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APPENDIX TO NOTICE OF ANNUAL GENERAL MEETING
CHINA AVIATION OIL (SINGAPORE) CORPORATION LTD
Incorporated in the Republic of Singapore Company Registration No.: 199303293Z
LETTER TO SHAREHOLDERS
in relation to
(1) THE PROPOSED RENEWAL OF, AND AMENDMENTS TO, THE GENERAL
MANDATE FOR INTERESTED PERSON TRANSACTIONS;
(2) THE PROPOSED RENEWAL OF THE SHARE PURCHASE MANDATE; AND
(3) THE PROPOSED ADOPTION OF THE NEW CONSTITUTION.
Independent Financial Adviser in relation to the Proposed Renewal of, and
Amendments to, the General Mandate for Interested Person Transactions
CIMB BANK BERHAD (13491-P)
Singapore Branch
(Incorporated In Malaysia)
TABLE OF CONTENTS
DEFINITIONS ....................................................................................................................................... 02
LETTER TO SHAREHOLDERS
1. INTRODUCTION ........................................................................................................................ 10
2. THE PROPOSED RENEWAL OF, AND AMENDMENTS TO, THE IPT MANDATE ................ 11
3. THE PROPOSED RENEWAL OF THE SHARE PURCHASE MANDATE ................................ 13
4. THE PROPOSED ADOPTION OF THE NEW CONSTITUTION ............................................... 25
5. SHAREHOLDERS WHO WILL ABSTAIN FROM VOTING ....................................................... 33
6. DIRECTORS WHO WILL ABSTAIN FROM VOTING................................................................ 33
7. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN THE COMPANY...... 34
8. DIRECTORS’ RECOMMENDATIONS ....................................................................................... 34
9. DIRECTORS’ RESPONSIBILITY STATEMENT ........................................................................ 35
10. CONSENT .................................................................................................................................. 35
ANNEX I
GENERAL INFORMATION RELATING TO CHAPTER 9 OF THE LISTING MANUAL ...................... 36
ANNEX II
GENERAL MANDATE FOR INTERESTED PERSON TRANSACTIONS ........................................... 38
ANNEX III
LIST OF INTERESTED PERSONS ..................................................................................................... 57
ANNEX IV
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER TO THE INDEPENDENT DIRECTORS 60
ANNEX V
PROPOSED AMENDMENTS TO THE IPT MANDATE....................................................................... 65
ANNEX VI
THE NEW CONSTITUTION ................................................................................................................. 84
“ TSN-PEKCL ” : China National Aviation Fuel TSN‑PEK Pipeline Transportation Corporation Ltd (中国航油集团津京管道运输有限责任公司), a 49%‑owned associated company of the Company and an associate of CNAF
General
“ 2014 Amendment Act ” : The Companies (Amendment) Act 2014
“ 2017 Amendment Act ” : The Companies (Amendment) Act 2017
“ 2017 AGM ” : The annual general meeting of the Company held on 18 April 2017
“ 2017 Annual Report ” : Annual Report of the Company for FY
“ AGM ” : The forthcoming 24 th^ annual general meeting of the Company, notice of which is set out on pages 191 to 196 of the 2017 Annual Report
“ Applicable Threshold ” : Has the meaning ascribed to it in paragraph 7.1 of Annex II to this Letter
“ Approved Entities ” : Has the meaning ascribed to it in paragraph 3.1.3 of Annex II to this Letter
“ Audit Committee ” : The audit committee of the Company, comprising Independent Directors, Mr Ang Swee Tian, Dr Wang Kai Yuen and Mr Li Runsheng, and Non‑Independent, Non‑Executive Directors, Mr Li Yongji and Mr David Windle as at the date of this Letter
“ Average Barrel Price ” : The yearly average market price per barrel of KERO, which shall be the arithmetic average of the mean of the daily high and low quotations for KERO under the heading “FOB SINGAPORE — MARKET LOCATION” as published in Platts Asia‑Pacific/Arab Gulf Marketscan, effective for the calendar month prior to the date of the relevant transaction
“ Beijing Airport ” : Beijing Capital International Airport
“ Bluesky Supply Agreement ” : The supply agreement entered into by the Company and Bluesky dated 1 April 2010 relating to the terms of the supply arrangements between the Company and Bluesky, which was previously renewed and extended to 1 April 2014, then further renewed and extended to 1 April 2016, and which has been extended by way of a new agreement dated 2 February 2016, which will expire on 1 April 2018
“ Board ” : The board of Directors of the Company
“ BPIA Directors ” : Mr David Windle and Ms Bella Young, both of whom are Non‑ Independent, Non‑Executive Directors of the Company
“ CDP ” : The Central Depository (Pte) Limited
“ CFR ” : The acronym for the Incoterm “Cost and Freight” which indicates that the seller/exporter/manufacturer clears the goods for export and is responsible for the costs for transport of the goods to the port of destination. The buyer bears the risk of loss of the goods once the goods pass the ship’s rail at the port of shipment (and not destination)
“ CNAF Directors ” : Dr Xi Zhengping (Chairman and Non‑Independent, Non‑ Executive Director of the Company), Mr Meng Fanqiu (Chief Executive Officer/Executive Director of the Company), Mr Li Yongji (Non‑Independent, Non‑Executive Director of the Company) and Mr Wang Yanjun (Executive Director/Vice President of the Company)
“ CNAFCL Supply Agreement ” : The supply agreement entered into by the Company and CNAFCL dated 23 March 2010 relating to the terms of the supply arrangements between the Company and CNAFCL, the term of which was previously renewed and extended to 6 August 2014, then renewed and extended to 6 August 2016, and which was extended to 6 August 2018 by mutual agreement between the parties thereto on substantially similar terms
“ Code ” : The Singapore Code on Take‑overs and Mergers
“ Companies Act ” or “ Act ” : The Companies Act (Chapter 50 of Singapore)
“ Control ” : The capacity to dominate decision‑making, directly or indirectly, in relation to the financial and operating policies of the Company
“ Controlling Shareholder ” : In relation to a listed company, a person who:
(a) holds directly or indirectly fifteen per cent. (15%) or more of the total number of issued shares in the company excluding treasury shares and subsidiary holdings. The SGX‑ST may determine that a person who satisfies the above is not a Controlling Shareholder; or
(b) in fact exercises Control over the company
“ Deposit Banks ” : Has the meaning ascribed to it in paragraph 3.1.3 of Annex II to this Letter
“ Derivative Financial Instruments ”
: Derivative financial instruments including but not limited to all futures and swaps products available in the energy and freight markets
“ Director ” : A director of the Company as at the date of this Letter
“ Entrust Loan Arrangement Services ”
: Has the meaning ascribed to it in paragraph 3.1.3 of Annex II to this Letter
“ EPS ” : Earnings per Share
“ Executive Director ” : A Director who is an employee of and performs an executive function for the Company
“ Existing Constitution ” : The Constitution of the Company currently in force
“ Letter ” : This letter to Shareholders dated 27 March 2018
“ Listing Manual ” : The Listing Manual of the SGX‑ST
“ Listing Rules ” : The listing rules of the SGX‑ST set out in the Listing Manual
“ Market Day ” : A day on which the SGX‑ST is open for trading in securities
“ Maximum Price ” : Has the meaning ascribed to it in paragraph 3.3.4 of this Letter
“ MOPS ” : Has the meaning ascribed to it in paragraph 3.1.1 of Annex II to this Letter
“ New Constitution ” : The new constitution proposed to be adopted by the Company
“ Non-Executive Director ” : A Director (including an Independent Director) of the Company, as the case may be, who is not an Executive Director
“ NTA ” : Net tangible assets
“ Off-Market Purchases ” : Has the meaning ascribed to it in paragraph 3.3.3 of this Letter
“ On-Market Purchases ” : Has the meaning ascribed to it in paragraph 3.3.3 of this Letter
“ OTC ” : Has the meaning ascribed to it in paragraph 3.2.2 of Annex II to this Letter
“ Petroleum Products ” : Petroleum products including but not limited to aviation fuel, gas oil, fuel oil, crude oil and other petrochemicals
“ Pipeline Services Contract ” : The jet fuel transportation services framework agreement entered into between TSN‑PEKCL and CNAFCL relating to the provision of pipeline transportation services by TSN‑PEKCL to CNAFCL, which entry was approved at the 2017 AGM
“ PRC ” : The People’s Republic of China
“ Relevant Period ” : The period commencing from the date of the AGM being the date on which the Share Purchase Mandate is passed, if approved by the Shareholders, and expiring on the date the next annual general meeting is held or is required by law to be held, whichever is the earlier, after the date the resolution relating to the Share Purchase Mandate is passed
“ Risk Management Committee ” : The risk management committee of the Company, comprising the Non‑Executive Directors, namely Mr David Windle (Non‑ Independent BPIA Director), Mr Li Yongji (Non‑Independent CNAF Director) and Mr Ang Swee Tian (Independent Director) as at the date of this Letter, set up for the purposes of assisting the Board in fulfilling its oversight and approval responsibilities relating to its risk management framework and policies, as well as market, credit, operational, compliance and all other risk concerns
“ ROE ” : Return on equity
“ Securities Account ” : A securities account maintained by a depositor with CDP but does not include a securities sub‑account maintained with a depository agent
“ Senior Executives ” : The senior executives of the CAO Group who, for the purposes of undertaking the review procedures described in paragraph 6 of Annex II to this Letter (Review Procedures for Interested Person Transactions), are the chief executive officer, chief financial officer, deputy chief financial officer, chief operating officer, head of finance, deputy head of finance, head of trading, deputy head of trading, head of risk management, deputy head of risk management, head of operations, deputy head of operations, any head of department, function or business unit, assistant to the chief executive officer, or any position of equivalent rank or seniority as the foregoing, of any of the members of the CAO Group, and/or such other senior management personnel tasked to undertake the functions of the foregoing senior executives’ positions from time to time
“ Services ” : Services that the member(s) of the BP Group may provide to the CAO Group from time to time, whereby the member(s) of the BP Group share(s) the benefit of its contacts, expertise or knowledge with the CAO Group or where efficiencies and economies of scale can be achieved by the member(s) of the BP Group and the CAO Group through the provision of services by the former to the latter, including, without limitation, services relating to risk management, information‑sharing, marketing, training, secondment of staff and other corporate functions
“ SGX-ST ” : Singapore Exchange Securities Trading Limited
“ Share Purchase Mandate ” : Shareholders’ mandate to authorise the Directors to make purchases of Shares in accordance with the terms set out in this Letter as well as the rules and regulations set forth in the Companies Act and the Listing Manual
“ Shareholders ” : The registered holders of Shares, except that where the registered holder is CDP, the term “ Shareholders ” shall, in relation to those Shares, mean the depositors whose Securities Accounts are credited with Shares
“ Shares ” : Ordinary shares in the capital of the Company
“ Substantial Shareholder ” : A substantial shareholder of the Company as defined under Section 2(6) of the Securities and Futures Act (Chapter 289 of Singapore)
“ Supply Agreements ” : Collectively, the CNAFCL Supply Agreement and Bluesky Supply Agreement
“ Term Charter Party Agreement ” : The term charter party agreement entered into by the Company and CNAF Logistics dated 10 February 2014 relating to the provision of freight services by CNAF Logistics in respect of the transportation of Petroleum Products. The Term Charter Party Agreement, which was due to expire on 30 April 2015, was extended on the same terms (save for the delivery schedule, duration and pricing) by way of a new agreement dated 10 February 2015 and expired on 30 April 2017. It has been further extended for two (2) years on the same terms
Unless otherwise stated, the following closing exchange rates as at the Latest Practicable Date have been used in this Letter:
S$1: US$0.
The exchange rates as set out above are used for illustration purposes only and should not be construed as a representation that the relevant amounts have been or could be converted at the rates above or at any other rates.
CHINA AVIATION OIL (SINGAPORE) CORPORATION LTD Incorporated in the Republic of Singapore Company Registration No.: 199303293Z
Board of Directors: Registered Office:
Xi Zhengping (Chairman – Non‑Executive, Non‑Independent) 8 Temasek Boulevard Wang Kai Yuen (Deputy Chairman/Lead Independent Director – #31‑ 02 Non‑Executive, Independent) Suntec Tower Three Meng Fanqiu (Chief Executive Officer/Executive Director – Singapore 038988 Executive, Non‑Independent) Li Yongji (Director – Non‑Executive, Non‑Independent) Wang Yanjun (Vice President – Executive, Non‑Independent) David Windle (Director – Non‑Executive, Non‑Independent) Bella Young (Director – Non‑Executive, Non‑Independent) Ang Swee Tian (Director – Non‑Executive, Independent) Li Runsheng (Director – Non‑Executive, Independent) 27 March 2018
To: The Shareholders of China Aviation Oil (Singapore) Corporation Ltd
Dear Sir/Madam,
LETTER TO SHAREHOLDERS
(1) THE PROPOSED RENEWAL OF, AND AMENDMENTS TO, THE GENERAL MANDATE FOR INTERESTED PERSON TRANSACTIONS;
(2) THE PROPOSED RENEWAL OF THE SHARE PURCHASE MANDATE; AND
(3) THE PROPOSED ADOPTION OF THE NEW CONSTITUTION.
1. INTRODUCTION
1.1 AGM
We refer to the notice of annual general meeting of the Company (“ AGM ”) dated 27 March 2018 convening the AGM to be held on 25 April 2018, and in particular:
(a) the ordinary resolution number 11 under the heading “Special Business”, in relation to the proposed renewal of, and amendments to, the IPT Mandate;
(b) the ordinary resolution number 12 under the heading “Special Business”, in relation to the proposed renewal of the Share Purchase Mandate; and
(c) the special resolution number 13, in relation to the proposed adoption of the New Constitution,
as further explained in paragraphs 2, 3, and 4 respectively below.
1.2 Letter
The purpose of this Letter is to provide Shareholders with the relevant information relating to, and to seek Shareholders’ approval at the AGM for, the proposals referred to in paragraph 1.1 above.
If you are in any doubt as to the contents herein or as to the course of action that you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately.
2.3 Independent Financial Adviser’s Opinion
CIMB Bank has been appointed as the independent financial adviser to advise the Independent Directors on the IPT Mandate, as proposed to be renewed and amended and set out in Annex II to this Letter.
CIMB Bank is of the opinion that the methods and procedures under the IPT Mandate, with the proposed amendments as set out in Annex II to this Letter, if adhered to, are sufficient to ensure that the Interested Person Transactions carried out thereunder will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders. The letter dated 27 March 2018 from CIMB Bank to the Independent Directors is reproduced in Annex IV to this Letter.
2.4 Statement of the Audit Committee
Having considered, inter alia , the terms, the rationale and benefits of the IPT Mandate, as proposed to be renewed and amended and set out in Annex II to this Letter, the Audit Committee is satisfied that the review procedures proposed by the Company, as set out in paragraph 6 of Annex II to this Letter, for determining the transaction prices and terms of the Interested Person Transactions: (a) have not changed since Shareholders’ approval for the IPT Mandate, which was last proposed at the 2017 AGM to be amended, was obtained at the 2017 AGM; and (b) if adhered to, are sufficient to ensure that the Interested Person Transactions carried out thereunder will be on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders.
The Non‑Independent, Non‑Executive Directors of the Audit Committee, Mr David Windle and Mr Li Yongji, being a BPIA Director and a CNAF Director respectively, have abstained from the Audit Committee’s review and determination in relation to the above.
2.5 Validity Period of the IPT Mandate
If approved by Shareholders at the AGM, the IPT Mandate, with the proposed amendments, will take effect from the date of the passing of the resolution for the renewal of, and amendments to, the IPT Mandate, to be proposed at the AGM, and shall apply in respect of Interested Person Transactions entered or to be entered into from the date of the AGM until the conclusion of the next annual general meeting of the Company or the date on which the next annual general meeting of the Company is required to be held, whichever is the earlier, unless revoked or varied by the Company in a general meeting.
2.6 Disclosure
Pursuant to Chapter 9 of the Listing Manual, the Company will disclose in its annual report the aggregate value of the Interested Person Transactions entered into under the IPT Mandate, as renewed and amended, during the financial year under review, and in the annual reports of subsequent financial years during which the IPT Mandate, as renewed and amended, is in force. In addition, the Company will announce the aggregate value of the Interested Person Transactions entered into pursuant to the IPT Mandate, as renewed and amended, for the financial periods which it is required to report pursuant to Rule 705 of the Listing Manual within the time required for the announcement of such report 1. These disclosures will be in the form set out in Rule 907 of the Listing Manual.
(^1) In the case of Treasury Services involving interest‑bearing placement of funds by the CAO Group with CNAF Finance, the Company will disclose the highest amount of funds of the CAO Group on placement with CNAF Finance (including both principal and any interest which has been compounded) in aggregate at any one time during the relevant financial period covered by the announcement or annual report, as well as separate disclosure of the aggregate interest earned during the said financial period
3. THE PROPOSED RENEWAL OF THE SHARE PURCHASE MANDATE
3.1 Background
It is a requirement under the Companies Act that a company which wishes to purchase or otherwise acquire its own shares has to obtain the approval of its shareholders to do so at a general meeting of its shareholders. In this regard, the Share Purchase Mandate was approved by Shareholders at the extraordinary general meeting of the Company held on 18 September 2009, and last renewed at the 2017 AGM, to authorise the Directors to make purchases of Shares on the terms of the Share Purchase Mandate. Such Share Purchase Mandate will, unless renewed again, expire on the date of the AGM.
The Company proposes to renew the mandate for the Company to make on‑market and off‑ market purchases of Shares from time to time of up to ten per cent. (10%) of the total number of issued shares of the Company excluding treasury shares and subsidiary holdings as at the date of the AGM in accordance with the terms set out below.
3.2 Rationale for the Share Purchase Mandate
The rationale for the Company to undertake the purchase or acquisition of its Shares is as follows:
(a) in managing its business, the Group always strives to increase Shareholder value by improving, inter alia , the ROE of the Group and a Share purchase is one way by which ROE may be enhanced;
(b) the Share Purchase Mandate will give the Company an easy mechanism to facilitate the return of surplus cash in excess of its requirements taking into account its growth and expansion plans, in an expedient and cost‑efficient manner;
(c) the Share Purchase Mandate will provide the Company the flexibility to adjust the Company’s share capital structure and may, subject to market conditions and funding arrangements at the time, lead to an enhancement of the EPS and/or NTA per Share; and
(d) the use of treasury shares for the purposes of the Company’s share schemes for employees and others (if any) in lieu of issuing new Shares would mitigate the dilution impact (if any) on existing Shareholders which may arise from the operation of such schemes.
While the Share Purchase Mandate would authorise a purchase or acquisition of Shares up to the said ten per cent. (10%) limit during the period referred to in paragraph 3.3.2 below, Shareholders should note that purchases or acquisitions of Shares pursuant to the Share Purchase Mandate may not be carried out to the full ten per cent. (10%) limit as authorised and the purchases or acquisitions of Shares pursuant to the Share Purchase Mandate will be made only as and when the Directors consider it to be in the best interests of the Company and/or Shareholders and in circumstances which they believe will not result in any material adverse effect on the financial position of the Company or the Group, or result in the Company being delisted from the SGX‑ST.
The Directors will use their best efforts to ensure that after a purchase or acquisition of Shares pursuant to the Share Purchase Mandate, the number of Shares remaining in the hands of the public will not fall to such a level as to cause market illiquidity or adversely affect the orderly trading and listing status of the Shares on the SGX‑ST.
3.3.3 Manner of Purchase
Purchases of Shares may be made on the SGX‑ST (“ On-Market Purchases ”) and/or otherwise than on the SGX‑ST, in accordance with an equal access scheme (“ Off-Market Purchases ”).
On‑Market Purchases refer to purchases of Shares by the Company transacted through the SGX‑ST’s trading system through one or more duly licensed stockbrokers appointed by the Company for the purpose.
Off‑Market Purchases refer to purchases of Shares by the Company made under an equal access scheme or schemes for the purchase of Shares from Shareholders. The Directors may impose such terms and conditions, which are consistent with the Share Purchase Mandate, the Listing Rules and the Companies Act, as they consider fit in the interests of the Company in connection with, or in relation to, an equal access scheme or schemes. Under the Companies Act, an Off‑ Market Purchase must satisfy all the following conditions:
(a) offers for the purchase or acquisition of issued Shares shall be made to every person who holds issued Shares to purchase or acquire the same percentage of their issued Shares;
(b) all of those persons shall be given a reasonable opportunity to accept the offers made to them; and
(c) the terms of all the offers shall be the same, except that there shall be disregarded:
(i) differences in consideration attributable to the fact that offers may relate to Shares with different accrued dividend entitlements;
(ii) (if applicable) differences in consideration attributable to the fact that offers relate to Shares with different amounts remaining unpaid; and
(iii) differences in the offers introduced solely to ensure that each Shareholder is left with a whole number of Shares.
In addition, pursuant to the Listing Rules, in making an Off‑Market Purchase in accordance with an equal access scheme, the Company must issue an offer document to all Shareholders which must contain at least the following information:
(a) the terms and conditions of the offer;
(b) the period and procedures for acceptances;
(c) the reasons for the proposed purchase or acquisition of Shares;
(d) the consequences, if any, of purchases or acquisitions of Shares by the Company that will arise under the Code or other applicable take‑over rules;
(e) whether the purchases or acquisitions of Shares, if made, could affect the listing of the Shares on the SGX‑ST;
(f) details of any purchases or acquisitions of Shares made by the Company in the previous twelve (12) months (whether On‑Market Purchases or Off‑Market Purchases), giving the total number of Shares purchased, the purchase price per Share or the highest and lowest prices paid for such purchases of Shares, where relevant, and the total consideration paid for such purchases; and
(g) whether the Shares purchased or acquired by the Company will be cancelled or kept as treasury shares.
3.3.4 Maximum Purchase Price
The purchase price (excluding brokerage, stamp duties, commission, applicable goods and services tax and other related expenses) to be paid for the Shares will be determined by the Directors or a committee of Directors that may be constituted for the purposes of effecting purchases or acquisitions of Shares by the Company under the Share Purchase Mandate. However, the purchase price to be paid for the Shares pursuant to the purchases or acquisitions of the Shares must not exceed:
(a) in the case of an On‑Market Purchase, five per cent. (5%) above the average of the closing market prices of the Shares over the last five (5) Market Days, on which transactions in the Shares were recorded, before the day on which the On‑Market Purchase was made by the Company, which is deemed to be adjusted in accordance with the Listing Rules for any corporate action that occurs after the relevant period of five (5) Market Days; and
(b) in the case of an Off‑Market Purchase pursuant to an equal access scheme, ten per cent. (10%) above the average of the closing market prices of the Shares over the last five (5) Market Days on which transactions in the Shares were recorded, before the day on which the Company makes an announcement of an offer under the Off‑Market Purchase scheme,
in either case, excluding related expenses of the purchase or acquisition (the “ Maximum Price ”).
For the purposes of the above:
“ day on which the Company makes an announcement of an offer ” means the day on which the Company announces its intention to make an offer for the purchase or acquisition of Shares from the Shareholders, stating therein the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each Share and the relevant terms of the equal access scheme for effecting the Off‑Market Purchase.
3.3.5 Status of Purchased Shares
Any Share which is purchased or acquired by the Company is treated as cancelled immediately on purchase or acquisition (and all rights and privileges attached to that Share will expire on cancellation) unless such Share is held by the Company as a treasury share. All cancelled Shares will be automatically delisted by the SGX‑ST, and (where applicable) all certificates in respect thereof will be cancelled and destroyed by the Company as soon as reasonably practicable following settlement of any such purchase. Accordingly, the total number of issued Shares will be diminished by the number of Shares purchased or acquired by the Company and which are not held as treasury shares. Prior Board approval will be sought if any Share to be purchased pursuant to the Share Purchase Mandate will be held in treasury. It is presently intended by the Company that Shares which are purchased or acquired by the Company will be held as treasury shares, up to the maximum number of treasury shares permitted by law to be held by the Company.
3.3.6 Treasury Shares
Under the Companies Act, Shares purchased or acquired by the Company may be held or dealt with as treasury shares. Some of the key provisions on treasury shares under the Companies Act are as follows:
(a) Maximum holdings — The number of Shares held as treasury shares cannot at any time exceed ten per cent. (10%) of the total number of issued Shares;
(b) Voting and other rights — The Company shall be registered as a member in respect of the treasury shares but shall not have the right to attend or vote at meetings and/or to receive any dividends in respect of the treasury shares. However, the allotment of shares as fully paid bonus shares in respect of treasury shares is allowed. Also, a subdivision or consolidation of any treasury share into treasury shares of a greater or smaller amount is allowed so long as the total value of the treasury shares after the subdivision or consolidation is the same as before, as the case may be; and
Where the Company chooses not to hold the purchased Shares in treasury, such Shares shall be cancelled. The Company shall:
(a) reduce the amount of its share capital where the Shares were purchased or acquired out of the capital of the Company;
(b) reduce the amount of its profits where the Shares were purchased or acquired out of the profits of the Company; or
(c) reduce the amount of its share capital and profits proportionately where the Shares were purchased or acquired out of both the capital and the profits of the Company,
by the total amount of the purchase price paid by the Company for the Shares cancelled, including any expenses (including brokerage or commission) incurred in the purchase or acquisition of the Shares which are paid out of the Company’s capital or profits. Where the purchased Shares are held in treasury, the total number of issued Shares will remain unchanged.
As at the Latest Practicable Date, the issued and paid‑up share capital of the Company comprised 866,183,628 Shares (out of which 6,000,000 Shares were held in treasury). As the Company can only hold ten per cent. (10%) of its Shares being 86,618,362 Shares in treasury, the exercise in full of the Share Purchase Mandate would result in the purchase or acquisition of 80,618,362 2 Shares if all will be held in treasury, and 86,018,362 Shares if all will be cancelled. For the purposes of illustration and comparison only, the Company has assumed that pursuant to the Share Purchase Mandate, it will purchase or acquire the smaller number of Shares, i.e. 80,618,362 Shares, instead of the entire ten per cent. (10%) of the total number of issued Shares excluding treasury shares, i.e. 86,018,362 Shares.
It is not possible for the Company to realistically calculate or quantify the impact of purchases or acquisitions of Shares that may be made pursuant to the Share Purchase Mandate on the NTA and EPS as the resultant effect would depend on, inter alia , the aggregate number of Shares purchased or acquired, whether the purchase or acquisition is made out of capital or profits, the purchase price paid for such Shares and the amount borrowed (if any) by the Company to fund the purchase or acquisition of the Shares and whether the Shares purchased or acquired are cancelled or held as treasury shares.
For illustration purposes only and based on the assumptions set out below:
(i) in the case of On‑Market Purchases by the Company and assuming that the Company purchases or acquires 80,618,362 Shares, the maximum amount of funds required for the purchase (excluding brokerage, stamp duties, commission, applicable goods and services tax and other related expenses) assuming a Maximum Price of S$1.577 which is five per cent. (5%) above the average of the closing market prices of the Shares for the five (5) Market Days on which the Shares were traded on the SGX‑ST immediately preceding the Latest Practicable Date, is approximately S$127,135,156;
(ii) in the case of Off‑Market Purchases by the Company and assuming that the Company purchases or acquires 80,618,362 Shares, the maximum amount of funds required for the purchase (excluding brokerage, stamp duties, commission, applicable goods and services tax and other related expenses) assuming a Maximum Price of S$1.652 which is ten per cent. (10%) above the average closing market prices of the Shares for the last five (5) Market Days on which the Shares were traded on the SGX‑ST immediately preceding the Latest Practicable Date, is approximately S$133,181,534; and
(^2) Section 76I(1) of the Companies Act states that the aggregate number of shares held as treasury shares shall not at any time exceed ten per cent. (10%) of the total number of shares of the company at that time. As at the Latest Practicable Date, the Company has 6,000,000 Shares held in treasury. Hence, although the Share Purchase Mandate provides for up to 86,618,362 Shares to be purchased or acquired by the Company, the maximum number of Shares that the Company can purchase or acquire and hold in treasury is 80,618,362 Shares
(iii) the consideration for the purchase or acquisition of the Shares is funded equally by internal funds and borrowings after allowing for working capital, and interest payable on additional borrowings is at the rate of 3.3% per annum before adjusting for tax, and based on the audited financial statements of the Group for FY2017,
the effects of:
(a) the purchase or acquisition of 80,618,362 Shares by the Company in an On‑Market Purchase or Off‑Market Purchase and held as treasury shares; and
(b) the purchase or acquisition of 80,618,362 Shares by the Company in an On‑Market Purchase or Off‑Market Purchase and cancelled (where the 6,000,000 Shares held in treasury as at the Latest Practicable Date are also cancelled),
on the financial position of the Company and the Group are as follows:
(1) On-Market Purchase or Off-Market Purchase of 80,618,362 Shares – held as treasury shares
The Company Group
As at 31 December 2017
Before Share Purchase US$’
After On-Market Purchase US$’
After Off-Market Purchase US$’
Before Share Purchase US$’
After On-Market Purchase US$’
After Off-Market Purchase US$’ Share capital 215,573 215,573 215,573 215,573 215,573 215, Reserves 318,599 318,599 318,599 513,488 513,488 513, 534,172 534,172 534,172 729,061 729,061 729, Treasury shares (5,482) (102,232) (106,834) (5,482) (102,232) (106,834) Shareholders’ funds 528,690 431,940 427,338 723,579 626,829 622, NTA (1)^ 528,346 431,596 426,994 722,054 625,249 620, Current Assets 1,491,825 1,443,450 1,441,149 1,578,767 1,530,392 1,528, Current Liabilities 1,136,003 1,184,378 1,186,679 1,181,163 1,229,538 1,231, Working Capital 355,822 259,072 254,470 397,604 300,854 296, Total Borrowings 120,000 168,375 170,676 120,000 168,375 170, Number of Shares (’000) (2)^ 866,184 866,184 866,184 866,184 866,184 866, Number of Shares less treasury shares (’000) 860,184 779,565 779,565 860,184 779,565 779, Financial Ratios NTAper Share (US cents) (3)^ 61.42 55.36 54.77 83.94 80.20 79. Annualised Return on equity (%) 12.00 14.69 14.85 11.79 13.61 13. Basic EPS (US cents) (4)^ 7.38 8.14 8.14 9.92 10.95 10. Gearing ratio (times) (5)^ 0.23 0.39 0.40 0.17 0.27 0. Current ratio (times) (6)^ 1.31 1.22 1.21 1.34 1.24 1.
As illustrated above, the purchase of Shares made out of the capital of the Company and held as treasury shares would have the effect of reducing the working capital and NTA of the Company and the Group. The consolidated NTA per Share of the Group as at 31 December 2017 would decrease from 83.94 US cents to 80.20 US cents in the case of an On‑Market Purchase and from 83.94 US cents to 79.61 US cents in the case of an Off‑Market Purchase. No adjustment was made to take into account the reduction in dividend paid out during the year from the purchase of Shares.
