KHONG GUAN FLOUR MILLING LIMITED (Company Registration No.: G) (Incorporated in the Republic of Singapore)

Transcription

1 CIRCULAR DATED 17 DECEMBER 2014 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or other professional adviser immediately. If you have sold or transferred all your shares in Khong Guan Flour Milling Limited (the Company ), you should immediately forward this Circular with the Notice of Extraordinary General Meeting and the attached Proxy Form to the purchaser or transferee or to the bank, stockbroker or agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee. Singapore Exchange Securities Trading Limited assumes no responsibility for the accuracy of any of the statements or opinions made or reports contained in this Circular. KHONG GUAN FLOUR MILLING LIMITED (Company Registration No.: G) (Incorporated in the Republic of Singapore) CIRCULAR TO SHAREHOLDERS IN RELATION TO (1) THE PROPOSED AMENDMENTS TO THE MEMORANDUM OF ASSOCIATION; (2) THE PROPOSED ADOPTION OF THE NEW ARTICLES OF ASSOCIATION; AND (3) THE PROPOSED DIVERSIFICATION OF THE BUSINESS OF THE GROUP TO INCLUDE PROPERTY INVESTMENT AND PROPERTY DEVELOPMENT BUSINESS IMPORTANT DATES AND TIMES Last date and time for lodgment of Proxy Form : 13 January 2015 at 3.00 p.m. Date and time of Extraordinary General Meeting : 15 January 2015 at 3.00 p.m. Place of Extraordinary General Meeting : 2 MacTaggart Road (Level 2), Khong Guan Biscuit Factory, Singapore

2 TABLE OF CONTENTS PAGE DEFINITIONS INTRODUCTION THE PROPOSED AMENDMENTS TO THE MEMORANDUM AND THE PROPOSED ADOPTION OF THE NEW ARTICLES THE PROPOSED DIVERSIFICATION OF BUSINESS DIRECTORS AND SUBSTANTIAL SHAREHOLDERS INTEREST DIRECTORS RECOMMENDATION EXTRAORDINARY GENERAL MEETING ACTION TO BE TAKEN BY SHAREHOLDERS DIRECTORS RESPONSIBILITY STATEMENT CONSENT FROM THE VALUER DOCUMENTS FOR INSPECTION APPENDIX I THE PROPOSED AMENDMENTS TO THE MEMORANDUM APPENDIX II THE PROPOSED NEW ARTICLES NOTICE OF EXTRAORDINARY GENERAL MEETING PROXY FORM 2

3 DEFINITIONS In this Circular, the following definitions apply throughout unless otherwise stated:- Act : The Companies Act, Chapter 50 of Singapore, as may be amended or modified from time to time Articles : The existing Articles of Association of the Company Board : The board of directors of the Company CDP : The Central Depository (Pte) Limited Circular : This circular to Shareholders dated 17 December 2014 in relation to the Proposed Corporate Actions Code : The Singapore Code of Corporate Governance issued by the Corporate Governance Council on 2 May 2012 Companies Amendment : The Companies (Amendment) Act 2004 of Singapore Act 2004 Companies Amendment : The Companies (Amendment) Act 2005 of Singapore Act 2005 Company : Khong Guan Flour Milling Limited CPF : Central Provident Fund CPF Approved Nominees : Agent banks included under the CPFIS CPFIS : Central Provident Fund Investment Scheme Directors : The directors of the Company EGM : The extraordinary general meeting of the Company, notice of which is set out on pages 86 to 87 of this Circular EPS : Earnings per Share Existing Business : Has the meaning ascribed to it in Section 3.1 of this Circular Existing Property Assets : Has the meaning ascribed to it in Section 3.2 of this Circular FY : Financial year ending or ended 31 July Group : The Company and its subsidiaries, collectively Latest Practicable Date : 10 December 2014, being the latest practicable date prior to the printing of this Circular Listing Manual : The listing manual of the SGX-ST, as may be amended or modified from time to time Listing Rules : The Mainboard listing rules of the SGX-ST as set out in the Listing Manual as modified, supplemented or amended from time to time MacTaggart Building : Has the meaning ascribed to it in Section 3.2 of this Circular 3

4 DEFINITIONS MacTaggart Property : Has the meaning ascribed to it in Section 3.2 of this Circular Market Day : A day on which the SGX-ST is open for securities trading Memorandum : The existing Memorandum of Association of the Company New Articles : The Articles of Association as set out in Appendix II of this Circular proposed to be adopted by the Company New Memorandum : The Memorandum, after being amended in the manner set out in Appendix I of this Circular, such alteration proposed to be adopted by the Company New Property Assets : Has the meaning ascribed to it in Section 3.2 of this Circular Notice of EGM : The notice of EGM as set out on pages 86 to 87 of this Circular NTA : Net tangible assets of the Group Proposed Corporate Actions : (1) The proposed amendments to the Memorandum; (2) The proposed adoption of the New Articles; and (3) The Proposed Diversification Proposed Diversification : The proposed diversification of the business of the Group to include property investment and property development business Proposed New Business : Has the meaning ascribed to it in Section 3.2 of this Circular Property Related Assets : The Existing Property Assets and the New Property Assets, collectively Proxy Form : The proxy form in respect of the EGM as set out in this Circular Redevelopment of Mac : Has the meaning ascribed to it in Section 3.2 of this Circular Taggart Property Securities Account : The securities account maintained by a Depositor with CDP but does not include a securities sub-account maintained with a Depository Agent SGX-ST : Singapore Exchange Securities Trading Limited Shareholders : Registered holders of Shares except that where the registered holder is CDP, the term Shareholders shall, in relation to such Shares and where the context admits, mean the persons named as Depositors in the Depository Register and whose Securities Accounts maintained with CDP are credited with the Shares. Any reference to Shares held by or shareholdings of Shareholders shall include Shares standing to the credit of their respective Securities Accounts Shares : Ordinary shares in the share capital of the Company Special Resolutions : Resolutions 1 and 2 as set out in the Notice of EGM to be passed by way of special resolutions 4

5 DEFINITIONS Subsidiary or Subsidiaries : A corporation which is for the time being a subsidiary of the Company within the meaning of Section 5 of the Companies Act Substantial Shareholder : A person who has an interest (directly or indirectly) of 5% or more of the total issued share capital of the Company Take-over Code : The Singapore Code on Take-over and Mergers, as amended or modified form time to time Treasury Share : (a) A share which was (or is treated as having been) purchased by a company in circumstances in which Section 76H of the Act applies; and (b) Has been held by the company continuously since the treasury share was so purchased. S$ and cents : Singapore dollars and cents respectively, the lawful currency of the Republic of Singapore % or per cent. : Percentage or per centum Unless otherwise stated in this Circular, any term defined under the Act, the Securities and Futures Act (Chapter 289) (the SFA ), the Listing Manual or the Take-over Code shall, where applicable, have the meaning assigned to it under the Act, the SFA, the Listing Manual or the Take-over Code, as the case may be. The terms Depositor, Depository Agent and Depository Register shall have the same meanings ascribed to them in Section 130A of the 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 the neuter genders. References to persons shall include corporations. Any reference to a time of day in this Circular shall be a reference to Singapore time unless otherwise stated. Any discrepancies in the tables included herein between the listed amounts and totals thereof are due to rounding. Accordingly, figures shown as totals in this Circular may not be an arithmetic aggregation of the figures which precede them. 5

6 CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS All statements other than statements of historical facts included in this Circular are or may be forward-looking statements. Forward-looking statements include but are not limited to those using words such as expect, anticipate, believe, estimate, intend, project, plan, strategy, forecast and similar expressions or future or conditional verbs such as if, will, would, should, could, may and might. These statements reflect the Company s current expectations, beliefs, hopes, intentions or strategies regarding the future and assumptions in light of currently available information. Such forward-looking statements are not guarantees of future performance or events and involve known and unknown risks and uncertainties. Accordingly, actual results may differ materially from those described in such forward-looking statements. Shareholders should not place undue reliance on such forward-looking statements, and the Company disclaims any responsibility to update publicly or revise any forward-looking statements to reflect future developments, events or circumstances for any reason, even if such information becomes available or other events occur in the future, subject to compliance with all applicable laws and regulations and/or the rules of the SGX-ST and/or any other regulatory or supervisory body or agency. 6

7 LETTER TO SHAREHOLDERS KHONG GUAN FLOUR MILLING LIMITED (Registration No.: G) (Incorporated in the Republic of Singapore) Directors: Registered Office Chew Soo Lin (Executive Chairman) 2 MacTaggart Road (Level 3), Chew Soo Eng (Managing Director) Khong Guan Biscuit Factory, Tay Kwang Lip Willie (Lead Independent Director) Singapore Sam Teng Choong (Independent Director) Chan Weng Kee (Independent Director) Dr. Ng Peng Teng (Independent Director) 17 December 2014 To: The Shareholders of Khong Guan Flour Milling Limited Dear Sir / Madam, (1) THE PROPOSED AMENDMENTS TO THE MEMORANDUM OF ASSOCIATION; (2) THE PROPOSED ADOPTION OF THE NEW ARTICLES OF ASSOCIATION; AND (3) THE PROPOSED DIVERSIFICATION OF THE BUSINESS OF THE GROUP TO INCLUDE PROPERTY INVESTMENT AND PROPERTY DEVELOPMENT BUSINESS 1. INTRODUCTION 1.1 The Directors are convening an EGM to seek Shareholders approval for the following proposals:- (1) The proposed amendments to the Memorandum; (2) The proposed adoption of the New Articles; and (3) The Proposed Diversification. (collectively, the Proposed Corporate Actions ) 1.2 The purpose of this Circular is to provide Shareholders with information relating to the Proposed Corporate Actions. Approvals of Shareholders for the Proposed Corporate Actions by way of Special Resolutions and Ordinary Resolution will be sought at the EGM to be held on 15 January 2015 at 3.00 p.m., notice of which is set out on pages 86 to 87 of this Circular. 2. THE PROPOSED AMENDMENTS TO THE MEMORANDUM AND THE PROPOSED ADOPTION OF THE NEW ARTICLES 2.1 Rationale The existing Articles were adopted by the Company on 19 August 1960, and amended at an extraordinary general meeting of the Company held on 31 October 1992 in connection with the conversion of the Company to a public company and subsequent listing of the Company on the SGX-ST. Section 22(1) of the Act had been amended by the Companies Amendment Act 2004 so that it is no longer necessary to state the objects of the company in the memorandum of association. In accordance with Section 23(1) of the Act, subject to the provisions of the Act, any other written law and its memorandum and articles of association, a company has full capacity and powers to carry on or undertake any business or activity, do any act or enter into any transaction and for these 7

8 LETTER TO SHAREHOLDERS purposes, has full rights, powers and privileges. Hence, it is proposed that the objects clause in the Memorandum be amended so as to provide the Company with full rights, powers and privileges to engage in any business, activity or transaction (as allowed by law) if it deems fit. Section 22(1A) of the Act now provides that any provision in the memorandum of a company which states the registered capital or the division of share capital into shares of a fixed amount is deemed to be deleted. Accordingly, the relevant provision in clause 5 of the Memorandum relating to the division of share capital is deemed deleted pursuant to Section 22(1A) of the Act. Major amendments were made to the Act via the Companies Amendment Act 2005 which came into operation on 30 January 2006, such as the abolition of the concepts of par value and authorised capital and allowing repurchased shares to be held as Treasury Shares. With the abolition of the concept of par value pursuant to the Companies Amendment Act 2005, shares of a company no longer have any par or nominal value. The concepts of share premium and the issue of shares at a discount have also been abolished accordingly. The Companies Amendment Act 2005 also introduced new provisions on Treasury Shares. Under these new provisions, a company can hold shares which are the subject of a share purchase by a company as Treasury Shares instead of cancelling the same. The right to attend and vote at meetings and save as provided in the Companies Amendment Act 2005, the right to dividend or other distributions relating to such shares will be suspended for so long as the purchased shares are held in treasury. In addition, the Directors propose to amend certain Articles for the purposes of clarity and good order, and to promote higher standards of corporate governance for the Group in line with the recommendations of the Code. In compliance with Rule 730(2) of the Listing Manual, the Directors have carried out a review of the Articles to take into account the requirements of the Act, the Listing Manual (including but not limited to Appendix 2.2 of the Listing Manual) and the Code. 2.2 Proposed amendments to the Memorandum To eradicate any uncertainty surrounding the scope of the Company s power to act, the Directors propose to amend the existing Memorandum. The Directors propose to replace clause 3 of the existing Memorandum following the alteration to Section 23 of the Act. Pursuant to the new clause 3, the Company has full capacity to carry on or undertake any business or activity, do any act or enter into any transaction, subject to applicable laws and its Memorandum and Articles of Association. The Directors also propose to amend clause 5 of the existing Memorandum by removing references to the nominal capital and par value of the shares of the Company. This alteration follows the abolition of the concepts of authorised capital and par value pursuant to the Companies Amendment Act Full details of the proposed amendments to the existing Memorandum are set out in Appendix I of this Circular. 2.3 Proposed New Articles In view of the numerous changes which would have to be made to the Articles due to the changes to the Act and the Listing Manual and the adoption of the Code, it is proposed that the New Articles be adopted instead of amending the Articles. 8

9 LETTER TO SHAREHOLDERS Salient differences between the Articles and the New Articles The salient differences between the Articles and the New Articles are, as follows: (a) Interpretation clause The introduction of new definitions such as Auditors, Chairman, Depository Register, Electronic Communication, General Meeting, Managing Director, Register of Transfers, Securities Exchange Secretary, Statutes and treasury shares, are provided for under the New Articles for a clearer reading of the New Articles. To align the practices of the Company with the recommendations of the Code, it is proposed for the definitions of Independent Director and Non-Executive Director to be provided. The definition of CDP has been amended to Depository to encompass any other corporation approved by the Minister (referred to in the Act) as a depository company or corporation for the purposes of the Act, which operates the Central Depository System for the holding and transfer of book entry securities. Section 179 of the Act has been amended to highlight that a member of a company does not include the company itself where it is a member by virtue of its holding shares as Treasury Shares. The definition of Member under Article 2 of the New Articles reflects this position. The existing definitions, such as Act and Securities Account are amended for clarity. (b) References to Depository, Depositor and Depository Register The definition of Member and the new Articles 12, 13, 16, 17, 20, 32, 45, 71, 82, 84, 146, 149, 162 have been provided references to Depository, Depositor and Depository Register. (c) References to nominal value, share premium, share premium account, capital redemption reserve and capital redemption reserve fund under the Articles are removed. The concept of nominal value has been abolished under the Companies Amendment Act In addition, Section 69 of the Act has been repealed by the Companies Amendment Act 2005 as the concept of share premium ceases to apply with the abolition of the concept of par value or nominal value. (c) (e) Treasury Shares With the introduction of the concept of Treasury Shares, a new Article 7 is proposed. To be consistent with the current position, the new Article 7 clarifies that the Company may hold ordinary shares or stocks which it has acquired as Treasury Shares, in accordance with Section 76H of the Act. Share repurchase The Act had since 18 November 1998 introduced provisions to allow a Singapore incorporated company to purchase or otherwise acquire its issued ordinary shares. The Act was further amended to extend the scope of these provisions to include purchases or acquisitions of a company s stocks and preference shares. Rules 881 to 886 of the Listing Manual further supplement these provisions. New Article 4(B) provides the Company with the ability to seek a general mandate from Shareholders to purchase its own issued Shares and expressly allows the Company, subject to the relevant provisions of the Act, to purchase or acquire (other than its issued Shares) stocks, preference shares, options, debentures, debenture stocks, bonds, obligations, securities, and all other equity, derivative, debt and financial instruments. 9

10 LETTER TO SHAREHOLDERS (f) (g) Transfer of Shares Existing Article 39 does not provide for any duty of the Directors to give notice to both the transferor and the transferee of their refusal to register as required by the Act. For consistency with Rule 733 of the Listing Manual, Article 19 of the New Articles states that the time for notification to an applicant of the Directors refusal to register a transfer shall be ten (10) Market Days. General mandate to directors The Listing Manual permits a listed company to have a general mandate, if so given by the shareholders by ordinary resolution in a general meeting, to issue shares, convertible securities, or other additional convertible securities, provided that the aggregate number of such shares and convertible securities does not exceed 50% of the total number of issued shares (excluding Treasury Shares) of the company for the time being, of which the aggregate number of shares to be issued other than on a pro rata basis to existing shareholders does not exceed 20% of the total number of issued shares (excluding Treasury Shares) of the company for the time being. The new Article 46 is reflective of this position under the Listing Manual (including any supplemental measures which may be issued by the SGX-ST from time to time). In addition, the new Article 46 conforms with Rule 806 of the Listing Manual which provides that for the purpose of calculating the aggregate number of shares that may be issued under the general mandate, the Company s issued share capital is based on the total number of issued shares (excluding Treasury Shares) of the Company at the time that the ordinary resolution authorising the general share issue mandate is passed, after adjusting for: (i) (ii) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that the mandate is passed; and any subsequent bonus issue, consolidation or subdivision of shares. In exercising the power conferred under the share issue mandate, the new Article 46 makes it clear that the Company will comply with the provisions of the Listing Manual unless such compliance is waived by the SGX-ST. (h) Annual general meeting Existing Article 51 of the Articles provides that the Company shall in each year hold a general meeting and not more than fifteen (15) months shall elapse between the date of one general meeting of the Company and that of the next. Section 201(1) of the Act provides, inter alia, that the audited financial statements of a Singapore-listed public company shall be made up to a date not more than four (4) months before the date on which it holds its annual general meeting. Rule 707(1) and paragraph 1(10) of Appendix 2.2 of the Listing Manual also state that a listed company shall hold its annual general meeting not more than four (4) months after the close of its financial year. The existing Article 51 has been replaced with new Article 56 accordingly to reflect the aforementioned requirements. (i) Notice of meeting Existing Article 53 deals with notice of general meetings. It is proposed that the existing Article 53 be replaced with new Article 60 to: (a) specifically provide that at least twenty-one (21) days notice (excluding the date of notice and the date of meeting) is to be given for a general meeting at which it is proposed to pass a Special Resolution and at least fourteen (14) days notice 10

11 LETTER TO SHAREHOLDERS (excluding the date of notice and the date of meeting) is to be given for any other general meeting, so as to be consistent with the requirements in Rule 704(13) and paragraph 1(7) of Appendix 2.2 of the Listing Manual; (b) (c) provide, in accordance with Section 177(3) of the Act, that a general meeting may be called by shorter notice if it is so agreed (i) in the case of an annual general meeting, by all the members entitled to attend and vote thereat, and (ii) in the case of an extraordinary general meeting, by a majority in number of the members having a right to attend and vote thereat, being a majority which holds not less than 95% of the total voting rights of all the members having a right to vote at the meeting; and clarify that so long as the shares of the Company are listed on the SGX-ST, at least fourteen (14) days notice of every general meeting shall be given by advertisement in the daily press and in writing to the SGX-ST to be in line with paragraph 1(7) of Appendix 2.2 of the Listing Manual. (j) Appointment of proxies The Code encourages companies to amend their articles of association to avoid imposing a limit on the number of proxies for nominee companies so that shareholders who hold shares through nominees can attend annual general meetings as proxies. In addition, the recent proposed amendments to the Act have recommended that a multiple proxies regime be introduced to give indirect investors and CPF investors the same rights as direct investors in respect of attendance at shareholders meetings. Nominee companies and custodian banks will be allowed to appoint more than two proxies so that indirect investors can be appointed as proxies to participate in shareholders meetings. This regime will be extended to allow CPF investors who purchase shares through the CFPIS to attend shareholders meetings. Each proxy will be given the right to vote on a show of hands, in addition to voting on a poll. Articles 82 and 84 of the New Articles are in line with the recommendation as set out in the Code and the proposed amendments to the Act. (k) (l) (m) Power of Directors to hold offices of profit and to contract with Company/ Disclosure of interest Section 156 of the Act has been amended to require a Director to disclose his interest in a transaction or proposed transaction as opposed to the previous requirement for disclosure of interest in a contract or proposed contract. Accordingly, the existing Article 88 has been replaced with new Article 95 to align the wording of the Article with the requirements of the Act and paragraph 1(9)(e) of Appendix 2.2 of the Listing Manual. Managing directors / Rotation of directors To be consistent with the Code and in line with the Listing Manual, new Article 101 provides, inter alia, that Managing Director or a person holding an equivalent position shall be subject to the same provisions as to retirement by rotation, resignation and removal as other directors. New Article 100 provides that where the appointment of a Managing Director is for a fixed period, such period shall not exceed five (5) years. Vacation of office of director It is proposed that Article 93 of the Articles be replaced with Article 104 of the New Articles to provide that the office of a Director shall be vacated if a person becomes disqualified from being a director and is prohibited from being a director by reason of any order made, under any provision of the Act. Further, Rule 720(1) of the Listing Manual and paragraph 1(9)(n) of 11

12 LETTER TO SHAREHOLDERS Appendix 2.2 of the Listing Manual require a director who has been disqualified from acting as a director in any jurisdiction for reasons other than on technical grounds to resign from his directorships in Singapore. The new Article 104 is in line with such requirement. Article 93(c) of the Articles currently provides that the office of a director shall be vacated if a director has a receiving order made against him. The concept of a receiving order is no longer part of bankruptcy proceedings in Singapore. Thus, the new Article 104 which corresponds with the existing Article 93 states that the office of a director shall be vacated if he becomes a bankrupt or makes any arrangement or composition with his creditors. Pursuant to the recommendation of the Code, all directors of listed companies are subject to re-nomination and re-election at regular intervals and at least once in every three (3) years. As a principle of good corporate governance, the new Article 104 which corresponds with the existing Article 94 is in line with such recommendation. (n) (o) (p) (q) (r) (s) (t) Alternate Director New Article 111 provides for Directors to appoint alternate Directors, such appointment being subject to approval by a majority of the Directors, provided that the Directors may only appoint alternate Directors for limited periods of time, in line with Guideline 4.5 of the Code. Appointment of committee It is proposed that new Articles 119(B) and 120 be inserted to allow the Directors, from time to time and in accordance with applicable codes of best practice prescribed by the SGX-ST and/or other relevant governing or regulatory body, to delegate any of their powers or discretion to committees consisting of one or more members of their body and (if thought fit) one or more other persons, for the purposes of enhancing the corporate governance standards, risk management systems and internal controls of the Company and its Subsidiaries. Audit Committee, Remuneration Committee and Nominating Committee In accordance with Guidelines 4.1, 7.1 and 12.2 of the Code, it is proposed that new Articles 122 to 124, in relation to the formation of Audit Committee, Remuneration Committee and Nominating Committee be inserted. Resolutions in writing New Article 118 deals with resolutions in writing by Directors clarifies that the expressions in writing and signed include approval by facsimile transmission, telex, cable or telegram or such other electronic communication by any such Director. Meeting via electronic means New Article 65 empowers the Directors at their sole discretion to approve and implement measures to allow Members to participate in a General Meeting by electronic means. Seal New Article 131 makes it clear that the Directors may sign any instrument autographically or by facsimile, save for any certificates for shares or debentures or other securities of the Company, the Directors may by resolution determine that such signatures shall be dispensed with or affixed by some method of mechanical electronic signature or other method approved by the Directors. Proxy form New Article 86 which corresponds with the existing Article 76 provides for the difference in the execution of the proxy form between an individual member and a corporation. 12

13 LETTER TO SHAREHOLDERS (u) (v) (w) (x) Authentication of documents In addition to the traditional forms of writing and signatures, Articles 132 and 133 of the New Articles which corresponds with the existing Article 122, provides for any authentication or certification to be effected by electronic means approved by the Directors. This will be in tandem with technological advancements. Dividends Existing Article 123 provides that the Directors may, with the sanction of the Company by ordinary resolution, declare dividends but no dividend shall be payable except out of the profits of the Company. New Article 134 which corresponds with the existing Article 123 clarifies that no dividend shall (except as expressly authorised by the Act and/or other applicable law) be payable except out of the profits of the Company and that no higher dividend shall be paid than is recommended by the Directors and a declaration by the Directors as to the amount of the net profits at any time available for dividends shall be conclusive. Capitalisation of profits and reserves Existing Articles 137 and 138 relate, inter alia, to the capitalisation of profits and reserves (including share premium account and any capital redemption reserve funds).the new Articles 149 and 150 which corresponds with the above mentioned articles, permits the Company to issue bonus shares for which no consideration is payable. References to share premium account and capital redemption reserve fund have been excluded from the New Articles since under the Companies Amendment Act 2005, any amount standing to the credit of the Company s share premium account and the capital redemption reserve became part of its share capital. Presentation of accounts Existing Article 144 deals with the responsibility of the directors to keep proper accounts. New Article 155 which corresponds with existing Article 144 further sets out in detail the matters required to be recorded in books of account and provides that such books of account shall be kept at the registered office of the Company or such other place for the inspection of the Directors. Existing Article 145 provides for the Company to prepare and lay its profit and loss accounts, balance sheets, group accounts (if any) before a general meeting. New Article 156 which corresponds with the existing Article 145, is in line with Section 201(1) of the Act which requires a profit and loss account for the period since the preceding account to be laid before the Company at its annual general meeting, made up to a date not more than four (4) months before the date of the annual general meeting. (y) Service of notices The Act has been amended to allow notices of meetings or other documents to be served or given to members using electronic means. In view of the widespread use of electronic communication, new Article 163 provides that the service of any notice of a meeting or other document which is required or permitted to be given, sent or served under the Act or under the Articles may be given, sent or served using electronic communications in accordance with the Act and/or any other applicable regulations, law or procedures. Similarly, Articles 56, 118, 165 and 166 of the New Articles have provided for the service of notices and documents to be effected by electronic communications. Please note that the above list may not be exhaustive and Shareholders are advised to refer to the full text of the New Articles is contained in Appendix II of this Circular. 13

14 LETTER TO SHAREHOLDERS 2.3 Text of the New Memorandum and New Articles The text of the proposed amendments of objects in the Memorandum and the full text of the New Memorandum are contained in Appendix I of this Circular. The full text of the New Articles is contained in Appendix II of this Circular. 3. THE PROPOSED DIVERSIFICATION OF BUSINESS 3.1 Existing Business of the Group The Group s existing business is organised into the following business segments ( Existing Business ): (a) (b) (c) Trading of wheat flour and consumer goods in Singapore and Malaysia; Investment trading principally for shares listed in Singapore and Malaysia; and Investment holding holding of shares of Subsidiaries or associates in Singapore, and Malaysia as well as quoted and unquoted securities for dividend income purposes. As at the Latest Practicable Date, the Subsidiaries and their principal activities are as follows: Effective Equity held by the Company Country of as at the Latest Name of Subsidiary Principal Activities Incorporation Practicable Date (%) Held by the Company Khong Guan Food Trading in quoted Singapore Products Pte Ltd investments Victus Marketing Trading in edible foods Singapore Pte. Ltd. and quoted investments Tau Meng Investments Investment holding Singapore Pte Ltd Swee Hin Chan Wholesaler of wheat Malaysia Company Sdn. Berhad flour,general goods, and related products Tong Guan Food Wholesaler of wheat Malaysia Products Sdn. Bhd. flour, biscuits and other consumer goods Held by Tong Guan Food Products Sdn. Bhd. Sasinco Sdn. Bhd. Wholesaler of consumer Malaysia goods 14

15 LETTER TO SHAREHOLDERS As at the Latest Practicable Date, the associates and their principal activities are as follows: Effective Equity held by the Company Country of as at the Latest Name of Associate Principal Activities Incorporation Practicable Date (%) Held by the Company Henan Khong Guan Milling of wheat flour and The People s Cereal and Oil Food related by-products Republic of China Products Company Limited Held by Tong Guan Food Products Sdn. Bhd. Borneo Can Sendirian Manufacturing and sale of Malaysia Berhad paper cartons, metal tins and cans Held by Tau Meng Investments Pte Ltd United Malayan Flour Milling and trading of Malaysia (1996) Sdn. Bhd. wheat flour and related products 3.2 Information regarding the Proposed Diversification The existing principal office of the Company located at 2 MacTaggart Road, Singapore (the MacTaggart Building ) is approximately 50 years old. The property comprises an existing building (which has been designated for conservation purposes in view of its historical value) and an adjoining plot of vacant land (which is currently used as car-park). The existing plot ratio utilised for the MacTaggart Building is approximately 1.1 times, which is lower than the maximum permissible gross plot ratio of 2.5 times. As the MacTaggart Property is approximately 50 years old, it requires refurbishment and preservation, the Directors would like to take the opportunity to redevelop MacTaggart Building including the adjoining vacant land (collectively, the MacTaggart Property ), inter alia, refurbish, redevelop and preserve it in accordance with the applicable government s policies as well as to fully utilise the maximum permissible plot ratio of 2.5 times for the MacTaggart Property. Accordingly, the Board has proposed that the redevelopment, conservation, and alteration and addition works be carried out on the MacTaggart Property (the Redevelopment of MacTaggart Property ). The Group has to: (i) (ii) (iii) refurbish the existing 50 years old flagship building (slated for conservation) in accordance with applicable rules; improve the usage of the property and land thereon through increase in plot ratio; and hold the MacTaggart Property after redevelopment as a long term investment. As the available gross floor area upon completion of the Redevelopment of the MacTaggart Property may exceed the Group s then prevailing requirements, the Group may rent out any surplus lettable area. 15

16 LETTER TO SHAREHOLDERS The purpose for the Redevelopment of MacTaggart Property is for the creation of a new corporate image as its existing flagship building is more than 50 years old. The redevelopment will provide opportunities for an increase in Shareholders value (via improving asset utlisation), whilst allowing the Company to maximize its usage of plot ratio (which currently is 1.1 times), resulting in an increase in gross floor area. The appointed architect has worked on the redevelopment of the MacTaggart Property with, inter alia, the relevant government authorities and/or agencies for a period of time and hence is very experienced in terms of understanding the specific and unique requirements of the redevelopment. Based on architectural plans and subject to approval and modifications as may be required, it is envisaged that the completed redevelopment will comprise a 8-storey light industrial building, of which it is estimated that approximately 30% of the gross floor area will be set aside for the Company s activities. Subject to the Group s internal requirements and activities prevailing at time of completion, the Directors do intend to rent out any surplus lettable area (which are not required by the Group s then prevailing activities) and accordingly, it will provide the Group a new revenue and income source. The details of the Redevelopment of MacTaggart Property are as follow:- Details Tenure Area Specifications Freehold Gazetted conservation area Site Area 1,019.6 m 2 Existing building 3-storey conservation building Gross floor area (Current) Approximately 1,125 m 2 Gross plot ratio 2.5 Gross floor area (Maximum) Approximately 2,550 m 2 permissible The construction is expected to commence around June/July 2015 with an expected construction duration of one and a half to two years (excluding the time required for inspection by the relevant authorities). A valuation was conducted by DTZ Debenham Tie Leung (SEA) Pte Ltd, an independent valuer (the Valuer ), in September 2014 to determine the market value of the MacTaggart Property. The Valuer is of the opinion that the market value of the MacTaggart Property as at 31 July 2014, as an industrial redevelopment site (with a gross plot ratio of 2.5 times) with vacant possession and assuming it is free of encumbrances, restrictions and other outgoings of an onerous nature which would affect its value, is S$12.5 million. The carrying book value of the MacTaggart Property is S$3.9 million as at 31 July Based on preliminary estimates from professionals like, inter alia, architect, quantity surveyor and quotation from contractors, which are subject to finalization of design, submission of plans, modification thereafter and materials to be used, the cost for redevelopment (inter alia, construction of new building, preservation works etc) is approximately S$10.0 million. Accordingly, the aggregate value of the market value of the MacTaggart Property and the estimated construction cost is S$22.5 million. 16

17 LETTER TO SHAREHOLDERS The Directors are optimistic that the market value of the development on completion will exceed S$22.5 million based on (i) aggregate cost to complete the construction and (ii) comparable market values for buildings, properties in the vicinity of the MacTaggart Property. In light with the Redevelopment of MacTaggart Property and other opportunities which may arise, the Directors propose to seek the Shareholders approval for the Proposed New Business (as defined below). After the completion of the Redevelopment of MacTaggart Property, the Group may where appropriate opportunities arise, embark on such other developments or redevelopments of other properties currently held and used by the Group for its existing business activities being, inter alia, trading of wheat flour and consumer goods. As part of the Proposed New Business, the Company may, where appropriate opportunities arise, invest in, purchase or otherwise acquire or dispose of, from time to time, any such assets, investments and shares or interests in any entity that is in the Proposed New Business. Any business activities as aforesaid (including those listed in (a) and (b) below) shall, upon approval of the Proposed Diversification by the Shareholders at the EGM, constitute part of the ordinary course of business of the Group. The Directors do not plan to restrict the Proposed New Business to any specific geographical markets as each project and investment would be evaluated and assessed by the Board on its own merits. Nevertheless, in the initial stage of the Proposed New Business, the Group will focus on markets in Singapore for the New Property Assets (as defined below) whilst for the Existing Property Assets (as defined below), it will comprise Singapore and Malaysia. The Group may also consider joint ventures and/or strategic alliances to carry out the Proposed New Business as and when the opportunity arises. As at the Latest Practicable Date, the Group has not identified any specific projects or investments for the Proposed New Business, save for the Redevelopment of MacTaggart Property. As described earlier, subject to approval of Shareholders for the Proposed Diversification being obtained at the EGM, as and when appropriate opportunities arise, the Company intends to diversify the Group s business to include the following activities ( Proposed New Business ): (a) (b) to undertake property development activities including redevelopment of the Group s existing factories/commercial properties and investment properties in Singapore and Malaysia (the Existing Property Assets ), as well as acquisition, development and/or sales of residential, hospitality, commercial (retail and office), industrial and any other suitable types of properties (including mixed development properties) (the New Property Assets ). Collectively, the Existing Property Assets and the New Property Assets are referred as the Property Related Assets ; and to develop, acquire and hold investments in Property Related Assets for long term investment for the collection of rent, capital growth potential and/or provision of real estate and facilities management services (such as the services of managing agents in relation to real estate development projects). 17

18 LETTER TO SHAREHOLDERS 3.3 Rationale for the Proposed Diversification In deciding to expand the scope of the Existing Business of the Group to include the Proposed New Business, the Company has considered, inter alia, the following: (i) Requirement to develop or redevelop the MacTaggart Property The MacTaggart Property is an old building (about 50 years old) with physical requirements for refurbishment. The Group would like to take the opportunity to redevelop the MacTaggart Property to fully utilise the maximum permissible plot ratio of 2.5 times for the MacTaggart Property. The Group has to: (i) (ii) (iii) refurbish the existing 50 years old flagship building (slated for conservation) in accordance with applicable rules; improve the usage of the property and land thereon through increase in plot ratio; and hold the MacTaggart Property after redevelopment as a long term investment. Subject to the Group s internal requirements and activities prevailing at time of completion, the Directors do intend to rent out any surplus lettable area in the redevelopment (not required by the Group s then prevailing activities) and accordingly, to diversify and increase the revenue source and streams. Rental income from leasing out of surplus lettable areas on completion of the Redevelopment of the MacTaggart Property, will supplement the Group s existing income. (ii) (iii) New income stream Rental income to be generated upon completion of the MacTaggart Property will supplement the Group s revenue and profit before tax as well as diversify its source of revenue and income. Furthermore, any income arising from the Proposed New Business may result in an increase in the Group s revenue and income stream. Accordingly, the Proposed New Business will form part of the Group s on-going strategies to diversify and increase its revenue streams. The Board believes that this will enable the Group to enhance its profitability, Shareholders value and returns and enhance its prospects. Approval is not required from Shareholders for future developments or redevelopments Following the Proposed Diversification, the Group will generally be able to enter into any transaction relating to the Proposed New Business in and as part of its normal course of business without the need for further Shareholders approval even though such transaction may constitute a major transaction under Chapter 10 of the Listing Rules (but provided that such transaction does not change the risk profile of the Group and provided that such transaction does not constitute a very substantial acquisition or reverse takeover under Chapter 10 of the Listing Rules). This substantially reduces the administrative time and expenses in convening separate general meetings to seek Shareholders approval and consequently, facilitates the Group s pursuit of its corporate objectives and increases the Group s responsiveness to property development business opportunities that are available to the Group. 3.4 Organisation of the Proposed New Business As described above, the Group will undertake the Redevelopment of the MacTaggart Property on its own. For future projects or developments after the Redevelopment of MacTaggart Property, the Group may undertake the Proposed New Business independently or in joint venture or strategic alliances or collaboration with third parties who have the relevant expertise and resources. In each case, the Group will take into consideration various factors, such as the nature and scale of the project, 18

19 LETTER TO SHAREHOLDERS amount of investment required and risks associated with such an investment, nature of expertise required, the period of time that is required to complete the project and conditions in the property market, and the opportunities available, to decide whether a project should be undertaken by the Group on its own or via collaboration with third parties. Before undertaking any major project under the Proposed New Business, the management of the Company and the Board will undertake all appropriate due diligence and conduct feasibility studies including financial forecasts, risk analysis, market study, due diligence on the track record and background of any main contractors or joint venture partners, funding needs, potential and projected returns of the project before deciding on the nature and extent of the Group s investment in such a project. In addition, the Board will regularly review the risk exposure of the Proposed New Business on a half-yearly basis or on any interval the Board decides. 3.5 Management of Proposed New Business The Managing Director of the Company, Mr Chew Soo Eng, will lead the Proposed New Business and assisted by the management executives. Mr Chew Soo Eng, in his capacity as the Managing Director of United Malayan Flour (1996) Sdn. Bhd. ( UMF ), has been involved and overall in charge for various construction or enhancement projects undertaken by UMF over the years for its mill in Penang, Malaysia. He had led and supervised an alteration and addition ( A&A ) project for a 7-storey light industrial building in Singapore for a private company, which is similar in nature with the Redevelopment of MacTaggart Property which the Company is embarking upon. As such, Mr Chew Soo Eng does possess the relevant and needed experience for the Redevelopment of MacTaggart Property. The executives, will subject to its policies on corporate governance, provide strategic directions and set the policy on the Proposed New Business, inter alia, type or mix of development project(s), target market, and financing strategy and together with other senior management, manage the Proposed New Business. In view of the fact, that as at the Latest Practicable Date, save for the Redevelopment of MacTaggart Property, there is no other property development or redevelopment projects which the Group intends or plans to undertake, the Company may appoint such other senior management executives or executives with the appropriate experience as maybe required or outsource to such third parties with the required experience and expertise in the relevant area in relation to the project concerned or the management of or rentals for surplus lettable area of the MacTaggart Property after completion. In making their decisions, the Board and senior management of the Group will also, where necessary and appropriate, seek the advice of reputable external consultants and experts (including but not limited to quantity surveyors, architect, mechanical civil engineers, project consultant, and property marketing agents). The Group will monitor developments and progress in the Proposed New Business and take the necessary steps to identify suitable candidates both from within the Group as well as externally (including outsourcing) to support and manage the Proposed New Business as and when required. For developments after the Redevelopment of MacTaggart Property, the Group may enter into partnerships with various third parties in the property and construction industry to assist it in undertaking the Proposed New Business more effectively and efficiently as the Group gains inhouse expertise and experience in this field. Where necessary, work may be outsourced to third parties who have expertise in the relevant area in relation to the projects concerned. In selecting the partners or experts, the Group will take into account the specific expertise and competencies required for the project in question and the experience, historical track record and financial standing of the partners or experts concerned. 19