Osim International Ltd
Osim International Ltd
Osim International Ltd
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
“regional player...going global”<br />
We have made an application to the Singapore Exchange Securities Trading<br />
Limited (the ‘‘SGX-ST’’) for permission to deal in and for quotation of our ordinary<br />
shares of $0.05 each (‘‘Shares’’) already issued and the new Shares which are<br />
the subject of the Invitation. Such permission will be granted when we have<br />
been admitted to the Official List of the SGX-ST.<br />
Acceptance of applications will be conditional upon permission being granted<br />
to deal in and for quotation of all the issued Shares and the new Shares which<br />
are the subject of the Invitation. If the said permission is not granted, monies<br />
paid in respect of any application accepted will be returned without interest<br />
or any share of revenue or other benefit arising therefrom and at the applicant’s<br />
risk. Admission to the Official List of the SGX-ST is not to be taken as an<br />
indication of the merits of the Invitation, the Company, its subsidiaries,<br />
associated company or the Shares.<br />
The SGX-ST assumes no responsibility for the correctness of any of the<br />
statements made, reports set out or opinions expressed in this Prospectus.<br />
A copy of this Prospectus has been lodged with and registered by the<br />
Registrar of Companies and Businesses in Singapore who takes no responsibility<br />
for its contents.<br />
OSIM INTERNATIONAL LTD<br />
(Incorporated in the Republic of Singapore on 27 August 1983)<br />
INVITATION IN RESPECT OF 58,000,000 ORDINARY SHARES OF<br />
$0.05 EACH (‘‘INVITATION SHARES’’) COMPRISING 38,000,000 NEW SHARES<br />
AND 20,000,000 VENDOR SHARES AS FOLLOWS:–<br />
(A) 5,800,000 OFFER SHARES AT $0.52 FOR EACH OFFER SHARE BY WAY OF PUBLIC OFFER;<br />
AND<br />
(B) 52,200,000 PLACEMENT SHARES BY WAY OF PLACEMENT, COMPRISING:–<br />
(I) 46,400,000 PLACEMENT SHARES AT $0.52 FOR EACH PLACEMENT SHARE; AND<br />
(II) 5,800,000 RESERVED SHARES AT $0.47 FOR EACH RESERVED SHARE RESERVED<br />
FOR DIRECTORS AND EMPLOYEES OF THE GROUP,<br />
PAYABLE IN FULL ON APPLICATION<br />
Manager, Underwriter and Placement Agent<br />
Oversea-Chinese Banking Corporation Limited<br />
(Incorporated in Singapore)<br />
Applications should be received by 12.00 noon on 27 July 2000 or such later date and time as the<br />
Company and the Vendor may, in their absolute discretion, decide.
our global presence (as of May 31, 2000)<br />
USA: 11<br />
Total Number of Outlets: 203<br />
A leading marketer, distributor and franchisor of home health-care, health-check and<br />
healthy lifestyle products in Asia, we have more than 200 point-of-sales outlets around<br />
the world.<br />
We aim to increase our point-of-sales outlets<br />
worldwide to 300 by 2001, 500 by 2003 and<br />
1,000 by 2008.<br />
2001E<br />
2003E<br />
2008E<br />
financial highlights<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
103.1<br />
300<br />
No. of outlets<br />
69.7<br />
60.8<br />
500<br />
UAE: 1<br />
42.9<br />
31.4<br />
1000<br />
Hong Kong: 40 Taiwan: 30<br />
Thailand: 5<br />
Malaysia: 21<br />
Singapore: 37<br />
Indonesia: 14<br />
1.6<br />
PRC: 44<br />
3.2<br />
3.7<br />
4.4<br />
Turnover Profit Before Taxation<br />
(S$ million)<br />
10.8
Growth strategies<br />
our vision:<br />
to be a global leader in home health-care<br />
& healthy lifestyle products<br />
A) Expansion of Business<br />
Penetrate new geographical markets<br />
• Increase point-of-sales outlets<br />
• Appoint franchisees in Australia, the Philippines,<br />
United Kingdom, South Africa and Korea<br />
Introduce new product lines<br />
• Fitness equipment<br />
• Health supplements<br />
Expand wholesale distribution<br />
• Target hospitals, pharmacies, Chinese medical halls,<br />
health clubs, beauty centers and fitness centers<br />
Expand coverage of the consumer market<br />
• Develop our "NORO" brand<br />
• Lower-priced products to target<br />
different market segment<br />
B) Upgrading of IT Infrastructure<br />
• Enhance our Enterprise Resource Planning and<br />
Customer Relationship Management systems<br />
C) Venturing into E-Commerce Activities<br />
D) New Corporate Headquarters
Core business and products<br />
We provide a comprehensive range of home health-care<br />
products which are broadly categorised under:<br />
Healthy Lifestyle<br />
Millennium Chair Pro-Reflexologist eHuman Logic Blood<br />
Pressure Monitor<br />
Competitive strengths<br />
Operate & Control our Supply Chain<br />
• Design<br />
• Procurement<br />
• Distribution<br />
Established Brand Name<br />
• Well-known brand name in Singapore<br />
& Hong Kong<br />
Strong Marketing Capabilities<br />
• Strategic marketing focus<br />
• Niche business concept<br />
Extensive Distribution Network<br />
• More than 200 point-of-sales outlets covering<br />
Asia & USA<br />
• Stores are located in major departmental<br />
stores and suburban shopping malls<br />
• Ability to dictate what to sell & how to sell<br />
Experienced, Hands-on Management Team<br />
• Executive Directors have more than<br />
40 years of combined experience<br />
Health Care Health Check<br />
Management Team
CONTENTS<br />
CORPORATE INFORMATION .................................................................................................... 3<br />
DEFINITIONS .............................................................................................................................. 4<br />
DETAILS OF THE INVITATION<br />
Listing on the SGX-ST ................................................................................................................. 8<br />
Tentative Timetable for Listing ..................................................................................................... 9<br />
PROSPECTUS SUMMARY ......................................................................................................... 10<br />
RISK FACTORS .......................................................................................................................... 12<br />
INVITATION STATISTICS ............................................................................................................ 17<br />
SUMMARY OF FINANCIAL INFORMATION<br />
Results ......................................................................................................................................... 19<br />
Financial Position ......................................................................................................................... 20<br />
INFORMATION ON THE COMPANY AND THE GROUP<br />
Share Capital ............................................................................................................................... 22<br />
Our Shareholders ......................................................................................................................... 24<br />
Moratorium ................................................................................................................................... 25<br />
Restructuring Exercise ................................................................................................................. 25<br />
Group Structure ........................................................................................................................... 27<br />
History .......................................................................................................................................... 27<br />
Business ....................................................................................................................................... 29<br />
Franchise Model .......................................................................................................................... 35<br />
Intellectual Property Rights .......................................................................................................... 36<br />
Product And Service Quality Control ........................................................................................... 37<br />
New Products/Activities ............................................................................................................... 38<br />
Research and Development ........................................................................................................ 38<br />
Year 2000 Compliance ................................................................................................................. 38<br />
Insurance ..................................................................................................................................... 38<br />
Group Training Policy .................................................................................................................. 39<br />
Analysis of Turnover and Profits .................................................................................................. 39<br />
Review of Past Earnings Performance ........................................................................................ 41<br />
Prospects and Future Plans ........................................................................................................ 45<br />
Review of Financial Position ........................................................................................................ 47<br />
Dividends ..................................................................................................................................... 50<br />
Foreign Exchange Exposure ....................................................................................................... 50<br />
1<br />
Page
Competition .................................................................................................................................. 50<br />
Competitive Strengths .................................................................................................................. 51<br />
Major Suppliers and Customers .................................................................................................. 52<br />
Properties and Fixed Assets ........................................................................................................ 53<br />
Directors, Management and Staff ................................................................................................ 53<br />
<strong>Osim</strong> Share Option Scheme ........................................................................................................ 59<br />
Corporate Governance ................................................................................................................ 61<br />
Interest of Management and Others in Certain Transactions ..................................................... 62<br />
Potential Conflicts of Interest ....................................................................................................... 70<br />
DIRECTORS’ REPORT ............................................................................................................... 71<br />
ACCOUNTANTS’ REPORT ......................................................................................................... 72<br />
GENERAL AND STATUTORY INFORMATION .......................................................................... 95<br />
Page<br />
APPENDIX A — SUMMARY OF THE PRINCIPAL TERMS OF OSIM SHARE OPTION<br />
SCHEME (THE ‘‘SCHEME’’) .................................................................... 113<br />
— RULES OF THE OSIM SHARE OPTION SCHEME ................................... 118<br />
APPENDIX B — TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS . 136<br />
2
CORPORATE INFORMATION<br />
Board of Directors : Dr Ron Sim Chye Hock (Chairman & Chief Executive Officer)<br />
Teo Chay Lee (Chief Operating Officer)<br />
Leow Lian Soon (Regional General Manager)<br />
Teo Sway Heong (Non-executive Director)<br />
Khor Peng Soon (Non-executive Director)<br />
Michael Kan Yuet Yun, PBM (Independent Director)<br />
Ong Kian Min (Independent Director)<br />
Company Secretary : Juliet Ang, LLB (Hons)<br />
Registered Office and<br />
Principal Office<br />
Registrar and Share Transfer<br />
Office<br />
Manager, Underwriter and<br />
Placement Agent<br />
Auditors and Reporting<br />
Accountants<br />
: 57 Genting Lane<br />
<strong>Osim</strong> Industrial Building<br />
Singapore 349564<br />
: B.A.C.S. Private Limited<br />
63 Cantonment Road<br />
Singapore 089758<br />
: Oversea-Chinese Banking Corporation Limited<br />
65 Chulia Street #29-02/04<br />
OCBC Centre<br />
Singapore 049513<br />
: Arthur Andersen<br />
Certified Public Accountants<br />
10 Hoe Chiang Road #18-00<br />
Keppel Towers<br />
Singapore 089315<br />
Solicitors to the Invitation : Wong Partnership<br />
80 Raffles Place #58-01<br />
UOB Plaza 1<br />
Singapore 048624<br />
Principal Bankers : Oversea-Chinese Banking Corporation Limited<br />
65 Chulia Street #29-02/04<br />
OCBC Centre<br />
Singapore 049513<br />
The Development Bank of Singapore <strong>Ltd</strong><br />
6 Shenton Way<br />
DBS Building Tower One<br />
Singapore 068809<br />
3
DEFINITIONS<br />
In this Prospectus, the accompanying Application Forms and in relation to Electronic Applications, the<br />
instructions appearing on the screens of the ATMs of Participating Banks, the following definitions apply<br />
throughout where the context so admits:–<br />
‘‘Act’’ : Companies Act, Chapter 50 of Singapore<br />
‘‘Application Forms’’ : Official printed application forms for the Invitation Shares<br />
which are the subject of the Invitation and which form part of<br />
this Prospectus<br />
‘‘Application List’’ : List for the application to subscribe for the Invitation Shares<br />
‘‘ATM’’ : Automated teller machine<br />
‘‘CDP’’ : The Central Depository (Pte) Limited<br />
‘‘Company’’ or ‘‘<strong>Osim</strong> (S)’’ : <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
‘‘Controlling Shareholder’’ : A Shareholder exercising control over the Company and<br />
unless rebutted, a person who controls directly or indirectly<br />
a shareholding of fifteen (15) per cent. or more of our issued<br />
share capital shall be presumed to be a Controlling<br />
Shareholder of the Company<br />
‘‘Directors’’ : The Directors of the Company as at the date of this<br />
Prospectus<br />
‘‘Electronic Applications’’ : Applications for the Invitation Shares made through an ATM<br />
of one of the Participating Banks in accordance with the<br />
terms and conditions of this Prospectus<br />
‘‘EPS’’ : Earnings per Share<br />
‘‘e-commerce’’ : Electronic commerce<br />
‘‘FY’’ : Financial year ended or ending 31 December<br />
‘‘Investor’’ : Century Private Equity Holdings (S) Pte <strong>Ltd</strong>, a wholly-owned<br />
subsidiary of Temasek Holdings (Private) Limited<br />
‘‘Invitation’’ : Invitation in respect of the Invitation Shares, subject to and<br />
on the terms and conditions of this Prospectus<br />
‘‘Invitation Shares’’ : 58,000,000 Shares comprising 38,000,000 New Shares and<br />
20,000,000 Vendor Shares<br />
‘‘Market Day’’ : A day on which the SGX-ST is open for trading in securities<br />
‘‘New Shares’’ : 38,000,000 new Shares for which the Company invites<br />
applications to subscribe pursuant to the Invitation, subject<br />
to and on the terms and conditions of this Prospectus<br />
‘‘NTA’’ : Net tangible assets<br />
‘‘OCBC Bank’’, ‘‘Manager’’,<br />
‘‘Underwriter’’ or ‘‘Placement<br />
Agent’’<br />
: Oversea-Chinese Banking Corporation Limited<br />
4
‘‘Offer’’ : Invitation in respect of the Offer Shares to the public at the<br />
Offer Price, subject to and on the terms and conditions of this<br />
Prospectus<br />
‘‘Offer Price’’ : $0.52 for each Offer Share<br />
‘‘Offer Shares’’ : 5,800,000 Invitation Shares which are the subject of the<br />
Offer<br />
‘‘Participating Banks’’ : OCBC Bank group (comprising OCBC Bank and Bank of<br />
Singapore Limited), The Development Bank of Singapore<br />
<strong>Ltd</strong> (‘‘DBS Bank’’) including its POSBank Services division,<br />
Keppel TatLee Bank Limited (‘‘KTB’’), Overseas Union Bank<br />
Limited, and United Overseas Bank Limited (‘‘UOB’’) group<br />
(comprising UOB, Far Eastern Bank <strong>Ltd</strong> and Industrial &<br />
Commercial Bank Limited)<br />
‘‘PER’’ : Price earnings ratio<br />
‘‘PRC’’ : People’s Republic of China<br />
‘‘Placement’’ : Placement of the Placement Shares at the Placement Price,<br />
subject to and on the terms and conditions of this<br />
Prospectus<br />
‘‘Placement Agent’’ : OCBC Bank as placement agent who shall subscribe for<br />
and/or purchase, or procure subscription for and/or<br />
purchase of, the Placement Shares<br />
‘‘Placement Price’’ : $0.52 for each Placement Share and $0.47 for each<br />
Reserved Share<br />
‘‘Placement Shares’’ : 52,200,000 Invitation Shares which are the subject of the<br />
Placement (including the Reserved Shares)<br />
‘‘Proforma Group’’ or ‘‘Group’’ : The Company and its subsidiaries assuming that the group<br />
structure had been in place since 1 January 1995<br />
‘‘Reserved Shares’’ : 5,800,000 Placement Shares reserved for the Directors and<br />
employees of the Group at the price of $0.47 for each<br />
Reserved Share<br />
‘‘Restructuring Exercise’’ : The restructuring exercise of the Group undertaken in<br />
connection with the Invitation as described on pages 25 and<br />
26 of this Prospectus<br />
‘‘Securities Account’’ : Securities account maintained by a Depositor with CDP<br />
‘‘SGX-ST’’ : Singapore Exchange Securities Trading Limited<br />
‘‘Shares’’ : Ordinary shares of $0.05 each in the capital of the Company<br />
‘‘Shareholder’’ : Shareholder holding shares in the capital of the Company<br />
‘‘Subscription Agreement’’ : Agreement dated 17 July 2000 between Investor, Dr Ron<br />
Sim Chye Hock and the Company under which Investor<br />
agreed to subscribe for 11,600,000 new Shares,<br />
representing approximately 5 per cent. of the post-Invitation<br />
enlarged share capital of the Company, at $0.47 per Share<br />
(‘‘Investor Subscription’’)<br />
‘‘Vendor’’ : Dr Ron Sim Chye Hock<br />
5
‘‘Vendor Shares’’ : 20,000,000 issued and fully-paid Shares for which the<br />
Vendor invites applications to purchase pursuant to the<br />
Invitation<br />
‘‘USA’’ or ‘‘United States’’ : United States of America<br />
‘‘sq m’’ : Square metres<br />
‘‘$’’ or ‘‘S$’’ and ‘‘cents’’ : Singapore dollars and cents, respectively, unless otherwise<br />
stated<br />
‘‘HK$’’ : Hong Kong dollars<br />
‘‘NT$’’ : New Taiwan dollars<br />
‘‘RM’’ : Malaysian Ringgit<br />
‘‘RMB’’ : Renminbi, the lawful currency of the People’s Republic of<br />
China<br />
‘‘US$’’ : United States dollars<br />
‘‘Yen’’ : Japanese Yen<br />
Group Companies<br />
<strong>Osim</strong> (M’sia) : <strong>Osim</strong> (M) Sdn Bhd<br />
<strong>Osim</strong> (HK) : <strong>Osim</strong> (HK) Company Limited<br />
<strong>Osim</strong> (Shanghai) : <strong>Osim</strong> <strong>International</strong> Trading (Shanghai) Co., <strong>Ltd</strong>.<br />
<strong>Osim</strong> (Taiwan) : <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong><br />
Daito-<strong>Osim</strong> (Suzhou) : Daito-<strong>Osim</strong> Healthcare Appliance (Suzhou) Co., <strong>Ltd</strong>.<br />
Non-Group Companies<br />
HCC (Langfang) : Health Check and Care (Langfang) Co., <strong>Ltd</strong> (has since<br />
12 May 2000 been renamed as <strong>Osim</strong> GHC (Langfang) Co.,<br />
<strong>Ltd</strong>)<br />
ODCPL : <strong>Osim</strong> Distribution Centre (S) Pte <strong>Ltd</strong><br />
<strong>Osim</strong> (Beijing) : <strong>Osim</strong> (Beijing) Co., <strong>Ltd</strong><br />
<strong>Osim</strong> GHC (SH) : <strong>Osim</strong> GHC (Shanghai) Co., <strong>Ltd</strong><br />
<strong>Osim</strong> (Thai) : <strong>Osim</strong> GHC (Thailand) Co., <strong>Ltd</strong><br />
<strong>Osim</strong> (USA) : <strong>Osim</strong> (USA) Inc.<br />
PT Sharon : PT Sharon Samaru<br />
RSH : R.S.H. (Middle East) L.L.C.<br />
6
The exchange rates used to translate the accounts of foreign subsidiaries, as applied in this Prospectus<br />
are as follows:–<br />
Profit and Loss<br />
FY1995 FY1996 FY1997 FY1998 FY1999<br />
RM1 : S$ 0.564 0.558 0.528 0.428 0.447<br />
HK$1 : S$ 0.183 0.182 0.193 0.215 0.219<br />
NT$1 : S$ 0.054 0.052 0.053 0.050 0.052<br />
RMB1 : S$ — 0.170 0.184 0.202 0.205<br />
Balance Sheet<br />
RM1 : S$ 0.555 0.552 0.431 0.436 0.439<br />
HK$1 : S$ 0.182 0.180 0.216 0.214 0.215<br />
NT$1 : S$ 0.052 0.051 0.053 0.051 0.052<br />
RMB1 : S$ — 0.168 0.206 0.200 0.201<br />
The terms ‘‘Depositor’’, ‘‘Depository Agent’’ and ‘‘Depository Register’’ shall have the meanings ascribed<br />
to them respectively in Section 130A of the Act.<br />
The term ‘‘associate’’ shall have the meaning ascribed to it by the Singapore Exchange Securities<br />
Trading Limited’s Listing Manual, which is defined to include an immediate family member (that is, the<br />
spouse, child, adopted child, step-child, sibling or parent) of such director, chief executive officer or<br />
substantial shareholder, the trustees, acting in their capacity as such trustees, of any trust of which the<br />
director, chief executive officer or substantial shareholder or his immediate family is a beneficiary or, in<br />
the case of a discretionary trust, is a discretionary subject and any company in which the director/his<br />
immediate family, the chief executive officer/his immediate family or substantial shareholder/his<br />
immediate family has an aggregate interest (directly or indirectly) of 25 per cent. or more, and, where a<br />
substantial shareholder is a corporation, its subsidiary or holding company or fellow subsidiary or a<br />
company in which it and/or they have (directly or indirectly) an interest of 25 per cent. or more.<br />
Words importing the singular shall, where applicable, include the plural and vice versa and words<br />
importing the masculine gender shall, where applicable, include the feminine and neuter genders.<br />
Any reference in this Prospectus and the Application Forms to any enactment is a reference to that<br />
enactment as for the time being amended or re-enacted. Any word defined in the Act, or any statutory<br />
modification thereof and used in this Prospectus and the Application Forms shall have the meaning<br />
assigned to it in the Act, or such statutory modification, as the case may be.<br />
A reference to a time of day in this Prospectus shall be a reference to Singapore time unless otherwise<br />
stated.<br />
7
DETAILS OF THE INVITATION<br />
1. LISTING ON THE SGX-ST<br />
We have applied to the SGX-ST for permission to deal in and for quotation of all our Shares already<br />
issued (including Vendor Shares) and the New Shares. Such permission will be granted when the<br />
Company has been admitted to the Official List of the SGX-ST. Acceptance of applications will be<br />
conditional upon permission being granted to deal in and for quotation of all the issued Shares<br />
(including Vendor Shares) and the New Shares. If the said permission is not granted, moneys paid<br />
in respect of any application accepted will be returned without interest or any share of revenue or<br />
other benefit arising therefrom and at the applicant’s risk.<br />
The SGX-ST assumes no responsibility for the correctness of any statements made, reports set out<br />
or opinions expressed or reports contained in this Prospectus. Admission to the Official List of the<br />
SGX-ST is not to be taken as an indication of the merits of the Invitation, the Company, its<br />
subsidiaries, associated company or the Shares.<br />
Our Directors and the Vendor collectively and individually accept full responsibility for the accuracy<br />
of the information given in this Prospectus and confirm, having made all reasonable enquiries, that<br />
to the best of their knowledge and belief, the facts stated and opinions expressed in this Prospectus<br />
are fair and accurate in all material respects as at the date of this Prospectus and that there are no<br />
other material facts the omission of which would make any statement in this Prospectus misleading.<br />
No person is authorised to give any information or to make any representation not contained in this<br />
Prospectus in connection with the Invitation and, if given or made, such information or representation<br />
must not be relied upon as having been authorised by us, the Vendor or OCBC Bank. Neither the<br />
delivery of this Prospectus and the Application Forms nor the Invitation shall, under any<br />
circumstances, constitute a continuing representation or create any suggestion or implication that<br />
there has been no change in our affairs or any statement of fact or information contained in this<br />
Prospectus since the date of this Prospectus. Where such changes occur, we may make an<br />
announcement of the same to the SGX-ST. All applicants should take note of any such<br />
announcement and, upon release of such an announcement, shall be deemed to have notice of such<br />
changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as,<br />
a promise or representation as to our future performance or policies. This Prospectus has been<br />
prepared solely for the purpose of the Invitation and may not be relied upon by any persons other<br />
than the applicants in connection with their application for Invitation Shares or for any other purpose.<br />
This Prospectus does not constitute an offer of, or invitation to subscribe for, the Invitation Shares<br />
in any jurisdiction in which such offer or invitation is unauthorised or unlawful or to any person to<br />
whom it is unlawful to make such offer or invitation.<br />
Copies of this Prospectus and the Application Forms may be obtained on request, subject to<br />
availability, during office hours from:–<br />
Oversea-Chinese Banking Corporation Limited<br />
65 Chulia Street<br />
OCBC Centre<br />
Singapore 049513<br />
and from selected branches of OCBC Bank, members of the Association of Banks in Singapore,<br />
merchant banks in Singapore and members of the SGX-ST.<br />
The Application List will open at 10.00 a.m. on 27 July 2000 and will remain open until 12.00<br />
noon on 27 July 2000, or such later date and time as the Company and the Vendor may, in<br />
their absolute discretion, decide.<br />
8
2. TENTATIVE TIMETABLE FOR LISTING<br />
In accordance with the SGX-ST’s News Release of 28 May 1993 on the trading of initial public<br />
offering shares on a ‘‘when issued’’ basis, an indicative timetable is set out below for the reference<br />
of applicants:–<br />
Indicative Time and Date Event<br />
27 July 2000, 12.00 noon Close of Application List<br />
28 July 2000 Balloting of applications, if necessary<br />
31 July 2000, 9.00 a.m. Commence trading on a ‘‘when issued’’ basis<br />
10 August 2000 Last day for trading on a ‘‘when issued’’ basis<br />
11 August 2000, 9.00 a.m. Commence trading on a ‘‘ready’’ basis<br />
16 August 2000 Settlement date for all trades done on a ‘‘when issued’’ basis<br />
and for all trades done on a ‘‘ready’’ basis on 11 August 2000<br />
The above timetable is only indicative and is subject to the closing date for the Invitation being 27<br />
July 2000, the date of our admission to the Official List of the SGX-ST being 11 August 2000, the<br />
SGX-ST’s shareholding spread requirement being complied with and the New Shares being issued<br />
and fully paid up prior to 11 August 2000. The actual date on which the Shares will commence trading<br />
on a ‘‘when issued’’ basis will be announced when it is confirmed by the SGX-ST.<br />
The above timetable and procedure may be subject to such modifications as the SGX-ST may in its<br />
discretion decide, including the decision to permit trading on a ‘‘when issued’’ basis and the<br />
commencement date of such trading. All persons trading in the Shares on a ‘‘when issued’’ basis, if<br />
implemented, do so at their own risk. In particular, persons trading in the Shares before their<br />
Securities Accounts with CDP are credited with the relevant number of Shares do so at the<br />
risk of selling Shares which neither they nor their nominees have been allotted and/or<br />
allocated or are otherwise beneficially entitled to. Such persons are exposed to the risk of<br />
having to cover their net sell positions earlier if trading on a ‘‘when issued’’ basis ends<br />
sooner than the indicative date set out above. Persons who have net sell positions traded on<br />
a ‘‘when issued’’ basis should close their positions on or before the first day of trading on a<br />
‘‘ready’’ basis.<br />
Investors should consult the SGX-ST announcement on ‘‘ready’’ trading date on the Internet (at<br />
SGX-ST website http://www.singaporeexchange.com), INTV or the newspapers or enquire from their<br />
brokers the date on which trading on a ‘‘ready’’ basis will commence.<br />
9
PROSPECTUS SUMMARY<br />
The information contained in this summary is derived from and should be read in conjunction with the full<br />
text of this Prospectus. In addition to this summary, we urge you to read the entire Prospectus carefully,<br />
especially the discussion on ‘‘Risk Factors’’, before buying our Shares. References in this Prospectus to<br />
‘‘<strong>Osim</strong> (S)’’, ‘‘Company’’, ‘‘we’’, ‘‘our’’ and ‘‘us’’ refer to <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong> or, where the context admits,<br />
the Group.<br />
The Company<br />
We were incorporated in the Republic of Singapore on 27 August 1983 as a limited exempt private<br />
company under the name of R. Sim Trading Co. Pte <strong>Ltd</strong>. Subsequently, we changed our name firstly, to<br />
R. Sim & Company Pte <strong>Ltd</strong> and then, to <strong>Osim</strong> <strong>International</strong> (S) Pte <strong>Ltd</strong> on 24 November 1988 and 2<br />
September 1996 respectively. On 4 July 2000, we were converted to a public limited company, and the<br />
name of the Company was changed to <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong>.<br />
We are in the business of marketing, distributing and franchising of a comprehensive range of home<br />
health care, health check and healthy lifestyle products. Other than Daito-<strong>Osim</strong> (Suzhou), all the Group’s<br />
production needs are out-sourced to contract manufacturers in Japan and Taiwan as we believe in<br />
focusing on our strengths in marketing and brand management.<br />
As at 31 May 2000, our Group had 128 point-of-sales outlets in Singapore, Malaysia, Hong Kong and<br />
Taiwan, and through our franchisees, another 75 point-of-sales outlets in Thailand, Indonesia, PRC,<br />
United Arab Emirates and the United States. Barring unforeseen circumstances, we aim to increase the<br />
number of point-of-sales outlets worldwide to 300 by 2001, 500 by 2003 and 1,000 by 2008. In order for<br />
us to achieve this rate of growth, we will be gradually moving away from being a retailer and are<br />
beginning to position ourselves as a franchisor of our OSIM products. We believe that over time this will<br />
lower the capital risk in penetrating new geographical markets and enable our management to<br />
concentrate on strategic marketing and brand cultivation which are our main strengths.<br />
In the next phase of our future growth, we intend to expand our business by marketing and distributing<br />
other related home health-care products like health food and supplements, and fitness equipment. We<br />
also intend to increase our wholesale distribution sales by looking into, inter alia, wholesale distribution<br />
to hospitals, pharmacies, Chinese medical halls, health clubs, beauty centres and fitness centres.<br />
The Invitation<br />
Size : 58,000,000 Shares comprising 38,000,000 New Shares and<br />
20,000,000 Vendor Shares. The Vendor Shares and the<br />
New Shares, will, upon issue, rank pari passu in all respects<br />
with the then existing issued Shares.<br />
Offer Price and Placement Price : $0.52 for each Offer Share and Placement Share and $0.47<br />
for each Reserved Share.<br />
Purpose of the Invitation : We consider that the listing and quotation of the Shares on<br />
the SGX-ST will enhance the public image of the Group and<br />
will enable us to tap the capital markets for the expansion of<br />
our business. It will also give the general public, employees,<br />
Directors and business associates of the Group an<br />
opportunity to participate in the equity of the Company. The<br />
Invitation will enlarge our capital base for continued<br />
expansion of our businesses.<br />
10
Use of Proceeds : The net proceeds of the issue of New Shares will amount to<br />
approximately $18 million. We propose to utilise the net<br />
proceeds of the Invitation as follows:–<br />
(i) approximately $1.5 million to enhance and upgrade<br />
our Group’s information technology systems in order to<br />
facilitate our enterprise resource planning (‘‘ERP’’) and<br />
customer relationship management (‘‘CRM’’) (as more<br />
particularly described under ‘‘PROSPECTS AND<br />
FUTURE PLANS — Upgrading of IT Infrastructure’’ on<br />
pages 46 and 47 of this Prospectus);<br />
(ii) approximately $6 million for the expansion of our<br />
point-of-sales outlets in existing and new geographic<br />
markets, the development of new product lines and for<br />
strategic investments in e-commerce initiatives (as<br />
more particularly described under ‘‘PROSPECTS<br />
AND FUTURE PLANS — Expansion of Business and<br />
E-Commerce’’ on pages 45, 46 and 47 of this<br />
Prospectus respectively);<br />
(iii) approximately $8 million to partially finance the<br />
acquisition of land and construction costs of a new<br />
corporate headquarters in Singapore at Ubi Avenue 1<br />
(as more particularly described under ‘‘PROSPECTS<br />
AND FUTURE PLANS — New Corporate<br />
Headquarters’’ on page 45 of this Prospectus); and<br />
(iv) the balance of approximately $2.5 million for additional<br />
working capital for our Group.<br />
Pending the deployment of the net proceeds from the New<br />
Shares for the above purposes, we may place the net<br />
proceeds in deposits with financial institutions, invest them<br />
in short-term money market instruments, and/or add to our<br />
working capital as our Directors, may in their absolute<br />
discretion, deem appropriate.<br />
Reserved Shares : Of the Placement Shares, 5,800,000 Shares will be reserved<br />
for our Directors and employees of the Group. In the event<br />
that any of the Reserved Shares are not taken up, they will<br />
be made available to satisfy applications made for the<br />
Placement Shares or, in the event of an under-subscription<br />
for the Placement Shares, to satisfy applications made by<br />
members of the public for the Offer Shares.<br />
Listing Status : The Shares will, on admission of the Company to the Official<br />
List of SGX-ST and permission for dealing in and for<br />
quotation of the Shares being granted by the SGX-ST, be<br />
quoted on the SGX-ST.<br />
11
RISK FACTORS<br />
Investing in our Shares involves certain risks and you should consider carefully all the information<br />
contained in this Prospectus, especially the following, in evaluating whether to purchase our Shares. To<br />
the best of our belief and knowledge, all risk factors that are material to investors in making an informed<br />
judgement on our Group are set out below. Any of the following factors, depending upon the severity and<br />
circumstances of a particular occurrence, could result in a material adverse effect on our business,<br />
prospects, financial condition and results of operations.<br />
Industry Specific Risks<br />
(a) Changes in Consumer Tastes<br />
As with all other consumer products, sales of our products are dependent on consumers’ demand<br />
for our products and are susceptible to changes in consumer tastes. There is no assurance that in<br />
the future we will continue to be successful in keeping ourselves ahead of, and being up-to-date<br />
with, the latest health-care trends through constant market research and sourcing of feed-back from<br />
our customers. We can give no assurance that our intensive efforts in strategic marketing and<br />
product innovation will continue to enable us to satisfy the evolving consumer tastes. If we are not<br />
able to do so, our sales to consumers would be reduced and this will have a material adverse impact<br />
on our Group’s turnover and profitability.<br />
(b) Health Regulations in New Markets<br />
We do not consider ourselves to be in the medical or para-medical field. While our business is<br />
currently not subject to any governmental health regulations in our major geographical markets, the<br />
regulatory environment in new geographical markets may pose an obstacle to our plans to expand<br />
our geographical presence (our expansion plans are more particularly described under the section<br />
on ‘‘PROSPECTS AND FUTURE PLANS — Expansion of Business’’ on pages 45 and 46 of this<br />
Prospectus). Furthermore, we cannot discount the possibility that new health regulations that apply<br />
to our products may come into force in our existing major markets. If we are unable to comply with<br />
any such health regulations in any particular country, we may be prevented from effectively<br />
marketing our products in that country. This will have a material adverse impact on our overall<br />
turnover and profitability.<br />
(c) Exposure to Product Liability Laws<br />
As with other consumer product manufacturers, we are exposed to product liability laws in the<br />
countries where our products are marketed and may face lawsuits arising from alleged injuries to<br />
users caused by any alleged defects in our products. We may have to do substantial product recalls<br />
in respect of a product if there are allegations of that product being found to be unsafe in the future.<br />
We are also exposed to the product liability laws of the United States which, we believe, may<br />
impose much higher quantum of damages, whether compensatory or punitive, compared to the<br />
laws on product liability in other countries where we market our products. To mitigate this risk, we<br />
have obtained product liability insurance in the United States and Canada. The details of the<br />
insurance coverage are more particularly described under the section on ‘‘INSURANCE’’ on<br />
page 38 of this Prospectus. As we are not insured for product liability in any other jurisdictions, if we<br />
are ever unsuccessful in defending a product liability suit in one of these jurisdictions, we may have<br />
to pay substantial monetary damages which would have an adverse impact on our reputation and<br />
profitability.<br />
We have begun marketing our products in the United States since late 1997. To date, we have not<br />
encountered any legal suit, or threat of a legal suit, involving product liability in the United States or<br />
any other jurisdictions.<br />
(d) High Susceptibility to Downturns in Economic Cycles<br />
The nature of our home health-care products make us more susceptible to reduced demand in<br />
times of economic downturn than other kinds of businesses because our products may not be<br />
considered as essential medical or health products. Our profitability will therefore be adversely<br />
affected by downturns in economic cycles in any of our significant markets.<br />
12
(e) Prohibitive National Laws on Foreign Ownership<br />
Under the franchise business model which we have adopted (as more particularly described under<br />
the section on ‘‘FRANCHISE MODEL’’ on pages 35 and 36 of this Prospectus), it is not our business<br />
strategy to acquire equity interests in our franchisees. Nevertheless, where having an equity<br />
interest in a certain franchisee would enable us to have a share in their profits, we may decide to<br />
acquire ownership of that franchisee. However, this may be difficult, if not impossible, in certain<br />
jurisdictions. Currently we face prohibitive or restrictive laws in PRC, Indonesia and Thailand which<br />
do not permit us to have ownership or full ownership of our franchisees. As we expand our franchise<br />
network to more countries in the future, we may face similar prohibitive national laws that would<br />
affect our ability to acquire equity interests in our franchisees.<br />
In Malaysia, under the ‘‘Guidelines for the Regulation of Acquisition of Assets, Mergers and<br />
Take-overs’’ (the ‘‘Guidelines’’) established by The Foreign Investment Committee of Malaysia<br />
(‘‘FIC’’), the approval of the FIC is required for a foreign company to own more than a 15 per cent.<br />
interest in a Malaysian company. Foreign involvement in Malaysian companies engaging in the<br />
business of specialty stores is also subject to ‘‘Guidelines on Wholesale and Retail Trade’’ (the<br />
‘‘GWRT’’). The GWRT stipulates that the foreign ownership of such Malaysian company should be<br />
restricted to 30 per cent., with another 30 per cent. of the equity to be held by bumiputeras. The<br />
GWRT also requires the capitalisation of such Malaysian company to be at least RM1,000,000.<br />
We are of the view that the Guidelines and GWRT are not established under any statutory laws in<br />
Malaysia and non-compliance with the Guidelines and GWRT does not have any statutory<br />
implications. Therefore, we have not made any application to the FIC or the Committee of<br />
Wholesale and Retail Trade (the ‘‘Committee’’) for us to hold our 60 per cent. interest in the equity<br />
of <strong>Osim</strong> (M’sia). In the future, we may face the possibility of being directed by the FIC and/or the<br />
Committee to comply with the Guidelines and GWRT respectively. If so directed, we will seek<br />
consultations with the FIC and/or the Committee, as the case may be, for the appropriate<br />
compliance. Our non-compliance with the Guidelines and GWRT may lead to the non-renewal of<br />
our business premise licences in Malaysia which would result in a disruption or cessation of our<br />
operations. In such event, we would have to either dilute our shareholdings to comply with the<br />
Guidelines and/or the GWRT, or appoint a franchisee who is qualified to undertake the business in<br />
Malaysia.<br />
If the operations of <strong>Osim</strong> (M’sia) are not taken into account in preparing our financial statements,<br />
our Group’s profit after taxation and minority interests for FY1997, FY1998 and FY1999 would have<br />
been increased by 4.1 per cent. and reduced by 1.0 per cent. and 5.9 per cent. respectively, and<br />
our Group’s NTA as at 31 December 1997, 31 December 1998 and 31 December 1999 would have<br />
been reduced by 0.8 per cent., 1.1 per cent. and 5.9 per cent. respectively.<br />
Company Specific Risks<br />
(a) Dependence on Key Personnel<br />
Our continued success is dependent to a very large extent on our ability to retain key management<br />
personnel. The loss of the services of a substantial number of our key management personnel<br />
without adequate replacements, or the inability to attract or retain qualified personnel would have<br />
an unfavourable and material impact on our business. Furthermore, in connection with our future<br />
plans (as more particularly described under the section on ‘‘PROSPECTS AND FUTURE PLANS<br />
— Future Plans’’ on pages 45 to 47 of this Prospectus), we may need to recruit a greater number<br />
of experienced personnel in the future.<br />
Dr Ron Sim Chye Hock, our founder, has been the main contributor to our success and provides<br />
strategic leadership and vision for our Group. He will also hold, as direct and deemed interests, 69.0<br />
per cent. of our share capital after the Invitation. The loss of Dr Ron Sim Chye Hock’s services as<br />
our Chairman and Chief Executive Officer would adversely affect our business and future plans.<br />
13
(b) Reliance on Key Suppliers<br />
We are highly dependent on 3 suppliers (as disclosed in the section on ‘‘MAJOR SUPPLIERS AND<br />
CUSTOMERS — Major Suppliers’’ on pages 52 and 53 of this Prospectus) who are our suppliers<br />
or contract manufacturers for products contributing 75.5 per cent., 60.4 per cent. and 78.7 per cent.<br />
of our purchases for FY1997, FY1998 and FY1999 respectively. The involuntary or unexpected loss<br />
of any of our key suppliers/contract manufacturers will temporarily disrupt our supplies and have a<br />
material adverse impact on our Group’s turnover and profitability.<br />
Furthermore, there can be no assurance that the 3 key suppliers/contract manufacturers will<br />
continue to fulfil our needs and expectations in terms of cost and product quality although to date,<br />
we have not experienced any significant problems with our 3 key suppliers/contract manufacturers<br />
in these areas since we began our business relationship. In the event that the 3 key suppliers/<br />
contract manufacturers are not able to fulfil our requirements, we will incur costs in switching to new<br />
suppliers which would result in disruption to our business and profitability in the short term.<br />
(c) Failure of Franchising as a Business Model<br />
We have only recently since the last quarter of 1999 begun to adopt franchising group-wide (except<br />
for our Singapore and PRC operations) as a business model. Therefore, the results of our franchise<br />
business model have not been time-tested for long. More details on our franchise business model<br />
are set out in the section on ‘‘FRANCHISE MODEL’’ on pages 35 and 36 of this Prospectus. Our<br />
franchise business model is dependent on the quality of our franchisees, their financial strength and<br />
ability to penetrate new markets. Presently, of our 7 franchisees, 3 are our subsidiaries, 3 are our<br />
affiliated companies controlled by our Controlling Shareholders and the remaining 1 is an unrelated<br />
company. We cannot give any assurance that we will be able to attract suitable non-related<br />
companies as our franchisees or that such franchisees will continue with our franchise. The loss of<br />
our franchisee in any particular market will result in a decrease of our revenues in that market while<br />
we seek alternative franchisee or undertake to carry on the business ourselves if the domestic<br />
regulations permit. The loss of our franchisee may also present an opportunity to competitors to<br />
increase their market share in that market at our expense. We have not experienced any loss of<br />
franchisee in any particular market since the implementation of our franchise business model.<br />
(d) Increased Competition<br />
Currently, in our major markets such as Hong Kong, Singapore and Taiwan, we do not consider<br />
ourselves to have a major competitor as most of the distributors and manufacturers of home<br />
health-care products do not have a comparable distribution network where the distributor or<br />
manufacturer directly controls the supply chain from the design of the products to the marketing of<br />
these products. However, we cannot give any assurance that no competitor will arise in the future<br />
who has the marketing expertise or a comparable distribution network to pose a significant<br />
competitive threat. As we expand into new geographical markets or new product lines (as more<br />
particularly described under the section on ‘‘PROSPECTS AND FUTURE PLANS — Expansion of<br />
Business’’ on pages 45 and 46 of this Prospectus), we may face significant competition in these new<br />
markets which will erode or eliminate our profit margins.<br />
We face competitive pressures from manufacturers of low-priced products, especially in PRC. To<br />
handle these competitive pressures, we have developed NORO as a secondary brand to sell<br />
lower-priced massage chairs and kneading massagers in PRC to the segment of the consumer<br />
market which is sensitive to pricing.<br />
Our Directors believe that e-commerce is emerging as a very major marketing and distribution<br />
channel for businesses although the extent of the impact of e-commerce cannot be conclusively<br />
assessed today. We have the intention of tapping into the vast potential of e-commerce and other<br />
health-care retailers may also follow. We cannot give any assurance that the expansion of<br />
e-commerce initiatives by other distributors or contract manufacturers will not result in us losing<br />
market share.<br />
14
(e) Difficulty of Expanding Distribution Network<br />
It is our business strategy to expand our network of ‘brick-and-mortar’ point-of-sales outlets in the<br />
region and eventually, the world. Our franchisees and we, in the event that we establish our own<br />
outlets to penetrate and/or establish ourselves in new markets, may face considerable difficulties or<br />
high costs in securing suitable retail locations to expand our distribution network. Rental is one of<br />
our major operating expenses and is subject to inflationary pressure if property prices increase. In<br />
the event that we are unable to improve our revenue per square foot on our rented premises, any<br />
increase in rentals will adversely affect our net operating profit margins.<br />
(f) Intellectual Property Rights Disputes<br />
Unauthorised use of our trademarks, brand names and other intellectual property may damage the<br />
brand and name recognition, and reputation of our Group. We have as at 31 May 2000, filed<br />
trademark applications for the registration of ‘‘OSIM’’ and ‘‘NORO’’ in 26 jurisdictions. The details of<br />
the trademark registrations are more particularly described in the section on ‘‘INTELLECTUAL<br />
PROPERTY RIGHTS’’ on pages 36 and 37 of this Prospectus.<br />
Although we have registered OSIM as a trademark in the countries where our products are<br />
marketed and where we intend to expand our business to, it may be possible for third parties to<br />
unlawfully pass-off their products as ours or to counterfeit our products. In certain jurisdictions which<br />
do not have clear laws protecting intellectual property rights or a consistent record of protecting<br />
intellectual property rights, we may face considerable difficulties and costly litigation in order to<br />
enforce our intellectual property rights. In the event that we are not able to protect our intellectual<br />
property rights, we cannot discount the possibility of our brand reputation or sales volume being<br />
adversely affected by passing-off or counterfeiting. This will have a material adverse impact on our<br />
turnover and profitability.<br />
(g) Exposure to the Emerging Markets of Malaysia, Thailand, Indonesia and PRC<br />
Our sales in the emerging markets of Malaysia, Thailand, Indonesia and PRC accounted for 18.4<br />
per cent. of our Group’s revenues in FY1997, 7.7 per cent. in FY1998 and 12.3 per cent. in FY1999.<br />
Our Directors expect the contribution from these 4 countries to our Group’s revenues to increase in<br />
the future. Therefore, to a certain extent, our business may be affected by economic conditions in<br />
these emerging markets. The economies of these emerging markets have only recently begun to<br />
recover from the Asian financial crisis and the recovery may not be sustainable. If the high interest<br />
rate environment and drastic devaluation of regional currencies seen in the Asian financial crisis<br />
were to recur in the future, this will have an adverse effect on the financial performance of our<br />
Group’s business in these countries. It will also greatly magnify the risk to us from our foreign<br />
exchange exposure (as described in paragraph (h) below).<br />
(h) Foreign Exchange Risks<br />
In line with the country of incorporation, the accounts of our overseas subsidiaries are prepared in<br />
the local currency (i.e. RM, HK$, RMB and NT$). This represents a translation risk in that any<br />
material fluctuation in the relevant currency rates against the S$ will have an effect on our<br />
consolidated financial statements which are presented in S$.<br />
While our sales are mainly denominated in the respective local currencies in which the sales arise,<br />
namely the S$, RM, HK$, RMB and NT$, our costs of procurement of products from our contract<br />
manufacturers are incurred mainly in US$ and Yen, which accounted for 33% and 64% of our total<br />
purchases respectively for FY1999.<br />
(i) Country Risks<br />
Our business is conducted in many countries outside Singapore, including Indonesia and PRC,<br />
through our franchise network and our foreign-based business activities are subject to the particular<br />
risks of the country in which they operate.<br />
15
Indonesia and PRC are countries which have experienced significant political, social and economic<br />
uncertainties in recent years. Our performance may be adversely affected by political, social,<br />
economic and regulatory uncertainties in these regions. For example, changes in policies by the<br />
respective government authorities of these regions may materially affect us through (i) changes in<br />
laws and regulations; (ii) changes in customs and import tariffs; (iii) restrictions on currency<br />
conversions and remittances; and (iv) instability of the banking system.<br />
Under current Indonesian and PRC laws, we are prohibited from owning companies that engage in<br />
retailing. As disclosed earlier under ‘‘Industry Specific Risks’’, this precludes us from acquiring our<br />
franchisees in these countries in order to have a share in their profits.<br />
In addition, in PRC, there can be no assurance that exchange rates of the RMB against the US$ or<br />
S$ will not become volatile or that the RMB will not be devalued against the US$ or S$. Our PRC<br />
licensees will be adversely affected by a RMB devaluation as their purchase costs are denominated<br />
in US$ while their sales are denominated in RMB. If the financial condition of any of our PRC<br />
licensees deteriorates, this would affect the level of their purchases from us and our business with<br />
our PRC licensees will be adversely affected.<br />
(j) Expansion of Business<br />
As described under the section on ‘‘PROSPECTS AND FUTURE PLANS — Expansion of<br />
Business’’ on pages 45 and 46 of this Prospectus, we intend to penetrate deeper into the consumer<br />
markets, expand to new geographical markets, diversify into new product lines and venture into<br />
wholesale distribution. If we are unsuccessful in the above business expansion, our long-term<br />
growth prospects will be adversely affected.<br />
(k) E-commerce<br />
Despite the enthusiasm among many merchants to embrace e-commerce, we cannot give any<br />
assurance that there will be a market for our home health-care products on the Internet. The Internet<br />
has yet to evolve as an important and widespread means of buying and selling products and<br />
services. Furthermore, e-commerce business models remain largely untested and yet to be proven<br />
to be profitable. Because on-line procurement of business products and services is still in its growth<br />
stage, it is difficult for us to estimate the size of the home health-care products market on the<br />
Internet and its growth rate, if any. By nature of the industry, any e-commerce venture that we may<br />
enter into would be highly capital intensive and would have a high ‘burn rate’ for capital in the early<br />
stages of the venture. We cannot give any assurance that the capital we invest in e-commerce<br />
which will come from the proceeds of the Invitation, would not be quickly used up without yielding<br />
any financial gain for us.<br />
(l) Conflicts of Interest Between Us and Our Controlling Shareholders<br />
Companies owned and/or controlled by our Controlling Shareholders (the ‘‘Controlled Companies’’)<br />
are our franchisees. These arrangements will give rise to situations where there are potential<br />
conflicts of interests between us and our Controlling Shareholders, which are set out in the sections<br />
on ‘‘INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS’’ and<br />
‘‘POTENTIAL CONFLICTS OF INTERESTS’’ on pages 62 to 69 of this Prospectus respectively. The<br />
Audit Committee of our Board of Directors will review the implementation of the franchise<br />
agreements between us and the Controlled Companies to ensure that they are entered into on<br />
arms’ length basis and are on normal commercial terms. If the franchise agreements are not<br />
entered into on arms’ length basis and their terms are less favourable to us than what we would<br />
have offered to independent third party franchisees, we will suffer financial loss and this will have<br />
a significant adverse impact on our turnover and profitability.<br />
Had we been able to charge our affiliated companies the franchise fee, royalties (in the case of<br />
Controlled Companies which are our franchisees) or licensing fee (in the case of Controlled<br />
Companies which are our licensees) at rates similar to those charged to our subsidiaries and RSH<br />
(our unrelated franchisee), and had we been able to sell certain of our main products at prices<br />
similar to those sold to our subsidiaries and RSH, we would not have to suffer a reduction in income.<br />
For FY1999, the impact to our Group was a reduction in income of approximately $471,000 which<br />
represented 4.3 per cent. of our PBT.<br />
16
Offer Price (1)<br />
INVITATION STATISTICS<br />
: $0.52<br />
Placement Price for Placement Shares : $0.52<br />
Placement Price for Reserved Shares : $0.47<br />
NTA<br />
NTA per Share based on:–<br />
(a) the audited NTA of the Group as at 31 December 1999 before adjusting<br />
for the proceeds from the Investor Subscription and the estimated net<br />
proceeds of the New Shares and based on the pre-Investor<br />
Subscription and pre-Invitation issued share capital of 180,984,000<br />
Shares (the ‘‘Pre-Adjusted NTA per Share’’)<br />
(b) after adjusting for the proceeds from the Investor Subscription and the<br />
estimated net proceeds of the New Shares and based on the post-<br />
Investor Subscription and post-Invitation issued share capital of<br />
230,584,000 Shares (the ‘‘Adjusted NTA per Share’’)<br />
Premium of the Offer Price over:–<br />
: 5.67 cents<br />
: 14.57 cents<br />
(a) the Pre-Adjusted NTA per Share as at 31 December 1999 of 5.67 cents : 817 per cent.<br />
(b) the Adjusted NTA per Share of 14.57 cents : 257 per cent.<br />
Earnings<br />
Historical EPS based on the audited results of the Proforma Group for<br />
FY1999 and the pre-Investor Subscription and pre-Invitation issued share<br />
capital of 180,984,000 Shares<br />
Historical EPS had the Service Agreements as set out under the section on<br />
‘‘DIRECTORS, MANAGEMENT AND STAFF — Service Agreements’’ on<br />
pages 55 and 56 of this Prospectus been in effect for FY1999 and based on<br />
the pre-Investor Subscription and pre-Invitation issued share capital of<br />
180,984,000 Shares<br />
PER<br />
Historical PER based on the Offer Price and the historical EPS of 4.11 cents<br />
for FY1999<br />
Historical PER based on Offer Price and the historical EPS had the Service<br />
Agreements as set out under the section on ‘‘DIRECTORS, MANAGEMENT<br />
AND STAFF — Service Agreements’’ on pages 55 and 56 of this Prospectus<br />
been in effect for FY1999<br />
Net Operating Cash Flow (2)<br />
Historical net operating cash flow per Share for FY1999 based on the<br />
pre-Investor Subscription and pre-Invitation share capital of 180,984,000<br />
Shares<br />
17<br />
: 4.11 cents<br />
: 3.87 cents<br />
: 12.65 times<br />
: 13.44 times<br />
: 5.31 cents
Price to Net Operating Cash Flow Ratio<br />
Ratio of Offer Price to historical net operating cash flow per Share for FY1999<br />
based on the pre-Investor Subscription and pre-Invitation share capital of<br />
180,984,000 Shares<br />
Market Capitalisation<br />
Market capitalisation of our Company based on the Offer Price of $0.52 and<br />
based on the post-Investor Subscription and post-Invitation share capital of<br />
230,584,000 Shares<br />
: 9.79 times<br />
: $119.90 million<br />
Notes:–<br />
(1) The Offer Price of $0.52 has been used for the purpose of presenting the Invitation Statistics.<br />
(2) Net operating cash flow is defined as profit attributable to the members of the Company with depreciation added back.<br />
18
SUMMARY OF FINANCIAL INFORMATION<br />
The following selected financial information should be read in conjunction with the Accountants’ Report<br />
and the full text of this Prospectus.<br />
RESULTS<br />
The audited consolidated profit and loss statements of the Proforma Group for the past five financial<br />
years ended 31 December 1999, including EPS, are set out below:–<br />
——————— Year ended 31 December ———————<br />
1995 1996 1997 1998 1999<br />
$’000 $’000 $’000 $’000 $’000<br />
Turnover 31,432 42,897 60,837 69,747 103,138<br />
Other income (1)<br />
2 12 18 46 28<br />
Earnings before depreciation, interest expense<br />
and taxation 2,841 5,104 5,917 5,411 14,148<br />
Depreciation (313) (406) (569) (1,440) (4)<br />
(2,166) (4)<br />
Interest expense (896) (839) (929) (1,355) (1,468)<br />
Operating profit 1,632 3,859 4,419 2,616 10,514<br />
Share of (loss)/profit of associated company — (191) (17) 583 334<br />
Profit before taxation and minority interests 1,632 3,668 4,402 3,199 10,848<br />
Taxation (541) (1,177) (1,156) (912) (3,123)<br />
Profit after taxation 1,091 2,491 3,246 2,287 7,725<br />
Minority interests (49) (61) 84 (28) (284)<br />
Profit after taxation, minority interests but<br />
before extraordinary item 1,042 2,430 3,330 2,259 7,441<br />
Extraordinary item (2)<br />
— 1,759 (2)<br />
— — —<br />
Profit attributable to Shareholders 1,042 4,189 3,330 2,259 7,441 (5)<br />
Earnings per Share (3) (cents) 0.58 1.34 1.84 1.25 4.11<br />
Notes:–<br />
(1) Other income relates to interest income.<br />
(2) The extraordinary item relates to net gain on disposal of leasehold properties.<br />
(3) For comparative purposes, the historical EPS for FY1995 to FY1999 have been computed based on the profit after taxation<br />
and minority interests but before extraordinary item divided by the pre-Investor Subscription and pre-Invitation issued share<br />
capital of 180,984,000 Shares.<br />
(4) During FY1998, we had revised the estimated useful lives of certain fixed assets for depreciation purposes to more accurately<br />
reflect the economic useful lives of these fixed assets. The impact of the change in the accounting estimate is to decrease<br />
profit before taxation for FY1998 and FY1999 by approximately $182,000 and $68,000 respectively.<br />
During FY1999, a subsidiary, <strong>Osim</strong> (M’sia), had revised the estimated useful lives of certain fixed assets for depreciation<br />
purposes to be consistent with the Group’s accounting policy. The impact of the change in the accounting estimate is to<br />
decrease profit before taxation for FY1999 by approximately $105,000.<br />
(5) Had the Service Agreements referred to in the section on ‘‘DIRECTORS, MANAGEMENT AND STAFF — Service<br />
Agreements’’ on pages 55 and 56 of this Prospectus been in place for FY1999, the profit attributable to Shareholders for<br />
FY1999 would have been $7.0 million.<br />
19
FINANCIAL POSITION<br />
The audited consolidated balance sheets of the Proforma Group as at the end of each of the past five<br />
financial years ended 31 December 1999, including NTA per Share, are set out below:–<br />
————————— As at 31 December —————————<br />
1995 1996 1997 1998 1999<br />
$’000 $’000 $’000 $’000 $’000<br />
Fixed assets 17,272 12,349 13,455 16,607 18,276<br />
Investment in associated company — 303 333 905 1,068<br />
Current assets<br />
Stocks 3,750 5,808 7,706 5,452 12,089<br />
Trade debtors 2,168 3,204 6,094 5,818 8,846<br />
Other debtors, deposits and<br />
prepayments 1,140 2,126 3,893 2,360 2,574<br />
Due from affiliated companies<br />
— trade 3,236 3,300 7,039 4,634 8,587<br />
— non-trade 380 1,040 288 — 10 (2)<br />
Due from directors — 2,776 3,436 3,345 —<br />
Fixed deposits — 558 — — 236<br />
Cash and bank balances 227 2,311 5,668 3,080 4,265<br />
Current liabilities<br />
10,901 21,123 34,124 24,689 36,607<br />
Trade creditors 2,462 6,633 2,228 3,222 4,658<br />
Bills payable to banks (secured) 259 2,870 11,381 8,328 12,017<br />
Other creditors and accruals 1,399 1,585 5,046 1,967 8,925<br />
Due to an associated company<br />
— trade — — — 15 361<br />
Due to affiliated companies<br />
— trade — 4 321 260 —<br />
— non-trade — 559 — — 46 (2)<br />
Due to directors 2,112 — 2,361 830 1,600 (2)<br />
Term loans, current portion 1,279 2,123 537 660 646<br />
Short term bank loans 1,489 1,207 1,497 379 760<br />
Hire purchase liabilities, current<br />
portion — 36 118 112 115<br />
Proposed dividend — 370 370 370 75<br />
Provision for taxation 1,044 1,620 2,461 2,291 4,022<br />
Bank overdrafts (secured) 1,992 1,203 630 — 3,297<br />
(12,036) (18,210) (26,950) (18,434) (36,522)<br />
Net current (liabilities)/assets (1,135) 2,913 7,174 6,255 85<br />
20
Less:<br />
Non-current liabilities<br />
————————— As at 31 December —————————<br />
1995 1996 1997 1998 1999<br />
$’000 $’000 $’000 $’000 $’000<br />
Hire purchase liabilities, non-current<br />
portion — (80) (169) (145) (240)<br />
Term loans, non-current portion (8,837) (4,175) (6,886) (7,820) (7,255)<br />
Provision for pension benefits — — — — (157)<br />
Deferred taxation (102) (294) (147) (38) (369)<br />
Proforma shareholders’ equity<br />
(8,939) (4,549) (7,202) (8,003) (8,021)<br />
7,198 11,016 13,760 15,764 11,408<br />
Share capital 3,000 3,000 3,000 3,100 3,100<br />
Revenue reserves 3,571 7,343 9,508 11,157 6,375<br />
Enterprise expansion fund — 31 114 125 149<br />
Capital reserve — 16 91 347 466<br />
Translation reserves (154) (204) 294 208 179<br />
6,417 10,186 13,007 14,937 10,269<br />
Minority interests 781 830 753 827 1,139<br />
7,198 11,016 13,760 15,764 11,408<br />
NTA per Share (1) (cents) 3.55 5.63 7.19 8.25 5.67<br />
Notes:–<br />
(1) For comparative purposes, the historical NTA per Share as at 31 December 1995 to 1999 have been computed based on the<br />
pre-Investor Subscription and pre-Invitation issued share capital of 180,984,000 Shares.<br />
(2) Subsequent to the year ended 31 December 1999, these amounts have been repaid in June 2000.<br />
21
SHARE CAPITAL<br />
INFORMATION ON THE COMPANY AND THE GROUP<br />
We were incorporated on 27 August 1983 in the Republic of Singapore under the Act, as a limited exempt<br />
private company. We have only one class of shares. As at 31 December 1999, our authorised share<br />
capital was $5,000,000 divided into 5,000,000 ordinary shares of $1.00 each and our issued and paid-up<br />
share capital was $3,100,000 divided into 3,100,000 ordinary shares of $1.00 each.<br />
At the extraordinary general meeting held on 26 June 2000, our Shareholders approved, inter alia, the<br />
following:–<br />
(a) the increase of our authorised share capital from $5,000,000 divided into 5,000,000 ordinary shares<br />
of $1.00 each to $50,000,000 divided into 50,000,000 ordinary shares of $1.00 each;<br />
(b) the capitalisation of $5,921,000 from our revenue reserves for a bonus issue of 5,921,000 ordinary<br />
shares of $1.00 each in our capital, credited as fully paid, to the Shareholders of the Company on<br />
the basis of 1,910 new ordinary shares for every 1,000 ordinary shares held (the ‘‘Bonus Issue’’);<br />
(c) the subdivision of each of the existing ordinary shares of $1.00 each in the authorised share capital<br />
and issued and paid-up share capital of the Company into 20 shares of $0.05 each (the ‘‘Stock<br />
Split’’);<br />
(d) our conversion to a public limited company and the change of our name to <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong>;<br />
(e) the adoption of a set of new Articles of Association;<br />
(f) the issue of 564,000 new ordinary shares of $0.05 each to Mr Chen Chuan I and Ms Ho Jui Mei as<br />
consideration for the acquisition of their aggregate 10 per cent. equity in <strong>Osim</strong> (Taiwan) pursuant to<br />
the Restructuring Exercise;<br />
(g) the issue of 11,600,000 new ordinary shares of $0.05 each to Investor pursuant to the Subscription<br />
Agreement;<br />
(h) the issue of the New Shares which form part of the Invitation;<br />
(i) a shareholders’ mandate authorising <strong>Osim</strong> (S) to enter into recurrent transactions of a revenue<br />
and/or trading nature firstly, in the form of sales of our products to <strong>Osim</strong> (Thai), <strong>Osim</strong> (USA), PT<br />
Sharon, <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC (Langfang) and secondly, warehousing and<br />
freight forwarding contracts with ODCPL (these transactions are more particularly described on<br />
pages 62 to 69 of this Prospectus under ‘‘INTEREST OF MANAGEMENT AND OTHERS IN<br />
CERTAIN TRANSACTIONS’’);<br />
(j) the <strong>Osim</strong> Share Option Scheme (the ‘‘Scheme’’) (details of which are set out on pages 59 to 61 of<br />
this Prospectus and in Appendix A on pages 113 to 136 of this Prospectus) and the authorisation to<br />
our Board of Directors to implement and administer the Scheme, to modify and/or amend the<br />
Scheme, to offer and grant options and to allot and issue new Shares pursuant to the exercise of<br />
options granted pursuant to the Scheme subject to the rules of the Scheme; and<br />
(k) the authorisation of the Directors, pursuant to Section 161 of the Act and the provisions of the new<br />
Articles of Association becoming effective, to allot and issue such further shares in the Company at<br />
any time to such persons, upon such terms and conditions and for such purposes as the Directors<br />
may in their absolute discretion deem fit provided that the aggregate number of shares to be issued<br />
shall not exceed 50 per cent. of the issued share capital of the Company immediately prior to the<br />
proposed issue, provided that the aggregate number of shares to be issued other than on a pro-rata<br />
basis to the then existing Shareholders of the Company shall not exceed 20 per cent. of the issued<br />
share capital of the Company immediately prior to the proposed issue, and, unless revoked or<br />
varied by the Company in general meeting, such authority shall continue in force until the conclusion<br />
of the Annual General Meeting of the Company or the date by which the next Annual General<br />
Meeting of the Company is required by law to be held, whichever is the earlier.<br />
22
As at the date of this Prospectus, we have only one class of shares, being ordinary shares of $0.05 each.<br />
The rights and privileges of these Shares are stated in our Articles of Association. There are no founder,<br />
management or deferred shares reserved for issuance for any purpose.<br />
Our Company’s present and paid-up share capital is $9,629,200 comprising 192,584,000 Shares. Upon<br />
the allotment of the New Shares, our resultant issued and paid-up share capital will be increased to<br />
$11,529,200 comprising 230,584,000 Shares.<br />
The details of our Company’s issued and paid-up capital since 31 December 1999, being the date of our<br />
last audited accounts, and our issued and paid-up share capital immediately after the Invitation are as<br />
follows:–<br />
Number<br />
of Shares $<br />
Issued and fully paid ordinary shares of $1.00 each as at 31 December 1999 3,100,000 3,100,000<br />
Bonus Issue 5,921,000 5,921,000<br />
9,021,000 9,021,000<br />
Stock Split 180,420,000 9,021,000<br />
Shares issued pursuant to the Restructuring Exercise 564,000 28,200<br />
Shares issued pursuant to the Subscription Agreement 11,600,000 580,000<br />
Pre-Invitation issued share capital 192,584,000 9,629,200<br />
Issue of New Shares 38,000,000 1,900,000<br />
Post-Invitation issued share capital 230,584,000 11,529,200<br />
Our Company’s authorised share capital and shareholders’ funds as at 31 December 1999, before and<br />
after adjustments to reflect the increase in authorised share capital, the Bonus Issue, the Stock Split, the<br />
issue of Shares pursuant to the Restructuring Exercise and the Subscription Agreement, and the issue<br />
of the New Shares are set out below. This should be read in conjunction with the Accountants’ Report<br />
set out on pages 72 to 94 of this Prospectus.<br />
As at 31 December 1999 As adjusted<br />
Authorised Share Capital<br />
$’000 $’000<br />
Ordinary shares of $1.00 each 5,000 —<br />
Ordinary shares of $0.05 each — 50,000<br />
Shareholders’ Funds<br />
Issued and fully paid Shares 3,100 11,529<br />
Share premium — 21,107<br />
Accumulated profits 17,423 11,502<br />
Total shareholders’ funds 20,523 44,138<br />
23
OUR SHAREHOLDERS<br />
Our Shareholders and their respective direct shareholdings immediately before and after the Invitation<br />
are as follows:–<br />
Immediately<br />
— Before Invitation —<br />
Number of<br />
Shares %<br />
Immediately<br />
— After Invitation —<br />
Number of<br />
Shares (4)<br />
%<br />
Shareholders<br />
Directors<br />
Ron Sim Chye Hock (1)<br />
178,615,800 92.7 157,315,800 68.2<br />
Teo Sway Heong 1,804,200 0.9 1,804,200 0.8<br />
Teo Chay Lee (2)<br />
— — 500,000 (3)<br />
0.2<br />
Leow Lian Soon (2)<br />
— — 500,000 (3)<br />
0.2<br />
Khor Peng Soon — — — —<br />
Michael Kan Yuet Yun (2)<br />
— — — —<br />
Ong Kian Min (2)<br />
— — — —<br />
Substantial Shareholders (other than Directors)<br />
Investor 11,600,000 6.0 11,600,000 5.0<br />
Other Shareholders (of less than 5% who are<br />
related to Directors or substantial Shareholders)<br />
Chiang See Thong — — 100,000 **<br />
Other Shareholders (of less than 5% who are not<br />
related to Directors or substantial Shareholders)<br />
Others (4)<br />
564,000 0.3 764,000 0.3<br />
Public (including Reserved Shares) — — 58,000,000 25.2<br />
192,584,000 100.0* 230,584,000 100.0*<br />
Notes:–<br />
(1) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo Chay Lee and<br />
Mr Leow Lian Soon (our executive Directors), Ms Lim Choon Hui (our Executive Officer) and Mr Chiang See Thong (Dr Ron<br />
Sim Chye Hock’s brother-in-law, who provided corporate secretarial services to us from 1993 to 1999) respectively by way<br />
of a gift as a token of his appreciation of their contributions to our Group. These transfers will be completed immediately after<br />
the Invitation is completed.<br />
(2) Mr Teo Chay Lee and Mr Leow Lian Soon, both executive Directors, have each been allocated 500,000 Reserved Shares in<br />
recognition of their substantial contributions to the Group in their past 11 and 13 years of service to us respectively. The<br />
Reserved Shares are offered at $0.47 for each Reserved Share, representing approximately 10 per cent. discount to the Offer<br />
Price.<br />
Mr Michael Kan Yuet Yun and Mr Ong Kian Min, our independent Directors, have each been allocated 100,000 Reserved<br />
Shares. The Reserved Shares are offered at $0.47 for each Reserved Share, representing approximately 10 per cent.<br />
discount to the Offer Price in recognition of their future contributions to our Group as members of the Audit Committee.<br />
The above executive and independent Directors have no present intention of selling their Reserved Shares within 6 months<br />
after the Invitation.<br />
(3) The shareholdings of Mr Teo Chay Lee and Mr Leow Lian Soon do not include the Reserved Shares allocated to them. In<br />
addition, the shareholding of Mr Leow Lian Soon does not include 30,000 Reserved Shares allocated to his wife, Ms Tao Dong<br />
Mei, in recognition of her past and continuing contributions to the Group as a consultant.<br />
(4) The shareholding held by Others include the Shares issued to the minority shareholders of <strong>Osim</strong> (Taiwan) pursuant to the<br />
Restructuring Exercise and the 200,000 Shares held by Ms Lim Choon Hui after the Invitation.<br />
*The total may not add up to 100 per cent. due to rounding.<br />
**Less than 0.1 per cent.<br />
None of our Directors or substantial Shareholders is related to each other except that Ms Teo Sway<br />
Heong is the wife of Dr Ron Sim Chye Hock.<br />
24
MORATORIUM<br />
As evidence of their commitment to the Group, Dr Ron Sim Chye Hock and Ms Teo Sway Heong, who<br />
will in aggregate own or have an interest in 159,120,000 Shares representing 69.0 per cent. of our issued<br />
and paid-up capital immediately after the Invitation, do not intend to dispose of or transfer any part of their<br />
respective shareholdings for a period of 6 months commencing from the date of our admission to the<br />
Official List of the SGX-ST. In addition, Investor has given an undertaking not to dispose of or transfer<br />
any part of its shareholding for a period of 6 months commencing from the date of our admission to the<br />
Official List of the SGX-ST.<br />
In the subsequent 6 months thereafter, Dr Ron Sim Chye Hock and Ms Teo Sway Heong do not intend<br />
to reduce their aggregate shareholdings to below 51.0 per cent. of our enlarged share capital.<br />
RESTRUCTURING EXERCISE<br />
In connection with the Invitation, we undertook a Restructuring Exercise which consisted of a series of<br />
reconstruction agreements entered with our Directors and substantial Shareholders, Dr Ron Sim Chye<br />
Hock and Ms Teo Sway Heong. To complete the Restructuring Exercise, we entered into 4 separate<br />
share sale agreements with Mr Leow Lian Soon, Ms Tan Poh Khim, Mr Chen Chuan I and Ms Ho Jui Mei<br />
respectively. Save for Mr Leow Lian Soon who is one of our Directors, Ms Tan Poh Khim, Mr Chen Chuan<br />
I and Ms Ho Jui Mei are not related to any of our Directors or substantial Shareholders. Prior to the<br />
Restructuring Exercise, we were the holding company of <strong>Osim</strong> (Shanghai) and the owner of 30 per cent.<br />
of the total registered capital of Daito-<strong>Osim</strong> (Suzhou), our associated company. <strong>Osim</strong> (Shanghai) is a<br />
trading company that imports our products in PRC for wholesale distribution and we are not prohibited<br />
by PRC laws to have full ownership of <strong>Osim</strong> (Shanghai). Resulting from the Restructuring Exercise, <strong>Osim</strong><br />
(HK), <strong>Osim</strong> (M’sia) and <strong>Osim</strong> (Taiwan) became our subsidiaries. The rationale of carrying out the<br />
Restructuring Exercise was to reorganise all the various companies under a single holding company.<br />
The Restructuring Exercise involved the following steps:–<br />
(a) Acquisition of <strong>Osim</strong> (M’sia)<br />
Pursuant to a reconstruction agreement dated 25 February 2000, we acquired from Dr Ron Sim<br />
Chye Hock all the issued and paid up shares owned by Dr Ron Sim Chye Hock in <strong>Osim</strong> (M’sia) that<br />
represented 60 per cent. of the issued and paid up share capital of <strong>Osim</strong> (M’sia). The transfer of<br />
these shares was stated to be effective as of 31 December 1999. The purchase consideration paid<br />
by us was $2,500,000 and was arrived at on a willing buyer-willing seller basis. When calculated<br />
with reference to the audited profits after taxation of <strong>Osim</strong> (M’sia) for FY1999, the purchase<br />
consideration was equivalent to a PER of approximately 5.6 times. We believe that the purchase<br />
consideration is reasonable given the established business and customer base of <strong>Osim</strong> (M’sia). The<br />
purchase consideration was satisfied by off-setting an amount of $2,500,000 from a director’s loan<br />
owed by Dr Ron Sim Chye Hock to us.<br />
The remaining 40 per cent. of the issued and paid up capital of <strong>Osim</strong> (M’sia) are held by Mr Tay Sim<br />
Kim who holds 35 per cent. and Ms Ho Yoke Wah who holds 5 per cent., both of whom are not<br />
related to any of our Directors or substantial Shareholders. Mr Tay Sim Kim and Ms Ho Yoke Wah<br />
are husband and wife, and are the general manager and assistant general manager of <strong>Osim</strong> (M’sia)<br />
respectively. They are also directors of <strong>Osim</strong> (M’sia).<br />
(b) Acquisition of <strong>Osim</strong> (HK)<br />
In accordance with reconstruction agreements dated 31 December 1999, we acquired from Dr Ron<br />
Sim Chye Hock and Ms Teo Sway Heong all their issued and paid up shares in <strong>Osim</strong> (HK),<br />
representing in aggregate 95.1 per cent. of the issued and paid up share capital of <strong>Osim</strong> (HK). The<br />
aggregate purchase consideration was $10,770,000 which was arrived at on a willing buyer-willing<br />
seller basis. When calculated with reference to the audited profits after taxation of <strong>Osim</strong> (HK) for<br />
FY1999 and adding back the 3 per cent. royalty fees paid by <strong>Osim</strong> (HK) to <strong>Osim</strong> (S) in FY1999, the<br />
aggregate purchase consideration was equivalent to a PER of approximately 5.6 times. We believe<br />
that the above basis is reasonable given the established business and customer base of <strong>Osim</strong> (HK).<br />
The aggregate purchase consideration was satisfied by off-setting an amount of $10,770,000 from<br />
a loan owed by Dr Ron Sim Chye Hock to us.<br />
25
We have also entered into a share sale agreement dated 20 March 2000 with Ms Tan Poh Khim to<br />
purchase the entire remaining minority interest in <strong>Osim</strong> (HK) which then became our wholly-owned<br />
subsidiary. The purchase consideration for Ms Tan Poh Khim’s shares was $1,300,000 payable in<br />
cash which was arrived at on a willing buyer-willing seller basis, and was equivalent to a PER of<br />
approximately 13 times. We were prepared to pay a higher PER valuation for the acquisition of the<br />
above remaining minority interest so that <strong>Osim</strong> (HK) would become our wholly-owned subsidiary.<br />
We also believe that the above basis is reasonable as the acquisition gave us full management<br />
control of <strong>Osim</strong> (HK) which will enable us to formulate business plans and chart strategic directions<br />
of <strong>Osim</strong> (HK) expeditiously and exploit business opportunities as and when they arise. Our<br />
Directors believe having total management control of <strong>Osim</strong> (HK) is highly desirable to our Group as<br />
Hong Kong is one of our major markets.<br />
(c) Acquisition of <strong>Osim</strong> (Taiwan)<br />
Pursuant to a reconstruction agreement dated 9 December 1999, we acquired from Dr Ron Sim<br />
Chye Hock all his issued and paid up shares in <strong>Osim</strong> (Taiwan) representing 58 per cent. of the<br />
issued and paid up share capital of <strong>Osim</strong> (Taiwan). The purchase consideration was $230,000<br />
which was arrived at on a willing buyer-willing seller basis. When calculated with reference to the<br />
audited profits after taxation of <strong>Osim</strong> (Taiwan) for FY1999, the purchase consideration was<br />
equivalent to a PER of approximately 5.6 times. We believe that the purchase consideration is<br />
reasonable given the established business and customer base of <strong>Osim</strong> (Taiwan). The purchase<br />
consideration was satisfied by off-setting an amount of $230,000 from a loan owed by Dr Ron Sim<br />
Chye Hock to us.<br />
Concurrently, we also entered into 3 share sale agreements with Mr Leow Lian Soon, Mr Chen<br />
Chuan I and Ms Ho Jui Mei and purchased from them 2 per cent., 5 per cent. and 5 per cent.<br />
respectively of the issued and paid up share capital of <strong>Osim</strong> (Taiwan). The purchase consideration<br />
we paid for Mr Leow Lian Soon’s interest was $8,000 which was arrived at on a willing buyer-willing<br />
seller basis, and was satisfied in cash. The purchase consideration is equivalent to the<br />
consideration paid for Dr Ron Sim Chye Hock’s interest on a price per share basis. The purchase<br />
consideration we paid for Mr Chen Chuan I’s and Ms Ho Jui Mei’s shares was $146,500 each which<br />
was arrived at on a willing buyer-willing seller basis, and which was satisfied by the allotment and<br />
issue of 282,000 Shares based on the Offer Price credited as fully paid up to each of them<br />
respectively. The purchase consideration represents a premium of approximately 13 per cent.<br />
above the audited NTA of <strong>Osim</strong> (Taiwan) as at 31 December 1999.<br />
The remaining 30 per cent. of the equity interest in <strong>Osim</strong> (Taiwan) are held by Mr Chen Chuan I (13<br />
per cent.), Mr Teng Seng Sung (10 per cent.), Ms Ho Jui Mei (5 per cent.), Mr Liu Shih Wen (1 per<br />
cent.), Ms Chen Shin Chen (0.5 per cent.) and Ms Huang Chi Jane (0.5 per cent.). None of them<br />
is related to any of our Directors or substantial Shareholders. Mr Chen Chuan I and Ms Huang Chi<br />
Jane are husband and wife, and are the general manager and finance manager of <strong>Osim</strong> (Taiwan)<br />
respectively. Ms Chen Shin Chen is the daughter of Mr Chen Chuan I and Ms Huang Chi Jane. Mr<br />
Chen Chuan I is also a director of <strong>Osim</strong> (Taiwan).<br />
26
GROUP STRUCTURE<br />
The structure of our Group immediately after the Invitation is set out below:–<br />
Dr Ron Sim Chye Hock<br />
and<br />
Ms Teo Sway Heong<br />
Investor Others<br />
69.0% 5.0% 0.8% 25.2%<br />
<strong>Osim</strong><br />
(HK)<br />
<strong>Osim</strong><br />
(Taiwan)<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
<strong>Osim</strong><br />
(M’sia)<br />
Our subsidiaries and our associated company are not listed on any stock exchange.<br />
HISTORY<br />
The origins of our business began in November 1980 when Dr Ron Sim Chye Hock commenced his sole<br />
proprietor business of retailing an array of household goods such as knives, knife-sharpeners and mobile<br />
drying rods under R. Sim Trading Co. We were subsequently incorporated in 1983 under the name ‘‘R.<br />
Sim Trading Co. Pte <strong>Ltd</strong>’’ to take over the sole proprietorship. Operating from our first premises at a shop<br />
at Peoples’ Park, we were then only selling 2 health-care related products, namely, hand-held<br />
massagers and foot reflexology rollers. By 1987, we had created a distribution network of 10 outlets in<br />
Singapore, Hong Kong and Taiwan marketing household goods and health-care related products.<br />
Our founder, Dr Ron Sim Chye Hock then felt that there was market potential for specialty home health<br />
care products in an increasingly affluent Asia. As early as 1987, we saw that the home healthcare<br />
products sector was dominated by a disparate group of equipment manufacturers with little or no<br />
emphasis on marketing and as a result there was a lack of brand consciousness among consumers.<br />
Hence, in 1989 we decided to bring together different home health-care products from different<br />
equipment manufacturers and market them using specialty branding. For this purpose, we created the<br />
brand ‘‘Health Check & Care’’ to build and exploit a niche market in home health-care products. Our<br />
business grew rapidly and by 1994 we had approximately 60 point-of-sales outlets in Asia.<br />
In our business strategy we believe that marketing and strengthening our brand equity is of vital<br />
importance. As ‘‘Health Check & Care’’ was a generic name and was difficult to be registered as a<br />
trademark in many countries, in 1996 we officially launched our ‘‘OSIM’’ brand name which we had been<br />
using since the early 1990s. ‘‘OSIM’’ is a combination of our founder’s surname and the letter ‘‘O’’ which<br />
symbolises our vision to become a globally recognised brand. As at 31 May 2000, we have registered<br />
the name ‘‘OSIM’’ as a trademark in 26 countries spanning Asia (including Australia), Europe, North and<br />
South America, South Africa and Israel. We have also made trademark applications for ‘‘OSIM’’ in 10<br />
other countries.<br />
27<br />
<strong>Osim</strong><br />
(Shanghai)<br />
Public<br />
(including Reserved<br />
Shares)<br />
100% 70% 60% 100% 30%<br />
Daito-<strong>Osim</strong><br />
(Suzhou)
A major tenet of our marketing strategy is to have an extensive point-of-sales network and geographical<br />
coverage in our markets. Presently, we have point-of-sales outlets in Singapore located in all major<br />
departmental stores and suburban shopping malls. We began developing our overseas distribution<br />
network in 1986 when we ventured into Hong Kong and in the following year, into Taiwan. To ride on the<br />
rapid development of the Asian economies in the early 1990s, we expanded our operations to Thailand<br />
in 1990, Malaysia in 1992, Indonesia and Beijing in 1993, and Shanghai in 1994 by opening<br />
point-of-sales outlets in these countries either directly or through our franchisees and distributors. We<br />
expanded our markets to the United States in 1997 and Dubai in 1999 through the appointment of<br />
franchisees/licensees to market and sell our products in these countries. At present, of our 10<br />
franchisees/licensees, 3 are our subsidiaries, 6 are affiliated companies controlled by our Controlling<br />
Shareholders and the remaining 1 is an unrelated company.<br />
Our point-of-sales outlets in Singapore, Hong Kong, Taiwan and Malaysia are operated by our Company<br />
and our subsidiaries. The rest of our point-of-sales outlets are franchised outlets with the exception of<br />
outlets in the PRC for which we have trademark and licensing agreements with the owners. It is our<br />
business strategy that future expansion of our point-of-sales network will be substantially undertaken by<br />
franchising. We have begun to gradually move away from being a retailer to being a franchisor and, in<br />
furtherance of this strategy, we have also entered into franchise agreements with our subsidiaries, <strong>Osim</strong><br />
(HK), <strong>Osim</strong> (Taiwan) and <strong>Osim</strong> (M’sia). We believe that franchising gives us the ability to focus our<br />
attention on conceptualising and developing new products, improving existing products and brand<br />
management. Further, franchising will allow us to expand and multiply our point-of-sales outlets to more<br />
geographical markets at a faster pace with significantly less capital exposure. Franchising is also less<br />
taxing on our management’s time than operating self-owned outlets in penetrating new markets. A more<br />
detailed description of our business model as a franchisor is given under the section on ‘‘FRANCHISE<br />
MODEL’’ on pages 35 and 36 of this Prospectus.<br />
To diversify our sources of revenue, in 1998 we ventured into wholesale distribution of health-check and<br />
health-care products such as blood pressure monitors, thermometers and pulse massagers, in<br />
Singapore to hospitals like Tan Tock Seng Hospital and Kandang Kerbau Women’s and Children’s<br />
Hospital, pharmacies like the Apex Pharmacy and the Guardian Pharmacy chains, and Chinese medical<br />
halls. While wholesale distribution is currently only carried out in Singapore which contributes between<br />
1 and 2 per cent. to our turnover in Singapore, we intend to develop this business and carry out<br />
wholesale distribution in all our principal markets eventually.<br />
As part of our business strategy to extend our control over our business process and to exercise greater<br />
involvement and participation in the source of supply for our products, in 1995 we entered into a joint<br />
venture with Daito Electric Machine Industry Company Limited (‘‘Daito’’), a Japanese supplier to our<br />
Group, to take up a 30 per cent interest in Daito-<strong>Osim</strong> (Suzhou) with Daito taking up the remaining 70<br />
per cent.. Presently, Daito-<strong>Osim</strong> (Suzhou) has a plant in the Singapore-Suzhou Industrial Park in<br />
Jiangsu, PRC that manufactures products like hand-held massagers and foot reflexology rollers mainly<br />
for re-export and distribution to the markets in Japan and USA. Under the joint venture agreement, Daito<br />
has the right to appoint 3 directors of Daito-<strong>Osim</strong> (Suzhou) while we have the right to appoint 2 directors<br />
as we are the minority shareholder. However, Daito-<strong>Osim</strong> (Suzhou) shall not change the scope of its<br />
business activities from that as described in the aforegoing, without the consent of Daito and us. Any<br />
material financial commitment which is above US$100,000 or material contract to be entered by<br />
Daito-<strong>Osim</strong> (Suzhou) also requires the consent of Daito and us. The joint venture agreement is of<br />
unlimited duration but may be terminated with the consent of Daito and us. Neither Daito nor us can<br />
transfer an interest in the shares in Daito-<strong>Osim</strong> (Suzhou) without first making an offer to sell the interest<br />
to the other shareholder.<br />
On 28 March 2000, our founder Dr Ron Sim Chye Hock was conferred an honorary doctorate in business<br />
administration by the Wisconsin <strong>International</strong> University in recognition of his prominent achievements in<br />
business.<br />
28
In July 2000, pursuant to the Subscription Agreement, Investor, a wholly-owned subsidiary of Temasek<br />
Holdings (Private) Limited, subscribed for 11,600,000 new Shares, representing approximately 5 per<br />
cent. of the post-Investor Subscription and post-Invitation enlarged share capital of the Company, at the<br />
price of $0.47 per Share, representing a discount of approximately 10 per cent. to the Offer Price. We<br />
believe that the investment by Investor is a milestone in our corporate development and an endorsement<br />
of our Group. Investor has given an undertaking not to dispose of or transfer any part of its respective<br />
shareholding for a period of 6 months commencing from the date of our admission to the Official List of<br />
the SGX-ST. Mr Khor Peng Soon, a nominee of Investor, was appointed as our non-executive Director<br />
in June 2000.<br />
BUSINESS<br />
Range of Products<br />
We are in the business of marketing, distributing and franchising of a comprehensive range of home<br />
health-care, health-check and healthy lifestyle products. We have in the last quarter of FY1999 adopted<br />
franchising as a business model, the details of which are set out in the section on ‘‘FRANCHISE MODEL’’<br />
on pages 35 and 36 of this Prospectus. Other than Daito-<strong>Osim</strong> (Suzhou), all the Group’s production<br />
needs are out-sourced to contract manufacturers in Japan and Taiwan as we believe in focusing on our<br />
strengths in marketing and brand management. Our products can be broadly classified into 3<br />
categories:–<br />
Healthy Lifestyle<br />
To cater to the needs of an increasingly affluent society, we market massage chairs, massage<br />
mattresses, personal home saunas, slimming belts and fitness equipment like bicycles and riders, which<br />
are aimed at providing customers with relaxation techniques and luxurious comfort.<br />
Health Care<br />
To help relieve muscular and stress-induced strains, we provide foot reflexology rollers, pulse<br />
massagers, hand-held massagers, eye massagers, massaging hairbrushes, and hot and cold gel packs.<br />
We also market mechanical rotary toothbrushes and hearing aids.<br />
Health Check<br />
We also market a range of diagnostic equipment like blood pressure monitors, pedometers which are<br />
used for measuring calories burned during exercise, glucometers which are used for monitoring blood<br />
sugar levels for diabetics, electronic weight and height measuring machines, digital thermometers and<br />
ear scan thermometers. The ear scan thermometer is popular for use in paediatric care (i.e. child care)<br />
as the device consists of a short probe which can be gently inserted into the outer ear canal to take an<br />
accurate reading of the body temperature. Apart from the above products, we plan over the next 2 years<br />
to market in Singapore, posters, literature, music compact discs and tapes on the theme of health and<br />
healthy living to provide a total health experience to our customers. If this is well received in Singapore,<br />
we may extend the sale of these products to our overseas outlets.<br />
29
Business Process<br />
We operate a comprehensive business process which can be schematically represented below:−<br />
(a) Design<br />
Design<br />
▼<br />
Procurement &<br />
Supply<br />
▼<br />
Advertising &<br />
Promotion<br />
▼<br />
Distribution &<br />
Sales<br />
▼<br />
After-Sales<br />
Service &<br />
Customers’<br />
Feedback<br />
We internally conceptualise features and design outlooks for products such as portable hand<br />
massagers, pulse massagers and foot reflexology rollers which we believe can be marketed in our<br />
primary markets of Singapore, Hong Kong and Taiwan. We then invite design professionals and<br />
contract manufacturers with whom we have close relationships to submit designs in respect of<br />
these new products. Following a review process with the design professionals and contract<br />
manufacturers, we will approve designs and submit them to the contract manufacturers for the<br />
manufacture of the products.<br />
We have an understanding with these design professionals and contract manufacturers that they<br />
will not use these designs in the manufacture of competing products by other customers without our<br />
consent. In the past, we have consented to the use of these designs for other customers for markets<br />
in which we have no presence, e.g. Japan and Europe. In light of the above, we did not see a need<br />
to claim ownership rights over the designs.<br />
30<br />
▼<br />
Product<br />
Development and<br />
Innovation<br />
▼
(b) Procurement and Supply<br />
Substantially all of our products, representing 99 per cent. of our turnover in FY1999, are sold under<br />
our own brand names, including major products like massage chairs, blood pressure monitors and<br />
slimming belts. Other than Daito-<strong>Osim</strong> (Suzhou), all the Group’s production needs are out-sourced<br />
to contract manufacturers in Japan and Taiwan as we believe in focusing on our strengths in<br />
marketing and brand management.<br />
In order to exercise more control over the source and quality of products, we may enter into joint<br />
venture arrangements with our contract manufacturers to take up an equity stake in their<br />
operations. Currently, as disclosed in the section on ‘‘HISTORY’’ on pages 27 to 29 of this<br />
Prospectus, we have a joint venture agreement with Daito Electric Machine Industry Company<br />
Limited under which we took up a 30 per cent. equity interest in Daito-<strong>Osim</strong> (Suzhou).<br />
(c) Advertising and Promotion<br />
We promote and market our brand name aggressively as we recognise that we are tapping into a<br />
consumer-oriented market. We do direct advertising through television commercials, printed<br />
advertisements and product launches and other more indirect marketing through sponsoring of<br />
television programmes and health documentaries, and participating in exhibitions. We expended<br />
$4.5 million, $7.1 million and $10.5 million on advertising and promotion in FY1997, FY1998 and<br />
FY1999 respectively, representing 7.4 per cent., 10.2 per cent. and 10.2 per cent. of our Group’s<br />
turnover in those financial years respectively.<br />
(d) Distribution and Sales<br />
We believe that we have one of the largest distribution networks of home health-care products retail<br />
stores in Asia. As at 31 May 2000, we had 37 point-of-sales outlets in Singapore, 21 in Malaysia,<br />
40 in Hong Kong, 30 in Taiwan, and through our franchisees and business partners, our products<br />
are also sold in 5 point-of-sales outlets in Thailand, 14 in Indonesia and 44 in PRC. We have also<br />
established access points in the Middle East and United States markets with 1 franchised outlet in<br />
Dubai and 11 franchised outlets in Los Angeles, San Diego and Orange County, California.<br />
(e) After-Sales Service and Customers’ Feedback<br />
Our point-of-sales outlets strive to achieve the one-stop shop concept. Not only do our outlets carry<br />
our entire comprehensive range of home health-care products, they also provide servicing and<br />
repair services to customers, except for bulky products like massage chairs for which we provide<br />
on-site servicing.<br />
We also have in our organisation a customer management system which captures our customers’<br />
data in key markets at our point-of-sales outlets mainly through the warranty cards returned by our<br />
customers and comments given by our customers through Internet e-mails and product hotlines.<br />
The customers’ data is compiled to form a customer data-base and then ‘datamined’ by our<br />
management feeding valuable information to our various functional divisions like marketing, sales<br />
and order fulfilment, and service and support.<br />
(f) Product Development and Innovation<br />
We add value to the supply-to-sales chain by constantly innovating new product concepts such as<br />
by improving the aesthetic features (such as the colours, designs, finishings, functions and fabric)<br />
of our products. We also continuously seek feed-back from our customers in order to better<br />
understand their needs and modify our existing products accordingly. In line with our emphasis on<br />
marketing, we constantly seek creative marketing approaches to promote our new products.<br />
Currently, we are in the process of obtaining ISO 9002 certification of our business processes and are<br />
targeting to complete by the third quarter of 2000. The purpose of obtaining ISO 9002 certification is to<br />
obtain an external endorsement of our business processes and practices.<br />
31
Strategic Marketing<br />
Through taglines like ‘‘Health is An Attitude To Life’’ and ‘‘Good Health Begins With Care’’, we encourage<br />
consumers to be pro-active and to enhance the quality of life by leading a healthy lifestyle and cultivating<br />
a healthy mindset. Our strategic marketing efforts focus on the above.<br />
To build the image of the OSIM brand among the general public, we engage popular television and movie<br />
artistes like Carina Lau, Lydia Sum and Moses Lim who have a strong following among the Chinese<br />
population in Asian countries to endorse our products. To enhance public awareness of our name, we<br />
also sponsor or participate in popular Hong Kong television entertainment programmes, special events<br />
and charities like for instance, in Singapore, The President Star Charity, Star Search, the Health Tips<br />
documentary series and the National Healthy Lifestyle Campaign. Ultimately, the aim of our marketing<br />
efforts is to strengthen the positioning of our OSIM brand in the markets we operate.<br />
To help us further enhance the value of our OSIM brand through wider recognition, and to assist us in<br />
positioning ourselves for further growth, we commissioned the services of Interbrand Pte <strong>Ltd</strong> in early<br />
1999. Interbrand Pte <strong>Ltd</strong> is a global brand consultant whose clientele includes leading consumer<br />
multi-nationals like IBM, British Airways, Proctor & Gamble and Philips, and the Singapore Tourism<br />
Board and Singapore Trade Development Board.<br />
To handle competitive pressures from manufacturers of low-priced products, we have developed NORO<br />
as a secondary brand to sell lower-priced massage chairs and kneading massagers to cater to the<br />
segment of consumers in PRC which is sensitive to pricing.<br />
With the assistance of Interbrand Pte <strong>Ltd</strong>, we have unveiled a new corporate logo in April 2000 to replace<br />
our previous logo. The new logo seeks to portray a more international and forward-looking image. The<br />
tri-colours of the arcs around our name in the new logo symbolise our quest for global expansion through<br />
blue which signifies the blue sky, green which signifies the green land and orange which signifies the<br />
vibrancy of light and spirit. We have made applications to register our new corporate logo as a trademark<br />
in the countries where required under the law, the details of which are more particularly set out in the<br />
section on ‘‘INTELLECTUAL PROPERTY RIGHTS’’ on pages 36 and 37 of this Prospectus.<br />
Under the new modern image, we are working towards adopting a new shop layout concept by<br />
re-classifying the products that we currently market under the themes of ‘relaxation’, ‘healthy living’,<br />
‘beauty/fitness’ and ‘spirit’. This will be carried out gradually and in tandem with new product lines that<br />
we intend to introduce (as more particularly described under the section on ‘‘PROSPECTS AND<br />
FUTURE PLANS’’ on pages 45 to 47 of this Prospectus).<br />
32
Organisational Management<br />
We have moved away from the conventional hierarchical form of management which emphasises central<br />
command and control to one which is predicated on an open and interactive management style. Our<br />
management concept can be schematically represented as follows:–<br />
establishing the vision<br />
We have established a vision for ourselves to be a global leader in home health-care and healthy lifestyle<br />
products. Guided by this vision, our management has steered the Group from being a retailer of<br />
household products to being one of the leading brand names in Asia today in home health-care products.<br />
To achieve the status as a global player, barring unforeseen circumstances, we plan to have worldwide,<br />
300 point-of-sales outlets by the year 2001, 500 point-of-sales outlets by the year 2003 and 1,000<br />
point-of-sales outlets by the year 2008. This would be in addition to our intention to build a significant<br />
presence on the Internet by engaging in e-commerce.<br />
communicating the vision<br />
▼<br />
Communicating<br />
the vision<br />
▼<br />
Establishing<br />
the vision<br />
Goal-setting<br />
and<br />
strategising<br />
We strive to communicate our vision to every employee in the Group and to get the employees to<br />
appreciate how their individual actions support our corporate objective to be a global leader in home<br />
health-care products.<br />
To emphasise the importance of our strategies to achieve our corporate vision, senior management<br />
adopt a pro-active, ‘hands-on’ and ‘lead by example’ style of management. We also communicate our<br />
vision and business strategies through holding regular sales talks with our marketing staff and annual<br />
group conferences that involve all senior executives and managers in our organisation.<br />
33<br />
▼<br />
Feedback and<br />
re-learning<br />
▼
goal-setting and strategising<br />
To realise our vision, each functional division in our organisation is involved in the following process:–<br />
(i) benchmarking targets;<br />
(ii) identifying strategic measures to improve the division’s performance and efficiency that are in line<br />
with our overall corporate strategy and direction; and<br />
(iii) allocating our resources towards achieving our benchmarked targets and investing in strategic<br />
initiatives.<br />
feedback and re-learning<br />
As a marketing-oriented company, we believe that our business environment is complex and we strive<br />
to be a learning organisation in order to apply the most effective business strategies. Our management<br />
believes that the development of our business strategies is a process to which all employees can<br />
contribute. We actively seek feedback from our staff at all levels to test the assumptions made in our<br />
strategies and to see if they are consistent with the practical experience and observations of our front line<br />
staff.<br />
Distribution Network<br />
We have developed, and will continue to further develop, an extensive distribution network in order to<br />
have control over our point-of-sales outlets. This is because we believe that the quality of sales service<br />
and strategic marketing are as important as the quality of our products. Our franchisees are obliged<br />
under our franchise agreements to follow our retail concept and advertising guidelines rigorously. More<br />
details on our franchise model are given in the section ‘‘FRANCHISE MODEL’’ on pages 35 and 36 of<br />
this Prospectus.<br />
We also believe our extensive distribution channels give us an important competitive edge as we reap<br />
economies-of-scale in procurement of products, product development, and brand and service quality<br />
developments.<br />
Our present distribution network consists of point-of-sales outlets in retail locations. In addition, in<br />
Singapore, our distribution network also consists of wholesale distribution channels through hospitals<br />
like Tan Tock Seng Hospital and Kandang Kerbau Women’s and Children’s Hospital, pharmacies like the<br />
Apex Pharmacy and the Guardian Pharmacy chains, and Chinese medical halls. The point-of-sales<br />
outlets in Singapore, Hong Kong, Taiwan and Malaysia are operated by us predominantly out of rented<br />
premises. Our point-of-sales outlets in USA, Indonesia, Thailand and Dubai are operated by our<br />
franchisees for which more details are set out in the section on ‘‘FRANCHISE MODEL’’ on pages 35<br />
and 36 of this Prospectus. Our point-of-sales outlets in PRC are operated by PRC companies, namely,<br />
<strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC (Langfang) which are not members of our Group and with<br />
which we have entered into licensing and distribution agreements (the ‘‘Licensing and Distribution<br />
Agreements’’) as present PRC laws do not permit foreign companies to grant franchises in the country.<br />
We do not own the point-of-sales outlets in USA, Indonesia, Thailand, Dubai and PRC.<br />
Under the Licensing and Distribution Agreements, we charge <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC<br />
(Langfang) a licensing fee of between 0.25 and 5 per cent. of their turnover for use of our trademarks.<br />
The licensees are contractually bound to distribute our products exclusively and must purchase the<br />
products from us directly and not through any third parties. They are not permitted to distribute the<br />
products outside PRC. We presently sell our products at cost plus a mark-up to <strong>Osim</strong> (Beijing), <strong>Osim</strong><br />
GHC (SH) and HCC (Langfang). Therefore, under the Licensing and Distribution Agreements, we have<br />
2 revenue sources, namely, (i) the licensing fees and (ii) the sale of our products. The Licensing and<br />
Distribution Agreements are of 5 years duration each and may be renewed with the consent of the<br />
licensees and us.<br />
34
FRANCHISE MODEL<br />
Our long-term growth strategy is to position ourselves as a franchisor. We believe that through<br />
franchising we can expand and multiply our point-of-sales outlets to cover more geographical markets<br />
at a more rapid rate than we have ever experienced. We have, since the last quarter of FY1999, adopted<br />
the franchise business model to allow us to focus on our marketing strengths.<br />
In line with our new business model, we had, in May 2000 entered into franchising arrangements with<br />
<strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and <strong>Osim</strong> (M’sia) notwithstanding that they are our subsidiaries. Our other<br />
franchisees are <strong>Osim</strong> (USA), <strong>Osim</strong> (Thai) and PT Sharon (who are not members of our Group but are<br />
controlled by our Controlling Shareholders) and RSH in Dubai who is not a member of our Group and<br />
is an independent third party. As described in the section on ‘‘BUSINESS — Distribution Network’’ on<br />
page 34 of this Prospectus, for the PRC market, we did not appoint any franchisees because of PRC<br />
laws but we had, in May 2000, licensed <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC (Langfang) to be our<br />
distributors under the Licensing and Distribution Agreements. The shareholders of <strong>Osim</strong> (Beijing), <strong>Osim</strong><br />
GHC (SH) and HCC (Langfang) are disclosed under the section on ‘‘INTEREST OF MANAGEMENT<br />
AND OTHERS IN CERTAIN TRANSACTIONS’’ on pages 62 to 69 of this Prospectus.<br />
The advantages of adopting franchising as a business model, in our opinion, are that it will entail less<br />
capital risk in penetrating new geographical markets and will consume less management resources as<br />
compared to operating self-owned outlets. It will also allow us to concentrate on what we believe are our<br />
main strengths which are strategic marketing and brand enhancement. Franchising is also widely<br />
recognised as a business model which has been capitalised by major consumer brands like<br />
Bodyshop TM , McDonalds TM , Pizza Hut TM and Guess? TM to attain penetration in major global markets.<br />
Under the terms of our standard franchise agreement (which may be subject to modifications depending<br />
on the circumstances of the franchisee and the markets concerned), we charge our franchisee a<br />
one-time franchise fee. As in all franchise agreements, we also charge royalties (as more described in<br />
the paragraphs below) for use of our brand name. Our franchisees must purchase the franchised<br />
products from us directly and not through any third parties. We presently sell our products at cost plus<br />
a mark-up to our franchisees. Our franchisees are contractually bound to market our products exclusively<br />
and follow our retail concept and store lay-out in their point-of-sales outlets. The franchises we have<br />
awarded are all currently restricted to the country in which the franchisee is incorporated, save for the<br />
franchise to RSH which covers Kuwait as well as United Arab Emirates where RSH is incorporated.<br />
Presently, our franchise agreements are each of 5 years’ duration and may be renewed with the consent<br />
of the franchisee and us.<br />
The revenue sources under our franchise model are as follows:–<br />
(a) franchise fee<br />
In our standard franchise agreement, our current franchise fee ranges from US$10,000 to<br />
US$100,000. For our subsidiaries who have been appointed as our franchisees, i.e. <strong>Osim</strong> (M’sia),<br />
<strong>Osim</strong> (Taiwan) and <strong>Osim</strong> (HK), we have not levied the franchise fee. For franchisees who are<br />
previously our distributors and are appointed as our franchisees when we adopted the franchise<br />
business model, we have not charged them the franchise fee either. For the above reasons, the<br />
contribution of franchise fees to our profit before taxation was insignificant in FY1999. Moving<br />
forward, we intend to charge new franchisees the franchise fee. However, depending on our<br />
assessment of the market conditions and the difficulty of market penetration, we are prepared to<br />
waive or suspend the franchise fee.<br />
(b) royalties<br />
We currently collect royalties based on the sales made by the franchisees of between 0.25 per cent.<br />
and 5 per cent., depending on the size of the potential markets they operate in for our products. In<br />
order to assist our franchisees to obtain a foothold in the market and lower the start-up costs, we<br />
are prepared to impose a graduated scale for royalty payments until such time as the franchisees’<br />
businesses have achieved performance targets set by us. The performance targets, which will be<br />
based on turnover, will be determined on a case-by-case basis, depending on the size and maturity<br />
of the markets in which the franchisees operate.<br />
35
(c) management fees<br />
For providing technical assistance, management and consultancy services to our franchisees, we<br />
are entitled to be reimbursed for all costs incurred by us such as travel costs, accommodation,<br />
time-costs charged for the services of our employees and overseas allowances paid to our<br />
employees.<br />
(d) sale of products<br />
We sell our products at cost plus a mark-up to the franchisees, thereby generating additional profits<br />
for us.<br />
Brand management and strategic marketing of our brand and concept are crucial for our franchising<br />
business. As the franchisor, we control the type and quality of promotion and marketing to be undertaken<br />
by our franchisees. Our present franchisees are obliged to allocate from 2 to 10 per cent. (depending on<br />
the market in which they operate) of the value of the total sales made by them for their advertising and<br />
promotion budget every year. We reserve the right to review the amount allocated from time to time.<br />
Presently, none of our franchisees are allowed to sub-franchise. In future, for large markets like the<br />
United States, we may appoint master-franchisees who will have the right to sub-franchise. In such large<br />
territories, it may be preferable for us to appoint an entity which has a substantial distribution network and<br />
knowledge of the domestic markets.<br />
INTELLECTUAL PROPERTY RIGHTS<br />
We regard our trademarks and other intellectual property as being a significant factor of the brand<br />
recognition of our products. To protect our trademarks and brand names, we have, as at 31 May 2000,<br />
obtained trademark registrations for ‘‘OSIM’’ and ‘‘NORO’’ in the following jurisdictions:–<br />
‘‘OSIM’’ trademark<br />
ASIA<br />
• Australia<br />
• Brunei<br />
• PRC<br />
• Hong Kong<br />
• Indonesia<br />
• Malaysia<br />
• Philippines<br />
• Singapore<br />
• South Korea<br />
• Taiwan<br />
• Thailand<br />
• Vietnam<br />
AFRICA<br />
• South Africa<br />
‘‘NORO’’ trademark<br />
• PRC<br />
• Indonesia<br />
• Hong Kong<br />
AMERICA<br />
• United States of America<br />
• Argentina<br />
EUROPE<br />
• Belgium<br />
• Netherlands<br />
• Luxembourg<br />
• Denmark<br />
• Norway<br />
• Russia<br />
• Spain<br />
• United Kingdom<br />
• France<br />
• Turkey<br />
36<br />
MIDDLE EAST<br />
• Israel
As described earlier in the section on ‘‘BUSINESS — Strategic Marketing’’ on page 32 of this Prospectus,<br />
we have made applications to register our new corporate logo as a trademark in PRC, USA and Canada<br />
as the laws of these countries require us to do so. The trademark applications in these countries are<br />
pending. We do not have to apply to register our new corporate logo as a new trademark in the other<br />
countries where we already had registered ‘‘OSIM’’ as a trademark.<br />
Pursuant to the Licensing and Distribution Agreements, we have granted <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH)<br />
and HCC (Langfang) rights to use our trademarks. Pursuant to the franchise agreements, we have<br />
granted our franchisees rights to use our trademarks. More details of the Licensing and Distribution<br />
Agreements and the franchise agreements are set out under the sections on ‘‘BUSINESS — Distribution<br />
Network’’ and ‘‘FRANCHISE MODEL’’ on pages 34 to 36 of this Prospectus respectively.<br />
As disclosed in the section on ‘‘BUSINESS — Business Process — (a) Design’’ on page 30 of this<br />
Prospectus, at present we do not have ownership rights over the designs of the products for which we<br />
are involved in the designing process. Based on our mutual understanding with the design professionals<br />
and contract manufacturers, they have sought our consent whenever they wish to use such designs for<br />
other customers.<br />
Save as disclosed in the above paragraphs of this section, our business is not dependent on any<br />
trademarks, copyrights, registered designs, patents or other intellectual property rights.<br />
PRODUCT AND SERVICE QUALITY CONTROL<br />
We have the following quality controls:–<br />
(a) Product Quality Assurance<br />
We subject the prototype of any product to be marketed under our brand to a review by our in-house<br />
quality engineer to ensure high material quality and functionality.<br />
Our Product Development & Procurement (‘‘PDP’’) department provides feed-back to the contract<br />
manufacturer like suggesting ways to improve the aesthetic design or to make the product more<br />
user-friendly. In addition, we conduct quarterly visits to the factories of our key contract<br />
manufacturers in Japan, Taiwan and PRC as part of a process of close consultation with them to<br />
ensure maintenance of quality standards.<br />
We also conduct batch testing of the new products we order from our contract manufacturers to<br />
ensure the products measure up to our quality standards. If the quality does not measure up to our<br />
standards, we will not accept the products for delivery. While we have required minor modifications<br />
or repairs to be made, we have not encountered any significant faults with the products<br />
manufactured by our contract manufacturers.<br />
As a reflection of our confidence in the quality of our products, all our products are covered by<br />
product warranties given by us. The warranty period for massage chairs is 2 years while the<br />
warranty period for other major products we sell like hand-held massagers, pulse massagers, foot<br />
reflexology rollers and blood pressure monitors, is 1 year. Our costs of repairing products covered<br />
under warranty have been insignificant so far, and we have obtained replacement parts from our<br />
contract manufacturers at no additional cost to us.<br />
(b) Service Quality Assurance<br />
We emphasise marketing and quality service. Our service-oriented culture is adopted at all levels<br />
of our organisation. To incentivise our staff to achieve service quality excellence, we have monthly<br />
staff recognition awards for deserving employees.<br />
To instil our service mindset and oversee our service quality initiatives, we have an in-house service<br />
quality (‘‘SQ’’) manager to conduct SQ training for both our sales team and back-end office staff.<br />
Our front-line staff are trained to provide courteous, efficient and knowledgeable service to<br />
customers and to encourage customers to have hands-on experience with our comprehensive<br />
range of home health-care products. By doing so, we strive to make shopping at our point-of-sales<br />
outlets an informative and satisfying experience.<br />
37
NEW PRODUCTS/ACTIVITIES<br />
As described under the section on ‘‘BUSINESS — Business Process — (f) Product Development and<br />
Innovation’’ on page 31 of this Prospectus, we are constantly engaged in product development and<br />
innovation by regularly introducing to the market improved and newer models of our products with better<br />
aesthetic or more sophisticated features such as touch button controls.<br />
We have the intention to introduce new product lines under our OSIM brand. In the future, we may also<br />
engage in an extension of our current business activities. These proposed new product lines and<br />
activities are described in greater detail under the section on ‘‘PROSPECTS AND FUTURE PLANS —<br />
Expansion of Business’’ on pages 45 and 46 of this Prospectus.<br />
RESEARCH AND DEVELOPMENT<br />
To date, we have not engaged in any significant research and development activities.<br />
YEAR 2000 COMPLIANCE<br />
We understand ‘‘Year 2000 Compliance’’ or ‘‘Y2K Compliance’’ to mean that neither the performance nor<br />
functionality of critical computerised equipment or systems will be affected by information relating to<br />
dates prior to, during and after the year 2000.<br />
Our computer system is used internally for accounting, processing of purchasing and sales orders, and<br />
managing of stocks. Our computers are Y2K compliant and should not be materially affected by the Y2K<br />
issue. We do not link our computer system to any external system of our suppliers or customers, hence<br />
reducing our exposure to the Y2K problem. We have also received Y2K compliant assurances from<br />
majority of our Group’s major contract manufacturers and suppliers, and other business associates such<br />
as freight forwarders. We have incurred approximately $30,000 for expenses related to the Group’s Y2K<br />
compliance exercise which had been completed before 31 December 1999.<br />
Presently, to the best of our knowledge and based on the information currently available, we do not<br />
anticipate the Y2K issue to have a significant impact on our operations, costs and revenue. As at the date<br />
of this Prospectus, we have not experienced any problems relating to the Y2K issue.<br />
INSURANCE<br />
As disclosed under the section on ‘‘RISK FACTORS — Industry Specific Risks — (c) Exposure to<br />
Product Liability Laws’’, we are exposed to the product liability laws of the United States which, we<br />
believe, may impose much higher quantum of damages in the form of punitive damages compared to the<br />
product liability laws in the other countries where our products are marketed. Our USA franchisee, <strong>Osim</strong><br />
(USA), has taken out product liability insurance in California, USA to cover the risks of paying damages<br />
arising out of a breach of product liability laws of the USA. Pursuant to the franchise agreement entered<br />
with <strong>Osim</strong> (USA), <strong>Osim</strong> (USA) has undertaken to indemnify us of any product liability which we may<br />
suffer as its products supplier and to hold the product liability insurance for our benefit as well.<br />
The premia for the product liability insurance are borne by <strong>Osim</strong> (USA) and the insurance covers any<br />
sum of damages which the insured becomes legally obligated to pay by reason of liability imposed by law<br />
provided that the responsibility to pay damages is determined in a law suit brought in the USA, its<br />
territories or possessions, Canada or Puerto Rico.<br />
38
GROUP TRAINING POLICY<br />
We provide in-house training for our employees in Singapore and our overseas subsidiaries by our<br />
in-house SQ manager. In addition, our sales force undergoes a training programme as described<br />
below:–<br />
(a) Product Training<br />
We have 2 in-house trainers dedicated to train our sales force on our range of home health-care<br />
products to meet the needs of our customers.<br />
(b) Salesmanship Training<br />
We engage external professionals to conduct customised salesmanship training to impart<br />
marketing skills to our sales staff. We also send our staff for external courses on general<br />
salesmanship training.<br />
(b) On-the-Job Training<br />
As practical experience is very important in training our sales staff, all newly-recruited sales<br />
personnel at our outlets will understudy the shop managers to learn the finer points of the job.<br />
Apart from the above training, we organise talks by health-care professionals in our corporate<br />
headquarters for our sales staff. Periodically, we also send senior management staff overseas to attend<br />
seminars and exhibitions.<br />
Our Group’s training expenses for FY1999 amounted to $72,000, representing 0.5 per cent. of our<br />
payroll costs in FY1999.<br />
ANALYSIS OF TURNOVER AND PROFITS<br />
Overview<br />
Our revenue from FY1995 to FY1999 was generated:–<br />
(1) Through the Group’s distribution network comprising mainly point-of-sales outlets operated by us in<br />
Hong Kong, Taiwan, Singapore and Malaysia. Our subsidiaries in Hong Kong, Taiwan and Malaysia<br />
are also appointed as our franchisees. In addition, since FY1998, we have sold our products<br />
through wholesale distribution in Singapore to hospitals, pharmacies and Chinese medical halls.<br />
While wholesale distribution in Singapore currently contributes less than 1 per cent. to our Group’s<br />
turnover, we intend to develop this business and carry out wholesale distribution in all our principal<br />
markets eventually;<br />
(2) From sales to affiliated companies (who are our franchisees/licensees in PRC, Thailand, Indonesia<br />
and USA) and to third party distributors (who are our franchisees). The affiliated companies are<br />
companies in which our Controlling Shareholders have an equity interest, namely <strong>Osim</strong> (USA) and<br />
<strong>Osim</strong> (Thai), or over which our Controlling Shareholders could exercise management control,<br />
namely, PT Sharon, <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC (Langfang); and<br />
(3) Through franchise fees. Since the last quarter of FY1999, our Group has adopted the franchising<br />
model and has been collecting franchise fees. In FY1999, the franchise fees were in relation to<br />
amounts collected from third party franchisees and were insignificant.<br />
Geographically, our turnover can be classified under:–<br />
(1) North Asia, where our primary markets are Hong Kong, PRC and Taiwan;<br />
(2) South Asia, where our primary markets are Singapore, Indonesia, Thailand and Malaysia; and<br />
(3) Others which represents principally USA.<br />
39
All our products are purchased directly from our suppliers and/or contract manufacturers. Almost all of<br />
our products sold are sourced through our Singapore headquarters. Further details on our major<br />
suppliers are set out in the section on ‘‘MAJOR SUPPLIERS AND CUSTOMERS — Major Suppliers’’ on<br />
pages 52 and 53 of this Prospectus. Our main management, marketing, product development,<br />
administration and other support functions are also centralized in Singapore. Hence, a breakdown of<br />
profit before taxation (‘‘PBT’’) by geographical region and activities is not meaningful.<br />
In general, our most popular Healthy Lifestyle products are our massage chairs which have higher unit<br />
selling prices, while pulse and hand-held massagers in our Health Care products category have lower<br />
unit selling prices but yield higher margins.<br />
Our sales are dependent, to a large extent, on the number of point-of-sales outlets and our advertising<br />
and promotion efforts, and may be affected by consumer demand for our products in the various markets<br />
that we operate in, which may be brought about by political, economic and social changes. In general,<br />
sales through the Group’s distribution network yield higher gross profit margins than sales to affiliated<br />
companies and third party distributors as products sold through the Group’s distribution network are sold<br />
directly to end consumers. However, for sales through the Group’s distribution network, we have to bear<br />
the operating and overhead expenses.<br />
Besides our cost of sales (represented entirely by purchases from our suppliers and/or contract<br />
manufacturers), our main operating expenses are payroll expenses (which represented an average of<br />
27.5 per cent of total operating expenses from FY1997 to FY1999), advertising and promotion expenses<br />
(17.9 per cent), counter commissions i.e. commissions we pay to departmental stores on sales made at<br />
our point-of-sales outlets at these stores (22.5 per cent) and rental expenses (12.3 per cent).<br />
By Activities<br />
The breakdown of the Proforma Group’s turnover, and profit before taxation by activities for the past five<br />
financial years ended 31 December 1999 is set out below:–<br />
Turnover<br />
Sales of goods<br />
————— Year ended 31 December —————<br />
1995 1996 1997 1998 1999<br />
$’000 $’000 $’000 $’000 $’000<br />
— Through the Group’s distribution network 25,799 33,767 50,747 65,908 93,798<br />
— To affiliated companies and third party<br />
distributors (1)<br />
5,633 9,130 10,090 3,839 9,323<br />
Franchise fees — — — — 17<br />
Gross profit/Gross profit margin<br />
Sales of goods<br />
31,432 42,897 60,837 69,747 103,138<br />
————————————— Year ended 31 December —————————————<br />
—— 1995 —— —— 1996 —— —— 1997 —— —— 1998 —— —— 1999 ——<br />
$’000 % $’000 % $’000 % $’000 % $’000 %<br />
— Through the Group’s<br />
distribution network 15,531 60.2 20,902 61.9 32,833 64.7 40,731 61.8 62,563 66.7<br />
— To affiliated companies and<br />
third party distributors 1,617 28.7 2,474 27.1 2,734 27.1 683 17.8 1,659 17.8<br />
Note:−<br />
(1) For FY1995 to FY1999, over 90 per cent. of our sales to affiliated companies and third party distributors consisted of sales<br />
to affiliated companies.<br />
40
————— Year ended 31 December —————<br />
1995 1996 1997 1998 1999<br />
PBT ($’000) 1,632 3,668 4,402 3,199 10,848<br />
PBT margin 5.2% 8.6% 7.2% 4.6% 10.5%<br />
By Geographical Region<br />
The contribution by geographical region to the Proforma Group’s turnover for the past five financial years<br />
ended 31 December 1999 is set out below:–<br />
Turnover<br />
—————————————— Year ended 31 December ——————————————<br />
—— 1995 —— —— 1996 —— —— 1997 —— —— 1998 —— —— 1999 ——<br />
$’000 % $’000 % $’000 % $’000 % $’000 %<br />
North Asia 22,789 72.5 30,581 71.3 47,444 78.0 53,081 76.1 72,871 70.7<br />
South Asia 8,643 27.5 12,316 28.7 12,941 21.3 16,446 23.6 28,150 27.3<br />
Others — — — — 452 0.7 220 0.3 2,117 2.0<br />
31,432 100.0 42,897 100.0 60,837 100.0 69,747 100.0 103,138 100.0<br />
REVIEW OF PAST EARNINGS PERFORMANCE<br />
A review of the year to year earnings performance of the Company and its major subsidiaries for the past<br />
three financial years ended 31 December 1999 is set out below:–<br />
FY1996 to FY1997<br />
Turnover<br />
Sales of goods through our Group’s distribution network increased by $16.9 million or 50.0 per cent. from<br />
$33.8 million in FY1996 to $50.7 million in FY1997. Prior to FY1997, we had minimal advertising<br />
campaigns for our products. In FY1997, we carried out an aggressive advertising campaign to launch our<br />
new model massage chair in Hong Kong and Singapore. The sale of approximately 5,000 units of the<br />
above new model massage chair contributed mainly to the increase in our sales during the year through<br />
the Group’s distribution network.<br />
Similarly, as a result of the above aggressive advertising campaign in FY1997, our sales of goods to our<br />
affiliated companies and third party distributors increased by $1.0 million or 11.0 per cent from $9.1<br />
million in FY1996 to $10.1 million in FY1997.<br />
Turnover in North Asia increased by $16.8 million or 54.9 per cent. from $30.6 million in FY1996 to $47.4<br />
million in FY1997. This was mainly attributed to an increase in sales in Hong Kong from $17.1 million in<br />
FY1996 to $31.0 million in FY1997 and sales in Taiwan from $6.0 million in FY1996 to $8.4 million in<br />
FY1997. The increase in turnover of $0.6 million or 4.9 per cent. in South Asia from $12.3 million in<br />
FY1996 to $12.9 million in FY1997 was mainly attributed to increase in sales in Singapore from $9.3<br />
million in FY1996 to $9.8 million in FY1997. The above increase in turnover in our primary markets (of<br />
Singapore, Hong Kong and Taiwan) was the result of our aggressive advertising campaign for our new<br />
model massage chair and the increase in the number of our Group-owned point-of-sales outlets from<br />
approximately 60 to 80.<br />
We also achieved new sales of $0.5 million under ‘Others’ due mainly to sales to our affiliated company<br />
in the USA which commenced operations in FY1997.<br />
41
Profit Before Taxation<br />
PBT increased by 18.9 per cent. from $3.7 million to $4.4 million in line with the increase in turnover.<br />
However, while we achieved higher profit contribution from higher sales during the year, our operating<br />
expenses increased substantially by $11.6 million or 59.5 per cent. from $19.5 million in FY1996 to $31.1<br />
million in FY1997. This resulted in the decrease in PBT margin from 8.6 per cent. in FY1996 to 7.2 per<br />
cent. in FY1997.<br />
Our higher profit contribution achieved during the year was due mainly to higher gross profit (‘‘GP’’)<br />
margin for sales through our Group’s distribution network from 61.9 per cent. in FY1996 to 64.7 per cent.<br />
in FY1997 while we maintained our GP margin of 27.1 per cent. in FY1997 for sales to our Group’s<br />
affiliated companies and third party distributors. The higher GP margin of 64.7 per cent. in FY1997 for<br />
sales through our Group’s distribution network was due mainly to the launch of our new model massage<br />
chair which yielded higher gross profit margin.<br />
The increase in operating expenses was due mainly to:–<br />
(i) an increase in advertising and promotion expenses by $1.7 million from $2.8 million in FY1996 to<br />
$4.5 million in FY1997. This increase was due mainly to the aggressive advertising campaigns to<br />
launch the new model of our OSIM massage chair;<br />
(ii) the increase in counter commission by $3.0 million from $4.3 million in FY1996 to $7.3 million in<br />
FY1997. This increase was in line with the increased volume of counter sales at departmental<br />
stores;<br />
(iii) a $3.3 million increase in directors’ remuneration, fees and payroll-related expenses from $5.9<br />
million in FY1996 to $9.2 million in FY1997. This increase is attributed to the increase in directors’<br />
remuneration and fees ($1.1 million), and payroll-related expenses ($2.2 million). The higher<br />
payroll-related expenses were due to an increase in salesmen’s commission resulting from<br />
increase in turnover, as well as an increased number of employees due to expansion of our Group’s<br />
operations;<br />
(iv) provision for stock obsolescence of $0.5 million. In FY1997, we decided to concentrate on selling<br />
OSIM brand products and hence, we made a provision for non-OSIM brand products left in our<br />
stocks in FY1997;<br />
(v) an increase in rental expenses by $1.0 million from $2.5 million in FY1996 to $3.5 million in FY1997<br />
due to the addition of approximately 20 point-of-sale outlets; and<br />
(vi) write-off of fixed assets, amounting to $0.6 million, incurred when we shifted from our former<br />
headquarters at Pines Industrial Building to our current premises at Genting Lane.<br />
The increase in operating expenses was offset, to some extent, by a net foreign exchange gain of $0.9<br />
million in FY1997 against a net foreign exchange loss of $93,000 in FY1996. This was mainly a result<br />
of the strengthening of the US dollar against the Singapore dollar during FY1997 attributable to our<br />
export sales which were billed in US dollars.<br />
FY1997 to FY1998<br />
Turnover<br />
Sales of goods through our Group’s distribution network comprising point-of-sales outlets operated by us<br />
and wholesale distribution in Singapore increased by $15.2 million or 30.0 per cent. from $50.7 million<br />
in FY1997 to $65.9 million in FY1998. This was due mainly to additional sales of 2,300 units of this new<br />
model massage chair and the additional sales of 5,600 units of the pulse massager during the year<br />
through the Group’s distribution network.<br />
Sales of goods to our affiliated companies and third party distributors decreased significantly in FY1998<br />
by $6.3 million or 62.4 per cent. from $10.1 million in FY1997 to $3.8 million in FY1998. This decrease<br />
was due mainly to the lower sales by us to the PRC licensees who were affected by the regional<br />
economic crisis and the effect of overstocking of goods by the PRC licensees in FY1997. This resulted<br />
in lower sales orders from them as they were selling down their existing stocks during FY1998.<br />
42
Turnover in North Asia increased by $5.7 million or 12.0 per cent. from $47.4 million in FY1997 to $53.1<br />
million in FY1998. This was due mainly to an increase in sales in Hong Kong from $31.0 million in<br />
FY1997 to $33.9 million in FY1998. Another new model of our OSIM massage chair was launched in<br />
Taiwan in the third quarter of FY1998, resulting in an increase in sales in Taiwan from $8.4 million in<br />
FY1997 to $16.1 million in FY1998 . These increases were partially offset by the decrease in sales in<br />
PRC by $5.0 million from $8.0 million in FY1997 to $3.0 million in FY1998, as a result of the regional<br />
economic crisis and the effect of overstocking of goods by the PRC licensees in FY1997 as mentioned<br />
above.<br />
The increase of $3.5 million or 27.1 per cent. in South Asia sales from $12.9 million in FY1997 to $16.4<br />
million in FY1998 was mainly attributed to increased sales of our pulse massagers and massage chairs.<br />
The above increases in turnover in our primary markets (of Singapore, Hong Kong and Taiwan) were the<br />
result of our continuing aggressive advertising campaign for our products and the increase in the number<br />
of our Group-owned point-of-sales outlets from approximately 80 to approximately 100.<br />
Profit Before Taxation<br />
PBT decreased from $4.4 million in FY1997 to $3.2 million in FY1998. PBT margins also declined from<br />
7.2 per cent in FY1997 to 4.6 per cent in FY1998. This was due mainly to the decrease in GP margins<br />
for sales through our Group’s distribution network and sales to affiliated companies, third party<br />
distributors and franchisees.<br />
GP margins for sales through our Group’s distribution network declined from 64.7 per cent. in FY1997<br />
to 61.8 per cent. in FY1998. This decline was largely due to the increase in our cost of sales. A substantial<br />
part of our purchases from our major suppliers are denominated in Yen which had strengthened against<br />
the regional currencies. The GP margin for our sales to our affiliated companies and third party<br />
distributors declined from 27.1 per cent. in FY1997 to 17.8 per cent. in FY1998 for the above reasons.<br />
The increase in operating expenses of $7.7 million, from $31.1 million in FY1997 to $38.8 million in<br />
FY1998, was due mainly to:–<br />
(i) an increase of $2.6 million in advertising and promotion expenses from $4.5 million in FY1997 to<br />
$7.1 million in FY1998. This was due mainly to the higher advertisement production cost and new<br />
advertisement for our OSIM massage chair which was first launched in Taiwan in FY1998;<br />
(ii) a $1.7 million increase in counter commissions from $7.3 million in FY1997 to $9.0 million in<br />
FY1998. This increase was in line with the higher counter sales at departmental stores;<br />
(iii) an increase in payroll and related expenses of $1.4 million from $7.3 million in FY1997 to $8.7<br />
million in FY1998. This increase was due to the increase in salesmen’s commission resulting from<br />
increase in turnover, as well as an increased number of employees to cater to our expanding Group<br />
operations; and<br />
(iv) variance in the foreign exchange differences (from a gain of $1.0 million in FY1997 to a loss of $0.6<br />
million in FY1998). The foreign exchange loss in FY1998 was due mainly to the Japanese Yen<br />
strengthening against the Hong Kong dollar during the year. Approximately 60 per cent. of our total<br />
purchases were denominated in Japanese Yen.<br />
FY1998 to FY1999<br />
Turnover<br />
Sales of goods through our Group’s distribution network increased by $27.9 million or 42.3 per cent. from<br />
$65.9 million in FY1998 to $93.8 million in FY1999. This was due mainly to the additional sales of<br />
approximately 48,000 units of the pulse massagers which were officially launched in FY1999 and<br />
approximately 3,500 units of massage chairs due to our aggressive advertising through media (like TV,<br />
newspapers and magazines), promotion fairs held at shopping centres and an increase in the number<br />
of our Group-owned point-of-sales outlets from approximately 100 to approximately 120.<br />
43
Sales to our affiliated companies and third party distributors and franchisees increased significantly by<br />
$5.5 million or 144.7 per cent from $3.8 million in FY1998 to $9.3 million in FY1999. The increase was<br />
attributed to increased sales to PT Sharon ($1.3 million), <strong>Osim</strong> (USA) ($1.7 million) and PRC licensees<br />
($2.1 million). The increase was due mainly to more intensive effort in marketing the massage chairs as<br />
evidenced by the additional 2,300 units sold from FY1998 to FY1999. In addition, the economic recovery<br />
in the region contributed to the increase in sales, particularly in the second half of FY1999.<br />
Turnover in North Asia increased by $19.8 million or 37.3 per cent from $53.1 million in FY1998 to $72.9<br />
million in FY1999. This was mainly attributed to an increase in sales in Hong Kong from $33.9 million to<br />
$49.7 million, sales in Taiwan from $16.1 million to $18.0 million and sales in PRC from $3.0 million to<br />
$5.1 million during the year. The increase was mainly due to the additional sales of our OSIM massage<br />
chair and the pulse massager.<br />
Sales in South Asia increased by $11.8 million or 72.0 per cent. from $16.4 million in FY1998 to $28.2<br />
million in FY1999. This increase was mainly attributable to increase in sales in Singapore from $14.1<br />
million to $20.5 million, sales in Malaysia from $1.9 million to $5.8 million, and sales to Indonesia from<br />
$0.4 million to $1.7 million during the year supported by the economic recovery in the region.<br />
Overall, the above increase in our sales was a result of our aggressive advertising campaign for our<br />
products through media (like TV, newspapers and magazines), promotion fairs held at shopping centres,<br />
and an increase in the number of our Group-owned point-of-sales outlets from approximately 100 to<br />
approximately 120.<br />
Increase in sales of S$1.9 million under ‘‘Others’’ was due mainly to the increased sales to the USA from<br />
$0.2 million in FY1998 to $1.9 million in FY1999 as the business of our affiliated distributor in the USA<br />
improved.<br />
Profit Before Taxation<br />
PBT increased by $7.6 million from $3.2 million to $10.8 million in line with the increase in turnover. PBT<br />
margin also increased from 4.6 per cent in FY1998 to 10.5 per cent. in FY1999. This was due mainly to<br />
the 42.3 per cent. increase in turnover, higher GP margin from sales through the Group’s distribution<br />
network and a lower increase of 39.2 per cent. in operating expenses. The operating expenses increased<br />
by $15.2 million from $38.8 million in FY1998 to $54.0 million in FY1999.<br />
Our higher profit contribution achieved during the year was due mainly to higher GP margin for sales<br />
through our Group’s distribution network from 61.8 per cent. in FY1998 to 66.7 per cent. in FY1999 while<br />
we maintained our GP margin at 17.8 per cent. in FY1999 for sales to our Group’s affiliated companies<br />
and third party distributors. The higher GP margin of 66.7 per cent. in FY1999 for sales through our<br />
Group’s distribution network was due mainly to a change in sales mix, with a higher proportion of sales<br />
achieved on our pulse and hand-held massagers, which yielded higher margins.<br />
The increase in operating expenses was due mainly to:–<br />
(i) increase in advertising and promotion expenses of $3.4 million from $7.1 million in FY1998 to $10.5<br />
million in FY1999 in our key markets of Singapore, Hong Kong, Taiwan and Malaysia;<br />
(ii) increase in rental by $3.8 million from $4.2 million in FY1998 to $8 million in FY1999, mainly due<br />
to the increased number of our Group-owned point-of-sales outlets from approximately 100 in<br />
FY1998 to approximately 120 in FY1999;<br />
(iii) higher payroll expenses, which increased by $4.3 million, from $8.7 million in FY1998 to $13.0<br />
million in FY1999, due mainly to increase in salesmen’s commission resulting from the significant<br />
increase in turnover, as well as an increase in the number of employees to cater to the expanding<br />
operations;<br />
(iv) higher counter commissions of $1.3 million, from $9.0 million in FY1998 to $10.3 million in FY1999,<br />
attributed to the higher counter sales at departmental stores; and<br />
44
(v) higher foreign exchange losses, from $0.6 million in FY1998 to $1.9 million in FY1999. The higher<br />
foreign exchange loss was due mainly to the strengthening of the Japanese Yen against the<br />
Singapore, Hong Kong and Taiwan dollars during the year. We procured approximately 64 per cent.<br />
of our products from our Japanese contract manufacturers in Yen and sold them in the respective<br />
outlets in local currencies.<br />
PROSPECTS AND FUTURE PLANS<br />
Prospects<br />
Our Directors believe that the economic recovery of Asian economies which began in 1999 will continue<br />
in 2000. We feel that it is an opportune time to further expand our distribution network in Singapore and<br />
the rest of Asia as consumer sentiment is expected to improve in tandem with the economic recovery.<br />
To achieve the status as a global player and barring unforeseen circumstances, we plan to have<br />
worldwide, 300 point-of-sales outlets by the year 2001, 500 point-of-sales outlets by the year 2003 and<br />
1,000 point-of-sales outlets by the year 2008. In view of the above, we believe that, barring any<br />
unforeseen circumstances, the growth prospects of our Group are good.<br />
Future Plans<br />
To enhance our future growth, our Directors intend to embark on the following initiatives:− (1) move to<br />
a new corporate headquarters, (2) embark on business expansion plans, (3) upgrade our IT<br />
infrastructure and (4) engage in e-commerce by marketing and distributing our products on the Internet.<br />
New Corporate Headquarters<br />
We intend to move our corporate headquarters from 57 Genting Lane, Singapore which has a gross floor<br />
area (‘‘GFA’’) of 2,610 sq m to a larger complex at Ubi Avenue 1, Singapore with GFA of approximately<br />
18,000 sq m. We have, on 12 May 2000, signed an agreement with GBI Realty Pte <strong>Ltd</strong> of 63 Ubi Avenue<br />
1, #06-01, Boustead House, Singapore 408937, to sell to us the land and construct the building on a<br />
turnkey project basis at a total cost of $36.3 million. We have earmarked $8 million from the proceeds<br />
of the New Shares to finance the acquisition of the new corporate headquarters and intend to use bank<br />
borrowings to finance the balance.<br />
Our new corporate headquarters will continue to centralise our corporate functions. In addition, the<br />
increased facilities in the new corporate headquarters such as classrooms and auditorium will facilitate<br />
our training program for our staff and franchisees’ staff. This is in line with our vision to expand our<br />
distribution network through our franchise model (as described under the section on ‘‘FRANCHISE<br />
MODEL’’ on pages 35 and 36 of this Prospectus).<br />
Expansion of Business<br />
We believe that there are opportunities for us to expand our existing business in the following areas:–<br />
(a) New Geographical Markets<br />
We intend to extend our geographical reach by appointing franchisees in Australia, the Philippines,<br />
United Kingdom, South Africa and Korea. Discussions are underway on these arrangements and<br />
we hope to appoint a franchisee in the Philippines in the last quarter of FY2000. When discussions<br />
are more advanced, we will appoint legal counsel to advise on regulatory compliance issues in<br />
these jurisdictions. For the potentially bigger markets like the United States, we may appoint<br />
master-franchisees who have the right to sub-franchise to others to build up our distribution network<br />
more rapidly.<br />
A wide distribution network will remain a cornerstone of our business strategy as we believe that it<br />
gives us an important competitive edge as we reap economies-of-scale in procurement of products,<br />
product development, and brand and service quality developments. Barring unforeseen<br />
circumstances, we plan to have worldwide, 300 point-of-sales outlets by the year 2001, 500<br />
point-of-sales outlets by the year 2003 and 1,000 point-of-sales outlets by the year 2008.<br />
45
(b) New Product Lines<br />
We intend to diversify our range of home health-care products by branching into the marketing of<br />
related products like fitness equipment and health supplements like vitamins. We have identified<br />
potential sources of supply for these products and plan to introduce them in our primary markets.<br />
Barring any unforeseen circumstances, we hope to launch them over the next 2 years.<br />
(c) Wholesale Distribution<br />
As mentioned under the section on ‘‘HISTORY’’ on pages 27 to 29 of this Prospectus, we have<br />
already ventured into wholesale distribution in Singapore to hospitals, the Apex Pharmacy and<br />
Guardian Pharmacy chains and Chinese medical halls. Our intention is for the entire Group to<br />
undertake wholesale distribution more extensively in our other primary markets of Hong Kong and<br />
Taiwan through the following channels:–<br />
(1) hospitals;<br />
(2) pharmacies;<br />
(3) Chinese medical halls;<br />
(4) health clubs;<br />
(5) beauty centres; and<br />
(6) fitness centres.<br />
We believe that wholesale distribution will also enhance our marketing presence substantially as it<br />
is a relatively new market for us.<br />
(d) Deeper Penetration of Consumer Markets<br />
Over the years, we have targeted the middle to high end of the product price range in the consumer<br />
market in order to achieve higher profit margins and as part of our marketing efforts to build a global<br />
brand. We believe that we can expand our coverage of the consumer market while maintaining the<br />
position of the OSIM brand by developing a secondary brand called ‘‘NORO’’ to sell lower-priced<br />
products to serve a different segment of the consumer market who are more sensitive to pricing.<br />
However, we will be careful to differentiate the products marketed under the NORO brand to prevent<br />
cannibalising the sales of our main OSIM brand. We intend to differentiate NORO brand products<br />
by having less complex designs and fewer features.<br />
We currently retail lower-priced massage chairs and kneading massagers under the NORO brand.<br />
As at this date, we have registered NORO as a trademark in PRC, Hong Kong and Indonesia, and<br />
have trademark applications pending in Singapore and Malaysia.<br />
Upgrading of IT Infrastructure<br />
As disclosed in the section on ‘‘Use of Proceeds’’ on page 11 of this Prospectus, we intend to use<br />
approximately $1.5 million from the proceeds of the New Shares to enhance and upgrade our Group’s<br />
information technology systems in order to facilitate our enterprise resource planning (‘‘ERP’’) and<br />
customer relationship management (‘‘CRM’’). We are currently conducting evaluation studies on our<br />
needs for ERP and CRM.<br />
Through ERP we aim to strengthen the use of our resources in the following ways:–<br />
Area Objective<br />
Forecasting and Planning Optimise levels of service and logistic support<br />
Purchasing and Material<br />
Management<br />
Warehousing and Inventory<br />
Management<br />
Improve links to point-of-sales outlets<br />
Shift to demand-driven management from a stock-driven approach<br />
46
Area Objective<br />
Product Distribution Standardise reporting of sales by marketing outlets<br />
Accounting and Finance<br />
departments<br />
Improve internal reporting<br />
Through CRM we hope to attract more repeat sales from existing customers as well as to win new<br />
customers through the strengthening of the following areas:–<br />
Area Objective<br />
Sales Provide real-time access to customer profiles and history to sales<br />
staff<br />
Service Improve customer service<br />
Marketing Create new sales opportunities<br />
E-commerce<br />
We believe that e-commerce will be an important avenue of doing business in the new millennium and<br />
our Directors believe that the expansion of our presence to the Internet is a logical extension of our<br />
business and will enhance our brand name in the global market.<br />
We have registered a website ‘‘www.osim.com.sg’’ to market ourselves on the Internet. E-commerce is<br />
a new and developing business and we are in the process of drawing up a definitive e-commerce<br />
strategy under which we may undertake, among other things, any or all of the following activities:–<br />
‰ dissemination of information on our products on the Internet<br />
‰ marketing and sale of our products to consumers through Business-to-Consumer e-commerce<br />
‰ wholesale distribution of our products through Business-to-Business e-commerce<br />
‰ establishing a presence on Internet medical and health-care portals or web communities by forming<br />
synergistic alliances with other related health-care players like medical information providers and<br />
alternative medicine providers<br />
We intend for our e-commerce business to complement and augment our existing ‘brick-and-mortar’<br />
distribution network. We envisage that high visibility on the Internet would also lead to wider customer<br />
base.<br />
While we are in the process of having discussions with a leading Japanese investment bank, presently<br />
we have no understanding, commitments or agreements to make any acquisitions or investments or<br />
enter into any joint ventures for e-commerce. As and when such strategic initiatives are identified and<br />
crystallised, we intend to use part of the proceeds of this Invitation to substantially finance our strategic<br />
investments as disclosed in the section on ‘‘PROSPECTUS SUMMARY — Use of Proceeds’’ on<br />
page 11 of this Prospectus.<br />
REVIEW OF FINANCIAL POSITION<br />
Shareholders’ equity<br />
Shareholders’ equity increased from $10.2 million in FY1996 to $13.0 million in FY1997 and to $14.9<br />
million in FY1998. This was in line with the retention of our Group’s profit after taxation in each financial<br />
year, less net dividend and translation reserve. A net dividend of $0.4 million per year was declared in<br />
FY1996, FY1997 and FY1998. In FY1999, shareholders’ equity was reduced to $10.3 million. This was<br />
a result of the retained profit for that year amounting to $7.4 million being offset by the write-off of goodwill<br />
amounting to $12.4 million arising from the difference between the NTA of the subsidiaries and the actual<br />
cost of investment in the subsidiaries in connection with the Restructuring Exercise.<br />
47
Fixed assets<br />
Fixed assets comprise mainly freehold land and buildings, leasehold buildings, and shop renovations<br />
and fittings. Fixed assets increased from $12.3 million in FY1996 to $13.5 million in FY1997 mainly due<br />
to the construction of our present headquarters at Genting Lane. In FY 1997, fixed assets increased<br />
further to $16.6 million in FY1998 due to the final completion of the above headquarters as well as<br />
renovation costs of the additional shop outlets of approximately $1.0 million each in Hong Kong and<br />
Singapore during the financial year. In FY1999, fixed assets further increased to $18.3 million due<br />
primarily to the costs associated with renovating additional outlets. The net book value of shop<br />
renovations increased by $1.2 million in FY1999. In line with the increase in fixed assets, depreciation<br />
expenses were $0.6 million, $1.4 million and $2.2 million in FY1997, FY1998 and FY1999 respectively.<br />
Investment in associated company<br />
This refers to our investment in Daito-<strong>Osim</strong>. Our investment increased from $303,000 in FY1996 to<br />
$333,000 in FY1997, to $905,000 in FY1998, and to $1.07 million in FY1999. The increase of $767,000<br />
over the past 3 years was due to our share of post-acquisition reserves of Daito-<strong>Osim</strong>.<br />
Current assets<br />
Current assets consist mainly of stocks, trade debtors and amount due from affiliated companies which<br />
are trade in nature, other debtors, cash and bank balances.<br />
Current assets increased from $21.1 million in FY1996 to $34.1 million in FY1997 due to increase in<br />
stocks by $1.9 million from $5.8 million in FY1996 to $7.7 million in FY1997. This increase is in line with<br />
the expanded operation evidenced by the increase in number of outlets and higher turnover. In addition,<br />
trade debtors and trade amount due from affiliated companies increased by $6.6 million from $6.5 million<br />
in FY1996 to $13.1 million in FY1997, largely due to slow debt collections from the PRC affiliated<br />
companies as a result of lower than expected sales performance. Fixed deposits, cash and bank balance<br />
increased by $2.8 million from $2.9 million in FY1996 to $5.7 million in FY1997 due to cash generated<br />
from operating profits and proceeds from term loans.<br />
Current assets reduced by $9.4 million from $34.1 million in FY1997 to $24.7 million in FY1998. This was<br />
attributed mainly to decrease in the stock balance by $2.2 million from $7.7 million in FY1997 to $5.5<br />
million in FY1998 due to our gradual effort in reducing the average stock holding period. Trade debtors<br />
and trade amount due from affiliated companies decreased from $13.1 million in FY1997 to $10.5 million<br />
in FY1998 despite an increase in sales turnover in the corresponding period. This was the result of an<br />
improvement in debt collection largely from the PRC market as their sales performance picked up<br />
towards the end of the year. Our average stock holding and debtors turnover period are approximately<br />
3 months and 2 months respectively. Cash and bank balance also decreased from $5.7 million in FY1997<br />
to $3.1 million in FY1998 due to higher investment in fixed assets.<br />
In FY1999, current assets increased by $11.9 million or 48.2 per cent. to $36.6 million, mainly in line with<br />
the increase in sales turnover and expansion of the operations. The increase was contributed mainly by<br />
increase in stocks from $5.5 million in FY1998 to $12.1 million in FY1999, and trade debtors and trade<br />
amount due from affiliated companies from $10.5 million in FY1998 to $17.4 million in FY1999. The<br />
increase in trade debtors and trade balances from affiliated companies were in line with our increased<br />
sales through the Group’s distribution network from $65.9 million in FY1998 to $93.8 million in FY1999<br />
and sales to affiliated companies from $3.8 million in FY1998 to $9.3 million in FY1999. In spite of the<br />
above increases in stocks and trade balances, the stocks and debtors turnover periods remained<br />
substantially the same in FY1999 versus FY1998 which were approximately 3 months and 2 months<br />
respectively. Cash and bank balance rose by $1.2 million to $4.3 million in FY1999 pursuant to significant<br />
improvement in the Group’s profitability in FY1999 when it recorded profit after taxation but before<br />
minority interest of $7.7 million. The above increase in current assets were offset, to some extent, by the<br />
full repayment of amounts due from directors of $3.3 million by the end of FY1999.<br />
48
Current liabilities<br />
Current liabilities comprise mainly creditors, bills payable, bank borrowings and provision for taxation.<br />
Current liabilities increased by $8.8 million from $18.2 million in FY1996 to $27.0 million in FY1997. This<br />
was due primarily to increase in bills payable by $8.5 million from $2.9 million in FY1996 to $11.4 million<br />
in FY1997, offset by decrease in trade creditors by $4.4 million from $6.6 million in FY1996 to $2.2 million<br />
in FY1997. The overall net increase in trade payable was in line with the increased purchase of stocks<br />
and the expansion of operations. Other creditors increased by $3.4 million from $1.6 million in FY1996<br />
to $5.0 million in FY1997 mainly due to higher accrued operating expenses in line with the expanded<br />
operations. Increase in provision of taxation by $0.9 million from $1.6 million in FY1996 to $2.5 million<br />
in FY1997 was due to higher net profits for FY1997. Amount due to directors of $2.4 million in FY1997<br />
from nil in FY1996 further contributed to the overall increase in current liabilities. These increases were<br />
offset by a decrease in bank overdraft and bank borrowings of $1.8 million from $4.5 million in FY1996<br />
to $2.7 million in FY1997.<br />
Current liabilities fell from $27.0 million in FY1997 to $18.4 million in FY1998, representing a decrease<br />
of $8.6 million. This was due largely to a decrease in trade and other creditors from $7.6 million in<br />
FY1997 to $5.5 million in FY1998, and bills payable from $11.4 million in FY1997 to $8.3 million in<br />
FY1998, representing a decrease of $2.1 million and $3.1 million respectively. This was in line with lower<br />
purchase of stocks at the end of the financial year. Bank overdrafts and short-term portion of borrowings<br />
also decreased from $2.7 million in FY1997 to $ 1.0 million in FY1998. This was due mainly to repayment<br />
of short-term bank loan and clearance of bank overdraft by end of FY1998.<br />
In FY1999, current liabilities increased by $18.1 million, or 98.4 per cent., to $36.5 million. The increase<br />
was attributable mainly to increase in creditors of $8.5 million or a 156 per cent. increase. Bills payable<br />
also increased by $3.6 million to $12.0 million. Creditors’ payment period reduced from 165 days in<br />
FY1998 to 135 days in FY1999 due to the improved cash flow of the Group. The increase in creditors<br />
and bills payable was in line with the increase in stock balances as at the end of FY1999 to support the<br />
Group’s sales. Accordingly, bank overdraft and borrowings increased to $4.7 million in FY1999 with an<br />
increase by $3.3 million in bank overdraft. This was required to provide additional working capital for the<br />
expanded operations of the Group. Amount due to directors increased to $1.6 million in FY1999. Such<br />
amount was fully repaid in June 2000. With the improved profit before taxation from $3.2 million in<br />
FY1998 to $10.8 million in FY1999, provision for taxation increased correspondingly from $2.3 million to<br />
$4.0 million.<br />
Non-current liabilities<br />
Non-current liabilities consist mainly of hire purchase creditors, term loans and deferred taxation.<br />
Non-current liabilities increased by $2.7 million from $4.5 million in FY1996 to $7.2 million in FY1997<br />
attributed to net increase in term loans. From FY1997 to FY1998, non-current liabilities increased from<br />
$7.2 million to $8.0 million. This was due mainly to the increase in bank borrowings from $6.9 million in<br />
FY1997 to $7.8 million in FY1998 for additional working capital. In FY1999, non-current liabilities<br />
remained at $8.0 million.<br />
Commitments and contingent liabilities<br />
Non-cancellable operating lease commitments refer to lease agreements that the Group has entered into<br />
in respect of the shop units leased by the Group for its point-of-sales outlets. As at 31 December 1999,<br />
our non-cancellable operating lease commitments due within 1 year and due within 2 to 5 years were<br />
$9.7 million and $8.1 million respectively as disclosed in the Accountants’ Report on page 92 of this<br />
Prospectus. As at 31 May 2000, our non-cancellable operating lease commitments due within 1 year and<br />
due within 2 to 5 years were $8.8 million and $5.3 million respectively.<br />
As at 31 December 1999, we had outstanding letters of credit totalling $0.3 million and bank guarantees<br />
amounting to $0.7 million. The letters of credit were issued in relation to our purchases and the bank<br />
guarantees were in lieu of rental deposits for our point-of-sales outlets. Details of these securities are<br />
disclosed in the Accountants’ Report on page 92 of this Prospectus. As at 31 May 2000, we had<br />
outstanding letters of credit totalling $0.3 million and bank guarantees amounting to $0.8 million.<br />
49
Bank borrowings<br />
As at 31 December 1999, our Group had secured bank borrowings, hire purchase liabilities and bills<br />
payable amounting in aggregate to approximately $24.3 million. Details of the securities provided for<br />
these bank borrowings are disclosed in the Accountants’ Report on pages 90 and 91 of this Prospectus.<br />
As at 31 May 2000, our Group had secured bank borrowings, hire purchase liabilities and bills payable<br />
amounting in aggregate to approximately $29.0 million.<br />
DIVIDENDS<br />
Our Company declared net dividends of $74,500 for the year ended 31 December 1999. No dividends<br />
were paid by the subsidiaries in that year. For the year ended 31 August 1996, we declared net dividends<br />
of $370,000. The same amount was declared in each of the years ended 31 December 1997 and 31<br />
December 1998. We currently do not have a dividend policy. Our past dividend payments should not be<br />
taken as an indication of dividends to be paid by us in future. In future, the amount of dividend payable<br />
will be determined by the Directors and is dependent upon the aggregate distributable profits and the<br />
Group’s capital requirements for the ensuing year.<br />
FOREIGN EXCHANGE EXPOSURE<br />
The accounts of some of our subsidiaries are prepared in RM, HK$, RMB and NT$. This represents a<br />
translation risk in that any material fluctuation in the relevant currency rates against the S$ will have an<br />
effect on our consolidated financial statements which are presented in S$. While our sales are<br />
denominated mainly in the respective local currencies in which the sales arise, namely the S$, RM, HK$,<br />
RMB and NT$, our costs of procurement of products from our contract manufacturers are incurred mainly<br />
in US$ and Yen which accounted for 33 per cent. and 64 per cent. of our total purchases respectively for<br />
FY1999. This has resulted in us reporting the following net foreign exchange gains/(losses) for the last<br />
three financial years:–<br />
FY1997 FY1998 FY1999<br />
Net foreign exchange gains/(losses) ($’000) 968 (647) (1,893)<br />
Percentage of Group’s PBT (%) 22.0 20.2 17.5<br />
We are therefore vulnerable to currency risks arising from the fluctuations of the foreign currencies<br />
against S$. In the past, we did not adopt a hedging policy but since May 2000, we have begun hedging<br />
our foreign exchange exposure by entering into forward contracts to cover up to 70 per cent. of our<br />
Group’s purchases in Yen and US$ up to 3 months prior to the date of payment. Between May and June<br />
2000, we had entered into 1-month forward contracts with financial institutions to hedge our Yen and US$<br />
purchases amounting to approximately S$2.6 million.<br />
COMPETITION<br />
Our Directors are of the view that currently, in our primary markets of Singapore, Hong Kong and Taiwan,<br />
no company poses a significant threat to us as a major competitor. We believe that we currently have a<br />
competitive edge over our competitors in our primary markets as our extensive distribution network of<br />
outlets is dedicated to home health-care products. We exercise full control over our point-of-sales<br />
network and dictate to our distribution chain ‘how’ to sell and not only ‘what’ to sell. We also control our<br />
supply chain, from the design of the products to the marketing of the products. In general, we regard<br />
National, Sanyo and Omron to be our competitors.<br />
Singapore, Hong Kong and Taiwan are our largest markets and their aggregate domestic sales<br />
accounted for 85.6 per cent. of our Group’s revenues in FY1999. In Singapore, IPS Brothers Enterprise<br />
Pte <strong>Ltd</strong> and Goh Joo Hin Pte <strong>Ltd</strong> market similar home health-care products under the brands of Oto and<br />
Lifestyle respectively. In Hong Kong, National and Omron are our competitors. In Taiwan, there are many<br />
retailers in the home health-care products industry and we do not believe that any company is a major<br />
competitor to us.<br />
50
Currently, as there are no published statistics or official sources of information on companies engaged<br />
in the retail and distribution of home health-care products in our primary markets, we are unable to<br />
determine our market share. However, we believe that we are one of the leaders in Asia in this business<br />
based on 2 market surveys in 1999 which we had commissioned international survey firms, The Gallup<br />
Organisation and ACNielsen (China) <strong>Ltd</strong> (‘‘ACNielsen’’), to undertake to determine our market positions<br />
in Singapore and Hong Kong respectively.<br />
The Gallup Organisation’s survey revealed that in Singapore, we are the number 1 brand for electronic<br />
home health-care products when compared to other brands like National, Omron, Oto and Lifestyle, in<br />
terms of the following:–<br />
‰ brand awareness;<br />
‰ market share; and<br />
‰ perceived image in terms of quality, trustworthiness, brand preference, technology, designs and<br />
features, range of products, customer service and value for money.<br />
The ACNielsen’s survey revealed that in Hong Kong we are number 1 in terms of overall brand<br />
preference for massage chairs, foot reflexology rollers, pulse massagers and pulse monitors. In the<br />
ACNielsen’s survey, we were compared with brands like National, Oto, Sharp and Philips.<br />
To handle competitive pressures from manufacturers of low-priced products in the PRC market, we have<br />
developed ‘‘NORO’’ as a secondary brand to sell lower-priced massage chairs and kneading massagers<br />
to the segment of the consumer market which are more sensitive to pricing.<br />
While the barriers to entry into the home health-care products industry are not prohibitive, new entrants<br />
may face high start-up costs and will have to compete against established brands. New entrants may<br />
also lack the knowledge of ‘how’ to sell and ‘where’ to sell. We are convinced that in this industry,<br />
strategic marketing and branding are crucial. Furthermore, new entrants might find it more difficult to<br />
establish a distribution network. For example, owners of strategic departmental stores and suburban<br />
shopping malls normally prefer the more well-established names.<br />
COMPETITIVE STRENGTHS<br />
We regard the following to be our main competitive strengths:–<br />
(a) We operate and control our supply chain<br />
We operate and control our supply chain from the design and sourcing of our products to the<br />
distribution of our products. Our influence and control in the supply-side and more importantly, our<br />
distribution network through our point-of-sales outlets allows us to plan future product launches with<br />
a horizon of as far as 1 to 2 years. This, to some extent, buffers us from the impact of cyclical<br />
changes in business cycles. In fact, in the recent Asian financial crisis, our business has managed<br />
to grow in revenue and remain profitable.<br />
(b) We have an established brandname<br />
Through our efforts in strategic marketing, we have emerged as one of the more recognisable<br />
brands in the home health-care industry, especially in our primary markets of Singapore, Hong Kong<br />
and Taiwan. This is demonstrated by the results of the market surveys we have commissioned The<br />
Gallup Organization and ACNielsen (China) <strong>Ltd</strong> to undertake in Singapore in August 1999 and in<br />
Hong Kong in January 1999 respectively. The surveys are described in more detail in the section<br />
on ‘‘COMPETITION’’ on pages 50 and 51 of this Prospectus. Brand preference among consumers<br />
is valuable to us in our industry as the products in the industry are not highly differentiated.<br />
(c) We have an established strategic marketing focus and niche business concept<br />
We have an established strategic marketing focus and niche business concept which have been the<br />
main thrusts of our growth, enabling us to increase our turnover from $31 million in FY1995 to $103<br />
million in FY1999, control a distribution network of more than 200 point-of-sales outlets today and<br />
build our own home grown OSIM brand.<br />
51
(d) We have an extensive regional distribution network<br />
At present, we have more than 200 point-of-sales outlets spanning Asia, the Middle East and the<br />
United States. Our extensive distribution network enhances our competitiveness as it gives us<br />
extensive marketing presence and economies-of-scale in procurement of products, product<br />
development, and brand and service quality developments. In addition, our distribution network is<br />
dedicated to the sale of our products and is controlled by us through franchise agreements or, in the<br />
case of the PRC market, through licensing and distribution agreements. This allows us to dictate<br />
‘what’ to sell and ‘how’ to sell.<br />
(e) We have an experienced management team<br />
Dr Ron Sim Chye Hock, our Chairman and Chief Executive Officer, has 17 years’ experience in the<br />
home health-care products industry. Our executive Directors have been with us since the formative<br />
years of our business and have witnessed the growth of the home health-care products industry in<br />
Asia from its infancy to the present phase. The 41 years of combined experience and in-depth<br />
knowledge of the industry of Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon give<br />
us an advantage in planning strategies and charting future directions.<br />
(f) We provide good customer service<br />
We train our sales staff to provide courteous, knowledgeable, efficient and prompt service to our<br />
customers. We have an in-house Service Quality Manager to provide such training to our<br />
frontline staff and our franchisees’ sales staff. In the survey by The Gallup Organisation (as<br />
more particularly described in the section on ‘‘COMPETITION’’ on pages 50 and 51 of this<br />
Prospectus), we emerged as the No. 1 brand that offers ‘‘good customer service’’.<br />
MAJOR SUPPLIERS AND CUSTOMERS<br />
Major Suppliers<br />
The suppliers which accounted for 5 per cent. or more of our Proforma Group’s purchases for the past<br />
three financial years ended 31 December 1997 to 1999 are as follows:–<br />
—— Year ended 31 December ——<br />
1997 1998 1999<br />
% % %<br />
Oriental Export & Import Co. <strong>Ltd</strong> (‘‘OEI’’) 51.8 44.5 55.9<br />
Daito-Electric Machine Industry Company <strong>Ltd</strong>. (‘‘DEMI’’) 10.3 5.1 11.6<br />
Red Time Trading <strong>Ltd</strong> (‘‘RT’’) 13.4 10.8 11.2<br />
OEI is a privately-owned Japanese trading company based in Tokyo which supplies us with massage<br />
chairs manufactured by Family Company Limited, another privately-owned Japanese company which<br />
operates out of Osaka. DEMI is a privately-owned Japanese company and is our contract manufacturer<br />
for pulse massagers. DEMI is also our joint venture partner in Daito-<strong>Osim</strong> (Suzhou) (the joint venture is<br />
more particularly described in the section on ‘‘HISTORY’’ on page 28 of this Prospectus). RT is a<br />
privately-owned Taiwanese company and is our contract manufacturer for foot reflexology rollers.<br />
Our association with each of OEI, DEMI and RT goes back 15 years, 18 years and 13 years respectively.<br />
To date, we have never experienced any involuntary loss of our suppliers or contract manufacturers.<br />
Nonetheless, to reduce our vulnerability from this dependency, we are taking the following measures:–<br />
‰ sourcing for new contract manufacturers;<br />
‰ having more than 1 contract manufacturer for our key products; and<br />
‰ entering into joint ventures with our contract manufacturer to buttress our business relationship.<br />
52
Most of our purchases from our suppliers and contract manufacturers are settled on payment upon<br />
delivery basis except for purchases from DEMI which are settled on 60 days’ credit terms. Where<br />
payment is settled upon delivery basis, we have utilised our trust receipts banking facilities which gives<br />
us up to 150 days’ credit terms.<br />
None of the Directors or substantial Shareholders have any interest, direct or indirect, in OEI, DEMI and<br />
RT, or any of our other suppliers and contract manufacturers.<br />
Major Customers<br />
We do not have any single customer accounting for 5 per cent. or more of our turnover. Overall,<br />
approximately 70 per cent. of sales are on credit terms of 30 to 90 days while the balance is on cash<br />
terms. To date, we have not encountered any significant difficulties in collecting receivables from our<br />
customers. For the last 3 financial years, our provision for doubtful debts/bad debts written off was nil in<br />
FY1997, $194,000 in FY1998 and $32,000 in FY1999.<br />
PROPERTIES AND FIXED ASSETS<br />
We own the following major properties, the details of which are set out below:–<br />
No. Location Description Area Tenure<br />
1<br />
2<br />
3<br />
4<br />
5<br />
6<br />
57 Genting Lane<br />
Singapore 349564<br />
Rochor Canal Road<br />
#01-08 and #01-41<br />
Sim Lim Square<br />
Singapore 188504<br />
6 Xuanwumenwai<br />
Street, Junefield Plaza<br />
Tower 1 15th Floor,<br />
unit 1526 and 1527<br />
Beijing, PRC<br />
Unit 8C, 1523-2 Dong<br />
Fang Road, Pudong<br />
New Development<br />
Zone, Shanghai, PRC<br />
25F-2 and B2-B4,<br />
No. 508, Section 5,<br />
Chung Hsiao E. Road,<br />
Taipei, Taiwan<br />
Third subsection,<br />
Fu-De section,<br />
Hsin-Yi district,<br />
Taipei, Taiwan (1)<br />
11-storey<br />
industrial building<br />
Strata units in<br />
commercial<br />
building<br />
Strata units in<br />
commercial<br />
building<br />
Residential<br />
condominium<br />
Strata units in<br />
commercial<br />
building<br />
Land<br />
2,657 sq m<br />
(gross floor<br />
area)<br />
Unexpired<br />
Term<br />
Annual<br />
Rental<br />
Net Book Value<br />
(as at<br />
31 December 1999)<br />
Freehold NA NA $9.5 million<br />
86 sq m 99 years 82 years NA $1.6 million<br />
186.1 sq m 50 years 45 years NA S1.1 million<br />
165.40 sq m 68 years 63 years NA NA (2)<br />
244.83 sq m Freehold NA NA $0.9 million<br />
(82/10000<br />
share of<br />
2,275 sq m)<br />
Freehold NA NA $0.5 million<br />
Notes:–<br />
(1) This is the land on which the building at 25F-2 and B2-B4, No. 508, Section 5, Chung Hsiao E. Road was constructed on.<br />
(2) We purchased the property on 3 March 2000 at a cost of RMB790,000.<br />
The net book value of other fixed assets of the Group as at 31 December 1999 (as more particularly set<br />
out in the Accountants’ Report on page 86 of this Prospectus) was $4.7 million.<br />
53
DIRECTORS, MANAGEMENT AND STAFF<br />
Directors<br />
The names, addresses, ages and principal occupations of our Directors are as follows:–<br />
Name Address Age Position<br />
Dr Ron Sim Chye<br />
Hock<br />
55 Jalan Kampong Chantek<br />
Singapore 588627<br />
Teo Chay Lee Blk 222 Loyang Avenue #01-06<br />
Singapore 509068<br />
Leow Lian Soon Blk 210 Loyang Avenue #01-05<br />
Singapore 509063<br />
Teo Sway Heong 55 Jalan Kampong Chantek<br />
Singapore 588627<br />
Khor Peng Soon 20J East Coast Avenue<br />
Singapore 459219<br />
Michael Kan Yuet Yun 48 Poole Road<br />
Singapore 437535<br />
Ong Kian Min 16-D Chatsworth Road<br />
Singapore 249778<br />
41 Chairman & Chief Executive<br />
Officer<br />
41 Chief Operating Officer<br />
40 Regional General Manager<br />
37 Non-executive Director<br />
50 Non-executive Director<br />
61 Independent Director<br />
39 Independent Director<br />
The business and working experience of each of the Directors are as follows:–<br />
Dr Ron Sim Chye Hock is our founder, Chairman and Chief Executive Officer and has been<br />
instrumental in our success. He is responsible for the overall strategic and marketing direction, and<br />
management policies of our Group. Dr Sim has 17 years of experience in the home health-care industry<br />
as he has founded the Group’s home health-care business in 1983. The Wisconsin <strong>International</strong><br />
University conferred on him on 28 March 2000 an honorary doctorate in business administration in<br />
recognition of his prominent achievements in business.<br />
Mr Teo Chay Lee joined us in 1989 as a sales personnel, advancing to Assistant General Manager in<br />
1993 and Chief Operating Officer in February 2000. He was appointed to the Board in June 2000. Mr Teo<br />
is also responsible for managing the operations in Singapore and South Asian countries including<br />
Malaysia, Thailand and Indonesia. Mr Teo was instrumental in establishing our Singapore headquarters<br />
as a role model for our subsidiaries. From 1979 to 1988, Mr Teo was working with Smith Corona as a<br />
production supervisor.<br />
Mr Leow Lian Soon has been our Regional General Manager for the last 7 years and is in charge of our<br />
operations in countries in North Asia including Taiwan, PRC and Hong Kong. He was appointed to the<br />
Board in June 2000. Mr Leow had spearheaded our foray into these 3 countries and was responsible for<br />
building up our established operations there. Prior to joining us in 1987, he worked in the retail industry<br />
as a sales supervisor from 1983 to 1986.<br />
Ms Teo Sway Heong is the wife of our founder, Dr Ron Sim Chye Hock, and has made valuable<br />
contributions to us in the formative stages of our business. From 1987 to February 2000, she was one<br />
of our executive Directors with responsibility for our administrative and human resource management<br />
functions of the Group. Ms Teo assumed the role of a non-executive Director since March 2000.<br />
54
Mr Khor Peng Soon was appointed as our director in June 2000. He has held the position of<br />
Vice-President, Direct Investments in Temasek Holdings (Private) Limited since March 1999 and was<br />
Director, Special Projects in Investor from November 1997 to February 1999. Mr Khor was also<br />
managing director of Sembawang Aviation Pte <strong>Ltd</strong> where he worked from August 1991 to November<br />
1997 and group corporate planning director of Sembawang Holdings Pte <strong>Ltd</strong> where he worked from<br />
November 1990 to February 1992. Prior to that date, he had held positions in Ernst & Young, Economic<br />
Development Board and Telecoms Malaysia (October 1973 to June 1979). Mr Khor was awarded the<br />
Colombo Plan Scholarship in 1969 and was conferred a Bachelor of Engineering (First Class Honours)<br />
(Mechanical) by the University of Auckland, New Zealand in 1972 and a Masters of Engineering Science<br />
(Industrial Engineering) from the University of New South Wales, Australia in 1981.<br />
Mr Michael Kan Yuet Yun was appointed our independent Director in June 2000. Mr Kan was previously<br />
the finance director of British-American Tobacco Co (Singapore) <strong>Ltd</strong> and Singapore Tobacco Co (Pte) <strong>Ltd</strong><br />
(‘‘BAT group’’). He was with the BAT group from 1969 to October 1999. Mr Kan graduated with a<br />
Bachelor of Economics (Honours) from University of Sydney and is a member of the Institute of<br />
Chartered Accountants in England and Wales and the Institute of Certified Public Accountants of<br />
Singapore. For his community work, Mr Kan is the chairman of the management committee of the<br />
Tanjong Pagar Community Club, a member of Tanjong Pagar Citizens Consultative Committee and the<br />
Silver Jubilee Fund committee of management. He is also the Vice-Chairman of the Children’s Aid<br />
Society. Mr Kan was conferred The Pingkat Bakti Masyarakat (PBM) in the 1998 National Day Awards.<br />
Mr Ong Kian Min was appointed our independent Director in June 2000. He is an Advocate and Solicitor<br />
and a partner in Shook Lin & Bok where he practises corporate law. He has been with Shook Lin & Bok<br />
since 1993. Mr Ong is also a Member of Parliament for Pasir Ris Group Representation Constituency<br />
(GRC). Mr Ong was awarded the President’s Scholarship and Police Force Scholarship in 1979. He<br />
graduated with a Bachelor of Science (Honours) degree from the Imperial College of Science and<br />
Technology, London in 1982. Thereafter, he read law and obtained a Bachelor of Laws (Honours) degree<br />
from the University of London. He was called to the Bar of England and Wales in 1988 and to the<br />
Singapore Bar the following year.<br />
Audit Committee<br />
The Audit Committee comprises Mr Michael Kan Yuet Yun, Mr Ong Kian Min and Mr Teo Chay Lee. The<br />
Audit Committee will be chaired by Mr Michael Kan Yuet Yun. Mr Teo Chay Lee is our executive Director,<br />
and Mr Michael Kan Yuet Yun and Mr Ong Kian Min are our independent Directors.<br />
Service Agreements<br />
In June 2000, we entered into separate service agreements (‘‘Service Agreements’’) with the executive<br />
Directors, Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon (collectively, the<br />
‘‘Appointees’’). The Service Agreements are each for a duration of 2 years but may be terminated by<br />
either party giving the other at least six months’ notice and shall be automatically renewed thereafter on<br />
an annual basis unless either party indicates otherwise. The Service Agreements took effect from<br />
1 January 2000.<br />
We may summarily terminate the Service Agreement if the Appointee commits a breach of the Service<br />
Agreement, such as being convicted of an offence involving fraud or dishonesty or being adjudicated<br />
bankrupt. Each Appointee has covenanted that in the event the Service Agreement is terminated for<br />
whatever reason, he shall not within the following 1 year engage in any capacity in any business that<br />
competes with our businesses.<br />
Under the terms of the Service Agreements, the basic monthly remuneration of Dr Ron Sim Chye Hock,<br />
Mr Teo Chay Lee and Mr Leow Lian Soon are $80,000, $15,000 and $15,000 respectively. We shall<br />
provide a motor car to Dr Ron Sim Chye Hock and pay for all related running expenses during his<br />
employment. We shall also acquire a country club membership for Dr Ron Sim Chye Hock and pay for<br />
his monthly subscription expenses.<br />
55
Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon shall be entitled to participate in an<br />
Executive Profit Sharing Scheme (‘‘EPSS’’) for the financial years beginning from FY2000. The amount<br />
we are setting aside for the EPSS is set at 4.5 per cent. of the audited consolidated profit before taxation,<br />
minority interests, extraordinary items and the sum set aside for the EPSS.<br />
The entitlements of Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon under the EPSS<br />
are 4 per cent., 0.25 per cent. and 0.25 per cent. respectively.<br />
The total remuneration packages of the Appointees under the Service Agreements will be annually<br />
reviewed by the Compensation Committee. We will renew the Service Agreements only with the<br />
recommendation of the Compensation Committee.<br />
Had the service agreements provided to the Appointees been in place for FY1999, the aggregate<br />
remuneration (including contributions to CPF and other benefits) paid or provided to the Appointees<br />
would be approximately $1.9 million instead of approximately $1.3 million and our profit before taxation<br />
for FY1999 would have been approximately $10.2 million instead of approximately $10.8 million.<br />
Directors’ Remuneration<br />
Details of the remuneration (including salary, bonus, profit sharing and other benefits in kind) paid by our<br />
Group to Dr Ron Sim Chye Hock and Ms Teo Sway Heong, our Directors in FY1998 and FY1999, for<br />
each of the past two financial years ended 31 December 1999 are set out below:–<br />
————————— FY1998 ————————— ————————— FY1999 —————————<br />
Executive<br />
Directors<br />
Non-executive<br />
Directors Total<br />
Executive<br />
Directors<br />
Non-executive<br />
Directors Total<br />
$’000 $’000 $’000 $’000 $’000 $’000<br />
1,524 — 1,524 1,317 — 1,317<br />
Number of Directors in Remuneration Bands<br />
——————— FY1998 ——————— ——————— FY1999 ———————<br />
Executive<br />
Directors<br />
Non-executive<br />
Directors Total<br />
Executive<br />
Directors<br />
Non-executive<br />
Directors Total<br />
$500,000 and above 1 — 1 1 — 1<br />
$250,000 to $499,999 1 — 1 1 — 1<br />
Below $250,000 — — — — — —<br />
Total 2 — 2 2 — 2<br />
Remuneration of employees related to our Directors, substantial Shareholders and Executive<br />
Officers<br />
For FY1997 to FY1999, the aggregate remuneration (including CPF contributions and benefits) of<br />
employees who are related to our Directors and substantial Shareholders amounted to approximately<br />
$55,000, $70,000 and $160,000 respectively. These represent approximately 1.3 per cent., 2.2 per cent.<br />
and 1.5 per cent. respectively of our profit before taxation for FY1997 to FY1999. These employees are<br />
Mr Teo Yeong Ann, Ms Tao Dong Mei, Mr Leow Lian Teck, Mr Leow Lian Cheong and Mr Heah Hwee<br />
Meng.<br />
56
Mr Teo Yeong Ann is our Executive Officer and is the brother of Ms Teo Sway Heong and the<br />
brother-in-law of Dr Ron Sim Chye Hock. Mr Teo Yeong Ann who joined us in April 1999, is our Corporate<br />
Planning Manager and his remuneration is in line with other employees of the same level. Ms Tao Dong<br />
Mei is the wife of Mr Leow Lian Soon and is employed as a business consultant to our Group since July<br />
1999. Mr Leow Lian Teck and Mr Leow Lian Cheong are Mr Leow Lian Soon’s brothers. Mr Leow Lian<br />
Teck assists the business development manager and Mr Leow Lian Cheong is a sales executive, and<br />
they have been employed by us since October 1995 and January 1999 respectively. Mr Heah Hwee<br />
Meng is Dr Ron Sim Chye Hock’s nephew and joined us in June 1997 as a sales executive. The<br />
remuneration of Ms Tao Dong Mei, Mr Leow Lian Teck, Mr Leow Lian Cheong and Mr Heah Hwee Meng<br />
are in line with other employees of the same level.<br />
The remuneration of the executive Directors, and Executive Officers and employees who are related to<br />
the Directors and substantial Shareholders will be reviewed annually by the Compensation Committee<br />
and subject to approval by the independent Directors to ensure that their remuneration packages are in<br />
line with our prevailing remuneration levels and commensurate with their respective job scope and level<br />
of responsibility. The total remuneration paid to these persons will be disclosed in our annual reports.<br />
Had the service agreements provided to the Appointees been in place for FY1999, the aggregate<br />
remuneration (including contributions to CPF and other benefits) paid or provided to the executive<br />
Directors, and Executive Officers and employees who are related to the Directors, substantial<br />
Shareholders and Executive Officers in FY1999 would be approximately $2.4 million and would<br />
represent 22.2 per cent. of the profit before taxation of the Group in FY1999.<br />
Management<br />
The day-to-day operations of our Group are entrusted to our team of Executive Officers whose names,<br />
addresses, ages and designations are set out below:–<br />
Name Address Age Position<br />
Lim Choon Hui 5 West Coast Walk #06-04<br />
Westpeak<br />
Singapore 127146<br />
Teo Yeong Ann Blk 148 Bedok Reservoir<br />
#13-1687<br />
Singapore 470148<br />
Lim Ching Chye Blk 455 Sin Ming Avenue<br />
#02-481<br />
Singapore 570455<br />
Cha Mui Hwang Blk 129 Lorong Ah Soo<br />
#09-340<br />
Singapore 530129<br />
Chee Fook Curn Blk 59 Circuit Road #06-169<br />
Singapore 370059<br />
Tang Sheh Yow Blk 117 Pasir Ris Street 11<br />
#06-519<br />
Singapore 510117<br />
Yeo Khee Chye Blk 665 Choa Chu Kang<br />
Crescent #08-279<br />
Singapore 680665<br />
Soh Eng Ann Blk 108 Bukit Purmei Road<br />
#08-103<br />
Singapore 090108<br />
57<br />
48 Financial Controller<br />
32 Corporate Planning Manager<br />
44 Business Development Manager<br />
33 Merchandising Manager<br />
32 MIS Manager<br />
40 Project Manager<br />
31 Assistant Operations Manager<br />
28 Regional Accountant
Name Address Age Position<br />
Lie Heu Cheng Blk 211 Tampines Street 23<br />
#12-105<br />
Singapore 520211<br />
26 Regional Accountant<br />
The business and working experience of each of the Executive Officers are as follows:–<br />
Ms Lim Choon Hui joined us in 1995 as Financial Controller. She oversees the implementation of<br />
financial and accounting policy, computerization of point-of-sales and accounting system for our Group.<br />
Prior to joining us, Ms Lim worked in various business industries including retail, trading, manufacturing,<br />
hospital health care and government body. Her last held positions before joining us was Finance<br />
Manager of Balestier Medical Centre for 1 year, Finance Manager of Hwa Kay Thai (S) Pte <strong>Ltd</strong> for 1 year<br />
and Administration and Financial Controller of Telemecanique Manufacturing Singapore Pte <strong>Ltd</strong> for 4<br />
years. Altogether, Ms Lim has more than 25 years of finance, administration and IT applications<br />
experience. She holds a Bachelor of Commerce, Accountancy degree from Nanyang University in<br />
Singapore and is a Certified Public Accountant.<br />
Mr Teo Yeong Ann joined us in April 1999 as Corporate Planning Manager. He is responsible for<br />
streamlining our support operations, including re-engineering of work processes, and setting up system<br />
policy and procedure. Mr Teo is also our ISO project quality management representative. Prior to joining<br />
us, Mr Teo was with the Defence Science Organisation as an R&D engineer for 3 1 ⁄ 2 years. He holds a<br />
first class honours degree in Mechanical Engineering from National University of Singapore and a MBA<br />
from Australian Graduate School of Management, University of New South Wales.<br />
Mr Lim Ching Chye is our Business Development Manager and spearheads our franchise development<br />
overseas. He first joined us as an Operations Manager in 1992 and was responsible for formulating and<br />
developing our franchising system. In 1995, Mr Lim was appointed our Marketing Manager to oversee<br />
sales performance and outlets expansion in Singapore. Mr Lim’s prior working experience was with<br />
Middle Curtain and Carpet Supplier Pte <strong>Ltd</strong> where he was an operations manager for 2 years.<br />
Ms Cha Mui Hwang joined us in 1995. She is presently our Merchandising Manager and is responsible<br />
for centralised purchasing as well as design and development of our products and packaging. Ms Cha<br />
has been instrumental in the development of our products for the past few years. Prior to joining us, Ms<br />
Cha worked as a purchaser in Lee-Ila Traders Pte <strong>Ltd</strong>, an import/export local firm, for 3 years.<br />
Mr Chee Fook Curn joined us recently in January 2000 as our MIS Manager and is responsible for the<br />
alignment of the use of information technology with our Group’s business development. Mr Chee has<br />
over 7 years of IT experience with Lotus Development (Asia Pacific) Pte <strong>Ltd</strong>, Wafer Systems Pte <strong>Ltd</strong> and<br />
Netband Pte <strong>Ltd</strong>. He holds a Bachelor of Engineering from Nanyang Technological University and a MBA<br />
from National University of Singapore.<br />
Mr Tang Sheh Yow joined us in 1985 and presently is our project manager handling our business<br />
operations in Malaysia. Through his 15 years of service with us, Mr Tang has accumulated extensive<br />
experience in sales and marketing. His contributions have led to a strong growth of our Malaysian<br />
operations in the past 2 years.<br />
Mr Yeo Khee Chye joined us in November 1999 as Assistant Operations Manager with responsibility for<br />
warehousing and delivery, technical service, customer service and shipping. Mr Yeo has 6 years of<br />
experience in warehousing and distribution with CWT Distribution Limited. He graduated from National<br />
University of Singapore with an honours degree in Business Administration in 1994.<br />
Mr Soh Eng Ann joined us in 1998 as a Regional Accountant for our Hong Kong, Taiwan and PRC<br />
operations. Prior to joining us, Mr Soh had 2 years of audit experience with Ernst & Young. He graduated<br />
from Nanyang Technological University in 1996 with a Bachelor degree in Accountancy.<br />
Ms Lie Heu Cheng joined us in October 1999 as a Regional Accountant. Prior to joining us, Ms Lie had<br />
3 1 ⁄ 2 years of audit experience with Ernst & Young. Ms Lie graduated from Nanyang Technological<br />
University in 1996 with a Bachelor of Accountancy (Honours). She is a Certified Public Accountant.<br />
58
Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Mr Teo Yeong Ann, our<br />
Executive Officer is the brother of Ms Teo Sway Heong and the brother-in-law of Dr Ron Sim Chye Hock.<br />
Save as disclosed, none of our Directors and Executive Officers are related to one another or to any of<br />
our substantial Shareholders.<br />
Staff<br />
As at 31 May 2000, our Group had a total of 588 full-time employees. Relations between the<br />
management and the staff are good and we have not suffered any major work stoppages as a result of<br />
industrial action in the past three years.<br />
OSIM SHARE OPTION SCHEME<br />
The <strong>Osim</strong> Share Option Scheme (the ‘‘Scheme’’) was approved by our Shareholders at an Extraordinary<br />
General Meeting held on 26 June 2000. This Scheme will provide an opportunity for our employees,<br />
executive and non-executive Directors, other than Dr Ron Sim Chye Hock and Ms Teo Sway Heong, to<br />
participate in our equity.<br />
Purpose of the Scheme<br />
Our Directors believe that our human resources are critical to us. The recruitment and retention of<br />
experienced employees and the motivation of such employees are paramount to our operations. We<br />
believe that with this Scheme in place, it can be used as an effective incentive tool to attract, recruit,<br />
retain and motivate employees. We hope to use the Scheme as an incentive to recruit and retain<br />
qualified personnel to grow with the business.<br />
Size of the Scheme<br />
We are of the view that the size of the Scheme of 15 per cent. of our issued share capital is reasonable,<br />
after taking into account the nature of the industry, the contributions to the Group made by the Directors<br />
and employees of the Group, the number of executive employees in the Group and the size of the share<br />
capital of the Company. In order for the Scheme to achieve its objective, the Scheme must be of sufficient<br />
size to allow adequate options to be issued to existing and new hires in the Group and sufficiently<br />
attractive in comparison with schemes offered by other companies.<br />
Eligibility<br />
Rationale for participation by employees and non-executive Directors<br />
In addition to executive Directors and employees of the Group, we are proposing to allow our<br />
non-executive Directors, to participate in the Scheme. It is not proposed for Dr Ron Sim Chye Hock or<br />
Ms Teo Sway Heong to participate in the Scheme as Controlling Shareholders and their associates are<br />
not eligible to participate in the Scheme.<br />
It is our long term objective to pursue continuous growth and expansion in our business and operations.<br />
At the same time, conscious efforts are directed towards streamlining and rationalisation of our objective<br />
to preserve financial strength for future business developments as well as for difficult times.<br />
Consequently, we are constantly striving to contain remuneration for our key employees which forms one<br />
of the major components of our operating cost.<br />
In order to maintain the quality of service of our key employees, it is necessary for us to formulate<br />
incentive plans with features that may reduce the impact of the strict salary controls adopted by us,<br />
encourage staff retention and allow us to remain attractive and competitive as an employer. It is therefore<br />
desired that the Scheme, by allowing all eligible employees and non-executive Directors (other than Ms<br />
Teo Sway Heong) to participate, be implemented so as to give us the flexibility to use options as a means<br />
of promoting long term staff retention and also to make our remuneration for these employees and<br />
non-executive Directors more flexible, building a variable component into their remuneration package in<br />
the form of stock options so that we can better manage our fixed overhead costs without compromising<br />
their performance, standard and efficiency.<br />
59
Our non-executive Directors, although not involved in the day to day running of our business, can also<br />
play an invaluable role in the success of the Company by contributing the wealth of their experience and<br />
expertise to our Board of Directors for the benefit of the Group. Currently, 2 of our non-executive<br />
Directors are also members of the Audit Committee of the Board of Directors and 1 non-executive<br />
Director is also a member of the Compensation Committee of the Board of Directors. The audit<br />
committee is an important function of our corporate governance and the duties and responsibilities of the<br />
audit committee are included in the Companies Act. It is therefore desirable that they be allowed to<br />
participate in the Scheme as well. The Compensation Committee also plays an important role in ensuring<br />
that the executive Directors are competitively and fairly remunerated for their services to us. Through the<br />
participation of the non-executive Directors in the Scheme, we may acknowledge and give recognition<br />
to outstanding services and contributions made by a non-executive director of the Company. Through<br />
this way, it will also allow us to continue to attract directors of great ability and aptitude onto our Board.<br />
This will help enhance the growth and long term profitability of our business.<br />
We are of the view that our executive Directors’ remuneration package (including the profit sharing and<br />
the share options that they will be granted under the Scheme) is fair given the value which they have<br />
contributed to the Group. Our executive Directors provide leadership, management skills, business<br />
networks, market contacts and strategic directions and vision to us, and are able to bring the Group into<br />
the global health-care market. Furthermore, because some of our executive Directors have nurtured the<br />
Group from conception, the executive Directors have forgone other opportunities and have committed<br />
themselves to our future. Accordingly, we consider that the remuneration packages offered to them are<br />
fair and not excessive.<br />
The cost to us of granting options under the Scheme<br />
Any options granted for Shares (whether or not the exercise price is set at a discount to the market price)<br />
have a fair market value. Where such options are granted at a consideration which is less than fair value,<br />
there will be a cost to us, the amount of which will depend on whether the options are granted at a market<br />
price or at a discount.<br />
Our cost of granting options, with or without a discounted exercise price under the Scheme, would be as<br />
follows:–<br />
(i) the effect of the issue of new Shares upon the exercise of options on our net tangible asset per<br />
share is accretive if the exercise price is above the net tangible asset per share, but dilutive<br />
otherwise. The dilutive effect is even greater if the exercise price is at a discount to the market price;<br />
(ii) if the options were granted with a discounted exercise price, the exercise of an option at a<br />
discounted exercise price would translate into a reduction of the proceeds from the exercise of such<br />
option, as compared to the proceeds that we would have received from such exercise had the<br />
exercise been made at the prevailing market price of the Shares. Such reduction of the exercise<br />
proceeds would represent the monetary cost to us of granting options with a discounted exercise<br />
price; and<br />
(iii) as the monetary cost of granting options with a discounted exercise price is borne by us, our<br />
earnings would effectively be reduced by an amount corresponding to the reduced interest<br />
earnings that we would have received from the difference in proceeds from exercise price with no<br />
discount versus the discounted exercise price. Such reduction would, accordingly, result in the<br />
dilution of our earnings per share.<br />
It should be noted that the costs discussed in (i), (ii) and (iii) above would materialise only upon the<br />
exercise of the relevant options. Measured against these costs would be the desirable effect of the<br />
Scheme to attract, recruit, retain and motivate directors and employees which could, in the long term,<br />
yield greater returns for us and our shareholders.<br />
60
Issue Price<br />
Under the <strong>Osim</strong> Share Option Plan, we may issue option shares at a discount of up of 20 per cent. to<br />
the market price at the time of grant of the option, as presently prescribed by the SGX-ST listing rules.<br />
Factors which will be taken into consideration in determining the quantum of such discount include, but<br />
are not limited to, our performance, the individual performance of the participant and the contribution of<br />
the participant to the success and development of our Group. The ability to offer options at a discount<br />
to the prevailing market price of the Shares may be utilised as a means to recognise participants for their<br />
outstanding performance as well as to motivate them to continue to excel while encouraging them to<br />
have greater dedication and loyalty to us through a longer vesting period before the option may be<br />
exercised. Such a discretion was requested in view of the following:–<br />
(a) An additional method of compensating employees other than through salary, salary increments,<br />
cash bonuses and wage supplements would be available to us. This would enable us to introduce<br />
an effective manner of motivating participants to maximise their performance, which we believe<br />
would in turn create better value for our shareholders.<br />
(b) Share options are like cashless bonuses and would not have an immediate direct financial impact<br />
on our profitability as no cash outlay would be expended by us in the grant of such options.<br />
However, when share options are exercised, the share capital base of the Company will increase.<br />
Share options granted with a discount would be subject to a longer vesting period of up to 2 years<br />
as presently prescribed by the SGX-ST listing rules than those granted at the prevailing market<br />
price. Therefore holders of such options would be encouraged to have a longer term view of us,<br />
thereby promoting staff retention and reinforcing their ties to us.<br />
(c) It is not possible for us to grant options only when share prices are low and not grant options when<br />
share prices are high. For a share option scheme to function effectively as an incentive tool, options<br />
should be granted on a regular basis throughout the duration of the scheme based on the<br />
participants performance for the period under review and on our expectations of their, and our,<br />
future performance. However, it is not always the case that the share price would correlate with our<br />
financial performance as measured by financial parameters such as return on equity and/or<br />
earnings growth. Having the discretion to grant options at a discount to the market price will make<br />
us less vulnerable to market sentiments which affect the share price and/or stock market volatility<br />
at the time that offers of the grant of options are to be made to participants.<br />
Conclusion<br />
While the Scheme is structured such that we have the discretion to make the appropriate allotments<br />
depending on the prevailing circumstances of the Group, the Scheme conforms with the requirements<br />
as set out in the Practice Note of the SGX-ST listing rules.<br />
In-principle approval has been obtained from the SGX-ST for the listing and quotation for the new Shares<br />
to be issued pursuant to the Scheme. Such in-principle approval is not to be taken as an indication of the<br />
merits of the Scheme, the Company, its subsidiaries, associated company or the Option Shares.<br />
The principal terms of the Scheme are summarised in Appendix A of this Prospectus. The rules of the<br />
Scheme are also set out in Appendix A of this Prospectus. Details of the number of options granted, the<br />
number of options exercised and the subscription price (as well as the discount involved, if any) will be<br />
disclosed in our annual report. A committee of the Board of Directors, the <strong>Osim</strong> Share Option Scheme<br />
Committee will implement and administer the Scheme.<br />
As at the date of this Prospectus, no options have been granted under the Scheme.<br />
CORPORATE GOVERNANCE<br />
Our Directors and management are committed to high standards of corporate governance in order to<br />
protect the interests of our Shareholders, and will follow closely the best practices outlined in the Best<br />
Practices Guide issued by the SGX-ST.<br />
61
Board of Directors<br />
Our Board of Directors, comprising seven members at the time of listing, is made up of 3 executive<br />
Directors and 4 non-executive Directors. The Board will meet periodically throughout the year. To assist<br />
the Board of Directors to discharge its responsibilities, we have the following Committees:−<br />
(i) the Executive Committee which shall comprise the 3 executive Directors and the Financial<br />
Controller. The Committee will assist the Board to strengthen our management culture and direct<br />
the Group towards fulfilling our vision of being a global brand name in home health-care products.<br />
The Committee will also assist the Board to allocate resources of the Group after considering the<br />
risks and returns associated with our operations, including business and financial risks;<br />
(ii) the Audit Committee which shall comprise 2 independent Directors and 1 executive Director. The<br />
Committee will meet periodically to review: (a) with the assistance of the external auditors, the audit<br />
plan, their evaluation of our internal accounting controls and audit report; (b) the assistance given<br />
by our officers to the external auditors; (c) the scope and results of the internal audit procedures;<br />
(d) the financial statements of the Group, including the half year and full year results; (e) our<br />
compliance with such functions and duties as may be required under the relevant laws or the Listing<br />
Manual; and (f) all interested person transactions to ensure that they are carried out on normal<br />
commercial terms and are not prejudicial to the interest of our Shareholders;<br />
(iii) the Compensation Committee shall comprise 2 independent Directors and 3 executive Directors.<br />
The Committee will annually review and the independent Directors shall approve the remuneration<br />
packages and terms of employment of each executive Director and each employee who is related<br />
to the executive Directors, substantial Shareholders or Executive Officers (see ‘‘Service<br />
Agreements’’ and ‘‘Remuneration of Employees Related to Directors, substantial Shareholders and<br />
Executive Officer’’ on pages 55 to 57 of this Prospectus); and<br />
(iv) the <strong>Osim</strong> Share Option Scheme Committee shall comprise 2 independent Directors and 2<br />
executive Directors. The Committee will administer the Scheme in accordance with the Rules of the<br />
Scheme as set out in Appendix A of this Prospectus.<br />
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS<br />
Ongoing and Past Related Party Transactions<br />
Save as disclosed below and on pages 25 and 26 of this Prospectus under ‘‘Restructuring Exercise’’,<br />
none of our Directors, substantial Shareholders and Executive Officers have any interest in any material<br />
transactions undertaken by our Group in the past three financial years:–<br />
(a) Purchase of Property from Director<br />
On 3 March 2000, we entered into a sale and purchase agreement with Dr Ron Sim Chye Hock, our<br />
Director, to purchase a residential condominium in Shanghai, PRC owned by him for RMB790,000<br />
(approximately S$164,000). We decided to acquire this property at Unit 8C, 1523-2 Dong Fang<br />
Road, Pudong New Development Zone as we have been using it as accommodation for our senior<br />
management personnel based in Shanghai since 1995 rent-free. The purchase consideration was<br />
supported by a desk-top valuation of the property of RMB790,000 as at 3 February 2000 done by<br />
First Pacific Davies Integrated Property Services (Shanghai) Company Limited.<br />
(b) Transactions with Related Companies<br />
In relation to affiliated companies which are <strong>Osim</strong> (USA), <strong>Osim</strong> (Thai), PT Sharon, <strong>Osim</strong> (Beijing),<br />
<strong>Osim</strong> GHC (SH) and HCC (Langfang), Dr Ron Sim Chye Hock has an equity interest in, or could<br />
exercise management control over or direct the transfer of the shares to him in certain<br />
circumstances in these companies. Mr Teo Chay Lee, our Director, is the registered owner of 1 per<br />
cent. of the equity in <strong>Osim</strong> (Thai). Mr Leow Lian Soon, our Director, has a deemed interest in <strong>Osim</strong><br />
(Beijing), <strong>Osim</strong> GHC (SH) and HCC (Langfang) as his wife, Ms Tao Dong Mei holds 90 per cent. in<br />
<strong>Osim</strong> GHC (SH) and HCC (Langfang). These 2 companies are in turn the shareholders of <strong>Osim</strong><br />
(Beijing). Therefore, the affiliated companies are companies related to the Group.<br />
62
<strong>Osim</strong> (USA) is not included as part of the Group as part of the Restructuring Exercise because it is<br />
presently a loss-making company. As stated in the section on ‘‘RISK FACTORS — Industry Specific<br />
Risks — (e) Prohibitive National Laws on Foreign Ownership’’ on page 13 of this Prospectus, due<br />
to restrictive laws in Thailand, Indonesia and PRC, we are not permitted to include <strong>Osim</strong> (Thai), PT<br />
Sharon, <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC (Langfang) as members of the Group.<br />
We have in May 2000 entered into franchise agreements with <strong>Osim</strong> (USA), <strong>Osim</strong> (Thai) and PT<br />
Sharon (the ‘‘Related Franchisees’’) on materially the same terms and conditions as those we have<br />
entered with <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK) and <strong>Osim</strong> (Taiwan) which are our subsidiaries and RSH which<br />
is our third party franchisee in Dubai. None of our Directors or substantial Shareholders has any<br />
interest in RSH. The franchising arrangements with the Related Franchisees are consistent with our<br />
franchise business model as described under the section on ‘‘FRANCHISE MODEL’’ on pages 35<br />
and 36 of this Prospectus.<br />
As with <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK) and <strong>Osim</strong> (Taiwan), the Related Franchisees pay us a royalty fee.<br />
We have waived the payment of the one-time franchise fee from the Related Franchisees on the<br />
same ground as that for waiving the franchise fee for <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK) and <strong>Osim</strong> (Taiwan)<br />
as the Related Franchisees were our existing distributors prior to being appointed as our<br />
franchisees. The franchise agreements entered with the Related Franchisees are of 5-year duration<br />
and may be renewed with the consent of the Related Franchisees and us, as the case with the<br />
franchise agreements entered with <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK) and <strong>Osim</strong> (Taiwan). The royalties and<br />
the prices at which we sell certain of our main products to <strong>Osim</strong> (USA) are lower than the royalties<br />
and prices of certain main products sold to <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and RSH<br />
because firstly, our brand name is not that established in the United States and secondly, <strong>Osim</strong><br />
(USA) operates in a higher-cost environment. These reasons translate to a higher break-even sales<br />
level for <strong>Osim</strong> (USA) and therefore, we charge a royalty rate which is approximately 92% lower than<br />
the royalty rates charged to <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and RSH and we sell certain<br />
of our main products to <strong>Osim</strong> (USA) at prices averaging 20 to 28 per cent. lower than the prices of<br />
similar product items sold to <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and RSH. Currently, <strong>Osim</strong><br />
(USA) is making losses in its operations due to high start-up costs and the inability to reap<br />
economies of scale. For these reasons, we believe our franchise agreement with <strong>Osim</strong> (USA) and<br />
our sale transactions with <strong>Osim</strong> (USA) are on arms’ length basis notwithstanding the lower royalty<br />
rate and sale prices of certain main products.<br />
We have in May 2000 entered into a licensing and distribution agreement each with <strong>Osim</strong> (Beijing),<br />
<strong>Osim</strong> GHC (SH) and HCC (Langfang) (the ‘‘PRC Related Companies’’). Existing PRC laws do not<br />
permit us to appoint the PRC Related Companies to be our franchisees in the PRC market. The<br />
licensing fees charged and the prices at which we sell certain of our main products to the PRC<br />
Related Companies are lower than the royalties charged to and prices of those certain main<br />
products sold to <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and RSH because firstly, the PRC Related<br />
Companies face hefty customs duties and consumption taxes and secondly, due to the lower<br />
disposable income of consumers in PRC. These reasons translate to a higher break-even sales<br />
level for the PRC Related Companies. The PRC Related Companies are incurring losses in their<br />
operations as their retail prices are reduced following the Asian financial crisis. For these reasons,<br />
we believe our licensing and distribution agreements with the PRC Related Companies and our sale<br />
transactions with the PRC Related Companies are on arms’ length basis notwithstanding the<br />
licensing fees charged to the PRC Related Companies is approximately 92% lower than the royalty<br />
rates charged to <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and RSH and notwithstanding the prices<br />
of certain of our main products sold to the PRC Related Companies average 20 to 25 per cent. lower<br />
than the prices of similar product items sold to RSH.<br />
In our opinion, RSH is not in a comparable situation as <strong>Osim</strong> (USA) or the PRC Related Companies<br />
as it has a retail business in sporting goods which was established since 1995 with 38 point-of-sales<br />
outlets in the United Arab Emirates. RSH does not face start-up costs unlike <strong>Osim</strong> (USA) and the<br />
PRC Related Companies. It does not face operating costs as high as for instance, manpower costs<br />
as in <strong>Osim</strong> (USA) or customs duties as heavy as the PRC Related Companies.<br />
63
We charge the same royalty rate to PT Sharon as <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and<br />
RSH. Our products are also sold to PT Sharon with the same mark-up margin as those sold to <strong>Osim</strong><br />
(M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong> (Taiwan) and RSH. PT Sharon is currently profitable in its operations.<br />
<strong>Osim</strong> (Thai) is presently a dormant company. Once it commences business, we may charge a lower<br />
royalty rate and sell our products at prices lower than those sold to <strong>Osim</strong> (M’sia), <strong>Osim</strong> (HK), <strong>Osim</strong><br />
(Taiwan) and RSH because firstly, <strong>Osim</strong> (Thai) would face high start-up costs and is expected to be<br />
unprofitable and secondly, in view of the lower disposable income of consumers in Thailand.<br />
We recognise that the markets our franchisees/licensees operate in are different due to differences<br />
in operating costs like manpower and rental costs, tax structure and consumers’ purchasing power.<br />
Therefore, in the long term, although we would strive to charge the same royalty rates to <strong>Osim</strong><br />
(USA), <strong>Osim</strong> (Thai) and the PRC Related Companies, once they are firmly established and are all<br />
profitable in their operations, as those charged to our subsidiaries and RSH, it may not be<br />
commercially possible to charge a uniform royalty rate to all our franchisees/licensees or sell our<br />
products to them at uniform sale prices.<br />
At the time of our entering into the franchise agreements with our subsidiaries, we are able to<br />
charge our subsidiaries royalty rates which are 12 times higher than the royalty and licensing rates<br />
charged to <strong>Osim</strong> (USA) and the PRC Related Companies respectively as our subsidiaries have<br />
been our established distributors and they do not face the high operating-cost environment as in the<br />
case of <strong>Osim</strong> (USA) or the hefty customs duties and consumption taxes as in the case of the PRC<br />
Related Companies.<br />
The amount of sales which we have transacted with the Related Franchisees and PRC Related<br />
Companies for the past three financial years and the extent of these sales as a percentage of our<br />
Group’s turnover are shown below:–<br />
FY1997 FY1998 FY1999<br />
——— sales amount ($’000) ———<br />
<strong>Osim</strong> (USA) 452 220 1,875<br />
<strong>Osim</strong> (Thai) Nil Nil Nil<br />
PT Sharon 1,524 369 1,659<br />
PRC Related Companies 8,011 3,036 5,113<br />
as a percentage of our Group’s turnover<br />
<strong>Osim</strong> (USA) 0.7% 0.3% 1.8%<br />
<strong>Osim</strong> (Thai) Nil Nil Nil<br />
PT Sharon 2.5% 0.5% 1.6%<br />
PRC Related Companies 13.2% 4.4% 5.0%<br />
We have entered into the following arrangements whereby we are given options to purchase the<br />
interest of our executive Directors in the Related Franchisees and the PRC Related Companies.<br />
Although it is our general strategy not to acquire equity stakes in our franchisees, we have taken the<br />
options in order to mitigate the conflicts of interest between ourselves and our executive Directors,<br />
and to prevent such conflicts-of-interest from prejudicing the interest of the minority Shareholders.<br />
Such arrangements will still be in line with our overall long-term strategy to franchise as we will<br />
exercise the options only when it is in our interest to do so, for instance, where having an equity<br />
interest in the Related Franchisees and/or the PRC Related Companies would enable us to have<br />
a share in their profits. Going forward, we intend to expand our distribution network through<br />
independent third-party franchisee arrangements and it is not our present intention to take up equity<br />
interest in third-party franchisees. However, from time to time, we may acquire equity stakes in our<br />
third-party franchisees if it is to our benefit to do so.<br />
64
(1) <strong>Osim</strong> (USA)<br />
The entire share capital of <strong>Osim</strong> (USA) is beneficially owned by Dr Ron Sim Chye Hock. The<br />
business of <strong>Osim</strong> (USA) which began in 1997 has not been profitable and our sales to <strong>Osim</strong><br />
(USA) is insignificant when compared to our Group’s turnover for the past 3 financial years. Dr<br />
Ron Sim Chye Hock had granted to us in May 2000 a call option (the ‘‘US Call Option’’)<br />
whereby in the event that <strong>Osim</strong> (USA)’s business becomes profitable in the future, we may<br />
require Dr Ron Sim Chye Hock to transfer all his shares in <strong>Osim</strong> (USA) to us at a price (the<br />
‘‘Option Price’’) to be determined by Dr Ron Sim Chye Hock and us, and approved by our Audit<br />
Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the<br />
SGX-ST.<br />
To assist <strong>Osim</strong> (USA) to obtain a foothold in the market and lower its start-up costs, we have<br />
imposed in the franchise agreement a graduated scale for royalty payments until such time as<br />
the business of <strong>Osim</strong> (USA) achieves performance targets set by us. Eventually, we expect the<br />
royalty payments charged to <strong>Osim</strong> (USA) to be comparable to those charged to our<br />
independent third party franchisee after the different maturity of the target markets and<br />
consumers’ purchasing power are factored in.<br />
We gauge the maturity of the target markets and consumers’ purchasing power by comparing<br />
the sales achieved by the franchisee against the break even sales level.<br />
(2) <strong>Osim</strong> (Thai)<br />
Currently, <strong>Osim</strong> (Thai) is a dormant company. 51 per cent. of the share capital of <strong>Osim</strong> (Thai)<br />
is owned by Thai nationals who are not related to any of our Directors or substantial<br />
Shareholders. Dr Ron Sim Chye Hock and Mr Teo Chay Lee own 48 per cent. and 1 per cent.<br />
of the share capital of <strong>Osim</strong> (Thai) respectively.<br />
Dr Ron Sim Chye Hock had in May 2000 granted a call option (the ‘‘First Thai Call Option’’) to<br />
us whereby in the event that <strong>Osim</strong> (Thai)’s business turns out to be profitable in the future, we<br />
may acquire his aggregate 48 per cent. interest at a price be determined by Dr Ron Sim Chye<br />
Hock and us, and approved by our Audit Committee in accordance with the requirements of<br />
Chapter 9A of the Listing Manual of the SGX-ST. Mr Teo Chay Lee had also in May 2000 given<br />
us a call option (the ‘‘Second Thai Call Option’’) over his shares on materially the same terms.<br />
Mr Krit Suktachan, one of the above Thai shareholders in <strong>Osim</strong> (Thai) had in June 2000<br />
granted us a call option (the ‘‘Third Thai Call Option’’) over his shares whereby we have the<br />
right to require Mr Krit Suktachan to transfer his entire 6 per cent. interest in <strong>Osim</strong> (Thai) to us<br />
in the event that Thai laws are revised to allow majority ownership of <strong>Osim</strong> (Thai) by foreign<br />
persons. The option price payable under the Third Thai Call Option is on the same basis as the<br />
First and Second Thai Call Option.<br />
As in the case of <strong>Osim</strong> (USA), to assist <strong>Osim</strong> (Thai) to obtain a foothold in the market and lower<br />
its start-up costs, we have imposed in the franchise agreement a graduated scale for royalty<br />
payments until such time as the business of <strong>Osim</strong> (Thai) achieves performance targets set by<br />
us. Eventually, we expect the royalty payments charged to <strong>Osim</strong> (Thai) to be comparable to<br />
those charged to our independent third party franchisee after the different maturity of the target<br />
markets and consumers’ purchasing power are factored in.<br />
Our present business in Thailand is undertaken by Health Check and Care (Thailand) Co., <strong>Ltd</strong><br />
(‘‘HCC (Thai)’’) which is not owned by any of our Directors or substantial Shareholders. None<br />
of our Directors is a director of HCC (Thai). Our sales to HCC (Thai) have been insignificant<br />
for the past 3 years and amounted to an average of approximately 0.17 per cent. of our<br />
Group’s turnover in each of our past 3 financial years.<br />
Going forward, we intend to grow our business in Thailand and, in line with this plan, it is<br />
intended that the undertaking of HCC (Thai) will be transferred to <strong>Osim</strong> (Thai). We envisage<br />
that <strong>Osim</strong> (Thai) will become our sole franchisee in Thailand and the franchise agreement<br />
signed with <strong>Osim</strong> (Thai) in May 2000 will take effect upon the injection of the assets of HCC<br />
(Thai) into <strong>Osim</strong> (Thai).<br />
65
(3) PT Sharon<br />
Our franchisee for the Indonesian market is PT Sharon which commenced business in 1993.<br />
Currently, the operations of PT Sharon are profitable. Under existing Indonesian laws, we are<br />
not permitted to own any equity interest in PT Sharon. None of our Directors or substantial<br />
Shareholders owns any share or is a director of PT Sharon. However, Dr Ron Sim Chye Hock<br />
is deemed to have an interest in PT Sharon because he has an oral agreement with Mr<br />
Chandra Makmuri, who owns 51 per cent. of PT Sharon, for Mr Chandra Makmuri to transfer<br />
10 per cent. of the share capital of PT Sharon owned by him to Dr Ron Sim Chye Hock in the<br />
event that Indonesian laws are revised to permit foreign shareholding in PT Sharon.<br />
To eliminate any perceived conflicts of interest between us and Dr Ron Sim Chye Hock, in<br />
consideration of Dr Ron Sim Chye Hock relinquishing his right under the oral agreement, we<br />
have procured Mr Chandra Makmuri to grant us in May 2000 a call option (the ‘‘Indonesian Call<br />
Option’’) whereby we have the right to require Mr Chandra Makmuri to transfer 10 per cent. of<br />
the share capital of PT Sharon owned by him to us in the event that Indonesian laws are<br />
revised to allow foreign shareholding in PT Sharon. The option price under the Indonesian Call<br />
Option is to be determined by Mr Chandra Makmuri and us, and approved by our Audit<br />
Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the<br />
SGX-ST.<br />
(4) PRC Related Companies<br />
As set out in the section on ‘‘BUSINESS — Distribution Network’’ on page 34 of this<br />
Prospectus, we have in May 2000 entered into a licensing and distribution agreement with<br />
each of the PRC Related Companies, namely, <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC<br />
(Langfang). They have commenced business in PRC since 1995 but their operations have<br />
resulted in losses for the past 2 years. Under existing PRC laws, we are not permitted to own<br />
any equity interest in the PRC Related Companies as they are engaged in retailing. However,<br />
we can own <strong>Osim</strong> (Shanghai) under existing PRC laws as it is a trading company which<br />
imports our products into PRC for distribution to the PRC Related Companies. There is<br />
therefore no conflict of interest in us owning <strong>Osim</strong> (Shanghai) and not the PRC Related<br />
Companies. The shareholders of <strong>Osim</strong> (Beijing) are <strong>Osim</strong> GHC (SH) (owning 50 per cent.) and<br />
HCC (Langfang) (owning 50 per cent.). Ms Tao Dong Mei (owning 90 per cent.) and Ms Han<br />
Shu Nong (owning 10 per cent.) are the shareholders of HCC (Langfang). Mr Wang Bang Zhi<br />
(owning 10 per cent.) and Ms Tao Dong Mei (owning 90 per cent.) are the shareholders of<br />
<strong>Osim</strong> GHC (SH).<br />
Dr Ron Sim Chye Hock is deemed to have an interest in the PRC Related Companies because<br />
he has an oral agreement with the shareholders of the PRC Related Companies whereby they<br />
have agreed to transfer the entire share capital of the PRC Related Companies to Dr Ron Sim<br />
Chye Hock in the event that PRC laws are revised to permit foreign ownership of the<br />
companies. Mr Leow Lian Soon is deemed to have an 90 per cent. interest in each of HCC<br />
(Langfang), <strong>Osim</strong> GHC (SH) and <strong>Osim</strong> (Beijing) through the direct and indirect interests of his<br />
wife, Ms Tao Dong Mei.<br />
To eliminate any perceived conflicts of interest between us, and Dr Ron Sim Chye Hock and<br />
Mr Leow Lian Soon, the following measures have been taken. In consideration of Dr Ron Sim<br />
Chye Hock relinquishing his right under the oral agreement, the shareholders in the Related<br />
PRC Companies have in May 2000 granted us call options (the ‘‘PRC Call Options’’) whereby<br />
we have the right to require them to transfer the entire share capital of the PRC Related<br />
Companies to us in the event that PRC laws are revised to allow foreign ownership of the PRC<br />
Related Companies. The option price under each of the PRC Call Options is to be determined<br />
by the shareholders of the PRC Related Companies and us, and approved by our Audit<br />
Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the<br />
SGX-ST.<br />
66
As in the case for <strong>Osim</strong> (USA) and <strong>Osim</strong> (Thai), to assist the PRC Related Companies to<br />
obtain a foothold in the PRC market and lower their start-up costs, we have imposed in the<br />
licensing and distribution agreements a graduated scale for royalty payments until such time<br />
as the businesses of the PRC Related Companies achieve performance targets set by us.<br />
Eventually, we expect the royalty payments charged to them to be comparable to those<br />
charged to our independent third party franchisee after the different maturity of the target<br />
markets and consumers’ purchasing power are factored in.<br />
The Audit Committee will continuously monitor our transactions with the Related Franchisees and<br />
the PRC Related Companies on a quarterly basis to ensure that our sales to them and the fees and<br />
royalties charged to them are on arms’ length basis and on normal commercial terms. The Audit<br />
Committee will review the financial and operating performance of and the sales achieved by (as<br />
against the break-even sales level necessary to cover all operating costs and overheads) our<br />
respective Related Franchisees and the PRC Related Companies so as to determine firstly,<br />
whether our sales to them and the royalties rates/licensing fees charged to them are on arms’ length<br />
basis and secondly, whether the royalty rates/licensing fees and the selling prices should be<br />
adjusted to the levels and prices comparable to those charged to our subsidiaries or our third party<br />
distributor.<br />
Had we, in FY1999, been able to charge the Related Franchisees and the PRC Related Companies<br />
the same franchise fee and royalty rate presently charged to RSH and had we been able to sell<br />
certain of our main products at prices similar to those sold to RSH, we would not have to suffer a<br />
reduction in income of approximately $471,000, representing 4.3 per cent. of PBT in FY1999.<br />
(c) Lease to Related Company<br />
With effect from 1 January 2000, our property at 6 Xuanwumenwai Street, Junefield Plaza Tower 1,<br />
15th Floor, unit 1526 and 1527, Beijing, PRC has been leased to <strong>Osim</strong> (Beijing) for 2 years at a<br />
monthly rental of RMB18,000 (the ‘‘Lease’’). As disclosed under sub-section (b) above, Dr Ron Sim<br />
Chye Hock and Mr Leow Lian Soon are deemed to have an interest in <strong>Osim</strong> (Beijing) and the Lease<br />
is a related party transaction. However, our Directors are of the opinion that the rentals received by<br />
us under the Lease is reasonable and on arms’ length basis based on the assessment of market<br />
rental value of the leased property by Beijing C.Y. Leung Property Service & Consultancy Co., <strong>Ltd</strong>.<br />
In the future, we may renew the Lease if it is in our interest to do so, subject to the review of the Audit<br />
Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the SGX-ST.<br />
(d) Transaction with <strong>Osim</strong> Distribution Centre Pte <strong>Ltd</strong> (‘‘ODCPL’’)<br />
Since FY1998, we have used the services of ODCPL to warehouse our products and handle our<br />
freight forwarding. ODCPL is 70 per cent. owned by Dr Ron Sim Chye Hock and the remaining<br />
equity is owned by Dr Ron Sim Chye Hock’s brother, Mr Sim Chye Choon. The warehouse rentals<br />
and freight forwarding fees paid by us to ODCPL since FY1998 and as a percentage of our Group’s<br />
operating expenses are shown below:–<br />
FY1998 FY1999<br />
Rentals and Fees $124,000 $272,000<br />
% of our Group’s operating expenses 0.3% 0.5%<br />
Our Directors are of the opinion that the commercial terms of the services provided by ODCPL to<br />
us are fair and on arms’ length basis. It is our intention to continue with this arrangement subject to<br />
the review of the Audit Committee in accordance with the requirements of Chapter 9A of the Listing<br />
Manual of the SGX-ST.<br />
(e) Previous Related Party Transactions<br />
Dr Ron Sim Chye Hock and Ms Teo Sway Heong are the owners of Global Health Pte <strong>Ltd</strong> (‘‘GHPL’’)<br />
and Health Check & Care Company Limited (‘‘HCCCL’’) which are now dormant. In the last 3<br />
financial years, we have sold products to GHPL and HCCCL totalling $233,000 in FY1997. In the<br />
same year, we have also purchased the fixed assets of GHPL and HCCCPL for $179,000.<br />
67
In addition, Dr Ron Sim Chye Hock was a director and shareholder of HCC (Thai) (owning 30 per<br />
cent. of the share capital) before September 1998. He has since ceased to be a director and<br />
shareholder of HCC (Thai). In FY1997 and FY1998, we sold products to HCC (Thai) totalling<br />
$213,000.<br />
In the last 3 financial years, amount owing to or from directors or affiliated companies as disclosed<br />
in the Financial Position on page 20 of this Prospectus are as follows:–<br />
FY1997 FY1998 FY1999<br />
$’000 $’000 $’000<br />
Due from affiliated companies<br />
— trade 7,039 4,634 8,587<br />
— non-trade 288 — 10 (1)<br />
Due from directors<br />
Due to affiliated companies<br />
3,436 3,345 —<br />
— trade (321) (260) —<br />
— non-trade — — (46) (1)<br />
Due to directors (2,361) (830) (1,600) (1)<br />
Net amount owing from/(to) directors/affiliated<br />
companies 8,081 6,889 6,951<br />
Note:–<br />
(1) These were fully repaid in June 2000.<br />
The trade amount due to/from affiliated companies are in relation to the purchase and sale of our<br />
products from/to them. We sell to our affiliated companies on credit periods of 60 to 90 days, similar to<br />
the credit periods extended to our subsidiaries and third-party distributor.<br />
Trade balances due from affiliated companies decreased from $7.0 million at end of FY1997 to $4.6<br />
million at end of FY1998 mainly due to the decrease in sales to the PRC Related Companies from $8.0<br />
million in FY1997 to $3.0 million in FY1998 and the PRC Related Companies selling down their existing<br />
stockholdings during FY1998. Further details are disclosed on page 42 of the Prospectus.<br />
However trade balances due from affiliated companies increased from $4.6 million at end of FY1998 to<br />
$8.6 million at end of FY1999 as a result of an overall increase in sales to PRC and South Asia following<br />
the economic recovery in the region and increase in sales to <strong>Osim</strong> (USA) as a result of its improved<br />
business. Further details are disclosed on page 44 of the Prospectus. For FY1999, approximately 68.7<br />
per cent. and 27.5 per cent. of the trade amount due from affiliated companies were due from the PRC<br />
Related Companies and <strong>Osim</strong> (USA) respectively for the sale of mainly massage chairs and foot<br />
reflexology rollers to them.<br />
Non-trade amount due to/from affiliated companies are in relation to expenses incurred on our/their<br />
behalf. Amount due to/from directors are in relation to cash advances to/from us and we do not intend<br />
to have any of such transactions in the future.<br />
Future Related Party Transactions<br />
Our Directors envisage that our Group, in our ordinary course of business, will enter into interested party<br />
transactions with interested persons of the Company in the future. Pursuant to this, a shareholders’<br />
mandate (the ‘‘Shareholders’ Mandate’’) was granted by our Shareholders at an extraordinary general<br />
meeting held on 26 June 2000 whereby authority was given to <strong>Osim</strong> (S) to firstly, enter into recurrent<br />
transactions of revenue and trading nature in order to sell our products to <strong>Osim</strong> (Thai), <strong>Osim</strong> (USA), PT<br />
Sharon, <strong>Osim</strong> (Beijing), <strong>Osim</strong> GHC (SH) and HCC (Langfang), and secondly, to enter into warehousing<br />
and freight forwarding contracts with ODCPL.<br />
68
The grant of the Shareholders’ Mandate and its renewal on an annual basis would eliminate the need to<br />
convene separate general meetings from time to time to seek shareholders’ approval as and when<br />
potential interested person transactions with a specified class of interested persons arise, thereby<br />
reducing substantial administrative time and expenses in convening such meetings, without<br />
compromising our corporate objectives and adversely affecting the business opportunities available to<br />
our Group.<br />
The Shareholders’ Mandate is intended to facilitate transactions in the normal course of business of our<br />
Group which are transacted from time to time with the specified classes of interested persons, provided<br />
that they are carried out at arm’s length and on normal commercial terms and are not prejudicial to our<br />
Shareholders.<br />
The terms of the Shareholders’ Mandate stipulate that the methods of determining the purchase price of<br />
the trading transactions and the commercial terms of the warehousing and freight forwarding contracts<br />
shall be subject to the review of the Audit Committee who must be satisfied that they are on arms’ length<br />
basis, taking into consideration the different maturity of the target markets and consumers’ purchasing<br />
power where appropriate, and on normal commercial terms and will not be prejudicial to the interests of<br />
our Shareholders.<br />
Unless renewed, the Shareholders’ Mandate shall lapse after the impending annual general meeting of<br />
our Shareholders. The renewal of the Shareholders’ Mandate shall be subject to the requirements in<br />
Chapter 9A10(2) of the Listing Manual of the SGX-ST. This means, among other things, that we shall<br />
disclose in our annual report, the aggregate value of transactions conducted pursuant to the<br />
Shareholders’ Mandate during the preceding financial year.<br />
Besides the transactions conducted pursuant to the Shareholders’ Mandate, the Audit Committee will<br />
review all other future related party transactions to ensure that they are carried out on an arms’ length<br />
basis and on normal commercial terms and will not be prejudicial to us or our Shareholders. To enable<br />
the Audit Committee to do so, the following procedures will be undertaken:–<br />
(a) market rates will be used as benchmarks for interested party transactions like rental of properties,<br />
and warehousing and freight forwarding charges. Where possible, 2 or 3 quotations will be obtained<br />
from unrelated third parties for the purpose of comparison;<br />
(b) all interested party transactions will be reviewed at least annually by the Audit Committee (excluding<br />
interested parties) or as and when the Audit Committee deems necessary; and<br />
(c) the financial performance of the Related Franchisees and Related PRC Companies will be reviewed<br />
by the Audit Committee to ensure that the terms of the franchise agreements and the licensing and<br />
distribution agreements respectively are not prejudicial to us or our shareholders.<br />
Each interested party transaction will be properly documented and submitted to the Audit Committee<br />
which will periodically review such transactions to ensure that they are carried out on normal arms’ length<br />
and commercial terms. In the event that a member of the Audit Committee is interested in any interested<br />
party transaction, he will abstain from reviewing that particular transaction. The Audit Committee will<br />
include the review of interested party transactions as part of its standard procedures while examining the<br />
adequacy of internal controls of our Group. It will also ensure that all disclosure requirements on<br />
interested party transactions, including those required by prevailing legislation, SGX-ST listing rules and<br />
accounting standards are complied with. If required under the SGX-ST’s Listing Manual or the Act, we<br />
will seek Shareholders’ approval for such transactions. In addition, if during the periodic reviews by the<br />
Audit Committee, the Audit Committee is of the view that the established guidelines and procedures are<br />
not sufficient to ensure that the interested person transactions will be on normal commercial terms and<br />
will not be prejudicial to the interests of our Shareholders, we will revert to our Shareholders for a fresh<br />
mandate based on new guidelines and procedures for transactions with interested persons.<br />
69
POTENTIAL CONFLICTS OF INTEREST<br />
Save as disclosed in the section on ‘‘INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN<br />
TRANSACTIONS’’ on pages 62 to 69 of this Prospectus, none of our Directors, substantial Shareholders<br />
and Executive Officers have any interest, direct or indirect, in any company carrying on the same<br />
business or similar trade as the Group.<br />
None of our Directors, substantial Shareholders and Executive Officers have any interest, direct or<br />
indirect, in any company which is our major supplier, contract manufacturer or customer.<br />
70
19 July 2000<br />
The Shareholders<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
57 Genting Lane<br />
<strong>Osim</strong> Industrial Building<br />
Singapore 349564<br />
Dear Sirs<br />
DIRECTORS’ REPORT<br />
This report has been prepared for inclusion in the prospectus to be dated 19 July 2000 (the<br />
‘‘Prospectus’’) in connection with the invitation in respect of 58,000,000 ordinary shares of $0.05 each<br />
(‘‘Shares’’) in the capital of <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong> (the ‘‘Company’’) comprising 38,000,000 new Shares<br />
and 20,000,000 existing Shares.<br />
On behalf of the Directors of the Company, I report that, having made due inquiry in relation to the period<br />
between 31 December 1999, the date to which the last audited consolidated accounts of the Company<br />
and its subsidiaries were made up, and the date hereof, being a date not earlier than 14 days before the<br />
issue of the Prospectus:–<br />
(a) the business of the Company and its subsidiaries has, in the opinion of the Directors, been<br />
satisfactorily maintained;<br />
(b) since the last Annual General Meeting of the Company, no circumstances have arisen which, in the<br />
opinion of the Directors, would adversely affect the trading or the value of the assets of the<br />
Company or any of its subsidiaries;<br />
(c) the current assets of the Company and its subsidiaries appear in the books at values which are<br />
believed to be realisable in the ordinary course of business;<br />
(d) no contingent liabilities have arisen by reason of any guarantees given by the Company or any of<br />
its subsidiaries; and<br />
(e) save as disclosed on pages 12 to 16, 23, 93 and 94 of this Prospectus there has been no change<br />
in the published reserves or any unusual factors affecting the profits of the Company and its<br />
subsidiaries since the last audited accounts.<br />
Yours faithfully<br />
for and on behalf of<br />
the Board of Directors<br />
Dr Ron Sim Chye Hock<br />
Chairman & Chief Executive Officer<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
71
19 July 2000<br />
The Board of Directors<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
57 Genting Lane<br />
<strong>Osim</strong> Industrial Building<br />
Singapore 349564<br />
Dear Sirs<br />
ACCOUNTANTS’ REPORT<br />
A. INTRODUCTION<br />
This report has been prepared for inclusion in the Prospectus of <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong> (‘‘the<br />
Company’’) to be dated 19 July 2000 in connection with the Invitation in respect of 58,000,000<br />
ordinary shares of S$0.05 each comprising 38,000,000 New Shares and 20,000,000 Vendor Shares<br />
in the capital of the Company, payable in full on application.<br />
B. THE COMPANY<br />
The Company was incorporated in Singapore on 27 August 1983 as a limited exempt private<br />
company under the name of R. Sim Trading Co Pte <strong>Ltd</strong>. On 24 November 1988, the Company<br />
changed its name to R. Sim & Company Pte <strong>Ltd</strong>. On 2 September 1996, the Company changed its<br />
name to <strong>Osim</strong> <strong>International</strong> (S) Pte <strong>Ltd</strong>. On 4 July 2000, the Company was converted to a public<br />
limited company and changed its name to <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong>. The principal activities of the<br />
Company are those of marketing, distributing and franchising of home health check, health care and<br />
healthy lifestyle products.<br />
The Company was incorporated with an authorised share capital of S$1,000,000 comprising<br />
1,000,000 ordinary shares of S$1 each and 2 initial subscriber shares of S$1 each. The movements<br />
in authorised and paid-up share capital thereafter were as follows:−<br />
Date<br />
Authorised<br />
share capital<br />
Issued and<br />
paid-up capital Shares issued and consideration<br />
9 January 1984 S$1,000,000 S$100,000 Issue of 99,998 ordinary shares of S$1 each at<br />
par for cash.<br />
15 August 1988 S$1,000,000 S$200,000 Issue of 100,000 ordinary shares of S$1 each at<br />
par for cash.<br />
16 May 1990 S$1,000,000 S$500,000 Issue of 300,000 ordinary shares of S$1 each at<br />
par for cash.<br />
4 October 1994 S$1,000,000 S$1,000,000 Issue of 500,000 ordinary shares of S$1 each at<br />
par for cash.<br />
17 February 1995 S$5,000,000 S$3,000,000 Increase in authorised share capital via the<br />
creation of 4,000,000 ordinary shares of S$1<br />
each.<br />
Issue of 2,000,000 ordinary shares of S$1 each<br />
at par via the capitalisation of amount owing to<br />
director.<br />
23 July 1998 S$5,000,000 S$3,100,000 Issue of 100,000 ordinary shares of S$1 each at<br />
par for cash.<br />
72
On 31 December 1999, pursuant to a Group restructuring exercise, the Company acquired its<br />
various subsidiaries from their then existing shareholder for cash as follows:−<br />
Name of subsidiary Equity acquired<br />
%<br />
Purchase<br />
consideration<br />
<strong>Osim</strong> (HK) Company Limited 95.1 S$10,770,000<br />
<strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> 58.0 S$ 230,000<br />
<strong>Osim</strong> (M) Sdn Bhd (Formerly known as <strong>Osim</strong> Global<br />
Health Care (M) Sdn Bhd)<br />
60.0 S$ 2,500,000<br />
The above consideration was arrived at by applying a price earnings ratio of approximately 5.6 times<br />
to the net profit after taxation of the various subsidiaries for the financial year ended 31 December<br />
1999 except for <strong>Osim</strong> (HK) Company Limited (‘‘<strong>Osim</strong> (HK)’’) where the consideration was arrived at<br />
with reference to the net profit after taxation of <strong>Osim</strong> (HK) for the financial year ended 31 December<br />
1999 and adding back the 3% royalty payments and management fees paid by <strong>Osim</strong> (HK) to <strong>Osim</strong><br />
<strong>International</strong> <strong>Ltd</strong> in the financial year ended 31 December 1999.<br />
Subsequent to 31 December 1999, the Company acquired additional equity interest in the following<br />
subsidiaries:−<br />
Equity<br />
Name of subsidiary<br />
acquired<br />
%<br />
Purchase consideration<br />
<strong>Osim</strong> (HK) Company Limited 4.9 S$1,300,000 for cash<br />
<strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> 2.0 S$8,000 for cash<br />
10.0 S$293,000 via the issue of 564,000 ordinary shares of<br />
S$0.05 each in the Company<br />
At an Extraordinary General Meeting held on 26 June 2000, the shareholders of the Company<br />
approved, inter alia, the following:−<br />
(i) the increase in the authorised share capital of the Company from S$5,000,000 comprising<br />
5,000,000 ordinary shares of S$1 each to S$50,000,000 comprising 50,000,000 ordinary<br />
shares of S$1 each;<br />
(ii) the capitalisation of S$5,921,000 from the revenue reserves of the Company for a bonus<br />
issue of 5,921,000 ordinary shares of S$1 each in the capital of the Company, credited as<br />
fully paid, to the shareholders of the Company on the basis of 1,910 new ordinary shares for<br />
every 1,000 ordinary shares held;<br />
(iii) the subdivision of each existing ordinary share of S$1 each in the authorised and issued and<br />
paid-up share capital of the Company into 20 ordinary shares of S$0.05 each;<br />
(iv) the conversion of the Company into a public limited company and the change of the<br />
Company’s name to <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong>;<br />
(v) the adoption of a new set of Articles of Association;<br />
(vi) the issue of an additional 564,000 new ordinary shares of S$0.05 each to certain<br />
shareholders of <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> as consideration for the acquisition of a 10%<br />
equity in <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong>;<br />
(vii) the issue of 11,600,000 new ordinary shares of S$0.05 each to Century Private Equity<br />
Holdings (S) Pte <strong>Ltd</strong> at S$0.47 per share, pursuant to the Subscription Agreement;<br />
(viii) the issue of 38,000,000 new ordinary shares of S$0.05 each pursuant to the Invitation which<br />
when fully paid, allotted and issued, will rank pari-passu in all respects with the existing<br />
issued shares of the Company;<br />
73
(ix) a shareholders’ mandate authorising <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong> to enter into recurrent<br />
transactions of a revenue and/or trading nature firstly, in the form of sales of the Company’s<br />
products to its affiliated companies, <strong>Osim</strong> GHC (Thailand) Co., <strong>Ltd</strong>, <strong>Osim</strong> (USA), Inc., PT<br />
Sharon Samaru, <strong>Osim</strong> (Beijing) Co., <strong>Ltd</strong>, <strong>Osim</strong> GHC (Shanghai) Co., <strong>Ltd</strong> and Health Check<br />
and Care (Langfang) Co., <strong>Ltd</strong> and secondly, warehousing and freight forwarding contracts<br />
with its affiliated company, <strong>Osim</strong> Distribution Centre (S) Pte <strong>Ltd</strong>;<br />
(x) the <strong>Osim</strong> Share Option Scheme (the ‘‘Scheme’’) and the authorisation of the Board of<br />
Directors to implement and administer the Scheme, to modify and/or amend the Scheme, to<br />
offer and grant options and to allot and issue new shares pursuant to the exercise of options<br />
granted pursuant to the Scheme subject to the rules of the Scheme; and<br />
(xi) the authorisation of the Directors, pursuant to Section 161 of the Act and the provisions of the<br />
new Articles of Association becoming effective, to allot and issue such further shares in the<br />
Company at any time to such persons, upon such terms and conditions and for such<br />
purposes as the Directors may in their absolute discretion deem fit provided that the<br />
aggregate number of shares to be issued shall not exceed 50 per cent of the issued share<br />
capital of the Company immediately prior to the proposed issue, provided that the aggregate<br />
number of shares to be issued other than on a pro-rata basis to the then existing shareholders<br />
of the Company shall not exceed 20 per cent of the issued share capital of the Company<br />
immediately prior to the proposed issue, and, unless revoked or varied by the Company in<br />
general meeting, such authority shall continue in force until the conclusion of the Annual<br />
General Meeting of the Company or the date by which the next Annual General Meeting of<br />
the Company is required by law to be held, whichever is the earlier.<br />
C. THE GROUP<br />
At the date of this report, the Company had the following subsidiaries and associated company<br />
(referred to collectively with the Company as the ‘‘Proforma Group’’):−<br />
Name of company Principal activities<br />
Subsidiaries<br />
Held by the Company<br />
<strong>Osim</strong> <strong>International</strong> Trading (Shanghai)<br />
Co., <strong>Ltd</strong>. (Formerly known as<br />
R. Sim <strong>International</strong> Trading<br />
(Shanghai) Co., <strong>Ltd</strong>.)<br />
Import, trading, franchising<br />
and distribution of home<br />
health check and health<br />
care products<br />
<strong>Osim</strong> (HK) Company Limited Distribution of home health<br />
check, health care and<br />
healthy lifestyle products<br />
<strong>Osim</strong> (M) Sdn Bhd (Formerly known as<br />
<strong>Osim</strong> Global Health Care (M)<br />
Sdn Bhd)<br />
Distribution of home health<br />
check, health care and<br />
healthy lifestyle products<br />
<strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> Distribution of home health<br />
check, health care and<br />
healthy lifestyle products<br />
Associated company<br />
Daito-<strong>Osim</strong> Healthcare Appliances<br />
(Suzhou) Co., <strong>Ltd</strong><br />
Manufacturer and exporter<br />
of home health check and<br />
health care products<br />
74<br />
Place and Date<br />
of incorporation<br />
People’s Republic<br />
of China<br />
28 June 1995<br />
Hong Kong<br />
10 October 1996<br />
Malaysia<br />
16 July 1997<br />
Taiwan<br />
29 July 1997<br />
People’s Republic<br />
of China<br />
22 December 1995<br />
Registered/<br />
Issued and<br />
paid-up capital<br />
Equity<br />
interest held<br />
by the Group<br />
%<br />
RMB1,666,000 100<br />
HK$4,100,000 100<br />
RM500,000 60<br />
NT$25,000,000 70<br />
RMB6,986,746 30
We have acted as auditors of the Company with effect from the financial year ended 31 December<br />
1997. The financial statements of the Company prior to the financial year ended 31 December 1997<br />
were audited by Soh, Wong & Partners. The financial statements of <strong>Osim</strong> (HK) Company Limited<br />
have been audited by our associated firm in Hong Kong with effect from the financial year ended 31<br />
December 1998. The financial statements of *<strong>Osim</strong> (HK) Company Limited from the date of<br />
incorporation to 31 December 1997 were audited by BDO Binder. The financial statements of <strong>Osim</strong><br />
(M) Sdn Bhd have been audited by our associated firm in Malaysia with effect from the financial year<br />
ended 31 December 1999. The financial statements of †<strong>Osim</strong> (M) Sdn Bhd from the date of<br />
incorporation to 31 December 1998 were audited by Tan Wong & Co. The financial statements of<br />
‡<strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> have been audited by our associated firm in Taiwan with effect from<br />
the financial year ended 31 December 1999. The financial statements of <strong>Osim</strong> GHC (Taiwan) Co.,<br />
<strong>Ltd</strong> prior to the financial year ended 31 December 1999 have not been audited as no statutory audit<br />
was required to be performed under the laws of its country of incorporation. The financial statements<br />
of <strong>Osim</strong> <strong>International</strong> Trading (Shanghai) Co., <strong>Ltd</strong>. (‘‘<strong>Osim</strong> Shanghai’’) prior to the financial year<br />
ended 31 December 1997 were audited by Shanghai Jia Hua Certified Public Accountants. The<br />
financial statements of <strong>Osim</strong> Shanghai for financial year ended 31 December 1997 have been<br />
audited by Shanghai Zhonghua & SASS. With effect from financial year ended 31 December 1998,<br />
the financial statements of <strong>Osim</strong> Shanghai were audited by Zhongzhou Certified Public Accountants<br />
(formerly known as Shanghai Jia Hua Certified Public Accountants).<br />
*The audited financial statements of Asia Growth Company Limited for the financial years ended 31 December 1995 to 1996<br />
have been included in the Proforma Group as prior to the incorporation of <strong>Osim</strong> (HK) Company Limited and during the<br />
financial year ended 31 December 1997, the business in Hong Kong was carried out by Asia Growth Company Limited. The<br />
business was transferred to <strong>Osim</strong> (HK) Company Limited in 1997 and Asia Growth Company Limited became dormant. The<br />
financial statements of Asia Growth Company Limited were audited by Peter W. H. Mah & Co.<br />
†The financial statements of Health Check & Care Sdn Bhd for the financial years ended 31 December 1995 to 1997 have<br />
been included in the Proforma Group as prior to the incorporation of <strong>Osim</strong> (M) Sdn Bhd, the business in Malaysia was<br />
carried out by Health Check & Care Sdn Bhd. The business was transferred to <strong>Osim</strong> (M) Sdn Bhd from the date of its<br />
incorporation and Health Check & Care Sdn Bhd became dormant. The financial statements of Health Check and Care Sdn<br />
Bhd were audited by Kiat & Associates.<br />
‡The financial statements of Asia Growth Company <strong>Ltd</strong> for the financial years ended 31 December 1995 to 1998 have been<br />
included in the Proforma Group as prior to the incorporation of <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong>, the business in Taiwan was<br />
carried out by Asia Growth Company <strong>Ltd</strong>. Asia Growth Company <strong>Ltd</strong> merged with <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> with effect<br />
from 1 January 1999, the date of incorporation of <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong>.<br />
The auditors’ report on the financial statements of the associated company, Daito-<strong>Osim</strong> Healthcare<br />
Appliances (Suzhou) Co. <strong>Ltd</strong>. for the financial year ended 31 December 1996 was qualified on<br />
grounds that the associated company was unable to provide shipping documents to support the<br />
import of materials amounting to RMB29,000,000. Subsequent to the financial year ended 31<br />
December 1996, the associated company’s auditors sighted the above shipping documents and<br />
noted that the transactions have been properly recorded.<br />
Other than as disclosed above, there were no other audit qualifications in respect of the audited<br />
financial statements of the Company, its subsidiaries and associated company for the financial<br />
periods covered by this report.<br />
The financial information set out in this report is based on the audited financial statements of the<br />
companies in the Proforma Group for the period from 1 January 1995 or their respective dates of<br />
incorporation, whichever is later, to 31 December 1999. It has been prepared in accordance with the<br />
accounting policies of the Proforma Group set out in Section I of this report and on the basis that the<br />
Proforma Group had been in place throughout the financial periods covered by this report.<br />
Where the reporting year ends of certain subsidiaries were not co-terminous with the reporting year<br />
end of the Company, we have properly accounted for on a consistent basis the audited financial<br />
statements of these subsidiaries drawn up to the different year ends after making such adjustments<br />
which we considered necessary in presenting the Proforma Group financial information.<br />
75
<strong>Osim</strong> (HK) Company Limited was incorporated on 10 October 1996. As its business was transferred<br />
from Asia Growth Company Limited, we have used the audited financial statements of Asia Growth<br />
Company Limited for the proforma periods prior to the transfer of business to <strong>Osim</strong> (HK) Company<br />
Limited for inclusion in the Proforma Group financial statements. Accordingly, we have made a<br />
notional adjustment to adjust for the proforma shareholders’ equity of Asia Growth Company Limited<br />
upon the incorporation of <strong>Osim</strong> (HK) Company Limited.<br />
<strong>Osim</strong> (M) Sdn Bhd was incorporated on 16 July 1997. As its business was transferred from Health<br />
Check & Care Sdn Bhd, we have used the audited financial statements of Health Check & Care Sdn<br />
Bhd for the proforma periods prior to the transfer of business to <strong>Osim</strong> (M) Sdn Bhd for inclusion in<br />
the Proforma Group financial statements. Accordingly, we have made a notional adjustment to<br />
adjust for the proforma shareholders’ equity of Health Check & Care Sdn Bhd upon the incorporation<br />
of <strong>Osim</strong> (M) Sdn Bhd.<br />
<strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> was incorporated on 29 July 1997. As Asia Growth Company <strong>Ltd</strong> was<br />
merged with <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong>, we have used the audited financial statements of Asia<br />
Growth Company <strong>Ltd</strong> for the proforma periods prior to the merger with <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong><br />
for inclusion in the Proforma Group financial statements.<br />
In arriving at the Proforma Group financial information, we have made such adjustments as we<br />
considered necessary in order to present the financial statements on a consistent and comparable<br />
basis, including notional adjustments to reflect the investments and share capital of the Company<br />
as if the Proforma Group had existed from 1 January 1995.<br />
D. STATEMENTS OF PROFORMA GROUP RESULTS<br />
The results of the Proforma Group after making such adjustments as we considered appropriate are<br />
set out below:−<br />
—————— Year ended 31 December ——————<br />
Note 1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
Turnover 1 31,432 42,897 60,837 69,747 103,138<br />
Operating profit 2 1,632 3,859 4,419 2,616 10,514<br />
Share of (loss) profit of associated<br />
company — (191) (17) 583 334<br />
Profit before taxation and minority<br />
interests 1,632 3,668 4,402 3,199 10,848<br />
Taxation 3 (541) (1,177) (1,156) (912) (3,123)<br />
Profit after taxation but before minority<br />
interests 1,091 2,491 3,246 2,287 7,725<br />
Minority interests (49) (61) 84 (28) (284)<br />
Profit after taxation and minority interests<br />
but before extraordinary item 1,042 2,430 3,330 2,259 7,441<br />
Extraordinary item 4 — 1,759 — — —<br />
Profit attributable to the Members of the<br />
Company 1,042 4,189 3,330 2,259 7,441<br />
76
E. NOTES TO THE STATEMENTS OF PROFORMA GROUP RESULTS<br />
1. Turnover represents revenue from the sale of home health check, health care and healthy<br />
lifestyle products net of discounts and returns, and franchise fees from franchising activities as<br />
follows:−<br />
—————— Year ended 31 December ——————<br />
1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
Sale of goods 31,432 42,897 60,837 69,747 103,121<br />
Franchise Fees — — — — 17<br />
31,432 42,897 60,837 69,747 103,138<br />
The Group has significant transactions with related parties on terms agreed between the parties<br />
as follows:−<br />
—————— Year ended 31 December ——————<br />
1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
Income<br />
Sales to affiliated companies 6,248 9,677 10,323 3,736 8,828<br />
Management fee income from affiliated<br />
companies 48 42 24 20 22<br />
Expenses<br />
Purchases from associated company — — 97 512 1,906<br />
Rental and service fees paid/payable to<br />
an affiliated company — — — 124 272<br />
Others<br />
Purchases of fixed assets from an<br />
affiliated company — — 179 — —<br />
77
2. Operating profit has been determined after charging (crediting) the following:−<br />
—————— Year ended 31 December ——————<br />
1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
Depreciation of fixed assets 313 406 569 1,440 2,166<br />
Directors’ remuneration and fees<br />
— directors of the Company 872 824 1,373 1,524 1,317<br />
— directors of subsidiaries 51 68 675 105 195<br />
Provision for doubtful trade debts<br />
— affiliated companies — — — 194 —<br />
Provision for warranty cost — — — 222 178<br />
Provision for stock obsolescence — — 536 383 201<br />
Interest expense<br />
— bank overdrafts 280 228 77 223 235<br />
— term loans 602 574 619 694 858<br />
— hire purchase 4 16 44 29 19<br />
— trust receipts 10 21 183 402 356<br />
— other creditors — — 6 7 —<br />
Interest income<br />
— fixed deposits — (11) (17) (7) (14)<br />
— bank balances (2) (1) (1) (39) (14)<br />
Exchange loss (gain), net 157 93 (968) 647 1,893<br />
Fixed assets written off — — 596 8 —<br />
Loss on disposal of fixed assets 9 — 3 2 4<br />
Bad trade debts written off — 12 — — 32<br />
Write back of provision for stock<br />
obsolescence — — — — (34)<br />
3. Taxation comprises:−<br />
—————— Year ended 31 December ——————<br />
1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
Current tax<br />
— current year 501 1,131 1,090 1,021 2,717<br />
— under/(over) provision of taxation in<br />
respect of prior year — (4) 67 — 74<br />
Deferred tax<br />
— current year 40 50 — 38 332<br />
— reversal of prior year deferred tax — — (1) (147) —<br />
78<br />
541 1,177 1,156 912 3,123
3. Taxation (continued)<br />
<strong>Osim</strong> <strong>International</strong> Trading (Shanghai) Co., <strong>Ltd</strong><br />
The company is subject to Enterprise Income Tax (‘‘EIT’’) at a rate of 15% as approved by the<br />
tax bureau of Pudong New Area, People’s Republic of China. It is entitled to preferential<br />
treatment of EIT and has been granted full exemption from EIT for fiscal years 1996 and 1997<br />
and 50% reduction of EIT for fiscal years 1998 to 2000.<br />
<strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong><br />
Pursuant to the amended Income Tax Law (‘‘ITL’’), which took effect on 1 January 1998, the<br />
income tax paid by the company for fiscal year 1998 and onwards may be used by the individual<br />
resident stockholders of the company or its corporate shareholders as individual income tax<br />
credits.<br />
Pursuant to the ITL, beginning with financial year 1998, annual distributable net earnings as<br />
determined under the ITL that are not distributed to shareholders in the following year are<br />
subject to an additional income tax at a rate of 10%. The additional income tax paid may be used<br />
by the shareholders (with the exception of the domestic corporate shareholders for which<br />
dividends received from domestic investee companies are exempt from income tax) as tax<br />
credits when the then undistributed earnings are ultimately distributed.<br />
4. Extraordinary item relates to gain on disposal of leasehold properties of the Company during the<br />
financial year ended 31 December 1996 amounting to approximately S$2,335,000 net of<br />
taxation of approximately S$576,000.<br />
5. Statement of Adjustments<br />
The following adjustments have been made in arriving at the Statements of Proforma Group<br />
results:−<br />
Turnover<br />
—————— Year ended 31 December ——————<br />
1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
From summation of audited financial<br />
statements/ management accounts of<br />
individual companies 39,308 54,025 80,022 91,416 143,960<br />
Elimination of sales within Proforma<br />
Group (7,876) (11,128) (19,185) (21,669) (40,822)<br />
Adjusted turnover as stated in the<br />
Statement of Proforma Group results 31,432 42,897 60,837 69,747 103,138<br />
Profit before taxation and minority<br />
interests<br />
From summation of audited financial<br />
statements/ management accounts of<br />
individual companies 1,991 4,093 4,397 3,215 12,292<br />
Unrealised profit on closing stocks, net (359) (425) 5 (16) (1,444)<br />
Adjusted profit before taxation and<br />
minority interests as stated in the<br />
Statements of Proforma Group results 1,632 3,668 4,402 3,199 10,848<br />
79
F. SUMMARISED PROFORMA GROUP BALANCE SHEETS<br />
The summarised balance sheets of the Proforma Group as at 31 December 1995 to 31 December<br />
1999 as set out below have been prepared based on audited financial statements/management<br />
accounts and on the basis that the Proforma Group structure had been in place since 1 January<br />
1995:−<br />
———————— As at 31 December ————————<br />
1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
Proforma shareholders’ equity 6,417 10,186 13,007 14,937 10,269<br />
Minority interests 781 830 753 827 1,139<br />
Represented by:<br />
7,198 11,016 13,760 15,764 11,408<br />
Fixed assets 17,272 12,349 13,455 16,607 18,276<br />
Investment in associated company — 303 333 905 1,068<br />
Current assets 10,901 21,123 34,124 24,689 36,607<br />
Current liabilities (12,036) (18,210) (26,950) (18,434) (36,522)<br />
Net current (liabilities)/assets (1,135) 2,913 7,174 6,255 85<br />
Less:<br />
Non-current liabilities<br />
Hire purchase liabilities, non-current portion — (80) (169) (145) (240)<br />
Term loans, non-current portion (8,837) (4,175) (6,886) (7,820) (7,255)<br />
Provision for pension benefits — — — — (157)<br />
Deferred taxation (102) (294) (147) (38) (369)<br />
7,198 11,016 13,760 15,764 11,408<br />
80
G. MOVEMENTS IN PROFORMA SHAREHOLDERS’ EQUITY<br />
The movements in the shareholders’ equity of the Proforma Group for each of the five years ended<br />
31 December 1995 to 1999 are as follows:−<br />
—————— Year ended 31 December ——————<br />
1995 1996 1997 1998 1999<br />
S$’000 S$’000 S$’000 S$’000 S$’000<br />
Balance brought forward 5,528 6,417 10,186 13,007 14,937<br />
Add (less):<br />
Net profit attributable to the Proforma Group 1,042 4,189 3,330 2,259 7,441<br />
Notional adjustment to adjust for proforma<br />
shareholders’ equity of Asia Growth<br />
Company Limited (Note (a)) — — (635) — —<br />
Notional adjustment to adjust for proforma<br />
shareholders’ equity of Health Check &<br />
Care Sdn Bhd (Note (b)) — — — 27 —<br />
Increase in share capital/share premium of<br />
the Company — — — 100 —<br />
Goodwill written off (Note (c)) — — — — (12,421)<br />
Dividends, net — (370) (370) (370) (75)<br />
Translation reserve (153) (50) 496 (86) 387<br />
Balance carried forward 6,417 10,186 13,007 14,937 10,269<br />
Notes:−<br />
(a) <strong>Osim</strong> (HK) Company Limited was incorporated on 10 October 1996. As its business was transferred from Asia Growth<br />
Company Limited, we have used the audited financial statements of Asia Growth Company Limited for the proforma<br />
periods prior to the transfer of business to <strong>Osim</strong> (HK) Company Limited for inclusion in the Proforma Group financial<br />
statements. Accordingly, we have made a notional adjustment to adjust for the proforma shareholders’ equity of Asia<br />
Growth Company Limited upon the incorporation of <strong>Osim</strong> (HK) Company Limited.<br />
(b) <strong>Osim</strong> (M) Sdn Bhd was incorporated on 16 July 1997. As its business was transferred from Health Check & Care Sdn<br />
Bhd, we have used the audited financial statements of Health Check & Care Sdn Bhd for the proforma periods prior to<br />
the transfer of business to <strong>Osim</strong> (M) Sdn Bhd for inclusion in the Proforma Group financial statements. Accordingly, we<br />
have made a notional adjustment to adjust for the proforma shareholders’ equity of Health Check & Care Sdn Bhd upon<br />
the incorporation of <strong>Osim</strong> (M) Sdn Bhd.<br />
(c) Relates to goodwill on consolidation arising from the acquisition of the various subsidiaries written off directly against<br />
reserves.<br />
81
H. STATEMENT OF NET ASSETS<br />
The statement of net assets of the Group and of the Company as at 31 December 1999 are set out<br />
below with the notes thereon, set out in Section J.<br />
Note Group Company<br />
S$’000 S$’000<br />
Proforma shareholders’ equity 1 10,269 20,816<br />
Minority interests 1,139 —<br />
11,408 20,816<br />
Represented by —<br />
Fixed assets 2 18,276 13,391<br />
Investment in subsidiaries 3 — 15,396<br />
Investment in associated company<br />
Current assets<br />
4 1,068 495<br />
Stocks 5 12,089 4,155<br />
Trade debtors 6 8,846 1,567<br />
Other debtors, deposits and prepayments<br />
Due from subsidiaries<br />
7 2,574 613<br />
— trade — 15,426<br />
— non-trade 9 — 491<br />
Due from affiliated companies<br />
— trade 8 8,587 2,688<br />
— non-trade 9 10 10<br />
Fixed deposits 236 —<br />
Cash and bank balances 4,265 2,117<br />
Less:<br />
Current liabilities<br />
36,607 27,067<br />
Trade creditors 4,658 4,470<br />
Bills payable to banks (secured) 10 12,017 12,017<br />
Other creditors and accruals<br />
Due to an associated company<br />
11 8,925 3,047<br />
— trade 361 221<br />
Due to affiliated companies<br />
— non-trade 9 46 46<br />
Due to a director 9 1,600 1,073<br />
Term loans, current portion 12 646 558<br />
Short term bank loans 13 760 —<br />
Hire purchase liabilities, current portion 14 115 104<br />
Proposed dividend 75 74<br />
Provision for taxation 4,022 3,814<br />
Bank overdrafts (secured) 10 3,297 3,297<br />
36,522 28,721<br />
Net current assets (liabilities)<br />
Less:<br />
Non-current liabilities<br />
85 (1,654)<br />
Hire purchase liabilities, non-current portion 14 240 213<br />
Term loans, non-current portion 12 7,255 6,427<br />
Provision for pension benefits 15 157 —<br />
Deferred taxation 369 172<br />
82<br />
11,408 20,816
I. SIGNIFICANT ACCOUNTING POLICIES<br />
The following significant accounting policies have been consistently applied in the preparation of the<br />
Proforma Group and Company financial information.<br />
Basis of accounting<br />
The financial statements, expressed in Singapore dollars, have been prepared in accordance with<br />
the historical cost convention and Statements of Accounting Standard in Singapore.<br />
Income recognition<br />
Income from sale of goods is recognised upon delivery of goods and acceptance by customers.<br />
Franchise fees are recognised on an accrual basis.<br />
Basis of consolidation<br />
The Proforma Group financial statements include the financial statements of the Company and its<br />
subsidiaries made up to the end of each financial year. The results of subsidiaries acquired or<br />
disposed of during the financial year are included in or excluded from the Proforma Group financial<br />
statements on the basis that the Proforma Group had been in place since 1 January 1995.<br />
Significant intercompany balances and transactions have been eliminated on consolidation.<br />
When subsidiaries are acquired, any excess of the purchase consideration over the net assets of<br />
subsidiaries at the date of acquisition represents goodwill on consolidation and is written off directly<br />
against reserves. Similarly, any excess of the net assets of subsidiaries at the date of acquisition<br />
over the purchase consideration represents reserve on consolidation which is credited directly to<br />
reserves.<br />
In the preparation of the consolidated financial statements, the financial statements of the foreign<br />
subsidiaries are translated at the rates of exchange ruling at the balance sheet date except for the<br />
share capital and reserves which are translated at historical exchange rates and profit and loss<br />
items which are translated at the average exchange rates for the year. Foreign currency translation<br />
differences are taken directly to translation reserve.<br />
Subsidiaries and associated company<br />
Investments in subsidiaries and associated company are stated in the financial statements of the<br />
Company at cost. Provision is made where there is a decline in value that is other than temporary.<br />
An associated company is defined as a company, not being a subsidiary, in which the Proforma<br />
Group has a long term equity interest of not less than 20% and in whose financial and operating<br />
policy decisions the Proforma Group exercises significant influence.<br />
The Proforma Group’s share of profits less losses of the associated company is included in the<br />
consolidated statement of profit and loss. The Group’s share of the post-acquisition accumulated<br />
profits and reserves of the associated company is adjusted against the cost of investment in the<br />
consolidated balance sheet.<br />
83
Fixed assets and depreciation<br />
Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight<br />
line basis to write-off the cost over their estimated useful lives. The annual rates of depreciation are<br />
as follows:−<br />
Freehold buildings 2%–3%<br />
Leasehold buildings 3%<br />
Computers 20%−100%<br />
Motor vehicles 20%<br />
Electrical appliances 33 1 ⁄ 3%<br />
Shop renovations 33 1 ⁄ 3%<br />
Furniture and fittings 10%<br />
Office equipment 10%−20%<br />
No depreciation is provided on freehold land.<br />
During the financial year ended 31 December 1998, the Company revised its estimated useful lives<br />
of certain fixed assets for depreciation purposes to more accurately reflect the economic useful lives<br />
of these fixed assets. The impact of the change in accounting estimate is to decrease profit before<br />
taxation for the financial year ended 31 December 1998 and 31 December 1999 by approximately<br />
S$182,000 and S$68,000 respectively.<br />
During the financial year ended 31 December 1999, a subsidiary, <strong>Osim</strong> (M) Sdn Bhd, revised its<br />
estimated useful lives of certain fixed assets for depreciation purposes to be consistent with the<br />
group accounting policy. The impact of the change in the accounting estimate is to decrease profit<br />
before taxation for the financial year ended 31 December 1999 by approximately S$105,000.<br />
Stocks<br />
Stocks are stated at the lower of cost (determined on a weighted average basis) and net realisable<br />
value. Provision is made for deteriorated, damaged, obsolete and slow-moving stocks.<br />
Taxation<br />
Income tax expense is determined on the basis of tax effect accounting, using the liability method<br />
and is applied to all significant timing differences. Deferred tax benefits are not recognised unless<br />
there is reasonable expectation of their realisation.<br />
Affiliated company<br />
An affiliated company is defined as a company, not being a subsidiary or an associated company,<br />
in which the directors of the Company have an equity interest or exercise significant influence over.<br />
Hire purchase<br />
Where assets are financed by hire purchase agreements that give rights approximating to<br />
ownership, the assets are capitalised as if they had been purchased outright at the values equivalent<br />
to the present values of the total rental payable during the periods of the hire purchase and the<br />
corresponding hire purchase commitments are included under liabilities. The excess of the hire<br />
purchase payments over the recorded hire purchase obligations is treated as finance charges,<br />
which are allocated over each hire purchase term to give a constant rate of interest on the<br />
outstanding balance at the end of each period.<br />
84
Foreign currency transactions and balances<br />
The accounting records of the companies in the Proforma Group are maintained in their respective<br />
functional currencies.<br />
Transactions in foreign currencies during the year are recorded in the respective functional<br />
currencies using exchange rates approximating those ruling at transaction dates. Foreign currency<br />
monetary assets and liabilities at the balance sheet date are translated into the respective functional<br />
currencies at exchange rates approximating those ruling at that date. All resultant exchange<br />
differences are dealt with through the profit and loss account.<br />
J. NOTES TO THE STATEMENT OF NET ASSETS<br />
1. Proforma shareholders’ equity<br />
Included in this balance is an amount of approximately $149,000 and $466,000 relating to<br />
Enterprise Expansion Fund and capital reserve respectively, which are non-distributable.<br />
In accordance with the relevant laws and regulations of the People’s Republic of China (‘‘PRC’’),<br />
<strong>Osim</strong> <strong>International</strong> Trading (Shanghai) Co., <strong>Ltd</strong> (‘‘the subsidiary’’) is required to set up an<br />
Enterprise Expansion Fund by way of appropriation from its statutory net profit. The amount to<br />
be appropriated to the Enterprise Expansion Fund is determined by the board of directors based<br />
on the profitability of the subsidiary.<br />
The Enterprise Expansion Fund may be used to increase the registered capital of the subsidiary,<br />
subject to approval from the PRC authorities. The Enterprise Expansion Fund is not available<br />
for dividend distribution to the shareholders.<br />
85
86<br />
2. Fixed assets<br />
(a) Group<br />
(S$’000)<br />
Cost<br />
———————————————————————————— 1999 ————————————————————————————<br />
Furniture<br />
Freehold Freehold Leasehold<br />
Motor Electrical Shop and Office<br />
land buildings buildings Computers vehicles appliances renovations fittings equipment Total<br />
$ $ $ $ $ $ $ $ $ $<br />
As at 1 January 1999 482 10,587 3,379 293 737 73 2,690 669 205 19,115<br />
Additions — 167 — 171 280 56 2,476 332 152 3,634<br />
Disposals/write-off — — — — (262) — (9) — (1) (272)<br />
Translation difference 16 32 — (1) 2 — 3 2 2 56<br />
As at 31 December 1999 498 10,786 3,379 463 757 129 5,160 1,003 358 22,533<br />
Accumulated depreciation<br />
As at 1 January 1999 — 231 534 268 380 22 665 105 66 2,271<br />
Charge for the year — 182 101 114 157 38 1,344 179 51 2,166<br />
Disposals/write-off — — — — (167) — (4) — (1) (172)<br />
Translation difference — 2 — — (1) (1) (9) (1) 2 (8)<br />
As at 31 December 1999 — 415 635 382 369 59 1,996 283 118 4,257<br />
Net book value<br />
As at 31 December 1999 498 10,371 2,744 81 388 70 3,164 720 240 18,276
87<br />
2. Fixed assets (continued)<br />
(b) Company<br />
(S$’000)<br />
Cost<br />
—————————————————————————— 1999 ——————————————————————————<br />
Furniture<br />
Freehold Leasehold<br />
Motor Electrical and Shop Office<br />
building buildings Computers vehicles appliances fittings renovations equipment Total<br />
$ $ $ $ $ $ $ $ $<br />
As at 1 January 1999 9,649 3,379 264 394 36 333 868 93 15,016<br />
Additions 167 — 97 150 19 102 604 29 1,168<br />
Disposals/write-off — — — (209) — — (9) — (218)<br />
As at 31 December 1999 9,816 3,379 361 335 55 435 1,463 122 15,966<br />
Accumulated depreciation<br />
As at 1 January 1999 159 535 264 232 22 33 477 10 1,732<br />
Charge for the year 165 101 97 71 16 43 487 12 992<br />
Disposals/write-off — — — (145) — — (4) — (149)<br />
As at 31 December 1999 324 636 361 158 38 76 960 22 2,575<br />
Net book value<br />
As at 31 December 1999 9,492 2,743 — 177 17 359 503 100 13,391<br />
As at 31 December 1999, the Group and the Company had fixed assets under hire purchase with a net book value of approximately S$340,000 and<br />
S$236,000 respectively. In addition, the Group and the Company had freehold land, buildings and leasehold buildings with a net book value of<br />
approximately S$13,613,000 and S$12,235,000 respectively, which were mortgaged as security for the banking facilities as disclosed in Notes 10 and<br />
12.
3. Investment in subsidiaries<br />
Name of company Principal activities<br />
Subsidiaries<br />
Held by the Company<br />
<strong>Osim</strong> <strong>International</strong><br />
Trading (Shanghai)<br />
Co., <strong>Ltd</strong>. (Formerly<br />
known as R. Sim<br />
<strong>International</strong> Trading<br />
(Shanghai) Co., <strong>Ltd</strong>.)<br />
<strong>Osim</strong> (HK) Company<br />
Limited<br />
<strong>Osim</strong> (M) Sdn Bhd<br />
(Formerly known as<br />
<strong>Osim</strong> Global Health<br />
Care (M) Sdn Bhd)<br />
<strong>Osim</strong> GHC (Taiwan)<br />
Co., <strong>Ltd</strong><br />
Import, trading,<br />
franchising, and<br />
distribution of home<br />
health check and<br />
health care products<br />
Distribution of home<br />
health check, health<br />
care and healthy<br />
lifestyle products<br />
Distribution of home<br />
health check, health<br />
care and healthy<br />
lifestyle products<br />
Distribution of home<br />
health check, health<br />
care and healthy<br />
lifestyle products<br />
4. Investment in associated company<br />
(a) This comprises:−<br />
Country of<br />
incorporation<br />
and place of<br />
business<br />
People’s Republic<br />
of China<br />
Equity<br />
interest<br />
held by<br />
the Group<br />
Cost of<br />
investment<br />
% S$’000<br />
100 295<br />
Hong Kong 100 12,070<br />
Malaysia 60 2,500<br />
Taiwan 70 531<br />
15,396<br />
Group Company<br />
S$’000 S$’000<br />
Unquoted equity shares, at cost 346 346<br />
Add: Share of post-acquisition profits of associated company 709 —<br />
1,055 346<br />
Translation reserve (136) —<br />
Loan to associated company 149 149<br />
1,068 495<br />
(b) The Company had the following associated company as at 31 December 1999:−<br />
Associated company Principal activity<br />
Daito-<strong>Osim</strong> Healthcare<br />
Appliances<br />
(Suzhou) Co., <strong>Ltd</strong><br />
Manufacturer and<br />
exporter of home<br />
health check and<br />
health care<br />
products<br />
88<br />
Country of<br />
incorporation<br />
and place of<br />
business<br />
People’s Republic<br />
of China<br />
Percentage<br />
of equity<br />
held<br />
Cost of<br />
investment<br />
% S$’000<br />
30 346
(c) Loan to associated company is unsecured and interest-free. The loan is not expected to be<br />
repaid within the next twelve months.<br />
5. Stocks<br />
Group Company<br />
S$’000 S$’000<br />
Finished goods 13,386 4,683<br />
Goods-in-transit 123 123<br />
13,509 4,806<br />
Less provision for stock obsolescence (1,420) (651)<br />
Movements in provision for stock obsolescence are as follows:−<br />
12,089 4,155<br />
At beginning of year 1,251 651<br />
Provision for the year 201 —<br />
Write back of provision (34) —<br />
Translation difference 2 —<br />
At end of year 1,420 651<br />
6. Trade debtors<br />
Group Company<br />
S$’000 S$’000<br />
Trade debtors 8,846 1,567<br />
Less provision for doubtful debts — —<br />
7. Other debtors, deposits and prepayments<br />
8,846 1,567<br />
Group Company<br />
S$’000 S$’000<br />
Deposits 2,249 501<br />
Prepayments 246 97<br />
Advances to employees 15 14<br />
Sundry debtors 64 1<br />
89<br />
2,574 613
8. Due from affiliated companies (trade)<br />
Group Company<br />
S$’000 S$’000<br />
Due from affiliated companies 8,781 2,882<br />
Less provision for doubtful debts (194) (194)<br />
Movements in provision for doubtful debts are as follows:−<br />
8,587 2,688<br />
At beginning of year 194 194<br />
Provision for the year — —<br />
At end of year 194 194<br />
9. Due from (to) affiliated companies/subsidiaries/director<br />
These amounts are non-trade in nature, unsecured, interest-free and have no fixed terms of<br />
repayment.<br />
10. Bills payable to banks and bank overdrafts<br />
The banking facilities granted to the Company are secured by:–<br />
(a) legal mortgage on the freehold and leasehold buildings of the Company;<br />
(b) legal mortgage on the leasehold building of an affiliated company; and<br />
(c) joint and several personal guarantee given by certain directors of the Company.<br />
11. Other creditors and accruals<br />
Group Company<br />
S$’000 S$’000<br />
Other creditors 4,236 1,927<br />
Accrued operating expenses 3,324 433<br />
Provision for warranty costs 572 367<br />
Accrued payroll costs 793 320<br />
12. Term loans<br />
8,925 3,047<br />
Group Company<br />
S$’000 S$’000<br />
Term loan A 5,500 5,500<br />
Term loan B 864 864<br />
Term loan C 621 621<br />
Term loan D 768 —<br />
Term loan E 148 —<br />
7,901 6,985<br />
Due within 12 months (646) (558)<br />
Due after 12 months 7,255 6,427<br />
90
Term loans A and B are repayable in equal monthly instalments over a period of 15 years from<br />
the date of draw down and term loan C is repayable in equal monthly instalments over a period<br />
of 10 years from the date of draw down. Term loans D and E are taken up by a subsidiary. Term<br />
loan D is repayable in equal monthly instalments over a period of 18 years from the date of<br />
draw down and term loan E is repayable in equal monthly instalments over a period of 5 years<br />
from the date of draw down. Interest on term loan A is charged at the bank’s prevailing prime<br />
lending rate plus 0.75% per annum, interest on term loan B is charged at 6.75% per annum<br />
and interest on term loan C is charged at 12.75% per annum. Interest on term loan D and E<br />
are charged at 9.05% per annum.<br />
Term loans A and B are secured by:−<br />
(a) legal mortgage over the freehold and leasehold buildings of the Company;<br />
(b) legal mortgage over the leasehold building of an affiliated company; and<br />
(c) joint and several personal guarantee given by certain directors of the Company.<br />
Term loan C is secured by a legal mortgage on the leasehold building of the Company.<br />
Term loans D and E are secured by legal mortgages over the subsidiary’s freehold land and<br />
building.<br />
13. Short term bank loans<br />
These loans are secured by (i) a guarantee of certain shareholders of a subsidiary; and (ii) a<br />
corporate guarantee provided by the Company for the loan taken by a subsidiary, at interest<br />
rates ranging from 3.75% to 7.25% per annum and are repayable within the next twelve<br />
months.<br />
14. Hire purchase liabilities<br />
Minimum payments under hire purchase<br />
Group Company<br />
S$’000 S$’000<br />
— within 1 year 133 121<br />
— within 2 to 5 years 286 247<br />
419 368<br />
Finance charges allocated to future periods (64) (51)<br />
Hire purchase liabilities are classified as follows:−<br />
355 317<br />
— current portion 115 104<br />
— non-current portion 240 213<br />
355 317<br />
15. Provision for pension benefits<br />
This relates to the amount of pension cost provided for in the current financial year for a<br />
subsidiary. This subsidiary has a retirement plan covering all full-time employees beginning<br />
1999. Benefits under the plan are based on length of service and estimated base pay at the<br />
time of retirement.<br />
91
16. Commitments and contingent liabilities<br />
(a) Non-cancellable operating lease commitments<br />
Group Company<br />
S$’000 S$’000<br />
Due within 1 year 9,663 2,206<br />
Due within 2 to 5 years 8,095 1,445<br />
(b) Contingent liabilities, secured<br />
17,758 3,651<br />
Group Company<br />
S$’000 S$’000<br />
Letters of credit 300 300<br />
Bank guarantees 709 509<br />
The details of the securities are disclosed in Note 10.<br />
(c) Options<br />
1,009 809<br />
The Company has been granted options to purchase 100% of <strong>Osim</strong> (USA), Inc., 55% of<br />
<strong>Osim</strong> GHC (Thailand) Co., <strong>Ltd</strong>, 10% of PT Sharon Samaru, 100% of Health Check and<br />
Care (Langfang) Co, <strong>Ltd</strong>, <strong>Osim</strong> (Beijing) Co., <strong>Ltd</strong> and <strong>Osim</strong> GHC (Shanghai) Co., <strong>Ltd</strong> (all<br />
being affiliated companies) at fair market values to be determined and subject to the laws<br />
of the countries of these companies permitting foreign shareholdings in these companies.<br />
17. Subsequent events<br />
Subsequent to 31 December 1999,<br />
(a) the Company entered into an agreement with GBI Realty Pte <strong>Ltd</strong> to purchase a piece of<br />
land and construct a building on a turnkey project basis, at Ubi Avenue 1, Singapore, for<br />
a consideration of S$36,282,540. This building is to be used as the new Group<br />
headquarters.<br />
(b) at an Extraordinary General Meeting held on 26 June 2000, the shareholders of the<br />
Company approved, inter alia, the following:−<br />
(i) the increase in the authorised share capital of the Company from S$5,000,000<br />
comprising 5,000,000 ordinary shares of S$1 each to S$50,000,000 comprising<br />
50,000,000 ordinary shares of S$1 each;<br />
(ii) the capitalisation of S$5,921,000 from the revenue reserves of the Company for a<br />
bonus issue of 5,921,000 ordinary shares of S$1 each in the capital of the<br />
Company, credited as fully paid, to the shareholders of the Company on the basis<br />
of 1,910 new ordinary shares for every 1,000 ordinary shares held;<br />
(iii) the subdivision of each existing ordinary share of S$1 each in the authorised and<br />
issued and paid-up share capital of the Company into 20 ordinary shares of S$0.05<br />
each;<br />
(iv) the conversion of the Company into a public limited company and the change of<br />
the Company’s name to <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong>;<br />
(v) the adoption of a new set of Articles of Association;<br />
(vi) the issue of additional 564,000 new ordinary shares of S$0.05 each to certain<br />
shareholders of <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong> as consideration for the acquisition<br />
of a 10% equity in <strong>Osim</strong> GHC (Taiwan) Co., <strong>Ltd</strong>;<br />
92
(vii) the issue of 11,600,000 new ordinary shares of S$0.05 each to Century Private<br />
Equity Holdings (S) Pte <strong>Ltd</strong> at S$0.47 per share pursuant to the Subscription<br />
Agreement;<br />
(viii) the issue of 38,000,000 new ordinary shares of S$0.05 each pursuant to the<br />
Invitation which when fully paid, alloted and issued, will rank pari-passu in all<br />
respects with the existing issued shares of the Company;<br />
(ix) a shareholders’ mandate authorising <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong> to enter into recurrent<br />
transactions of a revenue and/or trading nature firstly, in the form of sales of the<br />
Company’s products to its affiliated companies, <strong>Osim</strong> GHC (Thailand) Co., <strong>Ltd</strong>,<br />
<strong>Osim</strong> (USA), Inc., PT Sharon Samaru, <strong>Osim</strong> (Beijing) Co., <strong>Ltd</strong>, <strong>Osim</strong> GHC<br />
(Shanghai) Co., <strong>Ltd</strong> and Health Check and Care (Langfang) Co., <strong>Ltd</strong> and secondly,<br />
warehousing and freight forwarding contracts with its affiliated company, <strong>Osim</strong><br />
Distribution Centre Pte <strong>Ltd</strong>;<br />
(x) the <strong>Osim</strong> Share Option Scheme (the ‘‘Scheme’’) and the authorisation of the Board<br />
of Directors to implement and administer the Scheme, to modify and/or amend the<br />
Scheme, to offer and grant options and to allot and issue new shares pursuant to<br />
the exercise of options granted pursuant to the Scheme subject to the rules of the<br />
Scheme; and<br />
(xi) the authorisation of the Directors, pursuant to Section 161 of the Act and the<br />
provisions of the new Articles of Association becoming effective, to allot and issue<br />
such further shares in the Company at any time to such persons, upon such terms<br />
and conditions and for such purposes as the Directors may in their absolute<br />
discretion deem fit provided that the aggregate number of shares to be issued shall<br />
not exceed 50 per cent of the issued share capital of the Company immediately<br />
prior to the proposed issue, provided that the aggregate number of shares to be<br />
issued other than on a pro-rata basis to the then existing shareholders of the<br />
Company shall not exceed 20 per cent of the issued share capital of the Company<br />
immediately prior to the proposed issue, and, unless revoked or varied by the<br />
Company in general meeting, such authority shall continue in force until the<br />
conclusion of the Annual General Meeting of the Company or the date by which the<br />
next Annual General Meeting of the Company is required by law to be held,<br />
whichever is the earlier.<br />
K. NET TANGIBLE ASSET BACKING OF THE PROFORMA GROUP<br />
The net tangible asset backing of the Proforma Group for each ordinary share of S$0.05 each is<br />
based on the statement of net assets of the Proforma Group as at 31 December 1999 and after<br />
taking into account the issue of 11.6 million new ordinary shares of S$0.05 each to Century Private<br />
Equity Holdings (S) Pte <strong>Ltd</strong> and the issue of 38 million New Shares of S$0.05 each, which forms part<br />
of the subject of the Invitation, and the proceeds and estimated expenses in connection therewith.<br />
S$’000<br />
Net tangible assets as at 31 December 1999 10,269<br />
Proceeds from the issue of 11,600,000 new ordinary shares of S$0.05 each at S$0.47<br />
per share to Century Private Equity Holdings (S) Pte <strong>Ltd</strong> pursuant to the Subscription<br />
Agreement 5,452<br />
Proceeds from the issue of 34,200,000 New Shares of S$0.05 each at S$0.52 per share<br />
which forms part of the subject of this Invitation 17,784<br />
Proceeds from the issue of 3,800,000 Reserved Shares of S$0.05 each at S$0.47 per<br />
share which forms part of the subject of this Invitation 1,786<br />
Less: Estimated expenses of the Invitation payable by the Company (1,700)<br />
93<br />
33,591
Number of shares<br />
’000<br />
Issued share capital of 3,100,000 ordinary shares of S$1 each as at 31 December<br />
1999 3,100<br />
Bonus issue of 5,921,000 ordinary shares of S$1 each 5,921<br />
9,021<br />
(a) Subdivision into 180,420,000 ordinary shares of S$0.05 each 180,420<br />
(b) Issue of 564,000 shares of S$0.05 each to certain shareholders of <strong>Osim</strong> GHC<br />
(Taiwan) Co., <strong>Ltd</strong> 564<br />
(c) Issue of 11,600,000 shares of S$0.05 each to Century Private Equity<br />
Holdings (S) Pte <strong>Ltd</strong> pursuant to the Subscription Agreement 11,600<br />
(d) Issue of 38,000,000 New Shares of S$0.05 each which forms part of the<br />
subject of this Invitation 38,000<br />
Issued and paid-up share capital after the Invitation 230,584<br />
Net tangible asset backing per S$0.05 share (in cents) 14.6<br />
L. DIVIDENDS<br />
Dividends declared by the Company and its subsidiaries during the periods under review were as<br />
follows:−<br />
Ordinary dividend<br />
Year ended<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
Gross dividend<br />
per share<br />
Net dividend<br />
S$<br />
31 August 1996 16.67 cents 370,000<br />
31 December 1997 16.67 cents 370,000<br />
31 December 1998 16.13 cents 370,000<br />
31 December 1999 3.23 cents 74,500<br />
No other dividends have been paid or proposed by the Company or its subsidiaries for any of the<br />
periods under review.<br />
M. AUDITED FINANCIAL STATEMENTS<br />
No audited financial statements have been prepared for the Company or its subsidiaries for any<br />
period subsequent to 31 December 1999.<br />
Yours faithfully,<br />
Arthur Andersen<br />
Certified Public Accountants<br />
Singapore<br />
Max Loh Khum Whai<br />
Partner-in-charge<br />
94
GENERAL AND STATUTORY INFORMATION<br />
1. INFORMATION ON THE DIRECTORS AND THE EXECUTIVE OFFICERS<br />
(a) The names, addresses, ages and principal occupations of our Directors and Executive Officers<br />
are set out on pages 54, 57 and 58 of this Prospectus respectively.<br />
(b) The business and working experience of each of our Directors are set out on pages 54 and 55<br />
of this Prospectus.<br />
(c) Our Directors’ interests in the Shares as at the date of this Prospectus, as recorded in the<br />
register required to be kept by the Company under the Act, are set out below:–<br />
— Direct Interest — — Indirect Interest — — Total Interest —<br />
Number of<br />
Shares %<br />
Dr Ron Sim Chye Hock 178,615,800 (2)<br />
Number of<br />
Shares %<br />
92.7 1,804,200 (3)<br />
Teo Sway Heong 1,804,200 0.9 178,615,800 (3)<br />
Teo Chay Lee (1)<br />
Leow Lian Soon (1)<br />
Number of<br />
Shares %<br />
0.9 180,420,000 (2)<br />
92.7 180,420,000 (2)<br />
— — — — — —<br />
— — — — — —<br />
Khor Peng Soon — — — — — —<br />
Michael Kan Yuet Yun (1)<br />
Ong Kian Min (1)<br />
— — — — — —<br />
— — — — — —<br />
Notes:–<br />
(1) Mr Teo Chay Lee and Mr Leow Lian Soon, both executive Directors, have been allocated 500,000 Reserved<br />
Shares each. In addition, Dr Ron Sim Chye Hock has decided to transfer 500,000 Shares out of his own personal<br />
shareholding to each of Mr Teo Chay Lee and Mr Leow Lian Soon as described in note (2) below. Mr Leow Lian<br />
Soon’s wife, Ms Tao Dong Mei, has been allocated 30,000 Reserved Shares. Mr Michael Kan Yuet Yun and Mr<br />
Ong Kian Min, both independent Directors, have been allocated 100,000 Reserved Shares each. The above<br />
executive and independent Directors have no present intention of selling their Reserved Shares within 6 months<br />
after the Invitation.<br />
(2) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo<br />
Chay Lee, Mr Leow Lian Soon, Ms Lim Choon Hui and Mr Chiang See Thong respectively by way of a gift as a<br />
token of his appreciation of their contributions to our Group, such transfers to be completed immediately after the<br />
Invitation is completed.<br />
(3) Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Their indirect interests consist of the<br />
interest of their spouse.<br />
(d) The business and working experience of each of our Executive Officers are set out on<br />
page 58 of this Prospectus.<br />
(e) Save for the service agreements referred to on pages 55 and 56 of this Prospectus, there are<br />
no existing or proposed service contracts between our Directors or Executive Officers and us<br />
which are not determinable by us within one year without the payment of compensation (other<br />
than statutory compensation).<br />
(f) The aggregate remuneration and emoluments (including fees, salaries, bonuses and<br />
commissions) paid to our Directors for services rendered in all capacities to the Company and<br />
its subsidiaries for the financial year ended 31 December 1999 was approximately $1.3 million.<br />
For the current financial year ending 31 December 2000, the estimated amount payable to our<br />
Directors under the arrangements in force as at the date of this Prospectus is approximately<br />
$1.9 million.<br />
95<br />
93.6<br />
93.6
(g) Save as disclosed below, none of our Directors and Executive Officers is or was involved in any<br />
of the following:–<br />
(i) a petition under any bankruptcy laws in any jurisdiction filed against him/her in the last<br />
10 years;<br />
(ii) being a partner in any partnership involved in a petition under any bankruptcy laws in any<br />
jurisdiction filed against the partnership in the last 10 years, while he/she was a partner<br />
of that partnership;<br />
(iii) being a director or executive officer of any corporation involved in a petition under any<br />
bankruptcy laws in any jurisdiction filed against the corporation in the last 10 years, while<br />
he/she was such a director or executive officer;<br />
(iv) having an unsatisfied judgements outstanding against him/her;<br />
(v) convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty<br />
punishable with imprisonment for 3 months or more, or charged for violation of any<br />
securities laws or subject to any such pending criminal proceeding;<br />
(vi) convicted of any offence, in Singapore or elsewhere, involving a breach of any securities<br />
or financial market laws, rules or regulations;<br />
(vii) received any judgement against him/her in any civil proceeding in Singapore or<br />
elsewhere in the last 10 years involving fraud, misrepresentation or dishonesty or is<br />
subject to any such pending civil proceeding;<br />
(viii) convicted in Singapore or elsewhere of any offence in connection with the formation or<br />
management of any corporation;<br />
(ix) disqualified from acting as a director of any company, or from taking part in any way<br />
directly or indirectly in the management of any company;<br />
(x) been subject to any order, judgement or ruling of any court of competent jurisdiction,<br />
tribunal or governmental body permanently or temporarily enjoining him/her from<br />
engaging in any type of business practice or activity; and<br />
(xi) to his/her knowledge, in Singapore or elsewhere, been concerned with the management<br />
or conduct of affairs of any company or partnership which has been investigated by an<br />
inspector appointed under the provisions of the Companies Act, or other securities<br />
enactments or by any other regulatory body in connection with any matter involving the<br />
company partnership occurring or arising during the period when he/she was so<br />
concerned with the company or partnership.<br />
(h) Dr Ron Sim Chye Hock and Ms Teo Sway Heong, who are our Directors and substantial<br />
Shareholders, are husband and wife. Mr Teo Yeong Ann, our Executive Officer is the<br />
brother-in-law of Dr Ron Sim Chye Hock and the brother of Ms Teo Sway Heong. Save as<br />
disclosed, none of our Directors and Executive Officers are related to one another or to any<br />
substantial Shareholder.<br />
(i) No option to subscribe for our Shares or debentures or for shares and debentures of any of our<br />
subsidiaries has been granted to, or has been exercised by, any of our Directors or Executive<br />
Officers within the two years preceding the date of this Prospectus.<br />
(j) Save as disclosed on page 70 of this Prospectus, none of our Directors, Executive Officers or<br />
substantial Shareholders have any interest, direct or indirect, in any company carrying on a<br />
similar trade as the Company or any of its subsidiaries.<br />
96
(k) Save as disclosed on pages 62 and 69 of this Prospectus, none of our Directors or expert are<br />
interested, directly or indirectly, in the promotion of, or in any assets which have, within the two<br />
years preceding the date of this Prospectus, been acquired by or disposed of by or leased to<br />
the Company or any of its subsidiaries, or are proposed to be acquired by or disposed of by or<br />
leased to the Company or any of its subsidiaries. None of our Directors are materially interested<br />
in any contract or arrangement, subsisting at the date of this Prospectus, which is significant in<br />
relation to the business of the Company and its subsidiaries taken as a whole.<br />
(l) There is no shareholding qualification for our Directors in the Articles of Association of the<br />
Company.<br />
(m) The directorships, other than that held in <strong>Osim</strong> (S), of each of our Directors as at 30 June 2000<br />
and for the past five years, and in the case of Dr Ron Sim Chye Hock, to the best of his<br />
knowledge and recollection, are set out below:–<br />
Director Present directorships Past directorships<br />
Dr Ron Sim Chye Hock Group Companies<br />
<strong>Osim</strong> (M’sia)<br />
<strong>Osim</strong> (HK)<br />
<strong>Osim</strong> (Taiwan)<br />
<strong>Osim</strong> (Shanghai)<br />
Other Companies<br />
Global Health Pte <strong>Ltd</strong><br />
Healthcheck & Care Pte <strong>Ltd</strong><br />
Homedics Pte <strong>Ltd</strong><br />
Melbourne Townhouse Pty Limited<br />
<strong>Osim</strong> Distribution Centre (S)<br />
Pte <strong>Ltd</strong><br />
<strong>Osim</strong> Express Singapore Pte <strong>Ltd</strong><br />
<strong>Osim</strong> Investment Pte <strong>Ltd</strong><br />
<strong>Osim</strong> Logistics <strong>International</strong> Pte <strong>Ltd</strong><br />
<strong>Osim</strong> Pte <strong>Ltd</strong><br />
Plasma Precision Technology<br />
Pte <strong>Ltd</strong><br />
R. Sim Holding Pte <strong>Ltd</strong><br />
R. Sim Hotel & Development<br />
Pty <strong>Ltd</strong><br />
Health Check & Care Co., Limited<br />
Asia Growth Company Limited<br />
<strong>Osim</strong> (USA)<br />
<strong>Osim</strong> (Thai)<br />
Health Check & Care Sdn Bhd<br />
Health Check & Care (Australia)<br />
Pty Limited<br />
Mr Teo Chay Lee Other Companies<br />
<strong>Osim</strong> (Thai)<br />
Mr Leow Lian Soon Group Companies<br />
<strong>Osim</strong> (HK)<br />
<strong>Osim</strong> (Shanghai)<br />
97<br />
Other Companies<br />
Shen Property & Investment<br />
Pte <strong>Ltd</strong><br />
Scenic Resorts Pte <strong>Ltd</strong> (formerly<br />
<strong>Osim</strong> Distriplaza Pte <strong>Ltd</strong>)<br />
Health Check & Care (Thailand)<br />
Co., <strong>Ltd</strong>
Director Present directorships Past directorships<br />
Ms Teo Sway Heong Group Companies<br />
<strong>Osim</strong> (Shanghai)<br />
Other Companies<br />
Global Health Pte <strong>Ltd</strong><br />
Healthcheck & Care Pte <strong>Ltd</strong><br />
<strong>Osim</strong> Pte <strong>Ltd</strong><br />
R Sim Holding Pte <strong>Ltd</strong><br />
Mr Khor Peng Soon United Test and Assembly Center<br />
<strong>Ltd</strong><br />
Fibers Technology Corporation<br />
Pte <strong>Ltd</strong><br />
Prosper Development <strong>Ltd</strong> (B.V.I.)<br />
Mr Michael Kan Yuet Yun,<br />
PBM<br />
Other Companies<br />
Millennium Group Limited, HK<br />
Mr Ong Kian Min* Other Companies<br />
ASA Ceramic Limited<br />
GMG Global <strong>Ltd</strong><br />
JIT Holdings Limited<br />
Penguin Boat <strong>International</strong> Limited<br />
Food Empire Holdings Limited<br />
ACE Entrepreneurs & Advisers<br />
Pte <strong>Ltd</strong><br />
AdXplorer Pte <strong>Ltd</strong><br />
BrokersCapital Pte <strong>Ltd</strong><br />
Hwa Ying (Pte.) <strong>Ltd</strong><br />
SB China Holdings Pte <strong>Ltd</strong><br />
Sinor Invest Pte <strong>Ltd</strong><br />
Water Cove Networks (S) Pte <strong>Ltd</strong><br />
Group Companies<br />
<strong>Osim</strong> (HK)<br />
Sembawang Aviation Pte <strong>Ltd</strong><br />
Semair Pte <strong>Ltd</strong><br />
Catic Sembawang Aircraft<br />
Development Pte <strong>Ltd</strong><br />
Asia Pacific Air Cargo Pte <strong>Ltd</strong><br />
Other Companies<br />
Singapore Tobacco Co (Pte) <strong>Ltd</strong><br />
British-American Tobacco Co<br />
(Singapore) <strong>Ltd</strong><br />
Other Companies<br />
MG Logic Pte <strong>Ltd</strong><br />
CH2M Hill Singapore Private<br />
Limited<br />
*Companies in which Mr Ong Kian Min was appointed as director for the purpose of incorporation or as nominee<br />
director only and in the course of his professional practice have not been included.<br />
(n) Save as disclosed below, none of our Executive Officers currently hold or have held any<br />
directorships during the last five years, in any company as at 30 June 2000:–<br />
Executive Officer Present directorships Past directorships<br />
Mr Lim Ching Chye Other Companies<br />
<strong>Osim</strong> (Thai)<br />
Other Companies<br />
Homedics Pte <strong>Ltd</strong><br />
Ms Cha Mui Hwang Nil Other Companies<br />
Fourhin Metal Roofing Pte <strong>Ltd</strong><br />
98
2. SHARE CAPITAL<br />
(a) As at the date of this Prospectus, there is only one class of shares in the capital of the Company.<br />
The rights and privileges attached to the Shares are as stated in the Articles of Association of<br />
the Company. There are no founder, management or deferred shares.<br />
(b) Save as disclosed on pages 23, 25 and 26 of this Prospectus and below, there was no change<br />
in the issued share capital of the Company and its subsidiaries within the two years preceding<br />
the date of this Prospectus:–<br />
Number<br />
of shares<br />
issued<br />
Par<br />
Value<br />
Purpose of<br />
Issue<br />
Date<br />
<strong>Osim</strong> (S)<br />
23 July 1998 100,000 $1 To increase<br />
working capital;<br />
issued for cash<br />
at par value<br />
<strong>Osim</strong> (M’sia)<br />
28 December 1998 499,900 RM1 To acquire entire<br />
assets and<br />
liabilities of<br />
Health Check &<br />
Care Sdn Bhd<br />
<strong>Osim</strong> (HK)<br />
31 December 1999 3,100,000 HK$1 Capitalisation of<br />
director’s loan<br />
<strong>Osim</strong> (Taiwan)<br />
31 December 1998 500,000 NT$10 To acquire entire<br />
assets and<br />
liabilities<br />
of <strong>Osim</strong><br />
<strong>International</strong><br />
Co., <strong>Ltd</strong>.<br />
Resultant<br />
paid-up<br />
capital<br />
Party to<br />
whom shares<br />
were issued<br />
$3,100,000 Dr Ron Sim Chye<br />
Hock<br />
(69,001)<br />
Ms Teo Sway Heong<br />
(30,999)<br />
RM500,000 Health Check &<br />
Care Sdn. Bhd.<br />
HK$4,100,000 Dr Ron Sim Chye<br />
Hock<br />
NT$25,000,000 Shareholders of<br />
<strong>Osim</strong> <strong>International</strong><br />
Co., <strong>Ltd</strong>.<br />
(c) Save as disclosed on pages 25 and 26 of this Prospectus and paragraph 2(b) above, no shares<br />
in or debentures of the Company and its subsidiaries have been issued, or agreed to be issued,<br />
as fully or partly paid-up for cash or for a consideration otherwise than in cash within the two<br />
years preceding the date of this Prospectus.<br />
(d) Save as disclosed under ‘‘<strong>Osim</strong> Share Option Scheme’’ on pages 59 to 61 and 113 to 136 of<br />
this Prospectus, no person has been, or is entitled to be, given an option to subscribe for any<br />
shares in or debentures of the Company or of any of its subsidiaries.<br />
99
3. ARTICLES OF ASSOCIATION<br />
The following provisions in the Articles of Association of the Company relate to our Directors’<br />
remuneration and borrowing powers, restrictions on voting powers of our Directors in interested<br />
transactions, shareholders’ voting rights, consents for variation of class rights and transfer of<br />
shareholdings:−<br />
Director’s remuneration<br />
Article 79<br />
The ordinary fees of the Directors shall from time to time be determined by an Ordinary Resolution<br />
of the Company and shall not be increased except pursuant to an Ordinary Resolution passed at a<br />
General Meeting where notice of the proposed increase shall have been given in the notice<br />
convening the General Meeting and shall (unless such resolution otherwise provides) be divisible<br />
among the Directors as they may agree, or failing agreement, equally, except that any Director who<br />
shall hold office for part only of the period in respect of which such fees is payable shall be entitled<br />
only to rank in such division for a proportion of fees related to the period during which he has held<br />
office.<br />
Article 80<br />
(A) Any Director who holds any executive office, or who serves on any committee of the Directors,<br />
or who otherwise performs services which in the opinion of the Directors are outside the scope<br />
of ordinary duties of a Director, may be paid such extra remuneration by way of salary,<br />
commission or otherwise as the Directors may determine.<br />
(B) The fees (including any remuneration under Article 80(A) above) in the case of a Director other<br />
than an Executive Director shall be payable by a fixed sum and shall not at any time be by<br />
commission on or percentage of the profits or turnover, and no Director whether an Executive<br />
Director or otherwise shall be remunerated by a commission on or percentage of turnover.<br />
Article 81<br />
The Directors may repay to any Director all such reasonable expenses as he may incur in attending<br />
and returning from meetings of the Directors or of any committee of the Directors or General<br />
Meetings or otherwise in or about the business of the Company.<br />
Article 82<br />
The Directors shall have power to pay and agree to pay pensions or other retirement,<br />
superannuation, death or disability benefits to (or to any person in respect of) any Director for the<br />
time being holding any executive office and for the purpose of providing any such pensions or other<br />
benefits to contribute to any scheme or fund or to pay premiums.<br />
Article 83<br />
A Director may be party to or in any way interested in any contract or arrangement or transaction to<br />
which the Company is a party or in which the Company is in any way interested and he may hold and<br />
be remunerated in respect of any office or place of profit other than the office of Auditor of the<br />
Company or any subsidiary thereof) under the Company or any other company in which the<br />
Company is in any way interested and he (or any firm of which he is a member) may act in a<br />
professional capacity for the Company or any such other company and be remunerated therefor and<br />
in any such case as aforesaid (save as otherwise agreed) he may retain for his own absolute use<br />
and benefit all profits and advantages accruing to him thereunder or in consequence thereof.<br />
Article 84<br />
(A) The Directors may from time to time appoint one or more of their body to be the holder of any<br />
executive office (including, where considered appropriate, the office of Chairman or Deputy<br />
Chairman) on such terms and for such period as they may (subject to the provisions of the<br />
Statutes) determine and, without prejudice to the terms of any contract entered into in any<br />
particular case, may at any time revoke any such appointment.<br />
100
(B) The appointment of any Director to the office of Chairman or Deputy Chairman or Managing or<br />
Joint Managing or Deputy or Assistant Managing Director shall automatically determine if he<br />
ceases to be a Director but without prejudice to any claim for damages for breach of any<br />
contract of service between him and the Company.<br />
(C) The appointment of any Director to any other executive office shall not automatically determine<br />
if he ceases from any cause to be a Director, unless the contract or resolution under which he<br />
holds office shall expressly state otherwise, in which event such determination shall be without<br />
prejudice to any claim for damages for breach of any contract of service between him and the<br />
Company.<br />
Article 88<br />
The remuneration of a Managing Director shall from time to time be fixed by the Directors and may,<br />
subject to these presents, be by way of salary or commission or participation in profits or by any or<br />
all these modes but he shall not under any circumstances be remunerated by a commission on or<br />
a percentage of turnover.<br />
Borrowing Powers of Directors<br />
Article 109<br />
Subject as hereinafter provided and to the provisions of the Statutes, the Directors may exercise all<br />
the powers of the Company to borrow money, to mortgage or charge its undertaking, property and<br />
uncalled capital and to issue debentures and other securities, whether outright or as collateral<br />
security for any debt, liability or obligation of the Company or of any third party.<br />
Restrictions on Voting Powers of Directors<br />
Article 102<br />
A Director shall not vote in respect of any contract or proposed contract or arrangement or any other<br />
proposal whatsoever in which he has any personal material interest, directly or indirectly. A Director<br />
shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred<br />
from voting.<br />
Shareholders’ Voting Rights<br />
Article 48<br />
The holders of stock shall, according to the amount of stock held by them, have the same rights,<br />
privileges and advantages as regards dividend, return of capital, voting and other matters, as if they<br />
held the shares from which the stock arose, but no such privilege or advantage (except as regards<br />
participation in the profits or assets of the Company) shall be conferred by an amount of stock which<br />
would not, if existing in shares, have conferred such privilege or advantage; and no such conversion<br />
shall affect or prejudice any preference or other special privileges attached to the shares so<br />
converted.<br />
Article 65<br />
Subject and without prejudice to any special privileges or restrictions as to voting for the time being<br />
attached to any special class of shares for the time being forming part of the capital of the company,<br />
each member entitled to vote may vote in person or by proxy. On a show of hands, every member<br />
who is present in person or by proxy shall have one vote and on a poll, every member who is present<br />
in person or by proxy shall have one vote for every share which he holds or represents. For the<br />
purpose of determining the number of votes which a member, being a Depositor, or his proxy may<br />
cast at any General Meeting on a poll, the reference to shares held or represented shall, in relation<br />
to shares of that Depositor, be the number of shares entered against his name in the Depository<br />
Register as at forty-eight hours before the time of the relevant General Meeting as certified by the<br />
Depository to the Company.<br />
101
Article 66<br />
In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person<br />
or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this<br />
purpose, seniority shall be determined by the order in which the names stand in the Register of<br />
Members or (as the case may be) the Depository Register in respect of the share.<br />
Article 67<br />
Where in Singapore or elsewhere, a receiver or other person (by whatever name called) has been<br />
appointed by any court claiming jurisdiction in that behalf to exercise powers with respect to the<br />
property or affairs of any member on the ground (however formulated) of mental disorder, the<br />
Directors may in their absolute discretion, upon or subject to production of such evidence of the<br />
appointment as the Directors may require, permit such receiver or other person on behalf of such<br />
member to vote in person or by proxy at any General Meeting or to exercise any other right conferred<br />
by membership in relation to meetings of the Company.<br />
Article 68<br />
No member shall, unless the Directors otherwise determine, be entitled in respect of shares held by<br />
him to vote at a General Meeting either personally or by proxy or to exercise any other right conferred<br />
by membership in relation to meetings of the Company if any call or other sum presently payable by<br />
him to the Company in respect of such shares remains unpaid.<br />
Article 69<br />
No objection shall be raised as to the admissibility of any vote except at the meeting or adjourned<br />
meeting at which the vote objected to is or may be given or tendered and every vote not disallowed<br />
at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairman<br />
of the meeting whose decision shall be final and conclusive.<br />
Article 70<br />
On a poll, votes may be given personally or by proxy and a person entitled to more than one vote<br />
need not use all his votes or cast all the votes he uses in the same way.<br />
Article 71<br />
(A) A member may appoint not more than two proxies to attend and vote at the same General<br />
Meeting Provided that if the member is a Depositor, the Company shall be entitled and bound:−<br />
(a) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares<br />
entered against his name in the Depository Register as at forty-eight hours before the time<br />
of the relevant General Meeting as certified by the Depository to the Company; and<br />
(b) to accept as the maximum number of votes which in aggregate the proxy or proxies<br />
appointed by the Depositor is or are able to cast on a poll a number which is the number<br />
of shares entered against the name of that Depositor in the Depository Register as at<br />
forty-eight hours before the time of the relevant General Meeting as certified by the<br />
Depository to the Company, whether that number is greater or smaller than the number<br />
specified in any instrument of proxy executed by or on behalf of that Depositor.<br />
(B) The Company shall be entitled and bound, in determining rights to vote and other matters in<br />
respect of a completed instrument of proxy submitted to it, to have regard to the instructions (if<br />
any) given by and the notes (if any) set out in the instrument of proxy.<br />
(C) In any case where a form of proxy appoints more than one proxy, the proportion of the<br />
shareholding concerned to be represented by each proxy shall be specified in the form of proxy.<br />
(D) A proxy need not be a member of the Company.<br />
102
Article 72<br />
(A) An instrument appointing a proxy shall be in writing in any usual or common form or in any other<br />
form which the Directors may approve and:−<br />
(a) in the case of an individual, shall be signed by the appointor or his attorney; and<br />
(b) in the case of a corporation, shall be either given under its common seal or signed on its<br />
behalf by an attorney or a duly authorised officer of the corporation.<br />
(B) The signature on such instrument need not be witnessed. Where an instrument appointing a<br />
proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly<br />
certified copy thereof must (failing previous registration with the Company) be lodged with the<br />
instrument of proxy pursuant to Article 73, failing which the instrument may be treated as<br />
invalid.<br />
Article 73<br />
An instrument appointing a proxy must be left at such place or one of such places (if any) as may<br />
be specified for that purpose in or by way of note to or in any document accompanying the notice<br />
convening the meeting (or, if no place is so specified, at the Office) not less than forty-eight hours<br />
before the time appointed for the holding of the meeting or adjourned meeting or (in the case of a<br />
poll taken otherwise than at or on the same day as the meeting or adjourned meeting) for the taking<br />
of the poll at which it is to be used, and in default shall not be treated as valid. The instrument shall,<br />
unless the contrary is stated thereon, be valid as well for any adjournment of the meeting as for the<br />
meeting to which it relates; Provided that an instrument of proxy relating to more than one meeting<br />
(including any adjournment thereof) having once been so delivered for the purposes of any meeting<br />
shall not be required again to be delivered for the purposes of any subsequent meeting to which it<br />
relates.<br />
Article 74<br />
An instrument appointing a proxy shall be deemed to include the right to demand or join in<br />
demanding a poll, to move any resolution or amendment thereto and to speak at the meeting.<br />
Article 75<br />
A vote cast by proxy shall not be invalidated by the previous death or insanity of the principal or by<br />
the revocation of the appointment of the proxy or of the authority under which the appointment was<br />
made Provided that no intimation in writing of such death, insanity or revocation shall have been<br />
received by the Company at the Office at least one hour before the commencement of the meeting<br />
or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the<br />
meeting or adjourned meeting) the time appointed for the taking of the poll at which the vote is cast.<br />
Class Rights<br />
Article 4<br />
Subject to the Statutes, no shares may be issued by the Directors without the prior approval of the<br />
Company in General Meeting but subject thereto and to Article 8, and to any special rights attached<br />
to any shares for the time being issued, the Directors may allot or grant options over or otherwise<br />
dispose of the same to such persons on such terms and conditions and for such consideration and<br />
at such time and subject or not to the payment of any part of the amount thereof in cash as the<br />
Directors may think fit, and any shares may be issued with such preferential, deferred, qualified or<br />
special rights, privileges or conditions as the Directors may think fit, and preference shares may be<br />
issued which are or at the option of the Company are liable to be redeemed, the terms and manner<br />
of redemption being determined by the Directors, Provided always that:−<br />
(a) no shares shall be issued to transfer a controlling interest in the Company without the prior<br />
approval of the members in a General Meeting;<br />
(b) no shares shall be issued at a discount except in accordance with the Statutes;<br />
103
(c) (subject to any direction to the contrary that may be given by the Company in a General<br />
Meeting) any issue of shares for cash to members holding shares of any class shall be offered<br />
to such members in proportion as nearly as may be to the number of shares of such class then<br />
held by them and the provisions of the second sentence of Article 8(A) with such adaptations<br />
as are necessary shall apply; and<br />
(d) the rights attaching to shares of a class other than ordinary shares shall be expressed in the<br />
resolution creating the same.<br />
Article 5<br />
(A) In the event of preference shares being issued, the total nominal value of issued preference<br />
shares shall not at any time exceed the total nominal value of the issued ordinary shares and<br />
preference shareholders shall have the same rights as ordinary shareholders as regards<br />
receiving of notices, reports and balance sheets and attending General Meetings of the<br />
Company, and preference shareholders shall also have the right to vote at any meeting<br />
convened for the purpose of reducing the capital or winding-up or sanctioning a sale of the<br />
undertaking of the Company or where the proposal to be submitted to the meeting directly<br />
affects their rights and privileges or when the dividend on the preference shares is more than<br />
six months in arrear.<br />
(B) The Company has power to issue further preference capital ranking equally with, or in priority<br />
to, preference shares already issued.<br />
Variation of Class Rights<br />
Article 6<br />
(A) Whenever the share capital of the Company is divided into different classes of shares, the<br />
special rights attached to any class may, subject to the provisions of the Statutes, be varied or<br />
abrogated either with the consent in writing of the holders of three-quarters in nominal value of<br />
the issued shares of the class or with the sanction of a Special Resolution passed at a separate<br />
General Meeting of the holders of the shares of the class (but not otherwise) and may be so<br />
varied or abrogated either whilst the Company is a going concern or during or in contemplation<br />
of a winding-up. To every such separate General Meeting, all the provisions of these presents<br />
relating to General Meetings of the Company and to the proceedings thereat shall mutatis<br />
mutandis apply, except that the necessary quorum shall be two persons at least holding or<br />
representing by proxy at least one-third in nominal value of the issued shares of the class and<br />
that any holder of shares of the class present in person or by proxy may demand a poll and that<br />
every such holder shall on a poll have one vote for every share of the class held by him,<br />
Provided always that where the necessary majority for such a Special Resolution is not<br />
obtained at such General Meeting, consent in writing if obtained from the holders of<br />
three-quarters in nominal value of the issued shares of the class concerned within two months<br />
of such General Meeting shall be as valid and effectual as a Special Resolution carried at such<br />
General Meeting. The foregoing provisions of this Article shall apply to the variation or<br />
abrogation of the special rights attached to some only of the shares of any class as if each<br />
group of shares of the class differently treated formed a separate class the special rights<br />
whereof are to be varied.<br />
(B) The repayment of preference capital other than redeemable preference capital, or any<br />
alteration of preference shareholders’ rights, may only be made pursuant to a Special<br />
Resolution of the preference shareholders concerned Provided Always that where the<br />
necessary majority for such a Special Resolution is not obtained at the General Meeting,<br />
consent in writing if obtained from the holders of three-fourths of the preference shares<br />
concerned within two months of the General Meeting, shall be as valid and effectual as a<br />
special resolution carried at the General Meeting.<br />
(C) The special rights attached to any class of shares having preferential rights shall not, unless<br />
otherwise expressly provided by the terms of issue thereof, be deemed to be varied by the<br />
creation or issue of further shares ranking as regards participation in the profits or assets of the<br />
Company in some or all respects pari passu therewith but in no respect in priority thereto.<br />
104
Transfer of Shares<br />
Article 36<br />
All transfers of the legal title in shares may be effected by the registered holders thereof by transfer<br />
in writing in the form for the time being approved by any Stock Exchange upon which the Company<br />
may be listed or any other form acceptable to the Directors. The instrument of transfer of any share<br />
shall be signed by or on behalf of both the transferor and the transferee and be witnessed Provided<br />
that an instrument of transfer in respect of which the transferee is the Depository shall be effective<br />
although not signed or witnessed by or on behalf of the Depository. The transferor shall remain the<br />
holder of the shares concerned until the name of the transferee is entered in the Register of<br />
Members in respect thereof.<br />
Article 37<br />
The Register of Members may be closed at such times and for such period as the Directors may from<br />
time to time determine Provided always that such Register shall not be closed for more than thirty<br />
days in any year Provided always that the Company shall give prior notice of such closure as may<br />
be required to any Stock Exchange upon which the Company may be listed, stating the period and<br />
purpose or purposes for which the closure is made.<br />
Article 38<br />
(A) There shall be no restriction on the transfer of fully paid up shares (except where required by<br />
law, the listing rules of any Stock Exchange upon which the shares of the Company may be<br />
listed or the rules and/or bye-laws governing any Stock Exchange upon which the shares of the<br />
Company may be listed) but the Directors may in their discretion decline to register any transfer<br />
of shares upon which the Company has a lien and in the case of shares not fully paid up, may<br />
refuse to register a transfer to a transferee of whom they do not approve Provided always that<br />
in the event of the Directors refusing to register a transfer of shares, they shall within one month<br />
beginning with the day on which the application for a transfer of shares was made, serve a<br />
notice in writing to the applicant stating the facts which are considered to justify the refusal as<br />
required by the Statutes.<br />
(B) The Directors may in their sole discretion refuse to register any instrument of transfer of shares<br />
unless:−<br />
(a) all or any part of the stamp duty (if any) payable on each share certificate and such fee not<br />
exceeding $2 as the Directors may from time to time require pursuant to Article 41, is paid<br />
to the Company in respect thereof;<br />
(b) the instrument of transfer is deposited at the Office or at such other place (if any) as the<br />
Directors may appoint accompanied by the certificates of the shares to which it relates,<br />
and such other evidence as the Directors may reasonably require to show the right of the<br />
transferor to make the transfer and, if the instrument of transfer is executed by some other<br />
person on his behalf, the authority of the person so to do;<br />
(c) the instrument of transfer is in respect of only one class of shares; and<br />
(d) the amount of the proper duty with which each share certificate to be issued in<br />
consequence of the registration of such transfer is chargeable under any law for the time<br />
being in force relating to stamps is tendered.<br />
Article 39<br />
If the Directors refuse to register a transfer of any shares, they shall within one month after the date<br />
on which the transfer was lodged with the Company send to the transferor and the transferee notice<br />
of the refusal as required by the Statutes.<br />
Article 40<br />
All instruments of transfer which are registered may be retained by the Company.<br />
105
Article 41<br />
There shall be paid to the Company in respect of the registration of any instrument of transfer or<br />
probate or letters of administration or certificate of marriage or death or stop notice or power of<br />
attorney or other document relating to or affecting the title to any shares or otherwise for making any<br />
entry in the Register of Members affecting the title to any shares such fee not exceeding $2 as the<br />
Directors may from time to time require or prescribe.<br />
Article 42<br />
The Company shall be entitled to destroy all instruments of transfer which have been registered at<br />
any time after the expiration of six years from the date of registration thereof and all dividend<br />
mandates and notifications of change of address at any time after the expiration of six years from the<br />
date of recording thereof and all share certificates which have been cancelled at any time after the<br />
expiration of six years from the date of the cancellation thereof and it shall conclusively be presumed<br />
in favour of the Company that every entry in the Register of Members purporting to have been made<br />
on the basis of an instrument of transfer or other document so destroyed was duly and properly made<br />
and every instrument of transfer so destroyed was a valid and effective instrument duly and properly<br />
registered and every share certificate duly and properly cancelled and every other document<br />
hereinbefore mentioned so destroyed was a valid and effective document in accordance with the<br />
recorded particulars thereof in the books or records of the Company; Provided always that:−<br />
(a) the provisions aforesaid shall apply only to the destruction of a document in good faith and<br />
without notice of any claim (regardless of the parties thereto) to which the document might be<br />
relevant;<br />
(b) nothing herein contained shall be construed as imposing upon the Company any liability in<br />
respect of the destruction of any such document earlier than as aforesaid or in any other<br />
circumstances which would not attach to the Company in the absence of this Article; and<br />
(c) references herein to the destruction of any document include references to the disposal thereof<br />
in any manner.<br />
Article 47<br />
The holders of stock may transfer the same or any part thereof in the same manner and subject to<br />
the same Articles and subject to which the shares from which the stock arose might previously to<br />
conversion have been transferred (or as near thereto as circumstances admit) but no stock shall be<br />
transferable except in such units (not being greater than the nominal amount of the shares from<br />
which the stock arose) as the Directors may from time to time determine.<br />
4. BANK BORROWINGS<br />
Save as disclosed in the section on ‘‘REVIEW OF FINANCIAL POSITION’’ on pages 47 to 50 of this<br />
Prospectus and in Accountants’ Report on pages 90 and 91 of this Prospectus, we do not have any<br />
bank borrowings at 31 December 1999.<br />
5. WORKING CAPITAL<br />
Our Directors are of the opinion that, after taking into account its existing banking facilities and the<br />
net proceeds of the New Shares, our Group has sufficient working capital for its present operating<br />
requirements.<br />
106
6. UNDERWRITING AND PLACEMENT ARRANGEMENTS<br />
(a) Pursuant to the Management and Underwriting Agreement dated 17 July 2000, OCBC Bank<br />
has agreed to underwrite the Offer Shares for an underwriting commission of 1.5 per cent. of<br />
the Offer Price of the Offer Shares. The underwriting commission will be paid by the Company<br />
and the Vendor in the proportion borne by the number of Offer Shares each has offered<br />
pursuant to the Invitation to the total number of Offer Shares offered pursuant to the Invitation.<br />
In addition, OCBC Bank will receive a fee for its services as Manager in connection with the<br />
Invitation.<br />
(b) Pursuant to the Placement Agreement dated 17 July 2000, OCBC Bank agreed to subscribe for<br />
or purchase, or procure the subscription for or purchase of, the Placement Shares for a<br />
placement commission of 1.5 per cent. of the Placement Price of the Placement Shares, to be<br />
paid by the Company and the Vendor in the proportion borne by the number of Placement<br />
Shares each has offered pursuant to the Invitation to the total number of Placement Shares<br />
offered pursuant to the Invitation. The Placement Price is $0.47 for the Reserved Shares and<br />
$0.52 for the remaining Placement Shares.<br />
(c) Brokerage will be paid by the Company and the Vendor, in the proportion borne by the number<br />
of Invitation Shares each has offered pursuant to the Invitation to the total number of Invitation<br />
Shares offered pursuant to the Invitation, to members of the SGX-ST, merchant banks in<br />
Singapore and members of the Association of Banks in Singapore (including OCBC Bank) in<br />
respect of accepted applications made on Application Forms bearing their respective stamps,<br />
or to Participating Banks in respect of successful applications made through Electronic<br />
Applications at ATMs of the relevant Participating Banks, at the rate of 1.0 per cent. of the Offer<br />
Price for the Offer Shares and at a rate of 1.0 per cent. of the Placement Price for the Placement<br />
Shares.<br />
(d) The Management and Underwriting Agreement may be terminated by OCBC Bank at any time<br />
on or prior to the close of the Application List on the occurrence of certain events including, inter<br />
alia, changes in political, financial, monetary or economic conditions in Singapore or abroad<br />
which result, inter alia, in the Singapore stock market and/or stock market overseas being<br />
materially and adversely affected.<br />
In the event the Management and Underwriting Agreement is terminated for any reason, the<br />
Company and the Vendor reserve the right, at their absolute discretion, to cancel the Invitation.<br />
(e) The Placement Agreement is conditional upon the Management and Underwriting Agreement<br />
not having been terminated or rescinded pursuant to the provisions of the Management and<br />
Underwriting Agreement.<br />
7. CONSENTS<br />
(a) The Auditors and Reporting Accountants have given and have not withdrawn their written<br />
consent to the issue of this Prospectus with the inclusion of the Accountants’ Report and their<br />
name in the form and context in which they are included in this Prospectus and references<br />
thereto in the form and context in which they appear in this Prospectus and to act in such<br />
capacities in relation to this Prospectus.<br />
(b) The Manager, Underwriter and Placement Agent, Solicitors to the Invitation, Principal Bankers<br />
and Share Registrar have each given and have not withdrawn their respective written consents<br />
to the issue of this Prospectus with the inclusion of their respective names and references<br />
thereto in the form and context in which they respectively appear in this Prospectus and to act<br />
in such capacities in relation to this Prospectus.<br />
107
8. MATERIAL CONTRACTS<br />
The dates of, parties to, and general nature of all material contracts, not being contracts our Group<br />
had entered into in the ordinary course of our business, within the two years preceding the date of<br />
issue of this Prospectus are as follows:–<br />
(a) Merger Agreement dated 16 November 1998 between <strong>Osim</strong> (Taiwan) and <strong>Osim</strong> <strong>International</strong><br />
Co., <strong>Ltd</strong>. whereby <strong>Osim</strong> (Taiwan) purchased the entire undertaking of <strong>Osim</strong> <strong>International</strong> Co.,<br />
<strong>Ltd</strong>. and issued 500,000 new shares of par value NT$10 each as consideration;<br />
(b) Reconstruction Agreements dated 9 December 1999, 31 December 1999 and 25 February<br />
2000 between the Company and Dr Ron Sim Chye Hock whereby the Company acquired the<br />
interests of Dr Ron Sim Chye Hock in <strong>Osim</strong> (Taiwan), <strong>Osim</strong> (HK) and <strong>Osim</strong> (M’sia) respectively<br />
as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus and as<br />
amended by the Supplemental Agreement dated 31 March 2000;<br />
(c) Lease Agreement dated 30 December 1999 entered between the Company and <strong>Osim</strong> (Beijing)<br />
whereby the Company leased out its property at 6 Xuanwumenwai Street, Junefield Plaza<br />
Tower 1, 15th Floor, unit 1526 and 1527, Beijing, PRC for a period of 2 years at a monthly rental<br />
of RMB17,000;<br />
(d) Reconstruction Agreement dated 31 December 1999 between the Company and Ms Teo Sway<br />
Heong whereby the Company acquired the interest of Ms Teo Sway Heong in <strong>Osim</strong> (HK) as part<br />
of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus and as amended<br />
by the Supplemental Agreement dated 31 March 2000;<br />
(e) Sale and Purchase Agreement dated 18 February 2000 between the Company and Mr Leow<br />
Lian Soon whereby the Company acquired the interest of Mr Leow Lian Soon in <strong>Osim</strong> (Taiwan)<br />
as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;<br />
(f) Sale and Purchase of Property Agreement dated 3 March 2000 between the Company and Dr<br />
Ron Sim Chye Hock whereby the Company purchased Unit 8C, 1523-2 Dong Fang Road,<br />
Pudong New Development Zone, Shanghai, PRC from Dr Ron Sim Chye Hock for the<br />
consideration of RMB790,000;<br />
(g) Sale and Purchase Agreement dated 20 March 2000 between the Company and Ms Tan Poh<br />
Khim whereby the Company acquired the interest of Ms Tan Poh Khim in <strong>Osim</strong> (HK) as part of<br />
the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;<br />
(h) Joint Venture Agreement dated 24 March 2000 between the Company and Daito Electric<br />
Machine Industry Company Limited to regulate their relationship as shareholders of Daito-<strong>Osim</strong><br />
(Suzhou);<br />
(i) Sale and Purchase Agreement dated 8 May 2000 between the Company and Mr Chen Chuan<br />
I whereby the Company acquired the interest of Mr Chen Chuan I in <strong>Osim</strong> (Taiwan) as part of<br />
the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;<br />
(j) Sale and Purchase Agreement dated 8 May 2000 between the Company and Ms Ho Jui Mei<br />
whereby the Company acquired the interest of Ms Ho Jui Mei in <strong>Osim</strong> (Taiwan) as part of the<br />
Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;<br />
(k) Two Call Option Agreements both dated 8 May 2000 between Dr Ron Sim Chye Hock and the<br />
Company whereby Dr Ron Sim Chye Hock granted the Company call options over his shares<br />
of <strong>Osim</strong> (USA) and <strong>Osim</strong> (Thai) respectively as disclosed on page 65 of this Prospectus;<br />
(l) Call Option Agreement dated 8 May 2000 between Mr Teo Chay Lee and the Company whereby<br />
Mr Teo Chay Lee granted the Company call options over his shares of <strong>Osim</strong> (Thai) as disclosed<br />
on page 65 of this Prospectus;<br />
(m) Call Option Agreement dated 8 May 2000 between Ms Han Shu Nong and the Company<br />
whereby Ms Han Shu Nong granted the Company call options over her shares of HCC<br />
(Langfang) as disclosed on pages 66 and 67 of this Prospectus;<br />
108
(n) Call Option Agreement dated 8 May 2000 between Mr Wang Bang Zhi and the Company<br />
whereby Mr Wang Bang Zhi granted the Company call options over his shares of <strong>Osim</strong> GHC<br />
(SH) as disclosed on pages 66 and 67 of this Prospectus;<br />
(o) Call Option Agreement dated 10 May 2000 between Mr Chandra Makmuri and the Company<br />
whereby Mr Chandra Makmuri granted the Company call options over his shares of PT Sharon<br />
as disclosed on page 66 of this Prospectus;<br />
(p) Sale and Purchase Agreement dated 12 May 2000 between the Company and GBI Realty Pte<br />
<strong>Ltd</strong> whereby the Company purchased from GBI Realty Pte <strong>Ltd</strong> the land at Ubi Avenue 1,<br />
Singapore as disclosed on page 45 of this Prospectus;<br />
(q) Two Call Option Agreements both dated 19 May 2000 between Ms Tao Dong Mei and the<br />
Company whereby Ms Tao Dong Mei granted the Company call options over her shares of<br />
<strong>Osim</strong> GHC (SH) and HCC (Langfang) respectively as disclosed on pages 66 and 67 of this<br />
Prospectus;<br />
(r) Call Option Agreement dated 19 May 2000 between <strong>Osim</strong> GHC (SH) and the Company<br />
whereby <strong>Osim</strong> GHC (SH) granted the Company call options over its shares of <strong>Osim</strong> (Beijing)<br />
as disclosed on pages 66 and 67 of this Prospectus;<br />
(s) Call Option Agreement dated 19 May 2000 between HCC (Langfang) and the Company<br />
whereby HCC (Langfang) granted the Company call options over its shares of <strong>Osim</strong> (Beijing)<br />
as disclosed on pages 66 and 67 of this Prospectus;<br />
(t) Call Option Agreement dated 22 June 2000 between Mr Krit Suktachan and the Company<br />
whereby Mr Krit Suktachan granted the Company call options over his shares of <strong>Osim</strong> (Thai)<br />
as disclosed on page 65 of this Prospectus;<br />
(u) the Subscription Agreement dated 17 July 2000 between the Company, Dr Ron Sim Chye Hock<br />
and Investor;<br />
(v) a depository agreement dated 17 July 2000 between the Company and CDP, pursuant to which<br />
CDP agreed to act as share depository for the Company’s securities traded through the<br />
SGX-ST;<br />
(w) the Management and Underwriting Agreement referred to in paragraph 6 on page 107 of this<br />
Prospectus; and<br />
(x) the Placement Agreement referred to in paragraph 6 on page 107 of this Prospectus.<br />
9. LITIGATION<br />
We are not engaged in any litigation as plaintiff or defendant in respect of any claims or amounts<br />
which are material in the context of the Invitation and our Directors have no knowledge of any<br />
proceedings pending or threatened against ourselves or any facts likely to give rise to any litigation,<br />
claims or proceedings which might materially affect the financial position of our business.<br />
109
10. SUBSTANTIAL SHAREHOLDERS<br />
Our substantial Shareholders and their interests in the Shares as at the date of this Prospectus are<br />
as follows:–<br />
— Direct Interest — — Indirect Interest — — Total Interest —<br />
Number of<br />
Shares %<br />
Ron Sim Chye Hock 178,615,800 (1)<br />
Number of<br />
Shares %<br />
92.7 1,804,200 (2)<br />
Teo Sway Heong 1,804,200 0.9 178,615,800 (1)(2)<br />
Number of<br />
Shares %<br />
0.9 180,420,000 93.6<br />
92.7 180,420,000 93.6<br />
Investor 11,600,000 6.0 — — 11,600,000 6.0<br />
Notes:–<br />
(1) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo Chay<br />
Lee, Mr Leow Lian Soon, Ms Lim Choon Hui and Mr Chiang See Thong respectively by way of a gift as a token of<br />
appreciation of their contributions to our Group, such transfers to be completed immediately after the Invitation is<br />
completed.<br />
(2) Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Their respective deemed interest consists of<br />
their interest in the shares held by the other.<br />
11. MISCELLANEOUS<br />
(a) The nature of our business is set out on pages 29 to 34 of this Prospectus. As at the date of<br />
this Prospectus, all the corporations deemed to be related to us by virtue of Section 6 of the<br />
Act are set out in the Accountants’ Report on page 74 of this Prospectus.<br />
(b) Save as disclosed in this Prospectus, our Directors are not aware of any material information,<br />
including trading factors or risks which is unlikely to be known or anticipated by the general<br />
public and which could materially affect our Group’s profits.<br />
(c) Save as disclosed in this Prospectus, the financial condition and operations of our Group are<br />
not likely to be affected by any of the following:–<br />
(i) known trends, demands, commitments, events or uncertainties that will result in or are<br />
reasonably likely to result in the liquidity of our Group increasing or decreasing in any<br />
material way;<br />
(ii) material commitments for capital expenditure;<br />
(iii) any significant economic changes, unusual or infrequent events or transactions that will<br />
materially affect the amount of reported income from operations; and<br />
(iv) known trends or uncertainties that have had or are expected to have a material<br />
favourable or unfavourable impact on revenues or operating income.<br />
(d) The amount payable on application is $0.52 for each Offer Share and Placement Share and<br />
$0.47 for each Reserved Share. There has been no previous issue of shares by us, or offer<br />
for sale of its shares, to the public within the two years preceding the date of this Prospectus.<br />
(e) Application monies received by us and the Vendor in respect of all applications will be placed<br />
in a separate non-interest bearing account with OCBC Bank (the ‘‘Receiving Bank’’). Any<br />
refund of all or part of the application monies to unsuccessful or partially successful applicants<br />
will be made without interest or any share of such revenue or any benefit arising therefrom.<br />
(f) The estimated amount of the expenses of the Invitation and of the application for the listing,<br />
including underwriting and placement commission, brokerage, management fee and all other<br />
incidental expenses in relation to the Invitation, is approximately $2.0 million. Other than<br />
brokerage, underwriting and placement commission which will be paid by us and the Vendor<br />
in the proportion borne by the number of Invitation Shares each has offered pursuant to the<br />
Invitation to the total number of Invitation Shares offered pursuant to the Invitation, the listing<br />
and other incidental fees payable to the SGX-ST for the listing application, and the expenses<br />
of the Invitation will be paid by us. No preliminary expenses have been incurred or are payable<br />
by any person in relation to this Invitation.<br />
110
(g) No commission, discount or brokerage has been paid or other special terms granted within the<br />
preceding two years or is payable to any of our Directors, promoter, expert, proposed Director<br />
or any other person for subscribing or agreeing to subscribe, or procuring or agreeing to<br />
procure subscription, for any of our Shares or debentures or any shares in or debentures of<br />
any of our subsidiaries.<br />
(h) No amount, benefit, cash or securities has been paid or given within the two years preceding<br />
the date of this Prospectus or is intended to be paid or given to any promoter.<br />
(i) The time of opening of the Application List is 10.00 a.m. on 27 July 2000.<br />
(j) There is no minimum amount which, in the opinion of our Directors, must be raised by the<br />
Invitation in order to provide for the following items:−<br />
(i) the purchase price of any property purchased or to be purchased which is to be defrayed<br />
in whole or in part out of the proceeds of the Invitation;<br />
(ii) any preliminary expenses payable by us and any commission so payable to any person<br />
in consideration of his agreeing to subscribe for, or of his procuring or agreeing to<br />
procure subscriptions for, our Shares;<br />
(iii) the repayment of any money borrowed by us in respect of any of the foregoing matters;<br />
and<br />
(iv) working capital.<br />
Although no minimum amount must be raised from the Invitation in order to provide for the<br />
items set out above, the amount to be provided for those items is proposed to be provided out<br />
of the proceeds of the Invitation and/or out of other sources of funding including banking<br />
facilities and the issuance of securities.<br />
(k) Save as disclosed under ‘‘Use of Proceeds’’ on page 11 of this Prospectus and under ‘‘Future<br />
Plans — New Corporate Headquarters’’ on page 45 of this Prospectus, no property has been<br />
purchased or acquired by us or our subsidiaries or is proposed to be so purchased or acquired<br />
which is to be paid for wholly or partly out of the proceeds of the Invitation or the purchase or<br />
acquisition of which has not been completed at the date of the issue of this Prospectus, other<br />
than property the contract for the purchase or acquisition whereof was entered into in the<br />
ordinary course of our business or the business of our subsidiaries, the contract not being<br />
made in contemplation of the Invitation nor the Invitation in consequence of the contract.<br />
(l) Our Directors currently have no intention of changing the auditors of the various companies in<br />
our Group after the Invitation or appointing another firm of accountants as joint auditors of the<br />
Company or the various companies in our Group.<br />
(m) No Shares or debentures shall be allotted on the basis of this Prospectus later than 6 months<br />
after the date of issue of this Prospectus.<br />
12. STATEMENT BY THE DIRECTORS AND THE VENDOR<br />
This Prospectus has been seen and approved by the Directors and the Vendor and they collectively<br />
and individually accept full responsibility for the accuracy of the information given in this Prospectus<br />
and confirm that, having made all reasonable enquiries, to the best of their knowledge and belief<br />
this Prospectus constitutes a full and true disclosure of all the material facts about the Invitation and<br />
the Group, and the facts stated and opinions expressed in this Prospectus are fair and accurate in<br />
all material respects as at the date hereof and that there are no other material facts the omission<br />
of which would make any statements herein misleading.<br />
111
13. STATEMENT BY THE MANAGER<br />
OCBC Bank, as the Manager, confirms that, to the best of its knowledge and belief and based on<br />
information made available to it by the Group, this Prospectus constitutes a full and true disclosure<br />
of all the material facts about the Invitation and the Group and it is not aware of any other facts, the<br />
omission of which will make any statements herein misleading.<br />
14. DOCUMENTS FOR INSPECTION<br />
Copies of the following documents may be inspected at the registered office of the Company during<br />
normal business hours for a period of six months from the date of this Prospectus:–<br />
(a) the Memorandum and Articles of Association of the Company;<br />
(b) the Directors’ Report as set out on page 71 of this Prospectus;<br />
(c) the Accountants’ Report as set out on pages 72 and 94 of this Prospectus;<br />
(d) the letters of consent referred to in paragraph 7 on page 107 of this Prospectus;<br />
(e) the material contracts referred to in paragraph 8 on pages 108 and 109 of this Prospectus; and<br />
(g) the audited accounts of each company in the Group for each of the last two financial years<br />
ended 31 December 1999.<br />
112
SUMMARY OF THE PRINCIPAL TERMS OF<br />
OSIM SHARE OPTION SCHEME (THE ‘‘SCHEME’’)<br />
APPENDIX A<br />
The following is a summary of the principal terms of the Scheme and is qualified in its entirety by<br />
reference to the rules of the Scheme (the ‘‘Rules’’) as set out on pages 118 to 135. Capitalised terms<br />
used in this summary which are not otherwise defined in this summary bear the same meaning as<br />
ascribed to them in the Rules.<br />
1. Scope<br />
The Scheme covers eligible Employees, Executive and Non-Executive Directors of the Company, its<br />
subsidiaries or associated companies (the ‘‘Group’’) who are Employees (each, a ‘‘Participant’’).<br />
2. Administration<br />
(i) This Scheme shall be administered by the Committee in its absolute discretion with such<br />
powers and duties as are conferred on it by the Board of Directors.<br />
(ii) The Committee shall have the power, from time to time, to make or vary such regulations (not<br />
being inconsistent with this Scheme) for the implementation and administration of this Scheme<br />
as it thinks fit.<br />
(iii) Any decision of the Committee, made pursuant to any provision of this Scheme (other than a<br />
matter to be certified by the Auditors), shall be final and binding (including any decisions<br />
pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or<br />
procedure thereunder or as to any rights under the Scheme).<br />
(iv) A Grantee who is a member of the Committee shall not be involved in its deliberation in respect<br />
of Options to be granted to him.<br />
3. Eligibility<br />
Directors (both Executive and Non-Executive) of the Company, other than Dr Ron Sim Chye Hock<br />
and Ms Teo Sway Heong, and full-time confirmed employees of the Group, who have attained the<br />
age of twenty-one (21) years on or prior to the relevant Offer Date and are not undischarged<br />
bankrupts and who have not entered into a composition with their respective creditors, shall be<br />
eligible to participate in the Scheme, at the absolute discretion of the Committee. The employees<br />
must have been in the full-time service of the Group (as the case may be).<br />
Notwithstanding the above, Controlling Shareholders and their associates are not eligible to<br />
participate in the Scheme.<br />
4. Size of the Scheme<br />
The aggregate nominal amount of Shares over which the Committee may grant Options on any date,<br />
when added to the nominal amount of Shares issued and issuable in respect of all Options granted<br />
under the Scheme, shall not exceed fifteen (15) per cent. of the issued share capital of the Company<br />
on the day preceding that date.<br />
5. Entitlement<br />
Subject to Rule 4 and Rule 10, the aggregate number of Shares in respect of which Options may be<br />
offered to a Participant for subscription in accordance with the Scheme shall be determined at the<br />
discretion of the Committee which shall take into account (where applicable) criteria such as the rank<br />
and responsibilities within the Group, performance, years of service and potential for future<br />
development of the Grantee, and the performance of the Group.<br />
113
6. Grant of Options<br />
The Committee may, save as provided in Rule 4, Rule 5 and Rule 6, offer to grant Options to such<br />
Grantees as it may select in its absolute discretion at any time during the period when the Scheme<br />
is in force, except that no Options shall be granted during the period of 30 days immediately<br />
preceding the date of announcement of the Company’s interim and/or final results (whichever the<br />
case may be). In addition, in the event that an announcement on any matter of an exceptional nature<br />
involving unpublished price sensitive information is made, offers to grant Options may only be made<br />
on or after the third Trading Day on which such announcement is released.<br />
7. Acceptance of Offer<br />
Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged,<br />
transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part<br />
or in any way whatsoever unless approved in writing by the Committee. The grant of an Option by<br />
the Committee to a Grantee shall be accepted within thirty (30) days after the relevant Offer Date.<br />
Upon acceptance of the Option, the Grantee to whom it is granted will pay to the Company a<br />
consideration of S$1.00. Any offer which is not accepted shall, upon the expiry of the thirty (30) days<br />
period, automatically lapse and shall be null and void and of no effect.<br />
8. Exercise Price<br />
(a) Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect of<br />
which an Option is exercisable shall be determined by the Committee at its absolute discretion,<br />
and fixed by the Committee at:–<br />
(i) a price (the ‘‘Market Price’’) equal to the average of the last dealt prices for a Share, as<br />
determined by reference to the Financial News or other publication published by the<br />
SGX-ST for the 3 consecutive trading days immediately preceding the Offering Date of that<br />
Option, rounded up to the nearest whole cent in the event of fractional prices; or<br />
(ii) a price which is set at a discount to the Market Price, provided that:−<br />
(1) the maximum discount shall not exceed 20 per cent. of the Market Price (or such<br />
other percentage or amount as may be determined by the Committee and permitted<br />
by the SGX-ST); and<br />
(2) the Shareholders of the Company in general meeting shall have authorised the<br />
making of offers and grants of Options under the Scheme at a discount not exceeding<br />
the maximum discount as aforesaid.<br />
(b) Where the Exercise Price as determined above is less than the par value of the Share, the<br />
Exercise Price shall be the par value.<br />
9. Alteration of Capital<br />
If a variation in the issued share capital of the Company occurs (whether by way of a capitalisation<br />
of profits or rights issue or reduction (including any reduction arising by reason of the Company<br />
purchasing or acquiring its issued Shares), subdivision or consolidation or distribution or issues for<br />
cash or for shares or otherwise than for cash, or otherwise howsoever), the Exercise Price in respect<br />
of Shares comprised in an Option to the extent unexercised and/or the nominal value, class and/or<br />
number of Shares comprised in an Option to the extent unexercised and the rights attached thereto,<br />
or in respect of which additional Options may be granted to Participants under the Scheme and/or<br />
the maximum entitlement in any Financial Year, may, at the option of the Committee, be adjusted in<br />
such manner as the Committee may determine to be appropriate and, except in relation to a<br />
capitalisation issue, upon the written confirmation of the Auditors (acting only as experts and not as<br />
arbitrators) that in their opinion, such adjustment is fair and reasonable.<br />
114
Provided always no such adjustment shall be made (i) which would result in the Shares to be issued<br />
upon the exercise of an Option being issued at a discount to the nominal value and if such an<br />
adjustment would but for this sub-Clause have so resulted, the Exercise Price payable shall be the<br />
nominal value of a Share, (ii) if, as a result, the number of Shares which a Participant shall be<br />
entitled to subscribe for pursuant to the exercise of Options granted to him shall be reduced and<br />
(iii) unless the Committee after considering all relevant circumstances, considers it equitable to do<br />
so. The issue of securities as consideration for an acquisition of any assets by the Company will not<br />
be regarded as a circumstance requiring adjustment. Additionally, the cancellation of issued Shares<br />
purchased or acquired by the Company during the period when a share purchase mandate (or any<br />
renewal thereof) granted by the Shareholders of the Company is in force by way of a market<br />
purchase of such Shares undertaken by the Company on the SGX-ST shall not normally be<br />
regarded as a circumstance requiring adjustment unless the Committee considers an adjustment<br />
to be appropriate or determines that an adjustment should be made, having regard to market<br />
purchases of Shares undertaken by the Company from time to time during the time the share<br />
purchase mandate (or any renewal thereof) is in force.<br />
10. Option Period<br />
(a) An Option shall only be exercisable, in whole or in part (provided that an Option may be<br />
exercised in part only in respect of 1,000 Shares or any multiple thereof unless the number of<br />
remaining Options held by the Participant correspond to less than 1,000 Shares), at any time,<br />
by a Participant after the first anniversary of the Offer Date during the Option Period, provided<br />
always that Options granted to Executive Directors and other than Employees (other than<br />
Employees of Associated Companies) shall be exercised before the tenth anniversary of the<br />
relevant Offer Date and Options granted to Non-Executive Directors or to Employees of<br />
Associated Companies shall be exercised before the fifth anniversary of the relevant Offer<br />
Date, or such earlier date as may be determined by the Committee, failing which all<br />
unexercised Options shall immediately lapse and become null and void and a Participant shall<br />
have no claim against the Company.<br />
(b) In respect of Options with the Exercise Price set at a discount to Market Price, subject to the<br />
condition that no Options shall be exercisable prior to the second anniversary of the Offer Date<br />
of that Option, the Options granted to Executive Directors and other than Employees (other<br />
than Employees of Associated Companies) shall be exercisable on such terms as may be<br />
determined by the Committee, provided always that all the Options shall be exercised before<br />
the tenth anniversary of the relevant Offer Date and Options granted to Non-Executive<br />
Directors or Employees of Associated Companies shall be exercised before the fifth<br />
anniversary of the relevant Offer Date, or such earlier date as may be determined by the<br />
Committee, failing which all unexercised Options shall immediately lapse and become null and<br />
void and a Participant shall have no claim against the Company.<br />
(c) Special provisions deal with the lapse or earlier exercise of Options in circumstances which<br />
include:−<br />
(i) the termination of the Employee’s employment;<br />
(ii) the bankruptcy of the Grantee or the entering into a composition with the Grantee’s<br />
creditors;<br />
(iii) the termination of an Executive Director’s employment;<br />
(iv) the misconduct of the Grantee;<br />
(v) the death of the Grantee;<br />
(vi) a take-over of the Company;<br />
(vii) the winding up of the Company;<br />
(viii) the reconstruction of the Company; and<br />
(ix) the amalgamation of the Company with another company.<br />
115
11. Rights of New Shares<br />
Shares which are allotted on the exercise of an Option by a Grantee shall be issued, as the Grantee<br />
may elect, in the name of CDP to the credit of the securities account of the Grantee maintained with<br />
CDP or the Grantee’s securities sub-account with a CDP Depository Agent or in the name of the<br />
Grantee.<br />
Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the<br />
Memorandum and Articles of Association of the Company and shall rank pari passu in all respects<br />
with the then existing issued Shares in the capital of the Company except for any dividends, rights,<br />
allotments or other distributions, the record date of which is prior to the date on which such an<br />
Option is exercised. For this purpose, ‘‘record date’’ means the date as at the close of business on<br />
which Shareholders must be registered in order to participate in any dividends, rights, allotments<br />
or other distributions (as the case may be).<br />
12. Alterations and Modifications to the Scheme<br />
Subject to the approval of the SGX-ST (and any other stock exchange on which the Shares may<br />
be listed or quoted) and such other regulatory authorities as may be necessary, the provisions of<br />
the Scheme may be amended from time to time by a resolution of the Committee provided that any<br />
amendment which shall alter adversely the rights attached to any Option and which (in the opinion<br />
of the Committee) materially alters the rights attached to the Options granted prior to such<br />
amendment shall only be effected, with the consent in writing of such number of Participants who,<br />
if they exercised their Options in full, would thereby become entitled to not less than three-quarters<br />
( 3 ⁄ 4) in nominal amount of all the Shares which would have to be issued and allotted upon the<br />
exercise in full of all outstanding Options, nor shall any modification or alteration be made to the<br />
advantage of Participants except with the prior approval of Shareholders at a general meeting<br />
provided always the Committee may at any time by resolution (and without any other formality, save<br />
for the prior approval of the SGX-ST) amend or alter the Scheme in any way to the extent<br />
necessary to cause the Scheme to comply with any statutory provision or the provisions or the<br />
regulations of any regulatory or other relevant authority or body (including the SGX-ST).<br />
13. Duration of the Scheme<br />
The Scheme shall continue to be in force at the discretion of the Committee, subject to a maximum<br />
period of ten years, commencing on the date on which the Scheme is adopted by Shareholders in<br />
the Extraordinary General Meeting. Subject to compliance with any applicable laws and regulations<br />
in Singapore, the Scheme may be continued beyond the above-stipulated period with the approval<br />
of the Shareholders in a general meeting and of any relevant authorities which may then be<br />
required.<br />
14. Disclosure in Annual Report<br />
The Company shall make the following disclosure in its annual report:−<br />
(a) The names of the members of the Committee;<br />
(b) The information required in the table below for the following Participants:–<br />
(i) Directors of the Company;<br />
(ii) Participants, other than those in sub-paragraph (b)(i) and (ii) above, who receive five (5)<br />
per cent. or more of the total number of Options available under the Scheme; and<br />
116
(iii) The number and proportion of options granted at a discount of less than 10% and<br />
options granted at a discount of more than 10% during the financial year under review:−<br />
Name of<br />
Participant<br />
Options<br />
granted<br />
during<br />
financial year<br />
under review<br />
(including<br />
terms)<br />
Aggregate<br />
Options granted<br />
since<br />
commencement<br />
of Scheme to<br />
end of financial<br />
year under<br />
review<br />
117<br />
Aggregate<br />
Options<br />
exercised since<br />
commencement<br />
of Scheme to<br />
end of financial<br />
year under<br />
review<br />
Aggregate<br />
Options<br />
outstanding<br />
as at end of<br />
financial year<br />
under review
1. DEFINITIONS<br />
RULES OF THE OSIM SHARE OPTION SCHEME<br />
In this Scheme, unless the context otherwise requires, the following words and expressions shall<br />
have the following meanings:−<br />
‘‘Act’’ The Companies Act, Chapter 50 of Singapore, as amended or<br />
modified from time to time.<br />
‘‘Associated Company’’ A company which the Company has control over and in which at<br />
least twenty (20) per cent. but not more than fifty (50) per cent. of<br />
its shares are held by the Company.<br />
‘‘Auditors’’ The auditors of the Company for the time being.<br />
‘‘Board’’ The Board of Directors of the Company for the time being.<br />
‘‘CDP’’ The Central Depository (Pte) Limited.<br />
‘‘Committee’’ A committee of Directors who is duly authorised and appointed by<br />
the Board pursuant to Rule 15 to administer the Scheme.<br />
‘‘Company’’ <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong>.<br />
‘‘Control’’ The capacity to dominate decision making, directly or indirectly, in<br />
relation to the financial and operating policies of the Company.<br />
‘‘Controlling Shareholder’’ A Shareholder exercising control over the Company and unless<br />
rebutted, a person who controls directly or indirectly a<br />
shareholding of fifteen (15) per cent. or more of the Company’s<br />
issued share capital shall be presumed to be a Controlling<br />
Shareholder of the Company.<br />
‘‘Director’’ A person holding office as a director for the time being of the<br />
Company.<br />
‘‘Employee’’ Any full-time confirmed employee of the Group selected by the<br />
Committee to participate in the Scheme in accordance with Rule<br />
4.<br />
‘‘Executive Director’’ A Director who is a full-time employee of the Company and who<br />
performs an executive function.<br />
‘‘Exercise Price’’ The price at which a Participant shall subscribe for each Share<br />
upon the exercise of an Option, as determined in accordance with<br />
Rule 8, or such adjusted price as may be applicable pursuant to<br />
Rule 9.<br />
‘‘EGM’’ Extraordinary General Meeting.<br />
‘‘Grantee’’ Any Employee or Director of the Company who is eligible to<br />
participate in the Scheme in accordance with Rule 4,<br />
notwithstanding that such Employee or Director of the Company is<br />
a Controlling Shareholder.<br />
‘‘Group’’ The Company, its Subsidiaries and its Associated Companies (as<br />
they may exist from time to time).<br />
‘‘Incentive Option’’ The right to subscribe for Shares granted pursuant to the Scheme<br />
and for the time being subsisting, and in respect of which the<br />
Subscription Price is determined in accordance with Rule 8.1(ii).<br />
‘‘Market Day’’ A day on which the SGX-ST is open for trading of shares.<br />
118
‘‘Market Price Option’’ The right to subscribe for Shares granted pursuant to the Scheme<br />
and for the time being subsisting, and in respect of which the<br />
Subscription Price is determined in accordance with Rule 8.1(i).<br />
‘‘Non-Executive Director’’ A Director who is not an Executive Director.<br />
‘‘Offer Date’’ The date on which an offer to grant an Option is made.<br />
‘‘Option’’ An Incentive Option or a Market Price Option, as the case may be.<br />
‘‘Option Period’’ Subject as provided in Rules 11 and 14, the period for the exercise<br />
of an Option being:−<br />
(a) in the case of a Market Price Option, a period commencing<br />
after the first anniversary of the Offer Date and expiring not<br />
later than the tenth anniversary of such Offer Date, subject to<br />
the provisions of the Act, Rules 10 and 11, any other<br />
applicable law or regulation and any other conditions as may<br />
be introduced by the Committee from time to time; and<br />
(b) in the case of an Incentive Option, a period commencing<br />
after the second anniversary of the Offer Date and expiring<br />
not later than the tenth anniversary of such Offer Date,<br />
subject to the provisions of the Act, Rules 10 and 11, any<br />
other applicable law or regulation and any other conditions<br />
as may be introduced by the Committee from time to time.<br />
provided that where the Option is granted to a Non-Executive<br />
Director or to Employees of Associated Companies, the Option<br />
shall expire not later than the fifth anniversary of the Offer Date.<br />
‘‘Participant’’ A holder of an Option.<br />
‘‘SGX-ST’’ Singapore Exchange Securities Trading Limited.<br />
‘‘Scheme’’ The <strong>Osim</strong> Share Option Scheme as amended from time to time.<br />
‘‘Shares’’ Ordinary shares of S$0.05 each in the capital of the Company.<br />
‘‘Shareholders’’ The registered holders for the time being of the Shares (other than<br />
the CDP) or in the case of Depositors, Depositors who have<br />
Shares entered against their names in the Depository Register.<br />
‘‘Subsidiary’’ A company which is for the time being a subsidiary of the<br />
Company as defined by Section 5 of the Act.<br />
‘‘Trading Day’’ A day on which the Shares are traded on the SGX-ST.<br />
‘‘$’’ or ‘‘S$’’ Singapore dollars.<br />
The terms ‘‘Depositor’’, ‘‘Depository Register’’ and ‘‘Depository Agent’’ shall have the meanings<br />
ascribed to them respectively by Section 130A of the Act.<br />
The terms ‘‘associate’’ shall have the meaning ascribed to it by the Singapore Exchange Securities<br />
Trading Limited Listing Manual which is defined to include an immediate family member (that is, the<br />
spouse, child, adopted child, step-child, sibling or parent) of such director, chief executive officer or<br />
substantial shareholder, the trustees, acting in their capacity as such trustees, of any trust of which<br />
the director, chief executive officer or substantial shareholder or his immediate family is a beneficiary<br />
or, in the case of a discretionary trust, is a discretionary object and any company in which the<br />
director/his immediate family, the chief executive officer/his immediate family or substantial<br />
shareholder/his immediate family has an aggregate interest (directly or indirectly) of 25 per cent. or<br />
more, and, where a substantial shareholder is a corporation, its subsidiary or holding company or<br />
fellow subsidiary or a company in which it and/or they have (directly or indirectly) an interest of 25<br />
per cent or more.<br />
119
Words denoting the singular shall, where applicable, include the plural and vice versa and words<br />
denoting the masculine gender shall, where applicable, include the feminine and neuter gender.<br />
References to persons shall include corporations.<br />
Any reference in the Scheme to any enactment is a reference to that enactment as for the time being<br />
amended or re-enacted. Any word defined under the Act or any statutory modification thereof and<br />
used in this Scheme shall, where applicable, have the same meaning assigned to it under the Act.<br />
Any reference in this Scheme to a time of day shall be a reference to Singapore time unless<br />
otherwise stated.<br />
2. NAME OF THE SCHEME<br />
The Scheme shall be called the ‘‘<strong>Osim</strong> Share Option Scheme’’.<br />
3. OBJECTIVES OF THE SCHEME<br />
It is the Group’s long term objective to pursue continuous growth and expansion in its business and<br />
operations, and it recognises that maintaining an experienced workforce is important towards<br />
achieving such objective. Hence, it is desired that the Company should implement a share option<br />
scheme which gives the Company the flexibility to use share options as a means of promoting long<br />
term staff retention. Such flexibility would include a discretion to offer and grant share options at a<br />
discount to the market price of the Shares.<br />
The Scheme is primarily a share incentive scheme. It recognises the fact that the services of such<br />
Employees and Non-Executive Directors are important to the success and continued well-being of<br />
the Group. Implementation of the Scheme will enable the Company to give recognition to the<br />
contributions made by such Employees and Non-Executive Directors. At the same time, it will give<br />
such Employees and Non-Executive Directors an opportunity to have a direct interest in the<br />
Company at no direct cost to its profitability and will also help to achieve the following positive<br />
objectives:−<br />
(i) to motivate such Employees and Non-Executive Directors to maintain a high level of<br />
performance and contribution;<br />
(ii) to attract and maintain a group of key Employees whose contributions are important to the long<br />
term growth and profitability of the Group; and<br />
(iii) to improve employer and employee relations.<br />
4. ELIGIBILITY<br />
4.1 The employees’ eligibility to participate in the Scheme (including Executive Directors) shall be<br />
at the absolute discretion of the Committee and each Participant shall:−<br />
(a) be confirmed in his/her employment with the Group and not on probation;<br />
(b) have been in the full-time service of the Group;<br />
(c) have attained the age of twenty-one (21) years on or before the Offer Date; and<br />
(d) not be an undischarged bankrupt and must not have entered into a composition with his<br />
creditors.<br />
4.2 Executive Directors (other than Dr Ron Sim Chye Hock) who satisfy the eligibility requirements<br />
in Rule 4.1(a), (b), (c) and (d) shall also be eligible to participate in the Scheme.<br />
4.3 Non-Executive Directors (other than Ms Teo Sway Heong) who satisfy the eligibility criteria in<br />
Rule 4.1(c) and (d) shall also be eligible to participate in the Scheme.<br />
4.4 For the avoidance of doubt, Dr Ron Sim Chye Hock and Ms Teo Sway Heong or any Controlling<br />
Shareholders or their associates shall not be eligible to participate in the Scheme.<br />
120
4.5 Subject to the Act and any requirement of the SGX-ST or any other stock exchange on which<br />
the Shares may be listed or quoted, the terms of eligibility for participation in the Scheme may<br />
be amended from time to time at the absolute discretion of the Committee.<br />
5. LIMITATIONS UNDER THE SCHEME<br />
5.1 The aggregate number of Shares over which the Committee may grant Options on any date,<br />
when added to the number of Shares issued and issuable in respect of all Options granted<br />
under this Scheme, shall not exceed fifteen (15) per cent. of the issued share capital of the<br />
Company on the day immediately preceding the Offer Date of the Option.<br />
5.2 The number of Shares comprised in Market Price Options or, as the case may be, Incentive<br />
Options, to be offered to any Employee in accordance with the Scheme shall be determined at<br />
the absolute discretion of the Committee, who shall take into account criteria such as the<br />
position, the past performance, years of service and potential for future development of that<br />
employee, provided that:–<br />
6. OFFER DATE<br />
(a) the aggregate number of Shares which may be offered by way of grant of Options to any<br />
single eligible person under the Scheme shall not exceed 25 per cent. of the total number<br />
of Shares available under the Scheme; and<br />
(b) the aggregate number of Shares which may be offered by way of grant of Options in any<br />
single financial year under the Scheme shall not exceed 25 per cent. of the total number<br />
of Shares available under the Scheme (the ‘‘Annual Quota’’), Provided That in the event<br />
that the Annual Quota is not exceeded in any single financial year, Annual Quota for the<br />
following financial year shall be increased by the unused portion of the Annual Quota for<br />
the first-mentioned financial year.<br />
6.1 The Committee may, subject as provided in Rule 4 and Rule 5, offer to grant Options to such<br />
Grantees as it may select in its absolute discretion at any time during the period when the<br />
Scheme is in force, except that no Options shall be granted during the period of 30 days<br />
immediately preceding the date of announcement of the Company’s interim and/or final results<br />
(whichever the case may be). In addition, in the event that an announcement on any matter of<br />
an exceptional nature involving unpublished price sensitive information is made, offers to grant<br />
Options may only be made after the third Trading Day on which such announcement is<br />
released.<br />
6.2 An offer to grant the Option to a Grantee shall be made by way of a letter (the ‘‘Letter of Offer’’)<br />
in the form or substantially in the form set out in Schedule 1, subject to such modifications as<br />
the Committee may determine from time to time.<br />
7. ACCEPTANCE OF OFFER<br />
7.1 An Option offered to a Grantee pursuant to Rule 6 may only be accepted by the Grantee within<br />
thirty (30) days after the relevant Offer Date and not later than 5.00 p.m. on the thirtieth (30th)<br />
day from such Offer Date (i) by completing, signing and returning to the Company the<br />
Acceptance Form in or substantially in the form set out in Schedule 2, subject to such<br />
modification as the Committee may from time to time determine, accompanied by payment of<br />
S$1.00 as consideration or such other amount and such other documentation as the<br />
Committee may require and (ii) if, at the date on which the Company receives from the Grantee<br />
the Acceptance Form in respect of the Option as aforesaid, he remains eligible to participate<br />
in the Scheme in accordance with these Rules.<br />
7.2 If a grant of an Option is not accepted strictly in the manner as provided in this Rule 7, such<br />
offer shall, upon the expiry of the thirty (30) day period, automatically lapse and shall forthwith<br />
be deemed to be null and void and be of no effect.<br />
121
7.3 The Company shall be entitled to reject any purported acceptance of a grant of an Option made<br />
pursuant to this Rule 7 or Exercise Notice given pursuant to Rule 12 which does not strictly<br />
comply with the terms of the Scheme.<br />
7.4 Options are personal to the Grantees to whom they are granted and shall not be sold,<br />
mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered<br />
in whole or in part or in any way whatsoever without the Committee’s prior written approval, but<br />
may be exercised by the Grantee’s duly appointed personal representative as provided in Rule<br />
11.5 in the event of the death of such Grantee.<br />
7.5 The Grantee may accept or refuse the whole or part of the offer. If only part of the offer is<br />
accepted, the Grantee shall accept the offer in multiples of 1,000 Shares. The Committee shall<br />
within fifteen (15) Market Days of receipt of the Acceptance Form and consideration<br />
acknowledge receipt of the same.<br />
7.6 In the event that a grant of an Option results in a contravention of any applicable law or<br />
regulation, such grant shall be null and void and of no effect and the relevant Participant shall<br />
have no claim whatsoever against the Company.<br />
7.7 Unless the Committee determines otherwise, an Option shall automatically lapse and become<br />
null, void and of no effect and shall not be capable of acceptance if:−<br />
(a) it is not accepted in the manner as provided in Rule 7.1 within the thirty (30) days period;<br />
or<br />
(b) the Participant dies prior to his acceptance of the Option; or<br />
(c) the Participant is adjudicated a bankrupt or enters into a composition with his creditors<br />
prior to his acceptance of the Option; or<br />
(d) the Grantee being an Executive Director or, as the case may be, an Employee, ceases to<br />
be in the employment of the Group or (being a Non-Executive Director) ceases to be a<br />
Director of the Company, in each case, for any reason whatsoever prior to his acceptance<br />
of the Option; or<br />
(e) the Company is liquidated or wound-up prior to the Grantee’s acceptance of the Option.<br />
8. EXERCISE PRICE<br />
8.1 Subject to any adjustment pursuant to Rule 9, the Exercise Price for each Share in respect of<br />
which an Option is exercisable shall be determined by the Committee at its absolute discretion,<br />
and fixed by the Committee at:–<br />
(i) a price (the ‘‘Market Price’’) equal to the average of the last dealt prices for a Share, as<br />
determined by reference to the Financial News or other publication published by the<br />
SGX-ST for the 3 consecutive Trading Days immediately preceding the Offer Date of that<br />
Option, rounded up to the nearest whole cent in the event of fractional prices; or<br />
(ii) a price which is set at a discount to the Market Price, provided that:<br />
(A) the maximum discount shall not exceed 20% of the Market Price (or such other<br />
percentage or amount as may be prescribed or permitted for the time being by the<br />
SGX-ST); and<br />
(B) the Shareholders of the Company in general meeting shall have authorised the<br />
making of offers and grants of Options under the Scheme at a discount not<br />
exceeding the maximum discount as aforesaid.<br />
8.2 Where the Exercise Price as determined above is less than the par value of the Share, the<br />
Exercise Price shall be the par value.<br />
122
9. VARIATION OF CAPITAL<br />
9.1 If a variation in the issued ordinary share capital of the Company (whether by way of a<br />
capitalisation of profits or reserves or rights issue, reduction, sub-division or consolidation) shall<br />
take place, then:–<br />
(a) the Subscription Price for the Shares; and/or the nominal value, class and/or number of<br />
Shares comprised in the Option to the extent unexercised and the rights attached thereto;<br />
and/or<br />
(b) the nominal value, class and/or number of Shares over which additional Options may be<br />
granted under the Scheme,<br />
shall be adjusted in such manner as the Committee may determine to be appropriate and<br />
except in relation to a capitalisation issue, upon the written confirmation by the Auditors (acting<br />
only as experts and not as arbitrators), that in their opinion, such adjustment is fair and<br />
reasonable.<br />
9.2 Notwithstanding the provisions of Rule 9.1, no such adjustment shall be made:–<br />
(a) if as a result, the Subscription Price shall fall below the nominal value of a Share and if<br />
such adjustment would but for this paragraph (a) result in the Subscription Price being<br />
less than the nominal value of a Share, the Subscription Price payable shall be the<br />
nominal value of a Share; and<br />
(b) unless the Committee after considering all relevant circumstances, considers it equitable<br />
to do so.<br />
9.3 The following (whether singly or in combination) shall not be regarded as events requiring<br />
adjustment:–<br />
(a) any issue of securities as consideration for or in connection with an acquisition or a private<br />
placement of securities;<br />
(b) any increase in the number of issued Shares as a consequence of the exercise of options<br />
or other convertibles issued from time to time by the Company entitling holders thereof to<br />
acquire new Shares in the capital of the Company (including the exercise of any Options<br />
granted pursuant to the Scheme and any previous scheme(s)); and<br />
(c) any reduction in the number of issued Shares as a result of the cancellation of issued<br />
Shares purchased by the Company by way of market purchase(s) effected on the SGX-ST<br />
pursuant to a share purchase mandate (or any renewal thereof) given by the shareholders<br />
of the Company in general meeting and for the time being in force.<br />
9.4 Upon any adjustment required to be made pursuant to this Rule, the Company shall notify the<br />
Participant (or his duly appointed personal representatives, where applicable) in writing and<br />
deliver to him (or his duly appointed personal representatives, where applicable) a statement<br />
setting forth the Subscription Price thereafter in effect and the nominal value, class and/or<br />
number of Shares thereafter to be issued on the exercise of the Option. Any adjustment shall<br />
take effect upon such written notification being given.<br />
9.5 The restriction on the number of Shares to be offered to any Grantee under Rule 5 above, shall<br />
not apply to the number of additional Shares or Options over additional Shares issued by virtue<br />
of any adjustment to the number of Shares and/or Options pursuant to this Rule 9.<br />
9.6 Upon any adjustment required to be made, the Company shall notify each Participant (or his<br />
duly appointed personal representative(s)) in writing and deliver to him (or his duly appointed<br />
personal representative(s)) a statement setting forth the new Exercise Price thereafter in effect<br />
and the nominal value, class and/or number of Shares thereafter comprised in the Option so<br />
far as unexercised and the maximum entitlement in any one financial year.<br />
123
10. TAKE-OVER AND WINDING-UP OF THE COMPANY<br />
10.1 In the event of a take-over offer being made for the Company, Participants (including<br />
Participants holding Options which are then not exercisable pursuant to the provisions of<br />
Rule 11.1) holding Options as yet unexercised shall, notwithstanding Rule 11 and 12 but<br />
subject to Rule 10.5, be entitled to exercise such Options in full or in part in the period<br />
commencing on the date on which such offer is made or, if such offer is conditional, the date<br />
on which the offer becomes or is declared unconditional, as the case may be, and ending on<br />
the earlier of:−<br />
(a) the expiry of six (6) months thereafter, unless prior to the expiry of such six (6) month<br />
period, at the recommendation of the offeror and with the approvals of the Committee<br />
and the SGX-ST, such expiry date is extended to a later date (being a date falling not<br />
later than the date of expiry of the Option Period relating thereto); or<br />
(b) the date of the expiry of the Option Period relating thereto,<br />
whereupon any option then remaining unexercised shall immediately lapse and become null<br />
and void, provided always that if during such period the offeror becomes entitled or bound<br />
to exercise the rights of compulsory acquisition of the Shares under Section 215 of the Act<br />
and, being entitled to do so, gives notice to the Participants that it intends to exercise such<br />
rights on a specified date, the Option shall remain exercisable by the Participants until the<br />
specified date or the expiry of the Option Period relating thereto, whichever is earlier. Any<br />
Option not so exercised by the said specified date shall lapse and become null and void<br />
provided that the rights of acquisition or obligation to acquire stated in the notice shall have<br />
been exercised or performed, as the case may be. If such rights of acquisition or obligations<br />
have not been exercised or performed, all Options shall subject to Rule 11.2 remain<br />
exercisable until the expiry of the Option Period.<br />
For the avoidance of doubt, the provisions of this Rule 10.1 shall not come into operation in<br />
the event that a take-over offer which is conditional does not become or is not declared<br />
unconditional.<br />
10.2 If under the Act the court sanctions a compromise or arrangement proposed for the purposes<br />
of, or in connection with, a scheme for the reconstruction of the Company or its<br />
amalgamation with another company or companies, Participants (including Participants<br />
holding Options which are then not exercisable pursuant to the provisions of Rule 11.1) shall<br />
be entitled, notwithstanding Rule 11 and Rule 12 but subject to Rule 10.5, to exercise any<br />
Option then held by them during the period commencing on the date upon which the<br />
compromise or arrangement is sanctioned by the court and ending either on the expiry of<br />
ninety (90) days thereafter or the date upon which the compromise or arrangement becomes<br />
effective, whichever is later (but not after the expiry of the Option Period relating thereto),<br />
whereupon any unexercised Option shall lapse and become null and void, provided always<br />
that the date of exercise of any Option shall be before the tenth anniversary of the Offer<br />
Date.<br />
10.3 If an order or an effective resolution is passed for the winding up of the Company on the<br />
basis of its insolvency, all Options, to the extent unexercised, shall lapse and become null<br />
and void.<br />
10.4 In the event of a members’ solvent voluntary winding up (other than for amalgamation or<br />
reconstruction), Participants (including Participants holding Options which are then not<br />
exercisable pursuant to the provisions of Rule 11.1) shall, subject to Rule 10.5, be entitled<br />
within ninety (90) days of the passing of the resolution of such winding up (but not after the<br />
expiry of the Option Period relating thereto) to exercise in full any unexercised Option, after<br />
which such unexercised Option shall lapse and become null and void.<br />
124
10.5 If in connection with the making of a general offer referred to in Rule 10.1 above or the<br />
scheme referred to in Rule 10.2 above or the winding up referred to in Rule 10.3 and 10.4<br />
above, arrangements are made (which are confirmed in writing by the Auditors, acting only<br />
as experts and not as arbitrators, to be fair and reasonable) for the compensation of<br />
Participants, whether by the continuation of their Options or the payment of cash or the grant<br />
of other options or otherwise, a Participant holding an Option, which is not then exercisable,<br />
may not, at the discretion of the Committee, be permitted to exercise that Option as provided<br />
for in this Rule 10.<br />
10.6 To the extent that an Option is not exercised within the periods referred to in this Rule 10,<br />
it shall lapse and become null and void.<br />
11. OPTION PERIOD<br />
11.1 An Option shall only be exercisable, in whole or in part (provided that an Option may be<br />
exercised in part only in respect of 1,000 shares or any multiple thereof unless the number<br />
of remaining Options held by the Participant correspond to less than 1,000 Shares), at any<br />
time, by a Participant after the first anniversary of the Offer Date during the Option Period (or,<br />
in the case of Options with the Exercise Price set at a discount to Market Price, after the<br />
second anniversary of the Offer Date during the Option Period) provided always that Options<br />
granted to Executive Directors and other than Employees (other than Employees of<br />
Associated Companies) shall be exercised before the tenth anniversary of the relevant Offer<br />
Date and Options granted to Non-Executive Directors or to Employees of Associated<br />
Companies shall be exercised before the fifth anniversary of the relevant Offer Date, or such<br />
earlier date as may be determined by the Committee, failing which all unexercised Options<br />
shall immediately lapse and become null and void and a Participant shall have no claim<br />
against the Company.<br />
11.2 An Option shall, to the extent unexercised, immediately lapse and become null and void and<br />
a Participant shall have no claim against the Company:−<br />
(a) subject to Rules 11.2, 11.3 and 11.4, upon the Participant ceasing to be in full-time<br />
employment of the Company or any of the companies within the Group for any reason<br />
whatsoever; or<br />
(b) upon the bankruptcy of the Participant or the happening of any other event which result<br />
in his being deprived of the legal or beneficial ownership of such Option; or<br />
(c) in the event of misconduct on the part of the Participant, as determined by the<br />
Committee in its absolute discretion.<br />
For the purpose of Rule 11.2(a), a Participant shall be deemed to have ceased to be so<br />
employed as of the date the notice of termination of employment is tendered by or is given<br />
to him, unless such notice shall be withdrawn prior to its effective date.<br />
11.3 If a Participant ceases to be employed by the Group by reason of his:−<br />
(a) ill health, injury or disability as certified by a medical practitioner approved by the<br />
Committee;<br />
(b) redundancy;<br />
(c) retirement at or after a normal retirement age; or<br />
(d) retirement before that age with the consent of the Committee,<br />
or for any other reason approved in writing by the Committee, he may, at the absolute<br />
discretion of the Committee exercise any unexercised Option within the relevant Option<br />
Period and upon the expiry of such period, the Option shall immediately lapse and become<br />
null and void.<br />
125
11.4 If a Participant ceases to be employed by a Subsidiary or an Associated Company:−<br />
(a) by reason of the Subsidiary or the Associated Company, as the case may be, by which<br />
he is principally employed ceasing to be a company within the Group or the undertaking<br />
or part of the undertaking of such Subsidiary or Associated Company, as the case may<br />
be, being transferred otherwise than to another company within the Group; or<br />
(b) for any other reason, provided the Committee gives its consent in writing,<br />
he may, at the absolute discretion of the Committee, exercise any unexercised Options<br />
within the relevant Option Period and upon the expiry of such period, the Option shall<br />
immediately lapse and become null and void.<br />
11.5 If a Participant dies and at the date of his death holds any unexercised Option, such Option<br />
may, at the absolute discretion of the Committee, be exercised by the duly appointed legal<br />
personal representatives of the Participant within the relevant Option Period and upon the<br />
expiry of such period, the Option shall immediately lapse and become null and void.<br />
12. EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES<br />
12.1 An Option may be exercised, in whole or in part (provided that an Option may be exercised<br />
in part only in respect of 1,000 Shares or any multiple thereof), by a Participant giving notice<br />
in writing to the Company in or substantially in the form set out in Schedule 3 (the ‘‘Exercise<br />
Notice’’), subject to such modifications as the Committee may from time to time determine.<br />
Every Exercise Notice must be accompanied by a remittance for the full amount of the<br />
aggregate Exercise Price in respect of the Shares which have been exercised under the<br />
Option, the relevant CDP charges (if any) and any other documentation the Committee may<br />
require. All payment shall be made by cheque, cashier’s order, bank draft or postal order<br />
made out in favour of the Company. An Option shall be deemed to be exercised upon the<br />
receipt by the Company of the said notice duly completed and the receipt by the Company<br />
of the full amount of the aggregate Exercise Price in respect of the Shares which have been<br />
exercised under the Option.<br />
12.2 Subject to:–<br />
(a) such consents or other actions required by any competent authority under any<br />
regulation or enactment for the time being in force as may be necessary (including any<br />
approvals required from the SGX-ST); and<br />
(b) compliance with the Rules of the Scheme and the Memorandum and Articles of<br />
Association of the Company,<br />
the Company shall, as soon as practicable after the exercise of an Option by a Participant<br />
but in any event within ten (10) Market Days after the date of the exercise of the Option in<br />
accordance with Rule 12.1, allot the Shares in respect of which such Option has been<br />
exercised by the Participant and within five (5) Market Days from the date of such allotment,<br />
despatch the relevant share certificates to the Participant or CDP for the credit of the<br />
securities account of that Participant (as the case may be) by ordinary post or such other<br />
mode of delivery as the Committee may deem fit.<br />
12.3 The Company shall as soon as practicable after the exercise of an Option, apply to the<br />
SGX-ST or any other stock exchange on which the Shares are quoted or listed for<br />
permission to deal in and for quotation of the Shares which may be issued upon exercise of<br />
the Option and the Shares (if any) which may be issued to the Participant pursuant to any<br />
adjustments made in accordance with Rule 9.<br />
12.4 Shares which are all allotted on the exercise of an Option by a Participant shall be issued,<br />
as the Participant may elect, in the name of CDP to the credit of the securities account of the<br />
Participant maintained with CDP or the Participant’s securities sub-account with a CDP<br />
Depository Agent or in the name of the Participant.<br />
126
12.5 Shares allotted and issued upon the exercise of an Option shall be subject to all provisions<br />
of the Memorandum and Articles of Association of the Company and shall rank pari passu<br />
in all respects with the then existing issued Shares in the capital of the Company except for<br />
any dividends, rights, allotments or other distributions, the record date of which is prior to the<br />
date such Option is exercised. For this purpose, ‘‘record date’’ means the date as at the<br />
close of business on which Shareholders must be registered in order to participate in any<br />
dividends, rights, allotments or other distributions (as the case may be).<br />
12.6 Except as set out in Rule 12.2 and subject to Rule 9, an Option does not confer on a<br />
Participant any right to participate in any new issue of Shares.<br />
12.7 The Company shall keep available sufficient unissued Shares to satisfy the full exercise of<br />
all Options for the time being remaining capable of being exercised, provided that such<br />
Shares set apart shall not exceed fifteen (15) per cent. of the total issued capital of the<br />
Company.<br />
13. ALTERATIONS AND MODIFICATIONS TO THE SCHEME<br />
13.1 Any or all of the provisions of the Scheme may be modified and/or altered at any time and<br />
from time to time by resolution of the Committee except that:–<br />
(a) no modification or alteration shall alter adversely the rights attaching to any Option<br />
granted prior to such modification or alteration except with the consent in writing of such<br />
number of Participants who, if they exercised their Options in full, would thereby<br />
become entitled to not less than three-quarters ( 3 ⁄ 4) in nominal amount of all the Shares<br />
which would fall to be issued and allotted upon exercise in full of all outstanding<br />
Options;<br />
(b) the definitions of ‘‘Director’’, ‘‘Employee’’, ‘‘Group’’ and ‘‘Option Period’’ and the<br />
provisions of Rules 4, 5, 7.1, 8.1, 11.1, 12.5, 15 and this Rule shall not be altered or<br />
modified to the advantage of Participants under the Scheme except with the prior<br />
approval of Shareholders at a general meeting; and<br />
(c) no modification or alteration shall be made without the prior approval of the SGX-ST or<br />
(if required) any other stock exchange on which the Shares are quoted or listed, and<br />
such other regulatory authorities as may be necessary.<br />
13.2 Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any<br />
time by resolution (and without any other formality save for the prior approval of the SGX-ST)<br />
amend or alter the Scheme in any way to the extent necessary to cause the Scheme to<br />
comply with any statutory provision or the provisions or the regulations of any regulatory or<br />
other relevant authority or body (including the SGX-ST).<br />
13.3 Written notice of any modification or alteration made in accordance with this Rule shall be<br />
given to all Participants.<br />
14. DURATION OF THE SCHEME<br />
14.1 The Scheme shall continue to be in force at the discretion of the Committee, subject to a<br />
maximum period of ten (10) years, commencing on the date on which the Scheme is<br />
adopted by Shareholders in the Extraordinary General Meeting. Subject to compliance with<br />
any applicable laws and regulations in Singapore, the Scheme may be continued beyond the<br />
above stipulated period with the approval of the Shareholders by ordinary resolution at a<br />
general meeting and of any relevant authorities which may then be required.<br />
14.2 The Scheme may be terminated at any time by the Committee or by resolution of the<br />
Shareholders at a general meeting subject to all other relevant approvals which may be<br />
required and if the Scheme is so terminated, no further Options shall be offered by the<br />
Company hereunder, but the provisions of the Scheme shall, in relation to the Options then<br />
subsisting, remain in full force and effect.<br />
127
14.3 The termination, discontinuance or expiry of the Scheme shall be without prejudice to the<br />
rights accrued to Options which have been granted and accepted as provided in Rule 8,<br />
whether such Options have been exercised (whether fully or partially) or not.<br />
15. ADMINISTRATION OF THE SCHEME<br />
15.1 This Scheme shall be administered by the Committee in its absolute discretion with such<br />
powers and duties as are conferred on it by the Board of Directors.<br />
15.2 The Committee shall have the power, from time to time, to make or vary such regulations<br />
(not being inconsistent with this Scheme) for the implementation and administration of this<br />
Scheme as it thinks fit.<br />
15.3 Any decision of the Committee, made pursuant to any provision of this Scheme (other than<br />
a matter to be certified by the Auditors), shall be final and binding (including any decisions<br />
pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or<br />
procedure thereunder or as to any rights under this Scheme).<br />
15.4 A Participant who is a member of the Committee shall not be involved in its deliberation in<br />
respect of Options to be granted to him.<br />
16. NOTICES<br />
16.1 Any notice given by a Participant to the Company shall be sent by post or delivered to the<br />
registered office of the Company or such other address as may be notified by the Company<br />
to the Participant in writing.<br />
16.2 Any notice given by the Company to a Participant shall be sent to the Participant by post to<br />
his address stated in the records of the Company and, if sent by post, shall be deemed to<br />
have been given on the day immediately following the date of posting.<br />
17. TERMS OF EMPLOYMENT UNAFFECTED<br />
17.1 This Scheme or any Option shall not form part of any contract of employment between the<br />
Company, any Subsidiary and/or Associated Company and any Participant and the rights<br />
and obligations of any individual under the terms of the office or employment with such<br />
company within the Group shall not be affected by his participation in this Scheme or any<br />
right which he may have to participate in it or any Option which he may hold and this Scheme<br />
or any Option shall afford such an individual no additional rights to compensation or<br />
damages in consequence of the termination of such office or employment for any reason<br />
whatsoever.<br />
17.2 This Scheme shall not confer on any person any legal or equitable rights (other than those<br />
constituting the Options themselves) against the Company, any Subsidiary or Associated<br />
Company directly or indirectly or give rise to any cause of action at law or in equity against<br />
the Company, any Subsidiary and/or any Associated Company.<br />
18. NON-ASSIGNABILITY OF OPTIONS<br />
An Option shall be personal to the Participant to whom it is granted and save as provided in<br />
Rule 11, the Participant shall not transfer or assign to any other person, or create any charge, lien<br />
or other encumbrance whatsoever on or over the Option or any part thereof.<br />
19. TAXES<br />
All taxes (including income tax) arising from the exercise of any Option granted to any Participant<br />
under the Scheme shall be borne by the Participant.<br />
128
20. COSTS AND EXPENSES OF THE SCHEME<br />
20.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the<br />
issue and allotment of any Shares pursuant to the exercise of any Option in CDP’s name,<br />
the deposit of share certificate(s) with CDP, the Participant’s security account with CDP or<br />
the Participant’s securities sub-account with his Depository Agent and all taxes referred to<br />
in Rule 20 which shall be payable by the relevant Participant.<br />
20.2 Save for such costs and expenses expressly provided in this Scheme to be payable by the<br />
Participants, all fees, costs, and expenses incurred by the Company in relation to the<br />
Scheme including but not limited to the fees, costs and expenses relating to the issue and<br />
allotment of the Shares pursuant to the exercise of any Option shall be borne by the<br />
Company.<br />
21. DISCLAIMER OF LIABILITY<br />
Notwithstanding any provisions herein contained and subject to the Act, the Board, the Committee<br />
and the Company shall not under any circumstances be held liable for any costs, losses, expenses<br />
and damages whatsoever and howsoever arising in respect of any matter under or in connection<br />
with the Scheme including but not limited to the Company’s delay or failure in issuing and allotting<br />
the Shares or in applying for or procuring the listing of and quotation for the Shares on the SGX-ST<br />
or any other stock exchanges on which the Shares are quoted or listed.<br />
22. DISPUTES<br />
Any disputes or differences of any nature in connection with the Scheme shall be referred to the<br />
Committee and its decision shall be final and binding in all respects.<br />
23. CONDITION OF OPTION<br />
Every Option shall be subject to the condition that no Shares shall be issued pursuant to the<br />
exercise of an Option if such issue would be contrary to any law or enactment, or any rules or<br />
regulations of any legislative or non-legislative governing body for the time being in force in<br />
Singapore or any other relevant country.<br />
24. DISCLOSURE IN ANNUAL REPORT<br />
The Company shall make the following disclosure in its annual report:−<br />
(a) The names of the members of the Committee;<br />
(b) The information required in the table below for the following Participants:–<br />
(i) Directors of the Company; and<br />
(ii) Participants, other than those in Rule 24(b)(i) above, who receive five (5) per cent. or<br />
more of the total number of Options available under the Scheme;<br />
Name of<br />
Participant<br />
Options<br />
granted<br />
during<br />
financial year<br />
under review<br />
(including<br />
terms)<br />
Aggregate<br />
Options granted<br />
since<br />
commencement<br />
of Scheme to<br />
end of financial<br />
year under<br />
review<br />
129<br />
Aggregate<br />
Options<br />
exercised since<br />
commencement<br />
of Scheme to<br />
end of financial<br />
year under<br />
review<br />
Aggregate<br />
Options<br />
outstanding<br />
as at end of<br />
financial year<br />
under review
(c) (i) the number and proportion of options granted at a discount of the (10) per cent or less to<br />
the Market Price during the financial year under review; and<br />
(ii) the numbers and proportion of options granted at the discount of more than ten (10) per<br />
cent to the Market Price during the financial year under review.<br />
25. GOVERNING LAW<br />
This scheme shall be governed by and construed in accordance with the laws of the Republic of<br />
Singapore. The Company and the Participants, by accepting the offer of the grant of Options in<br />
accordance with the Scheme, submit to the exclusive jurisdiction of the courts of the Republic of<br />
Singapore.<br />
130
PRIVATE AND CONFIDENTIAL<br />
Date:<br />
OSIM SHARE OPTION SCHEME<br />
LETTER OF OFFER<br />
SCHEDULE 1<br />
Serial No:__________________<br />
To: Name PRIVATE AND CONFIDENTIAL<br />
Designation<br />
Address<br />
Dear Sir/Madam<br />
We are pleased to inform you that you have been nominated by the Committee of the Board of Directors<br />
of <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong> (the ‘‘Company’’) to participate in the <strong>Osim</strong> Share Option Scheme (the<br />
‘‘Scheme’’).<br />
Accordingly, an offer is hereby made to grant you an Option (as defined in the Scheme), in consideration<br />
of the payment of a sum of S$1.00, to subscribe for and be allotted ________ ordinary shares of S$0.05<br />
each in the capital of the Company at the price of S$____________ per ordinary share. The Option shall<br />
be subject to the terms of this Letter of Offer and the Scheme (as the same may be amended from time<br />
to time pursuant to the terms and conditions of the Scheme), a copy of which is enclosed herewith.<br />
The Option is personal to you and may not be sold, mortgaged, transferred, charged, assigned, pledged<br />
or otherwise disposed of or encumbered in whole or in part or in any way whatsoever. If you wish to<br />
accept the offer, please sign and return the enclosed Acceptance Form with a sum of S$1.00 not later<br />
than _______ a.m./p.m. on the ______ day of __________________2000 failing which this offer will<br />
forthwith lapse.<br />
Yours faithfully<br />
For and on behalf of<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
_____________________________<br />
Name:<br />
Designation:<br />
131
To: The Committee<br />
<strong>Osim</strong> Share Option Scheme<br />
c/o The Company Secretary<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
57 Genting Lane<br />
Singapore 349564<br />
OSIM SHARE OPTION SCHEME<br />
ACCEPTANCE FORM<br />
SCHEDULE 2<br />
Serial No:__________________<br />
Closing Time and Date for Acceptance of Option : __________________________________<br />
No. of Shares in respect of which Option is offered : __________________________________<br />
Exercise Price per Share : S$ ________________________________<br />
Total Amount Payable on acceptance of Option : S$ ________________________________<br />
(exclusive of the relevant CDP charges)<br />
I have read your Letter of Offer dated ________________________ (the ‘‘Offer Date’’) and agree to be<br />
bound by the terms thereof and of the <strong>Osim</strong> Share Option Scheme stated therein. I confirm that my<br />
acceptance of the Option will not result in the contravention of any applicable law or regulation in relation<br />
to the ownership of shares in the Company or options to subscribe for such shares.<br />
I hereby accept the Option to subscribe for ________ ordinary shares of S$0.05 each in the capital of<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong> (the ‘‘Shares’’) at S$____________ per Share and enclose *cash/banker’s<br />
draft/cashier’s order/postal order no. __________________ for S$1.00 being payment for the purchase<br />
of the Option.<br />
I understand that I am not obliged to exercise the Option.<br />
I also understand that I shall be responsible for all the fees of CDP relating to or in connection with the<br />
issue and allotment of any Shares in CDP’s name, the deposit of share certificates with CDP, my<br />
securities account with CDP or my securities sub-account with a CDP Depository Agent (as the case may<br />
be) (collectively, the ‘‘CDP charges’’).<br />
I confirm that as at the date hereof:−<br />
(a) I am not less that 21 years old nor an undischarged bankrupt nor have I entered into a composition<br />
with any of my creditors;<br />
(b) I satisfy the eligibility requirements to participate in the Scheme as defined in Rule 4 of the Scheme;<br />
and<br />
(c) I satisfy the other requirements to participate in the Scheme as set out in the Rules of the Scheme.<br />
I hereby acknowledge that you have not made any representation or warranty or given me any<br />
expectation of employment or continued employment to induce me to accept the offer and that the terms<br />
of the Letter of Offer and this Acceptance Form constitute the entire agreement between us relating to<br />
the offer.<br />
I agree to keep all information pertaining to the grant of the Option to me confidential.<br />
132
PLEASE PRINT IN BLOCK LETTERS<br />
Name in full : __________________________________________________________<br />
Designation : __________________________________________________________<br />
Address : __________________________________________________________<br />
Nationality : __________________________________________________________<br />
*NRIC/Passport No. : __________________________________________________________<br />
Signature : __________________________________________________________<br />
Date : __________________________________________________________<br />
*Delete as appropriate.<br />
Notes:−<br />
1. Option must be accepted in full or in multiples of 1,000 Shares unless the number of remaining Options held by the Participant<br />
correspond to less than 1,000 Shares.<br />
2. The Acceptance Form must be forwarded to the Company Secretary in an envelope marked ‘‘Private and Confidential’’.<br />
3. The Participant shall be informed by the Company of the relevant CDP charges payable at the time of the exercise of an<br />
Option.<br />
133
To: The Committee<br />
<strong>Osim</strong> Share Option Scheme<br />
c/o The Company Secretary<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
57 Genting Lane<br />
Singapore 349564<br />
OSIM SHARE OPTION SCHEME<br />
EXERCISE NOTICE<br />
SCHEDULE 3<br />
Total Number of ordinary shares of S$0.05 each (the<br />
‘‘Share’’) at S$____________ per Share under an<br />
Option granted on ________________________<br />
(the ‘‘Offer Date’’) : __________________________________<br />
Number of Shares previously allotted and issued<br />
thereunder : __________________________________<br />
Outstanding balance of Shares which may be<br />
allotted and issued thereunder : __________________________________<br />
Number of Shares now to be subscribed (in<br />
multiples of 1,000 unless the number of remaining<br />
Options held by the Participant correspond to less<br />
than 1,000 Shares) : __________________________________<br />
1. Pursuant to your Letter of Offer dated ________________________ (the ‘‘Offer Date’’) and my<br />
acceptance thereof, I hereby exercise the Option to subscribe for Shares in <strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
(the ‘‘Company’’) at S$____________ per Share.<br />
*2. I hereby request the Company to allot and issue to me the number of Shares specified in paragraph<br />
1 in the name of The Central Depository (Pte) Limited (‘‘CDP’’) to the credit of my *Securities<br />
Account with a CDP/* Securities Sub-Account with a CDP Depository Agent specified below and to<br />
deliver the share certificates relating thereto to CDP at my own risk. I further agree to bear such fees<br />
or other charges as may be imposed by CDP (the ‘‘CDP charges’’) in respect thereof:−<br />
*(a) Direct Securities Account Number : ______________________________________<br />
*(b) Securities Sub-Account Number : ______________________________________<br />
Name of CDP Depository Agent : ______________________________________<br />
3. I enclose a *cheque/cashier’s order/bank draft/postal order no. __________________ for<br />
$____________ in payment for the subscription of S$____________ for the total number of the<br />
said Shares and the CDP charges of S$____________.<br />
4. I agree to subscribe for the Shares subject to the terms of the Letter of Offer, the <strong>Osim</strong> Share Option<br />
Scheme (as the same may be amended pursuant to the terms thereof from time to time) and the<br />
Memorandum and Articles of Association of the Company.<br />
5. I declare that I am subscribing for the Shares for myself and not as a nominee for any other person.<br />
134
PLEASE PRINT IN BLOCK LETTERS<br />
Name in full : __________________________________________________________<br />
Designation : __________________________________________________________<br />
Address : __________________________________________________________<br />
Nationality : __________________________________________________________<br />
*NRIC/Passport No. : __________________________________________________________<br />
Signature : __________________________________________________________<br />
Date : __________________________________________________________<br />
*Delete as appropriate.<br />
Notes:–<br />
1. An Option may be exercised in whole or in part provided that an Option may be exercised in part only in respect of 1,000<br />
Shares or any multiple thereof unless the number of remaining Options held by the Participant correspond to less than 1,000<br />
Shares.<br />
2. The form entitled ‘‘Exercise Notice’’ must be forwarded to the Company Secretary in an envelope marked ‘‘Private and<br />
Confidential’’.<br />
135
TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS<br />
APPENDIX B<br />
Applications are invited for the subscription and/or purchase of Invitation Shares subject to the following<br />
terms and conditions:–<br />
1. APPLICATIONS FOR THE INVITATION SHARES MUST BE MADE IN LOTS OF 1,000 SHARES<br />
AND HIGHER INTEGRAL MULTIPLES THEREOF. APPLICATIONS FOR ANY OTHER NUMBER<br />
OF SHARES WILL BE REJECTED.<br />
2. Applications for Offer Shares may be made by way of Offer Shares Application Forms or by way of<br />
Electronic Applications through ATMs of the Participating Banks (‘‘ATM Electronic Applications’’).<br />
Applications for the Placement Shares (other than Reserved Shares) may only be made by way of<br />
Placement Shares Application Forms. Applications for Reserved Shares may only be made by way<br />
of Reserved Shares Application Forms. APPLICANTS MAY NOT USE CENTRAL PROVIDENT<br />
FUND (‘‘CPF’’) FUNDS TO APPLY FOR THE INVITATION SHARES.<br />
3. Only one application for either the Offer Shares or the Placement Shares may be made for the<br />
benefit of one person (other than in respect of Reserved Shares). A person submitting an<br />
application for Offer Shares by way of an Application Form MAY NOT submit another<br />
application for Offer Shares by way of an Electronic Application and vice versa. Such<br />
separate applications shall be deemed to be multiple applications and shall be rejected.<br />
A person, other than an approved nominee company, who is submitting an application in his<br />
own name should not submit any other application (other than for Reserved Shares), whether<br />
by way of an Application Form or by way of an Electronic Application, for any other person.<br />
Such separate applications shall be deemed to be multiple applications and shall be rejected.<br />
An applicant who has been procured by a Placement Agent to subscribe for Placement<br />
Shares (other than for Reserved Shares) shall not make any application for Offer Shares<br />
either through an Electronic Application or by way of an Application Form and vice versa.<br />
Such separate applications shall be deemed to be multiple applications and shall be rejected.<br />
An applicant for Reserved Shares using the Reserved Shares Application Form may submit<br />
one separate application for the Offer Shares in his own name either by way of an Application<br />
Form or by way of an Electronic Application provided he adheres to the terms and conditions<br />
of this Prospectus. Such separate applications shall not be treated as multiple applications.<br />
Joint or multiple applications shall be rejected. Persons submitting or procuring<br />
submissions of multiple share applications (whether for Offer Shares, Placement Shares or<br />
both Offer Shares and Placement Shares) may be deemed to have committed an offence<br />
under the Penal Code (Chapter 224) of Singapore and the Securities Industry Act (Chapter<br />
289) of Singapore, and such applications may be referred to the relevant authorities for<br />
investigation.<br />
4. Applications will not be accepted from any person under the age of 21 years, undischarged<br />
bankrupts, sole-proprietorships, partnerships, chops or non-corporate bodies, joint Securities<br />
Account holders of CDP and applicants whose addresses (furnished in their Application Forms or, in<br />
the case of Electronic Applications, contained in the records of the relevant Participating Banks) bear<br />
post office box numbers.<br />
136
5. The existence of a trust will not be recognised. Any application by a trustee or trustees must be<br />
made in his/her/their own name(s) and without qualification. Applications made by way of an<br />
Application Form in the name(s) of an approved nominee company or approved nominee<br />
companies must comply with paragraph 6 below.<br />
6. NOMINEE APPLICATIONS MAY BE MADE BY APPROVED NOMINEE COMPANIES ONLY.<br />
Approved nominee companies are defined as banks, merchant banks, finance companies,<br />
insurance companies, licensed securities dealers in Singapore and nominee companies controlled<br />
by them. Applications made by persons acting as nominees other than approved nominee<br />
companies shall be rejected.<br />
7. FOR NON-NOMINEE APPLICATIONS, EACH APPLICANT MUST MAINTAIN A SECURITIES<br />
ACCOUNT WITH CDP IN HIS OWN NAME AT THE TIME OF HIS APPLICATION. An applicant<br />
without an existing Securities Account with CDP in his own name at the time of his application will<br />
have his application rejected, in the case of an application by way of an Application Form, or will<br />
not be able to complete his Electronic Application, in the case of an Electronic Application. An<br />
applicant with an existing Securities Account who fails to provide his Securities Account number or<br />
who provides an incorrect Securities Account number in section B of the Application Form or in his<br />
Electronic Application, as the case may be, is liable to have his application rejected. Subject to<br />
paragraph 8 below, an application shall be rejected if the applicant’s particulars such as name,<br />
NRIC/passport number, nationality and permanent residence status provided in his Application<br />
Form or in the records of the relevant Participating Bank at the time of his Electronic Application,<br />
as the case may be, differ from those particulars in his Securities Account as maintained with CDP.<br />
If the applicant possesses more than one individual direct Securities Account with CDP, his<br />
application shall be rejected.<br />
8. If the address of an applicant stated in the Application Form or, in the case of an Electronic<br />
Application, in the records of the relevant Participating Bank, as the case may be, is<br />
different from the address registered with CDP, the applicant must inform CDP of his<br />
updated address promptly, failing which the notification letter on successful allotment and<br />
other correspondence from the CDP will be sent to his address last registered with CDP.<br />
9. The Company and the Vendor reserve the right to reject any application which does not<br />
conform strictly to the instructions set out in the Application Form and this Prospectus or<br />
which does not comply with the instructions for Electronic Applications or with the terms<br />
and conditions of this Prospectus or, in the case of an application by way of an Application<br />
Form, which is illegible, incomplete, incorrectly completed or which is accompanied by an<br />
improperly drawn remittance. The Company and the Vendor further reserve the right to treat<br />
as valid any applications not completed or submitted or effected in all respects in<br />
accordance with the terms and conditions of this Prospectus and also to present for<br />
payment or other processes all remittances at any time after receipt and to have full access<br />
to all information relating to, or deriving from, such remittances or the processing thereof.<br />
10. The Company and the Vendor reserve the right to reject or accept any application or to accept any<br />
application in part only without assigning any reason thereof, and no enquiry and/or<br />
correspondence on the decision of the Company and the Vendor will be entertained. This right<br />
applies to applications made by way of Application Forms and by way of Electronic Applications. In<br />
deciding the basis of acceptance, due consideration will be given to the desirability of allotting the<br />
Shares to a reasonable number of applicants with a view to establishing an adequate market for the<br />
Shares.<br />
137
11. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It is<br />
expected that CDP will send to each successful applicant, at his own risk, within 15 Market Days<br />
after the close of the Application List, a statement of account stating that his Securities Account has<br />
been credited with the number of Invitation Shares allotted and/or allocated to him. This will be the<br />
only acknowledgement of application moneys received and is not an acknowledgement by the<br />
Company and the Vendor. Each applicant irrevocably authorises CDP to complete and sign on his<br />
behalf as transferee or renouncee any instrument of transfer and/or other documents required for<br />
the issue or transfer of the Invitation Shares allotted and/or allocated to the applicant. This<br />
authorisation applies to applications made by way of Application Forms and by way of Electronic<br />
Applications.<br />
12. By completing and delivering an Application Form and, in the case of an ATM Electronic Application,<br />
by pressing the ‘‘Enter’’ or ‘‘OK’’ or ‘‘Confirm’’ or ‘‘Yes’’ key on the ATM in accordance with the<br />
provisions herein, each applicant:–<br />
(a) irrevocably offers to subscribe for the number of Invitation Shares specified in his application<br />
(or such smaller number for which the application is accepted) at the Offer Price or the<br />
Placement Price (as the case may be) and agrees that he will accept such Shares as may be<br />
allocated to him, in each case on the terms of, and subject to the conditions set out in, the<br />
Prospectus and the Memorandum and Articles of Association of the Company; and<br />
(b) warrants the truth and accuracy of the information provided in his application.<br />
13. In the event of an under-subscription for Offer Shares as at the close of the Application List, the<br />
number of Offer Shares under-subscribed shall be made available to satisfy applications for<br />
Placement Shares to the extent that there is an over-subscription for Placement Shares as at the<br />
close of the Application List. Any Reserved Shares not taken up by the employees and business<br />
associates of the Group will be made available first to satisfy other applications for the Placement<br />
Shares to the extent that there is an over-subscription for the Placement Shares and then to satisfy<br />
applications for Offer Shares to the extent that there is an over-subscription for Offer Shares.<br />
In the event of an under-subscription for Placement Shares (other than Reserved Shares) as at the<br />
close of the Application List, that number of Placement Shares (other than Reserved Shares)<br />
under-subscribed shall be made available to satisfy applications for Offer Shares to the extent that<br />
there is an over-subscription for Offer Shares as at the close of the Application List.<br />
In the event of an over-subscription of the Offer Shares as at the close of the Application List and<br />
the number of Placement Shares are fully subscribed or over-subscribed as at the close of the<br />
Application List, the successful applications for the Offer Shares will be determined by ballot or<br />
otherwise as determined by the Directors and the Vendor, and approved by the SGX-ST.<br />
14. Each applicant irrevocably authorises CDP to disclose the outcome of his application, including the<br />
number of Invitation Shares allotted or allocated to the applicant pursuant to his application, to<br />
authorised operators.<br />
15. Acceptance of applications will be conditional upon, inter alia, the Company and the Vendor being<br />
satisfied that:–<br />
(a) permission has been granted by the SGX-ST to deal in and for quotation for all the existing<br />
Shares and the New Shares on the Official List of the SGX-ST; and<br />
(b) the Management and Underwriting Agreement and the Placement Agreement referred to on<br />
page 107 of this Prospectus have become unconditional and have not been terminated.<br />
16. No application will be held in reserve.<br />
17. No Shares will be allotted or allocated on the basis of this Prospectus later than six months after<br />
the date of issue of this Prospectus.<br />
138
18. Additional terms and conditions for applications by way of Application Forms are set out on<br />
pages 139 to 142 of this Prospectus.<br />
19. Additional terms and conditions for applications by way of Electronic Applications are set out on<br />
pages 142 to 146 of this Prospectus.<br />
20. Any reference to the ‘‘applicant’’ in this section shall include a person applying for the Offer Shares<br />
by way of an Application Form or by way of an Electronic Application , a person applying for the<br />
Placement Shares through the Placement Agent, or a person applying for Reserved Shares by way<br />
of a Reserved Shares Application Form.<br />
ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS<br />
Applications by way of Application Forms shall be made on and subject to the terms and conditions of<br />
this Prospectus including but not limited to the terms and conditions appearing below as well as those<br />
set out under the section on ‘‘TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION’’ on<br />
pages 136 to 146 of this Prospectus, as well as the Memorandum and Articles of Association of the<br />
Company.<br />
1. Applications must be made using the WHITE Application Forms and official envelopes ‘‘A’’ and ‘‘B’’<br />
for Offer Shares and the BLUE Application Forms for Placement Shares (other than Reserved<br />
Shares) accompanying and forming part of this Prospectus. Attention is drawn to the detailed<br />
instructions contained in the respective Application Forms and this Prospectus for the completion of<br />
the Application Forms which must be carefully followed. The Company and the Vendor reserve the<br />
right to reject applications which do not conform strictly to the instructions set out in the<br />
Application Forms and this Prospectus or to the terms and conditions of this Prospectus or<br />
which are illegible, incomplete, incorrectly completed or which are accompanied by<br />
improperly drawn remittances.<br />
2. The Application Forms must be completed in English. Please type or write clearly in ink using<br />
BLOCK LETTERS.<br />
3. All spaces in the Application Forms except those under the heading ‘‘FOR OFFICIAL USE ONLY’’<br />
must be completed and the words ‘‘NOT APPLICABLE’’ or ‘‘N.A.’’ should be written in any space that<br />
is not applicable.<br />
4. Individuals, corporations, approved nominee companies and trustees must give their names in full.<br />
Applications must be made, in the case of individuals, in their full names appearing in their identity<br />
cards (if applicants have such identification documents) or in their passports and, in the case of<br />
corporations, in their full names as registered with a competent authority. An applicant, other than an<br />
individual, completing the Application Form under the hand of an official must state the name and<br />
capacity in which that official signs. A corporation completing the Application Form is required to affix<br />
its Common Seal (if any) in accordance with its Memorandum and Articles of Association or<br />
equivalent constitutive documents of the corporation. If an application by a corporate applicant is<br />
successful, a copy of its Memorandum and Articles of Association or equivalent constitutive<br />
documents must be lodged with the Company’s Share Registrar and Share Transfer Office. The<br />
Company and the Vendor reserve the right to require any applicant to produce documentary proof<br />
of identification for verification purposes.<br />
5. (a) All applicants must complete page 1 and Sections A and B of the Application Forms.<br />
(b) All applicants are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application<br />
Forms. Where paragraph 7(a) is deleted, the applicants must also complete Section C of the<br />
Application Forms with particulars of the beneficial owner(s).<br />
(c) Applicants who fail to make the required declaration in paragraph 7(a) or 7(b), as the case may<br />
be, on page 1 of the Application Forms are liable to have their applications rejected.<br />
139
6. Individual and corporate applicants, whether incorporated or unincorporated and wherever<br />
incorporated or constituted, will be required to declare whether they are citizens or permanent<br />
residents of Singapore or corporations in which citizens or permanent residents of Singapore or any<br />
body corporate constituted under any statute of Singapore have an interest in the aggregate of<br />
more than 50 per cent. of the issued share capital of or interests in such corporations. Approved<br />
nominee companies are required to declare whether the beneficial owner of the Invitation Shares<br />
is a citizen or permanent resident of Singapore or a corporation, whether incorporated or<br />
unincorporated and wherever incorporated or constituted, in which citizens or permanent residents<br />
of Singapore or any body corporate whether incorporated or unincorporated and wherever<br />
incorporated or constituted under any statute of Singapore have an interest in the aggregate of<br />
more than 50 per cent. of the issued share capital of or interests in such corporation.<br />
7. Each application must be accompanied by a remittance in Singapore currency for the full amount<br />
payable, in respect of the number of Invitation Shares applied for, in the form of a BANKER’S<br />
DRAFT or CASHIER’S ORDER drawn on a bank in Singapore, made out in favour of ‘‘OSIM<br />
SHARE ISSUE ACCOUNT’’ crossed ‘‘A/C PAYEE ONLY’’, with the name and address of the<br />
applicant written clearly on the reverse side. Applications not accompanied by any payment or<br />
accompanied by ANY OTHER FORM OF PAYMENT WILL NOT BE ACCEPTED. Remittances<br />
bearing ‘‘NOT TRANSFERABLE’’ or ‘‘NON TRANSFERABLE’’ crossings shall be rejected. No<br />
acknowledgement of receipt will be issued by the Company, the Vendor or OCBC Bank for<br />
applications and application moneys received.<br />
8. It is expected that unsuccessful applications will be returned to the applicants by ordinary post<br />
(without interest or any share of revenue or other benefit arising therefrom) within three Market<br />
Days after the close of the Application List at the applicants’ own risk. Where an application is<br />
rejected or accepted in part only, the full amount or the balance of the application moneys, as the<br />
case may be, will be refunded (without interest or any share of revenue or other benefit arising<br />
therefrom) to the applicant by ordinary post at the applicant’s own risk within 14 days after the close<br />
of the Application List.<br />
9. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the<br />
meanings assigned to them in this Prospectus.<br />
10. In consideration of the Company and the Vendor having distributed the Application Form to the<br />
applicant and agreeing to close the Application List at 12.00 noon on 27 July 2000 or such later time<br />
or date as the Company and the Vendor may, in their absolute discretion, decide and by completing<br />
and delivering the Application Form, the applicant agrees that:–<br />
(a) his application is irrevocable;<br />
(b) his remittance will be honoured on first presentation and that any application moneys<br />
returnable may be held pending clearance of his payment without interest or any share of<br />
revenue or other benefit arising therefrom;<br />
(c) all applications, acceptances and contracts resulting therefrom under the Invitation shall be<br />
governed by and construed in accordance with the laws of Singapore and that he irrevocably<br />
submits to the non-exclusive jurisdiction of the Singapore courts;<br />
(d) in respect of the Invitation Shares for which his application has been received and not<br />
rejected, acceptance of his application shall be constituted by written notification by or on<br />
behalf of Company and the Vendor and not otherwise, notwithstanding any remittance being<br />
presented for payment by or on behalf of the Company and the Vendor; and<br />
(e) he will not be entitled to exercise any remedy of rescission for misrepresentation at any time<br />
after acceptance of his application.<br />
140
Applications for Offer Shares<br />
1. Applications for Offer Shares MUST be made using the WHITE Offer Shares Application Forms and<br />
WHITE official envelopes ‘‘A’’ and ‘‘B’’. ONLY ONE APPLICATION should be enclosed in each<br />
envelope.<br />
2. The applicant must:–<br />
(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together with<br />
his remittance in the WHITE envelope ‘‘A’’ provided;<br />
(b) in the appropriate spaces on WHITE envelope ‘‘A’’:–<br />
(i) write his name and address;<br />
(ii) state the number of Offer Shares applied for; and<br />
(iii) affix adequate Singapore postage;<br />
(c) SEAL WHITE envelope ‘‘A’’;<br />
(d) write, in the special box provided on the larger WHITE envelope ‘‘B’’ addressed to OCBC<br />
BANK, 18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, the<br />
number of Offer Shares for which the application is made; and<br />
(e) insert WHITE envelope ‘‘A’’ into WHITE envelope ‘‘B’’, seal WHITE envelope ‘‘B’’ and thereafter<br />
DESPATCH BY ORDINARY POST OR DELIVER BY HAND at his own risk to OCBC BANK,<br />
18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, so as to<br />
arrive by 12.00 noon on 27 July 2000 or such later date and time as the Company and the<br />
Vendor may, in their absolute discretion, decide. Local Urgent Mail or Registered Post<br />
must NOT be used.<br />
3. No acknowledgement of receipt will be issued for any application or remittance received.<br />
4. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly<br />
drawn remittances are liable to be rejected.<br />
Applications for Placement Shares (other than Reserved Shares)<br />
1. Applications for Placement Shares must be made using the BLUE Placement Shares Application<br />
Forms. ONLY ONE APPLICATION should be enclosed in each envelope.<br />
2. The completed BLUE Placement Shares Application Form and the applicant’s remittance with the<br />
name and address of the applicant written clearly on the reverse side, must be enclosed and sealed<br />
in an envelope to be provided by the applicant. The sealed envelope must be DESPATCHED BY<br />
ORDINARY POST OR DELIVERED BY HAND at the applicant’s own risk to OCBC BANK,<br />
18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, to arrive by<br />
12.00 noon on 27 July 2000 or such later date and time as the Company and the Vendor may,<br />
in their absolute discretion, decide. Local Urgent Mail or Registered Post must NOT be used.<br />
3. No acknowledgement of receipt will be issued for any application or remittance received.<br />
141
Applications for Reserved Shares<br />
1. Applications for Reserved Shares must be made using the PINK Reserved Shares Application<br />
Forms. ONLY ONE APPLICATION should be enclosed in each envelope.<br />
2. The completed PINK Reserved Shares Application Form and the applicant’s remittance with the<br />
name and address of the applicant written clearly on the reverse side, in accordance with the terms<br />
of this Prospectus, must be enclosed and sealed in an envelope to be provided by the applicant. The<br />
sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at the<br />
applicant’s own risk to the Company at 57 Genting Lane, <strong>Osim</strong> Industrial Building, Singapore<br />
349564, to arrive by 12.00 noon on 27 July 2000 or such later date and time as the Company<br />
and the Vendor may, in their absolute discretion, decide. Local Urgent Mail or Registered Post<br />
must NOT be used.<br />
3. No acknowledgement of receipt will be issued for any application or remittance received.<br />
ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS<br />
The procedures for Electronic Applications at ATMs of the Participating Banks are set out on the ATM<br />
screens (in the case of ATM Electronic Applications) of the relevant Participating Banks (the ‘‘Steps’’). For<br />
illustration purposes, the procedures for Electronic Applications at ATMs of the OCBC Bank group are set<br />
out in the ‘‘STEPS FOR ATM ELECTRONIC APPLICATIONS’’ appearing on page 146 of this Prospectus.<br />
Please read carefully the terms of this Prospectus, the Steps and the terms and conditions for Electronic<br />
Applications set out below before making an Electronic Application. Any reference to the ‘‘applicant’’ in<br />
the terms and conditions for Electronic Applications and the Steps shall mean the applicant who applies<br />
for Offer Shares through an ATM of a Participating Bank.<br />
An applicant must have an existing bank account with and be an ATM cardholder of one of the<br />
Participating Banks before he can make an Electronic Application at the ATMs of that Participating Bank.<br />
An ATM card issued by one Participating Bank cannot be used to apply for Offer Shares at an ATM<br />
belonging to other Participating Banks. The Steps set out the actions that the Applicant must take at<br />
ATMs of the OCBC Bank group to complete an Electronic Application. The actions that an applicant must<br />
take at ATMs of other Participating Banks are set out on the ATM screens of the relevant Participating<br />
Banks. Upon the completion of his Electronic Application transaction, the applicant will receive an ATM<br />
transaction slip (‘‘Transaction Record’’), confirming the details of his Electronic Application. The<br />
Transaction Record is for retention by the applicant and should not be submitted with any printed<br />
Application Form.<br />
An applicant, including one who has a joint bank account with any of the Participating Banks,<br />
must ensure that he enters his own Securities Account number when using the ATM card issued<br />
to him in his own name. Using his own Securities Account number with an ATM card which is not<br />
issued to him in his own name will render his Electronic Application liable to be rejected.<br />
An Electronic Application shall be made on and subject to the terms and conditions of this Prospectus<br />
including but not limited to the terms and conditions appearing below and those set out under the section<br />
on ‘‘TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION’’ on page 146 of this<br />
Prospectus as well as the Memorandum and Articles of Association of the Company.<br />
1. In connection with his Electronic Application for Offer Shares, the applicant is required to confirm<br />
statements to the following effect in the course of activating his Electronic Application:–<br />
(a) that he has received a copy of this Prospectus and has read, understood and agreed to<br />
all the terms and conditions of application for Offer Shares in this Prospectus prior to<br />
effecting the Electronic Application and agrees to be bound by the same;<br />
(b) that he consents to the disclosure of his name, NRIC/passport number, address,<br />
nationality, permanent resident status, CDP Securities Account number, CPF investment<br />
account number (if applicable) and share application amount (the ‘‘Relevant<br />
Particulars’’) from his account with that Participating Bank to the Share Registrar, CDP,<br />
CPF, SCCS, the Company, the Vendor and the Manager (the ‘‘Relevant Parties’’); and<br />
142
(c) that the Electronic Application made is his only application for Offer Shares and it is<br />
made in his own name and at his own risk.<br />
His application will not be successfully completed and cannot be recorded as a completed<br />
transaction unless he presses the ‘‘Enter’’ or ‘‘OK’’ or ‘‘Confirm’’ or ‘‘Yes’’ key in the ATM. By doing<br />
so, the applicant shall be treated as signifying his confirmation of each of the three statements. In<br />
respect of statement 1(b) above, his confirmation, by pressing the ‘‘Enter’’ or ‘‘OK’’ or ‘‘Confirm’’ or<br />
‘‘Yes’’ key, shall signify and shall be treated as his written permission, given in accordance with the<br />
relevant laws of Singapore including Section 47(4) of the Banking Act, Chapter 19 of Singapore to<br />
the disclosure by that Participating Bank of the Relevant Particulars to the Relevant Parties.<br />
2. By making an Electronic Application, the applicant confirms that he is not applying for Offer<br />
Shares as nominee of any other person and that any Electronic Application that he makes is<br />
the only application made by him as beneficial owner. The applicant shall make only one<br />
Electronic Application for Offer Shares and shall not make any other application for Invitation<br />
Shares (other than Reserved Shares), whether at the ATMs of any participating bank or on the<br />
application forms. Where a person has made an application for Offer Shares or Placement<br />
Shares (other than Reserved Shares) on an application form, he shall not make an Electronic<br />
Application for Offer Shares.<br />
3. The applicant must have sufficient funds in his bank account with his Participating Bank at the time<br />
he makes his Electronic Application, failing which his Electronic Application will not be completed.<br />
Any Electronic Application which does not conform strictly to the instructions set out on the<br />
screens of the ATM through which the Electronic Application is being made shall be rejected.<br />
4. The applicant irrevocably agrees and undertakes to subscribe for and to accept the number of Offer<br />
Shares applied for as stated on the Transaction Record or any lesser number of Offer Shares that<br />
may be allotted or allocated to him in respect of his Electronic Application. In the event that the<br />
Company and the Vendor decide to allot any lesser number of such Offer Shares or not to allot any<br />
Offer Shares to the applicant, the applicant agrees to accept such decision as final. If the applicant’s<br />
Electronic Application is successful, his confirmation (by his action of pressing the ‘‘Enter’’ or ‘‘OK’’<br />
or ‘‘Confirm’’ or ‘‘Yes’’ key on the ATM) of the number of Offer Shares applied for shall signify and<br />
shall be treated as his acceptance of the number of Offer Shares that may be allotted or allocated<br />
to him and his agreement to be bound by the Memorandum and Articles of Association of the<br />
Company.<br />
5. No applications will be kept in reserve. Where an Electronic Application is unsuccessful, the full<br />
amount of the application moneys will be refunded in Singapore dollars (without interest or any share<br />
of revenue or other benefit arising therefrom) to the applicant by being automatically credited to the<br />
applicant’s account with his Participating Bank within three Market Days after the close of the<br />
Application List. Trading on a ‘‘WHEN ISSUED’’ basis, if applicable, is expected to commence<br />
after such refund has been made.<br />
Where an Electronic Application is rejected or accepted in part only, the full amount or the balance<br />
of the application moneys, as the case may be, will be refunded (without interest or any share of<br />
revenue or other benefit arising therefrom) to the applicant by being automatically credited to the<br />
applicant’s account with his Participating Bank within 14 days after the close of the Application List.<br />
Responsibility for timely refund of application moneys from Electronic Applications lies solely with the<br />
respective Participating Banks. Therefore, you are strongly advised to consult your Participating<br />
Bank as to the status of your Electronic Application and/or the refund of any moneys to you from an<br />
unsuccessful or partially successful Electronic Application, to determine the exact number of Offer<br />
Shares allotted to you before trading the Offer Shares on SGX-ST. Neither SGX-ST, the CDP, the<br />
SCCS, the Participating Banks, our Company, the Vendor or the Manager assume any responsibility<br />
for any loss that may be incurred as a result of you having to cover any net sell positions or from<br />
buy-in procedures activated by the SGX-ST.<br />
143
6. If the applicant’s Electronic Application is made through the ATMs of Keppel TatLee Bank Limited and<br />
is unsuccessful, it is expected that a computer generated notice will be sent to the applicant by his<br />
Participating Bank (at the address of the applicant stated in the records of such Participating Bank<br />
as at the date of his Electronic Application) by ordinary post at the applicant’s own risk within three<br />
Market Days after the close of the Application List.<br />
If the applicant’s Electronic Application is made through the ATMs of the OCBC Bank group<br />
(comprising, OCBC Bank and Bank of Singapore Limited), Overseas Union Bank Limited (‘‘OUB’’),<br />
The Development Bank of Singapore <strong>Ltd</strong> (‘‘DBS Bank’’) (including those of its POSBank Services<br />
division) or the United Overseas Bank Limited group (comprising United Overseas Bank Limited, Far<br />
Eastern Bank <strong>Ltd</strong> and Industrial & Commercial Bank Limited), and is unsuccessful, no notification will<br />
be sent by such Participating Bank.<br />
Applicants who make Electronic Applications through the ATMs of the following banks may check the<br />
provisional results of their Electronic Applications as follows:–<br />
Bank Telephone/Web-site Available at ATM Operating Hours Service expected from<br />
OCBC 1 800 363 3333 ATM Phone Banking/ATM:<br />
24 hours a day<br />
DBS<br />
Bank<br />
1 800 222 2222<br />
327 4767<br />
www.dbs.com.sg<br />
Internet Banking<br />
or Internet<br />
Kiosk<br />
KTB 222 8228 ATM ATM: 24 hours a day<br />
OUB 1 800 224 2000<br />
www.oub2000.com.sg<br />
UOB 1 800 533 5533<br />
1 800 222 2121<br />
www.uobcyberbank.com.sg<br />
Evening of the balloting day<br />
24 hours a day 7.00 p.m. on the balloting day<br />
Phone Banking:<br />
Mon−Fri: 0800−2200<br />
Sat: 0800−1500<br />
Not Available Internet Banking/Phone<br />
Banking:<br />
24 hours a day<br />
ATM (Other<br />
Transactions —<br />
‘‘IPO Enquiry’’)<br />
OUB Mobile Buzz:<br />
24 hours a day<br />
Phone Banking/ATM:<br />
24 hours a day<br />
ATM: Evening of the balloting<br />
day<br />
Phone Banking: 8.00 a.m. on<br />
the day after the balloting day<br />
Evening of the balloting day<br />
6.00 p.m. on the balloting day<br />
*Applicants who make Electronic Applications through the ATMs of OUB and who have activated their OUB Mobile Buzz<br />
services will be notified of the results of their Electronic Application, via their mobile phones.<br />
7. Electronic Applications shall close at 12.00 noon on 27 July 2000 or such later date and time as the<br />
Company and the Vendor may, in their absolute discretion, decide.<br />
8. The applicant is deemed to have requested and authorised the Company and the Vendor to:–<br />
(a) register the Offer Shares allotted or allocated to the applicant in the name of CDP for deposit<br />
into his Securities Account;<br />
(b) send the relevant Share certificate(s) to CDP;<br />
(c) return or refund (without interest or any share of revenue or other benefit arising therefrom) the<br />
application moneys, should his Electronic Application be rejected, by automatically crediting the<br />
applicant’s bank account with his Participating Bank with the relevant amount within three<br />
Market Days after the close of the Application List; and<br />
144
(d) return or refund (without interest or any share of revenue or other benefit arising therefrom) the<br />
balance of the application moneys, should his Electronic Application be accepted in part only,<br />
by automatically crediting the applicant’s bank account with his Participating Bank with the<br />
relevant amount within 14 days after the close of the Application List.<br />
9. The applicant irrevocably agrees and acknowledges that his Electronic Application is subject to<br />
risks of electrical, electronic, technical and computer-related faults and breakdowns, fires, acts of<br />
God and other events beyond the control of the Participating Banks, the Company, the Vendor and<br />
the Manager and if, in any such event, the Company, the Vendor, the Manager and/or the relevant<br />
Participating Bank do not record or receive the applicant’s Electronic Application, or data relating<br />
to the applicant’s Electronic Application or the tape containing such data is lost, corrupted,<br />
destroyed or not otherwise accessible, whether wholly or partially for whatever reason, the<br />
applicant shall be deemed not to have made an Electronic Application and the applicant shall have<br />
no claim whatsoever against the Company, the Vendor, the Manager and/or the relevant<br />
Participating Bank for the Offer Shares applied for or for any compensation, loss or damage.<br />
10. The existence of a trust will not be recognised. Any Electronic Application by an applicant must be<br />
made in his own name and without qualification. The Company and the Vendor will reject any<br />
Electronic Application by any person acting as nominee.<br />
11. All particulars of the applicant in the records of his Participating Bank at the time he makes his<br />
Electronic Application shall be deemed to be true and correct and his Participating Bank and the<br />
Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any change in<br />
the particulars of the applicant after the time of the making of his Electronic Application, the<br />
applicant shall promptly notify his Participating Bank.<br />
12. The applicant should ensure that his personal particulars as recorded by both CDP and the<br />
relevant Participating Bank are correct and identical, otherwise, his Electronic Application<br />
is liable to be rejected. The applicant should promptly inform CDP of any change in address,<br />
failing which the notification letter on successful allotment and other correspondence from the CDP<br />
will be sent to his address last registered with CDP.<br />
13. In consideration of the Company and the Vendor arranging for the Electronic Application facility<br />
through the ATMs of the Participating Banks and agreeing to close the Application List at 12.00<br />
noon on 27 July 2000 or such later time or date as the Directors and the Vendor, may in their<br />
absolute discretion decide, by making and completing an Electronic Application, the applicant<br />
agrees that:–<br />
(a) his Electronic Application is irrevocable;<br />
(b) his Electronic Application, the acceptance by the Company and the Vendor and the contract<br />
resulting therefrom under the Invitation shall be governed by and construed in accordance with<br />
the laws of Singapore and he irrevocably submits to the non-exclusive jurisdiction of the<br />
Singapore courts;<br />
(c) none of the Company, the Vendor, the Manager and the Participating Banks shall be liable for<br />
any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery<br />
of data relating to his Electronic Application to the Company, the Vendor or CDP due to a<br />
breakdown or failure of transmission, delivery or communication facilities or any risks referred<br />
to in paragraph 9 above or to any cause beyond their respective controls;<br />
(d) in respect of Offer Shares for which his Electronic Application has been successfully completed<br />
and not rejected, acceptance of the applicant’s Electronic Application shall be constituted by<br />
written notification by or on behalf of the Company and the Vendor and not otherwise,<br />
notwithstanding any payment received by or on behalf of the Company and the Vendor; and<br />
(e) he will not be entitled to exercise any remedy of rescission or misrepresentation at any time<br />
after acceptance of his application.<br />
145
Steps for ATM Electronic Applications through ATMs of the OCBC Bank group<br />
An applicant making an Electronic Application through the ATMs of the OCBC Bank group shall be<br />
viewing the following instructions on the ATM screens of the OCBC Bank group. Certain words appearing<br />
on the screen are in abbreviated form (‘‘a/c’’, ‘‘appln’’, ‘‘ESA’’, ‘‘no.’’ and ‘‘&’’ refer to ‘‘account’’,<br />
‘‘application’’, ‘‘electronic share application’’, ‘‘number’’ and ‘‘and’’ respectively). Instructions for<br />
Electronic Applications appearing on the ATM screens of the Participating Banks (other than the OCBC<br />
Bank group) may differ from those represented below.<br />
Step 1 : Insert your personal OCBC ATM card<br />
2 : Enter your Personal Identification Number<br />
3 : Select ‘‘Other Services’’<br />
4 : Select ‘‘Electronic Share Appln’’<br />
5 : Select ‘‘OSIM’’<br />
6 : For an applicant making an Electronic Application at the ATM for the first time<br />
(a) For non-Singaporean<br />
Press the ‘‘Yes’’ key if you are a permanent resident of Singapore, otherwise, press<br />
the ‘‘No’’ key.<br />
(b) Enter your own Securities Account number (12 digits) eg. 168101234567 and press<br />
‘‘Yes’’ key to confirm that the Securities Account number you have entered is correct.<br />
7 : Check your particulars appearing on the screen and press the ‘‘Correct’’ key to confirm that<br />
your particulars are correct.<br />
8 : Press the ‘‘Confirm’’ key to confirm that you have read the following messages:–<br />
— You have read, understood and agreed to all terms of appln & Prospectus/<br />
Document<br />
— You consent to disclose your NRIC/Passport No., address, nationality, securities<br />
a/c no., qty. of securities applied for and CPF investment a/c no. to share<br />
registrar, CDP, CPF, SCCS, Issuer & Vendor(s)<br />
— This appln is made in your own name & at your own risk<br />
9 : Press the ‘‘Confirm’’ key again to confirm that you have read the following messages:–<br />
— Where applicable, a copy of the Prospectus/Document has been lodged with and<br />
registered by the Registrar of Companies & Businesses in Singapore who take<br />
no responsibility for its contents<br />
— The Prospectus/Document are available at various Participating Banks<br />
10 : Select the number of Shares you wish to apply for:−<br />
— For fixed price ESA, this is the only application submitted<br />
— Fixed Price: $0.52<br />
11 : Select the type of bank account to debit your application moneys<br />
12 : Check the details of your application appearing on the screen and press the ‘‘Confirm’’ key<br />
to confirm your application<br />
13 : For customers with multiple bank accounts, select the bank account from which to debit<br />
your application moneys<br />
14 : Remove Transaction Record for your reference only<br />
146
Singapore<br />
<strong>Osim</strong> <strong>International</strong> <strong>Ltd</strong><br />
57 Genting Lane<br />
<strong>Osim</strong> Industrial Building<br />
Singapore 349564<br />
Tel: (65) 747-6866<br />
Fax: (65) 846-4919<br />
OSIM Global Network<br />
Hong Kong<br />
Taiwan<br />
PRC<br />
Indonesia<br />
Malaysia<br />
Thailand<br />
USA<br />
UAE<br />
For more information on <strong>Osim</strong> <strong>International</strong>, visit our website at http://www.osim.com.sg