NET PACIFIC FINANCIAL HOLDINGS LIMITED (Incorporated in Singapore on 9 January 2003) (Company registration no. 200300326D) THE PROPOSED DISPOSAL OF THE ENTIRE EQUITY INTERESTS IN K PLAS MOULDING PTE. LTD. ( K PLAS MOULDING ) 1. INTRODUCTION The board of directors (the Board ) of Net Pacific Financial Holdings Limited (the Company and together with its subsidiaries, the Group ) refers to the Company s circular dated 13 April 2011 ( Circular ) in relation to, inter alia, the general mandate for the disposal ( Mandate ) by the Company of its equity interests held by the Company s wholly-owned subsidiary, K Plas Moulding Pte. Ltd. ( K Plas Moulding ), in K Plas Hi-Tech (Shanghai) Co., Ltd ( K Plas Hi-Tech ) and K-Plas Hi- Tech Tooling (Shanghai) Co., Ltd ( K Plas Tooling ) (collectively, the Plastic Companies ) and the approval by shareholders of the Company ( Shareholders ) at the extraordinary general meeting of the Company held on 28 April 2011 ( EGM ) for, inter alia, the Mandate. The Board wishes to announce that the Company has on 3 November 2011 entered into a sale and purchase agreement (the SPA ) with Mr Beh Kim Ling, a substantial Shareholder with a 6.0% shareholding interest in the Company as at the date of this announcement (the Purchaser ), pursuant to which the Purchaser has agreed to acquire, and the Company has agreed to sell (the Proposed ), 100 ordinary shares in the capital of K Plas Moulding, representing the entire shareholding interest of K Plas Moulding, for an aggregate consideration of S$1,330,000 (the Consideration ). 2. INFORMATION ON K PLAS MOULDING As at the date of this announcement, K Plas Moulding is an investment holding company and holds the entire respective equity interests of the Plastic Companies. 2.1 Information on K Plas Hi-Tech K Plas Hi-Tech is a company established in Shanghai, the People s Republic of China ( PRC ). As at the date of this announcement, the registered and paid up capital of K Plas Hi-Tech is US$1,000,000 and its principal business activity is in the manufacture and sale of plastic components. In addition, K Plas Hi-Tech has a total of 20 units of plastic injection molding machines, fully equipped with advanced robotic system, with tonnage ranging from 10 tons to 350 tons. 2.2 Information on K Plas Tooling K Plas Tooling is a company established in Shanghai, the PRC. As at the date of this announcement, the registered and paid up capital of K Plas Tooling is US$1,500,000 and its principal business activity is the manufacture of plastic injection moulds. In addition, K Plas Tooling has CAD/CAM Systems (AutoCad 2002, Pro Engineering 1
2001, Master Cam 90 & Unigraphic) for mould design, and CNC, EDM, wire-cut, milling, lathe, and surface grinding machines for mould fabrication. 2.3 Combined financial information of the K Plas Moulding Group The summary combined financial information of K Plas Moulding and the Plastic Companies (the K Plas Moulding Group ) for the last 3 financial years ended 31 December 2010 and six-month financial period ended 30 June 2011 ( HY2011 ) is set out below: FY2008 FY2009 FY2010 HY2011 (HK$ 000) (unaudited) (unaudited) (unaudited) (unaudited) Revenue 28,990 14,400 12,173 8,069 Gross profit / (loss) 8,488 1,094 (89) 1,308 Profit / (Loss) before 3,584 (3,331) (11,692) (4,728) income tax Profit / (Loss) for the year / period 3,584 (3,331) (11,693) (4,728) ---------------- As at 31 December ------------------- As at 30 June 2008 2009 2010 2011 (HK$ 000) (unaudited) (unaudited) (unaudited) (unaudited) Current assets 16,143 12,109 9,563 10,703 Non-current assets 16,503 13,270 3,374 2,150 Current liabilities (1) 7,156 3,592 3,585 8,056 Total equity (2) 25,490 21,787 9,352 4,797 Notes: (1) The amount of current liabilities set out above includes amounts owing by the Plastic Companies to the Company as at the end of the respective financial years/period. (2) The amount of total equity set out above includes an interest free quasi-equity loan which is an inter-company loan from the Company to K Plas Moulding, of which K Plas Moulding had used to invest as paid-up capital in the Plastic Companies. 3. THE CONSIDERATION The Consideration was arrived at following arm s length and commercial negotiations between the Purchaser and the Company on a willing-buyer willing-seller basis, after taking into consideration, inter alia, the adjusted unaudited combined net asset value ( NAV ) of the K Plas Moulding Group as at 30 September 2011 (being the latest available monthly management accounts) of approximately HK$6.7 million (or approximately S$1.1 million) 1. The Consideration will be satisfied in cash via three (3) tranches by way of cheque from the Purchaser to the Company in the following manner: (i) first payment tranche of S$332,500 on the day falling two (2) weeks from the date of completion of the Proposed (the Completion Date ); 1 The adjusted unaudited combined NAV of the K Plas Moulding Group as at 30 September 2011 of approximately HK$6.7 million has been adjusted to exclude the amounts owing by the Plastic Companies to the Company as at 30 September 2011 of approximately HK$1.1 million. Without such adjustment, the unaudited combined NAV of the K Plas Moulding Group as at 30 September 2011 would have been approximately HK$5.6 million (or approximately S$0.9 million). 2
(ii) (iii) second payment tranche of S$332,500 at any time within 90 days from the Completion Date; and final payment tranche of S$665,000 at any time within 180 days from the Completion Date. In connection with the Proposed, the Company has agreed to waive (i) all the amounts owing by the Plastic Companies to the Company as at 30 September 2011 of approximately HK$1.1 million (or approximately S$0.2 million) and (ii) the quasi-equity loan owing by K Plas Moulding to the Company as at 30 September 2011 of approximately HK$26.0 million (or approximately S$4.3 million) of which K Plas Moulding had used to invest as paid-up capital in the Plastic Companies, collectively, the Loan Waiver. Save as aforementioned, the K Plas Moulding Group did not have any other debts owing to the other companies within the Group and vice versa. The Consideration represents a premium of approximately HK$1.3 million over the adjusted unaudited combined NAV of the K Plas Moulding Group as at 30 September 2011 after taking into account the Loan Waiver. Accordingly, the Proposed is expected to result in an estimated gain on disposal of approximately HK$0.6 million for the Group. The Group intends to utilise the net proceeds from the Proposed for its working capital requirements. 4. PRINCIPAL TERMS OF THE SPA 4.1 Conditions precedent Completion of the Proposed shall be conditional upon, inter alia, the following conditions precedent ( Conditions Precedent ) having been fulfilled or waived: (i) (ii) All necessary third party, governmental and regulatory consents, approvals and waivers where required for the transactions contemplated under the SPA having been obtained by the Company, and such consents, approvals and waivers not having been amended or revoked before Completion Date, and if any such consents, approvals or waivers are subject to conditions, such conditions being acceptable to the Purchaser; and All amounts owing by K Plas Moulding and the Plastic Companies to the Company and its other subsidiaries (other than K Plas Moulding and the Plastic Companies) being fully settled. 4.2 Completion The completion of the Proposed is expected to occur on 30 November 2011 and upon the Condition Precedents being fulfilled or waived. The long stop date for the completion of the Proposed will be three (3) months from the date of the SPA, or such other date as the Purchaser and the Company may agree in writing. 3
5. RATIONALE FOR THE PROPOSED DISPOSAL As at the date of this announcement, the Group s core business comprise (i) the plastic injection moulding and mould design and fabrication business ( Plastic Business ), which is undertaken by the Plastic Companies; and (ii) the financing business, which includes the provision of mezzanine loans and investments in companies with good fundamentals and growth potential ( Financing Business ), which is undertaken by the Company s wholly-owned subsidiary, Net Pacific Finance Group Limited. In view of the intense competition within the plastic injection moulding and mould design and fabrication industry and the decreasing demand in the electronics industry which the Plastic Business principally serves, the Board believes that it will be difficult to sustain the Plastic Business, which has been incurring losses for the last 2 financial years ended 31 December 2010, without further substantial investment to grow the business to achieve economies of scale and to reach a profitable level. The Board believes that the Financing Business is a viable business and that it will be in the Company s interest to exit the loss-making Plastic Business so as to focus its resources on the Financing Business. The Board, after careful consideration, is of the view that the Consideration is fair and reasonable and that the Proposed is in the best interest of the Company and its Shareholders. 6. CHAPTER 10 OF THE CATALIST RULES As the Proposed will result in a fundamental change in the Group s business, the Proposed would be classified as a major transaction which requires Shareholders approval pursuant to Rule 1013 of the Singapore Exchange Securities Trading Limited ( SGX-ST ) Listing Manual Section B: Rules of Catalist ( Catalist Rules ). The relative figures for the Proposed computed on the bases pursuant to Rule 1006 of the Catalist Rules, are as follows: Relative percentage (%) Rule 1006(a) Rule 1006(b) The NAV of the K Plas Moulding Group, compared with the Group s NAV The aggregate net profits attributable to the K Plas Moulding Group, compared with the Group s net profits 4.2 (1) Not applicable (2) Rule 1006(c) The Consideration compared with the Company s market capitalisation based on the total number of issued ordinary shares in the capital of the Company ( Shares ) excluding treasury shares (3) 9.0 Rule 1006(d) Rule 1006(e) The number of equity securities to be issued by the Company as consideration for an acquisition, compared with the number of equity securities of the Company previously in issue The aggregate volume or amount of proven and probable reserves to be disposed of, compared with the aggregate of the Group s proven and probable reserves Not applicable (4) Not applicable (5) 4
Notes: (1) Based on the adjusted unaudited combined NAV of the K Plas Moulding Group as at 30 June 2011 of approximately HK$6.1 million (as adjusted after taking into account the Loan Waiver) and the unaudited consolidated NAV of the Group as at 30 June 2011 of HK$144.5 million. (2) Not applicable as the K Plas Moulding Group was loss making in FY2010 and HY2011. The K Plas Moulding Group incurred unaudited combined loss before income tax in FY2010 and HY2011 of approximately HK$11.7 million and HK$4.7 million respectively. (3) The market capitalisation of the Company, being approximately S$14.7 million, is determined by multiplying the total number of issued Shares of 525,624,328 Shares as at the date of this announcement by the volume-weighted average price of approximately S$0.028 per Share on 2 November 2011 (being the last market day prior to the date of signing of the SPA). (4) Not applicable as no equity securities will be issued by the Company as consideration pursuant to the Proposed. (5) Not applicable as the Proposed does not relate to a disposal of mineral, oil and gas assets and the Group is not a mineral, oil and gas company. The Company had at the EGM, obtained the approval of Shareholders for the Mandate. As the Proposed is undertaken in accordance with the terms of the Mandate and does not constitute an interested person transaction within the ambit of Chapter 9 of the Catalist Rules nor a major transaction under Rule 1013 of the Catalist Rules by reason other than a fundamental change in the Company s business, the Company will not be required to convene a separate extraordinary general meeting to seek the specific approval of Shareholders for the Proposed. 7. FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL For illustrative purposes only, the financial effects of the Proposed on the Group set out below: (a) (b) are prepared based on the audited financial statements of the Group for FY2010; and assume that the Proposed had been completed, in respect of profit and loss statements on 1 January 2010 and in respect of balance sheets on 31 December 2010. The financial effects set out below are theoretical in nature and are therefore not necessarily indicative of the actual financial results and financial position of the Group after the completion of the Proposed. 7.1 Share capital As the Proposed does not involve the issue and allotment of any new Shares, the Proposed will not have any impact on the share capital of the Company. 5
7.2 Loss per Share ( LPS ) Before the Proposed After the Proposed Loss attributable to equity holders of the Company for FY2010 (HK$ 000) Weighted average number of Shares in issue in FY2010 ( 000) 17,842 5,616 283,286 283,286 LPS for FY2010 (HK cents) 6.30 1.98 7.3 Net tangible assets ( NTA ) Before the Proposed After the Proposed NTA as at 31 December 2010 (HK$ 000) 145,465 146,065 Number of Shares ( 000) 525,624 525,624 NTA per Share as at 31 December 2010 (HK cents) 27.67 27.79 7.4 Gearing The Proposed will have no impact on the gearing of the Group as the Group did not have any borrowings as at 31 December 2010. 8. STATEMENT FROM AUDIT COMMITTEE Having reviewed, inter alia, the Consideration, the rationale and the terms and conditions of the Proposed, the audit committee of the Company is of the opinion that the Proposed is not prejudicial to the interests of the Company and its Shareholders. 9. INTEREST OF DIRECTORS AND CONTROLLING SHAREHOLDERS None of the Company s directors or controlling shareholders has any interests, direct or indirect, in the Proposed (other than by reason only of being a director of the Company). No director will be appointed to the Board of the Company in connection with the Proposed. 6
10. DOCUMENT AVAILABLE FOR INSPECTION A copy of the SPA is available for inspection during normal business hours at the registered office of the Company at 53A Duxton Road, Singapore 089517, for a period of three (3) months from the date of this announcement. By Order of the Board Ong Chor Wei @ Alan Ong Chief Executive Officer 3 November 2011 This announcement has been reviewed by the Company's sponsor, CIMB Bank Berhad, Singapore Branch ( Sponsor ), for compliance with the Catalist Rules. The Sponsor has not independently verified the contents of this announcement. This announcement has not been examined or approved by the SGX-ST. The Sponsor and the SGX-ST assume no responsibility for the contents of this announcement, including the correctness of any of the statements or opinions made or reports contained in this announcement. The contact person for the Sponsor is Ms Tan Cher Ting, Senior Vice President, Corporate Finance, CIMB Bank Berhad, Singapore Branch, at 50 Raffles Place, #09-01 Singapore Land Tower, Singapore 048623, Telephone: +65 6337 5115. 7