facility from its premises at Kampong Ampat Industrial Estate which features a vertically and horizontally integrated operation for the processing of finished and semi-finished food products, food distribution and other related logistic services. Apart from performing the function of a central kitchen to our Company s F&B outlets, Nouvelle Events also processes food products, for example salmon fillet, to be sold to third party F&B establishments, including hotels, cafés and restaurants. The value-added service that Nouvelle Events provides to its corporate clients is its ability to prepare the food products to the exact specifications of the client. The quantity of food and food ingredients delivered to each of our Company s F&B outlets is based on the daily demand from each outlet to ensure that all food products delivered is fresh. We also distribute finished food products such as sushi and pastries to third-party F&B establishments, hotels and restaurants. Our corporate clients include the Conrad Hotel, the Shangri-La Hotel and Fish & Co.. Catering Nouvelle Events also provides catering services for various events and functions. With our portable conveyor belt, we are able to and have brought the kaiten experience to almost any venue. To date, we are able to cater for events and functions for more than one thousand people. Our chefs possess the skills to prepare various cuisines and therefore we are able to capitalise on this multi-cuisine ability to cater to the wide range of demands from customers with different needs, and are not restricted to only Japanese food. Another service that we provide and which is garnering increasing popularity amongst our more sophisticated clients is our chef-for-hire service, where our chef is personally present at such events to prepare the meal. 57

67 GENERAL INFORMATION OF OUR COMPANY Operation of F&B Facilities at Clubhouses Nouvelle Events is also in the business of operating the F&B facilities at clubhouses. At present, it operates most of the F&B facilities at the following clubhouses: a Ministry of Education clubhouse at North Buona Vista Drive; a Ministry of Education clubhouse at Evans Road; and a clubhouse of the Singapore Polytechnic Graduate Guild. The food and beverage served at the clubhouses mentioned above are procured from the food processing facility of Nouvelle Events. The economies of scale enjoyed by Nouvelle Events contributes to the success of our business in the operation of F&B facilities at clubhouses. As at the date of lodgement of this Prospectus, we are in the process of finalising an agreement to operate a Japanese-themed restaurant at the Legends Fort Canning Club. We may from time to time submit bids when there are tenders for the operation of F&B facilities. Trading Nouvelle Events is also involved in the trading of food products, including various types of seafood (such as dory fillet and salmon) and food sauces. We source for products directly from our wide network of suppliers, and with our integrated cold chain facilities, we are able to provide better service to our corporate clients such as hotels and restaurants. We have been the sole distributor of Bud s Ice Cream of San Francisco ( Bud s Ice Cream ) in Singapore since February The characteristic which sets Bud s Ice Cream apart from all other brands of icecream lies in the fact that Bud s Ice Cream is manufactured from skim milk, as opposed to the normally used full cream milk. As such, Bud s Ice Cream is an ideal choice for our Company as we have always been a strong promoter of healthy living. Bud s Ice Cream is currently served at all our F&B outlets, as well as several other restaurants to which we have distributed Bud s Ice Cream. Bud s Ice Cream is also sold in the hypermarket, Carrefour. F&B Franchising Business Sakae Sushi and Crepes & Cream We offer a franchise system for our Sakae Sushi restaurants and Crepes & Cream restaurants and kiosks. On 20 September 2001, we were awarded the Singapore Franchise Mark by IE Singapore, SPRING Singapore and FLA at the Global Franchise Show. Generally, the initial franchise period in connection with Sakae Sushi restaurants is ten years while Crepes & Cream franchises generally have a term of six years for local franchises and ten years for overseas franchises. We have, in December 2002, entered into a franchise agreement with a local franchisee to set up one Crepes & Cream kiosk in Singapore. We do not intend to grant any further franchises for any Crepes & Cream outlets in Singapore and will not grant any franchises for Sakae Sushi restaurants in Singapore as well. We have entered into franchise agreements for Sakae Sushi in Indonesia, Thailand and the Philippines and a technical assistance and licence agreement in the PRC. These arrangements are described in the section Our History on page 54 of this Prospectus. Potential franchisees are carefully evaluated by our management to ensure suitability for using the Sakae Sushi and Crepes & Cream brands and to ensure suitability and a smooth working relationship. The suitability of potential franchisees is often determined by their financial standing, track record and ability to secure good locations for the setting up of Sakae Sushi outlets or Crepes & Cream outlets, as the case may be. 58

68 GENERAL INFORMATION OF OUR COMPANY As franchisors, we provide the following to the franchisees as part of the franchise package: professional advice and support from inception through to the commencement of operations; guidelines on site selection and suggestions on outlet layout and space management are communicated to the franchisees; we provide initial training to key personnel running the outlets at our staff training centre; during the initial stages of the outlets, we provide on-site guidance so as to ensure smooth running of operations; and the franchisees are each given a set of comprehensive operations manual that outlines the daily operations of Sakae Sushi or Crepes & Cream, containing the standards, specifications, procedures and methods of each aspect of the franchised business. Subject to guidelines set out by us, the franchisees enjoy both goodwill and rights to use the trademark and trade name of the franchised business and are advised on the various promotional strategies that they can adopt. We control and maintain the standard of the food, image and service of our franchisees through regular reviews conducted by our staff. We have a dedicated team of employees who conduct quarterly reviews on the various outlets set up by our franchisees. In Indonesia, a member of our staff frequently visits the premises of our Indonesian franchisee to ensure that our standards are met. We believe that with our comprehensive franchise system, together with our regular reviews, we are able to maintain the standard of the outlets set up by our franchisees to ensure that our branding does not suffer. In addition, we also provide feedback to our franchisees on how their business can be improved. We monitor any changes after implementation of these measures. In order to retain product novelty, new products are constantly developed by our product development unit. Such new products will be introduced to both our own F&B outlets and to the franchisees. Our product development unit, comprising six team members as at Latest Practicable Date, is headed by our Senior Vice President, Mr Goh Kok Wee. This product development unit is involved in cultivating and developing novel F&B concepts. All aspects of the F&B concept, including brand, food testing and menu vetting are carefully evaluated by our product development unit before any concept is launched. IT Services Innotech Consulting Innotech Consulting was initially set up to provide IT support services to our Company and to develop the interactive menu system for Sakae Sushi. The scope of services provided by Innotech Consulting has since expanded to include provision of IT support to all the business divisions within our Company. The websites of all our Company s different divisions are designed and maintained by Innotech Consulting. Innotech Consulting is also responsible for the maintenance of the intranet and services for our entire Company. In addition, the point-of-sales systems at each of the Company s F&B outlets are managed and maintained by Innotech Consulting. Innotech Consulting has provided IT services to third parties outside the Company although revenue from such services is not significant. However, our Directors believe that there is a possibility that the provision of IT services to third parties may grow as a result of Innotech Consulting s IT capabilities. 59

69 GENERAL INFORMATION OF OUR COMPANY OUR SUPPLIERS The suppliers that accounted for 5% or more of our purchases during each of the three financial years ended 31 December 2002 are as follows: Percentage of total purchases (%) For purchase of FY 2000 FY 2001 FY 2002 All Big Trading Co. (All Big Frozen Food Pte Ltd) Seafood Marukawa Trading Dried / frozen food products Tomo-Ya Japanese Food Trading Frozen food products Shimaya Trading Pte Ltd Frozen food products Moon Marine Singapore Pte Ltd Frozen food products Surapon Foods Public Company Limited Seafood Lian Hup Fish Merchant Co. Seafood 8.3 Our Company purchases seafood and dried and frozen food products from All Big Trading Co. and Marukawa Trading respectively. The decrease in purchases from them in FY 2001 and FY 2002 is due to our ability to secure alternative sources of those products at lower costs. To reduce our reliance on All Big Trading Co. and to diversify our supplier base for seafood, we began to purchase seafood from Surapon Foods Public Company Limited and Lian Hup Fish Merchant Co. in FY 2001 and FY 2002 respectively. These purchases corresponded with our increase in turnover which was due to the increase in the number of Sakae Sushi restaurants. In addition to Marukawa Trading, we also purchased frozen food products from Tomo-Ya Japanese Food Trading, Shimaya Trading Pte Ltd and Moon Marine Singapore Pte Ltd who supply our Company with frozen food products. The amount of purchases made by our Company from each of these three suppliers was relatively constant for the last three financial years. None of our Directors or substantial Shareholders has an interest (direct or indirect) in the abovementioned suppliers. OUR CUSTOMERS None of our customers account for 5% or more of our turnover during each of the past three financial years ended 31 December. Our customers for our F&B Business are walk-in customers and regular patrons, whose individual annual expenditure at our various F&B outlets do not constitute a substantial percentage of our annual turnover. As our F&B Business operates mainly on a cash basis, there are no advance orders from our customers. The aggregate contribution from our franchisees to our turnover in each of FY 2001 and FY 2002 was less than 5%. As such, we have not been dependent on any single customer for the past three financial years ended 31 December. 60

70 GENERAL INFORMATION OF OUR COMPANY SEASONALITY For each of the past three financial years ended 31 December, revenue from our F&B outlets experienced a slight decrease in the month of April and an increase in the month of December. Our Directors believe that the abovementioned decrease and increase in revenue correspond to the mid-year exam period for students and the year-end school holidays respectively. For FY 2002, the rise and fall in revenue amounted to approximately 10% to 15% of the monthly revenue from our F&B outlets. Our F&B Franchising Business is generally not subject to any seasonal fluctuations. RESEARCH AND DEVELOPMENT We place a strong emphasis on innovation. For FY 2000, we embarked on a project to develop our portable conveyor belt to allow us to bring the kaiten dining experience to venues outside of our restaurants. The project was successful with the development of an efficient portable conveyor belt that can be customised to serve more than a thousand guests. Accordingly, we have applied to patent our portable conveyor belt in Singapore. Please see the section titled Trade Marks and Patents in this Prospectus for more details. We conduct R&D activities on a continuous basis for the purpose of upgrading our interactive menu system. The latest upgrade to our interactive menu system was in FY 2002 where improvements were made to increase the number of graphics, develop greater user interface efficiency with high interactivity with users, and to increase the speed at which orders are transmitted to our kitchens. In addition, as at the Latest Practicable Date, we also have a three-member IT development team headed by our Executive Director, Ms Foo Lilian. This team is involved in upgrading our interactive menu system and portable conveyor belt. In addition, our IT development team is also involved in seeking ways to utilise technology to improve our process of operating our restaurants and outlets including the front-end and back-end operations. Our product development unit which is involved in cultivating and developing novel F&B concepts contributes to our R&D efforts and innovative approach. Further details of our product development unit can be found in the section Our Business F&B Franchising Business on page 59 of this Prospectus. Our annual R&D expenditure for the last three financial years ended 31 December 2002, excluding grants for certain of our R&D projects, were approximately $35,000, $73,000 and $188,000 respectively. 61

71 GENERAL INFORMATION OF OUR COMPANY TRADE MARKS AND PATENTS As at the 30 June 2003, our Company has applied for registration of the following trade marks and service marks: Trade/Service Place of Registration / Mark Representation Application Class (1) Application Date Status Sakae Sushi Singapore November 1999 Registered Singapore November 1999 Registered Thailand November 1999 Registered Thailand November 1999 Registered Indonesia February 2002 Registered Indonesia February 2002 Registered The PRC 43 5 November 2002 Application filed Crepes & Cream Singapore 35 4 April 2003 Application filed Singapore 43 4 April 2003 Application filed Nouvelle Events Singapore 43 4 April 2003 Application filed Black Tea Box Singapore 43 4 April 2003 Application filed Sakae Sushi Singapore June 2003 Application filed Singapore June 2003 Application filed Sakae Express Singapore June 2003 Application filed Singapore June 2003 Application filed Note : 1. We have registered and applied for the registration of our trade marks and services marks under Classes 35, 42 and 43 of the International Trade Mark Classification of Goods and Services. The registration under Class 35 relates to franchising, business advisory services relating to franchising. The registration under Class 42 relates to restaurant, self service restaurant, snack bar, café, cafeteria, canteen, catering. The applications under Class 43 in respect of the trademark for Nouvelle relates to restaurants, self-service restaurants, snack bars, cafes, cafeterias, canteens, catering, bar services, rental of chairs, tables, table linen, glassware, rental of tents. The application under Class 43 in respect of the trademarks for Crepes & Cream and Black Tea Box, relates to restaurants, self service restaurants, snack bars, cafes, cafeterias, canteens, catering. 62