THE LEXICON GROUP LIMITED (Incorporated in Singapore) (Company Registration Number 199407135Z) PROPOSED SUBSCRIPTION OF IN AGGREGATE 180,000,000 NEW ORDINARY SHARES IN THE CAPITAL OF THE LEXICON GROUP LIMITED (THE COMPANY ) WITH 90,000,000 FREE ATTACHED WARRANTS (THE SUBSCRIPTION ) This announcement has been reviewed by the Company s Sponsor, KW Capital Pte. Ltd., for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited ( SGX-ST ). The Company s Sponsor has not independently verified the contents of this announcement. This announcement has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this document, including the correctness of any of the statements or opinions made or reports contained in this announcement. The details of the contact person for the Sponsor are: Name: Mr. Yang Eu Jin Address: 80 Raffles Place, #25-01 UOB Plaza 1, Singapore 048624 Tel: (65) 6238 3377 1. Introduction 1.1 The Board of Directors of the Company (the Board ) wishes to announce that the Company has today entered into a subscription agreement (the Subscription Agreement ) with several investors (the Subscribers ) pursuant to which the Company has agreed to issue in aggregate 180,000,000 new ordinary shares in the capital of the Company (the Subscription Shares ) with 90,000,000 free attached warrants (the Warrants ), each Warrant carrying the right to subscribe for one (1) new ordinary share (the New Warrant Share ) in the capital of the Company. The Warrants will not be listed or traded on the Catalist of the Singapore Exchange Securities Trading Limited ( SGX-ST ). The Subscribers have agreed to subscribe for 180,000,000 Subscription Shares in aggregate, at an issue price of S$0.014 per Subscription Share (the Issue Price ), amounting to an aggregate consideration of S$2,520,000, and on the terms and conditions of the Subscription Agreement. 1.2 The Issue Price represents a discount of 7.4% over the weighted average trading price of S$0.01512 per ordinary share of the Company based on the trades done on the Company s shares on the Catalist of the SGX-ST on 29 December 2010, being the last full market day immediately preceding the execution date of the Subscription Agreement. 1
1.3 The exercise price will be fixed at S$0.020 for each New Warrant Share upon exercise of the Warrants, subject to such adjustments to be set out in the deed poll constituting the Warrants. The exercise price of S$0.020 represents a premium of approximately 32.28% over the weighted average trading price of S$0.01512 per ordinary share of the Company based on the trades done on the Company s shares on the Catalist of the SGX-ST on 29 December 2010, being the last full market day immediately preceding the execution date of the Subscription Agreement. 1.4 The Subscription Shares will be issued pursuant to the general mandate authorising the Directors of the Company to issue new shares and convertible securities, which was granted by the shareholders of the Company by way of an ordinary resolution at the annual general meeting of the Company held on 29 July 2010 ( AGM ). The Subscription Shares alone represent approximately 17.29% of the total number of issued shares in the Company as at the date of this Announcement and 19.13% as at the date of the AGM, and aggregated with the New Warrant Shares approximately 25.94% of the total number of issued shares in the Company as at the date of this Announcement and 28.69% as at the date of the AGM. Based on the total issued share capital of 940,919,313 shares as at the date of the AGM, the said mandate allows the Company to issue 470,459,656 shares on a non-pro rata basis. Subsequent to the shares placement exercise of 100,000,000 million shares and the 50,000,000 unlisted warrants in October 2010, the total number of shares still available under the mandate is 320,459,656 shares. The Subscription Shares will be placed to the Subscribers pursuant to Section 272B of the Securities and Futures Act (Chapter 289) of Singapore. 1.5 The Subscription Shares shall be issued free from all claims, pledges, mortgages, charges, liens and other encumbrances and shall rank in all respects pari passu with the then existing issued shares of the Company at the time of the issue except that the Subscription Shares will not rank for any dividends, rights, allotments or other distributions in the event that the record date falls before the date of the issue of the Subscription Shares. 1.6 The proposed Subscription is subject to, inter alia, the approval in-principle of the SGX-ST for the listing and quotation of the Subscription Shares and the New Warrant Shares on the Catalist of the SGX-ST. 2
2. Details of the Subscribers and Rationale for the proposed Subscription 2.1 Details of the Subscribers, the number of Subscription Shares to be subscribed by each Subscriber with the respective Warrants and the aggregate subscription price to be paid by each Subscriber are set out below:- Name of Subscribers Number of Subscription Shares Aggregate Subscription Price (S$) Number of Free Warrants Tan Hiap Seng nee Low Lak Muay 30,000,000 420,000 15,000,000 Tan Wang Cheow 2,500,000 35,000 1,250,000 Poon Wai Hing 10,000,000 140,000 5,000,000 Joyce E-Ming Ng 5,000,000 70,000 2,500,000 Lim Chye Huat @ Bobby 25,000,000 350,000 12,500,000 Lim Chye Huat Tan Ghuat Woon 26,000,000 364,000 13,000,000 Tong Kin Leong 5,000,000 70,000 2,500,000 Lee Freddie 5,000,000 70,000 2,500,000 Low Ee Hwee 41,500,000 581,000 20,750,000 Tan Sze Seng 5,000,000 70,000 2,500,000 Teo Yong Ping 5,000,000 70,000 2,500,000 Chiang Ngee Fun 10,000,000 140,000 5,000,000 Natureland Limited 10,000,000 140,000 5,000,000 Total 180,000,000 2,520,000 90,000,000 The Subscribers were introduced through mutual contacts and business associates of the Managing Director of the Company. 2.2 Rationale for the Subscription The Company is of the view that the proposed subscription would widen its investor base and increase liquidity in its shares. With a view to enhancing shareholders value, the Directors believe that the proposed Subscription will also provide the Company and its subsidiaries (the Group ) with added financial flexibility for future corporate developments and to tap on new business opportunities as and when they arise. The Subscribers have subscribed to the Subscription Shares purely for financial investment purposes. 3
2.3 General Terms and Conditions of the Warrants Subject to the execution of a deed poll constituting the Warrants, the general terms of the Warrants are inter alia as follows: Number of Warrants : 90 million in aggregate Detachability and Trading : The Warrants will be detached from the Subscription Shares on issue and will not be listed and traded on the Catalist of the SGX-ST. Exercise Price : The exercise price will be fixed at S$0.02 for each New Warrant Share, subject to the prescribed adjustments. Exercise Period : The Warrants may be exercised at any time during the period which will commence on the date of issue of the Warrants and will end on the day immediately preceding the second anniversary of the date of issue of the Warrants. Warrants remaining unexercised at the expiry of the Exercise Period shall lapse and cease to be valid for any purpose. Adjustments : The Exercise Price and the number of Warrants to be held by each warrantholder will be subject to adjustments only in the event of rights, bonus or other capitalisation issues. 3. Conditions precedent to Completion Completion of the Subscription is conditional upon, inter alia:- (a) (b) (c) in-principle approval for an additional listing application for the Subscription Shares and New Warrant Shares to be issued upon exercise of the Warrants, being obtained from the SGX-ST and not having been revoked or amended and, where such approval is subject to conditions (which are not normally imposed by the SGX-ST for a transaction of a similar nature), such conditions being acceptable to the Subscribers and, to the extent that any conditions for the listing and quotation of the Subscription Shares on the Catalist of the SGX-ST are required to be fulfilled on or before Completion Date, they are so fulfilled; the Company having obtained approval of its board of directors for the transactions contemplated in the Subscription Agreement; the allotment, issue and subscription of the Subscription Shares, the Warrants 4
and the New Warrant Shares not being prohibited by any statute, order, rule, regulation or directive promulgated or issued after the date of the Subscription Agreement by any legislative, executive or regulatory body or authority of Singapore which is applicable to the Company or the Subscribers; and (d) the warranties and undertakings in the Subscription Agreement remaining true and correct in all material respects as at the Completion Date and the Company and the Subscribers having performed all of their obligations hereunder to be performed on or before the Completion Date. Completion of the Subscription is to take place on the date falling three (3) business days after the date on which all the conditions to the completion of the Subscription have been satisfied or waived (the Completion Date ), being a date not later than five (5) weeks from the date of the Subscription Agreement (or such other date as the Parties may agree in writing) whichever is the later. 4. Use of Net Proceeds 4.1 The Subscription will allow the Company to raise estimated net proceeds (the Net Proceeds ) of up to approximately S$4.22 million (after deducting expenses incurred in connection with the Subscription and assuming that all the 180,000,000 Subscription Share and the 90,000,000 Warrants are fully subscribed). 4.2 The Company intends to use the Net Proceeds for general working capital purposes. Additionally, the Net Proceeds may also be used to fund the acquisition of properties or other assets, business growth and investment opportunities as and when they arise. 4.3 The Directors are of the opinion that after taking into consideration the Company s present bank facilities, the working capital available to the Group is sufficient to meet its present requirements. The Directors are of the opinion that after taking into consideration the Company s present bank facilities and the net proceeds of the proposed Subscription, the working capital available to the Group is sufficient to meet its present requirements. Notwithstanding the present sufficiency of working capital, the Directors are of the opinion that the additional working capital will strengthen its balance sheet and add financial flexibility for future corporate developments and place the Group in a better position to undertake any strategic asset acquisition or tap on new business opportunities as and when they arise. 4.4 Pending deployment of the proceeds from the Subscription, such proceeds may be deposited with banks and/or financial institutions, invested in short-term money markets and/or marketable securities, as the Directors may deem appropriate in the interests of the Group. 5
5. Financial Effects The 180,000,000 Subscription Shares is approximately equal to 17.29% of the total number of ordinary shares that the Company has to-date issued. On the assumption that all the Subscription Shares are fully subscribed for but before exercise of the Warrants, the Company s issued and paid-up share capital will comprise of 1,220,933,313 ordinary shares. Based on the audited consolidated financial statements of the Group for the most recently completed financial year ended 31 March 2010, purely for illustrative purposes, the financial effects of the proposed Subscription on the Group based on the following assumptions are estimated as follows:- (a) (b) (c) (d) the financial position as at 31 March 2010 have been prepared on a proforma basis on the assumption that the proposed Subscription had been completed on 31 March 2010; the financial results for FY 2010 have been prepared on a proforma basis on the assumption that the Proposed Subscription has been completed on 1 April 2009; the Warrants of 90,000,000 were fully exercised; and transaction costs incurred for the proposed Subscription are approximately S$100,000. S$ 000 FY 2010 Before Proposed After Proposed Subscription Subscription Net Tangible Assets ( NTA ) 1,972 6,192 NTA per share (cents) 0.21 0.51 Net profit after tax 5,614 5,514 Earnings per share (cents) 0.60 0.46 Share capital ($ 000) 109,761 113,981 6. Directors and Substantial Shareholders Interests None of the directors and the substantial shareholders of the Company have any interest in the Subscription The Subscribers are not related to any directors and the substantial shareholders of the Company. 6
7. General The Company will make the necessary announcements once the approval-in-principle for the listing and quotation of the Subscription Shares and the New Warrant Shares has been obtained from the SGX-ST. For and on behalf of the Board Ricky Ang Gee Hing Executive Vice-Chairman and Managing Director 30 December 2010 7