CIRCULAR DATED 13 JULY 2009 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action that you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. If you have sold all your shares in the capital of China Precision Technology Limited, please forward this Circular and the attached Proxy Form immediately to the purchaser or to the agent through whom the sale was effected for onward transmission to the purchaser. The Singapore Exchange Securities Trading Limited takes no responsibility for the accuracy of any statements or opinions made or reports contained in this Circular.
CHINA PRECISION TECHNOLOGY LIMITED (Incorporated in the Republic of Singapore) Company Registration No. 200406029N
CIRCULAR TO SHAREHOLDERS
in relation to the proposed acquisition of the business and assets of MAHK Co., Ltd, including its entire equity interests in its subsidiaries, namely Hong Kong MAHK Limited, Ningbo MAHK Optics Co., Ltd and MAHK Optics (S) Pte Ltd, in accordance with the terms of the business transfer agreement dated 17 April 2009
IMPORTANT DATES AND TIMES Last date and time for lodgement of Proxy Form
:
26 July 2009 at 10.00 a.m.
Date and time of Extraordinary General Meeting
:
28 July 2009 at 10.00 a.m.
Place of Extraordinary General Meeting
:
80 Raffles Place #25-01 UOB Plaza 1 Singapore 048624
CONTENTS PAGE
DEFINITIONS......................................................................................................................................
3
LETTER TO SHAREHOLDERS..........................................................................................................
6
1.
INTRODUCTION ......................................................................................................................
6
2.
INFORMATION ON MAHK ......................................................................................................
8
3.
SUMMARY OF THE TERMS OF THE AGREEMENT ..............................................................
15
4.
RATIONALE AND BENEFITS OF THE PROPOSED ACQUISITION ......................................
16
5.
RISK FACTORS ........................................................................................................................
17
6.
SOURCE OF FUNDS ..............................................................................................................
20
7.
FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION..................................................
20
8.
VALUATION ..............................................................................................................................
22
9.
INTERESTS OF CONTROLLING SHAREHOLDERS AND DIRECTORS ..............................
24
10.
JUSTIFICATION BY THE BOARD OF DIRECTORS ..............................................................
24
11.
DIRECTORS’ RECOMMENDATIONS ......................................................................................
25
12.
AUDIT COMMITTEE’S VIEW....................................................................................................
25
13.
EXTRAORDINARY GENERAL MEETING ..............................................................................
25
14.
ACTION TO BE TAKEN BY SHAREHOLDERS ......................................................................
25
15.
CONSENTS ..............................................................................................................................
26
16.
INSPECTION OF DOCUMENTS ..............................................................................................
26
17.
DIRECTORS’ RESPONSIBILITY STATEMENT ......................................................................
26
APPENDIX 1 ......................................................................................................................................
27
NOTICE OF EXTRAORDINARY GENERAL MEETING ....................................................................
28
2
DEFINITIONS In this Circular, the following definitions apply throughout unless otherwise stated. Some of the definitions provide the Chinese characters which have been translated into English names that are used in this Circular. These translations are provided solely for the convenience of Singapore-based shareholders, may not have been registered with the relevant PRC authorities and should not be construed as representations that the English names actually represent the Chinese characters: Companies, Corporations and Agencies “Company”
:
China Precision Technology Limited
“CP Japan Subsidiary”
:
CP-MAHK Japan Co., Ltd
“HK MAHK”
:
Hong Kong MAHK Limited
“MAHK”
:
MAHK Co., Ltd
“MAHK Group”
:
MAHK and its subsidiaries, namely HK MAHK, Ningbo MAHK and Singapore MAHK
“NB Sunrise”
:
Ningbo Sunrise Electronics Co., Ltd
“Ningbo MAHK”
:
Ningbo MAHK Optics Co., Ltd
“SGX-ST”
:
Singapore Exchange Securities Trading Limited
“Singapore MAHK”
:
MAHK Optics (S) Pte Ltd
“Board”
:
The Board of Directors of the Company
“CEO”
:
Chief Executive Officer
“CDP”
:
The Central Depository (Pte) Limited
“Circular”
:
This circular to Shareholders dated 13 July 2009
“Companies Act”
:
The Companies Act, Chapter 50 of Singapore, as modified, supplemented or amended from time to time
“Directors”
:
The Directors of the Company for the time being
“EGM”
:
The extraordinary general meeting of the Company, notice of which is given on page 28 of this Circular
“EPS”
:
Earnings per share
“FY”
:
With reference to the Group, financial year ending 31 December
“GAAP”
:
Generally accepted accounting principles
“Group”
:
The Company, its subsidiaries and associated companies (if any)
“JPY”
:
Japanese Yen
“Latest Practicable Date”
:
The latest practicable date prior to the printing of this Circular, being 10 July 2009
General
3
DEFINITIONS “Listing Manual”
:
The Listing Manual of the SGX-ST as modified, supplemented or amended from time to time
“Market Day”
:
A day on which the SGX-ST is open for trading in securities
“NTA”
:
Net tangible assets
“PRC”
:
The People’s Republic of China
“Proposed Acquisition”
:
The proposed acquisition of business and assets of MAHK, including its entire equity interests in its subsidiaries, namely HK MAHK, Ningbo MAHK and Singapore MAHK
“Purchase Consideration”
:
JPY900 million
“Resolution”
:
The ordinary resolutions as set out in the Notice of the EGM
“RMB”
:
PRC Renminbi
“Securities Account”
:
Securities accounts maintained by Depositors with CDP, but not including securities accounts maintained with a Depository Agent
“Shareholders”
:
Registered holders of the Shares, except that where the registered holder is CDP, the term “Shareholders” shall, where the context admits, mean the Depositors whose Securities Accounts are credited with Shares
“Shares”
:
Ordinary shares in the capital of the Company
“Sq m”
:
Square metre
“$” and “cents”
:
Singapore dollars and cents, respectively
“%” or “per cent.”
:
Per centum or percentage
The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act. Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall, where applicable, include corporations. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act or any statutory modification thereof and not otherwise defined in this Circular shall have the same meaning assigned to it under the Companies Act or any statutory modification thereof, as the case may be. Any reference to a time of day in this Circular is made by reference to Singapore time unless otherwise stated. As at 16 April 2009, the exchange rates between RMB and S$, between JPY and S$ and between RMB and JPY were RMB4.975 to S$1.00, JPY1.00 to S$0.0152, and RMB1 to JPY14.3.
4
DEFINITIONS The following glossary provides a description of some of the technical terms and abbreviations used in this Circular. The terms and their assigned meanings may not correspond to standard industry or common meanings or usage, as the case may be, of these terms.
“Blu-Ray Discs”
:
A next-generation DVD standard that supports high definition (HD) video and the larger storage capacity that HD material requires. The Blu-Ray format was developed to enable recording, rewriting and playback of HD video, as well as storing large amounts of data. BluRay Discs generally hold more data and transfer data faster than HDDVD, although generally the HD-DVD format is less expensive to produce
“CDs”
:
A type of optical disk storage media, which comes in a variety of formats. These formats include CD-ROMs that are read-only, CD-Rs that you can write to once and are then read-only, and CD-RWs that you can write to in multiple sessions
“DVDs”
:
A type of disc with similar physical dimensions to a CD but the number of pits in the DVD are much smaller and closer together than on CDs. DVDs can hold much greater amounts of information such as sound or video and with the help of compression can store entire movies
“HD-DVDs”
:
High Density Digital Versatile Disc; a digital optical media format which is being developed as one standard for high definition DVD, a next-generation DVD standard that supports high definition (HD) video and the larger storage capacity that HD material requires. The smaller laser wavelength used in HD-DVDs allows the discs to use smaller pits and tighter tracks. Therefore, it could fit more data on the same size disc, compared to traditional DVDs
“LED”
:
Light Emitting Diode, a solid-state semiconductor device that converts electrical energy directly into light
“Magneto Optical Discs”
:
A type of optical disc that uses magnetic (magneto) and laser (optical) technologies to write and read data to and from the disc. The technology uses the optical properties of a magnetized platter upon which data is stored magnetically, but read optically, using a laser
“Mini Discs”
:
An optical disc-based data storage format that uses a disc roughly half the diameter of a standard compact disc, moderately popular as a convenient and relatively high quality medium for audio recordings both at home studios and broadcast applications
“ODM”
:
Original Design Manufacturer, typically a company which designs and manufactures a product which is specified and eventually branded by another firm for sale
“OEM”
:
Original Equipment Manufacturer, typically a company that uses a component made by a second company in its own product, or sells the product of the second company under its own brand
“Optical Pickup”
:
A noncontacting transducer which emits light from an internal infrared LED, and detects the level of reflected light with a phototransistor
5
LETTER TO SHAREHOLDERS
CHINA PRECISION TECHNOLOGY LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 200406029N)
Directors:
Registered Office:
Zhang Zhongliang (Executive Chairman and CEO) Shi Zhongguo (Executive Director) Chen Songjie (Executive Director) Lu Hong (Executive Director) Professor Wee Chow Hou (Lead Independent Director) Tan Soo Kiat (Independent Director) Professor Yeung Kwok On (Independent Director) Professor Peng Yinghong (Independent Director) Seah Kian Wee (Non-Executive Director)
80 Raffles Place #25-01 UOB Plaza 1 Singapore 048624
13 July 2009
To:
The Shareholders of China Precision Technology Limited
Dear Sir / Madam 1.
INTRODUCTION
1.1
The Proposed Acquisition On 30 March 2009, the Company announced that its subsidiary NB Sunrise had signed a nonbinding memorandum of understanding (“Memorandum of Understanding”) with MAHK, a Japanese corporation, on 27 March 2009, to acquire MAHK’s business and assets, including its entire equity interests in its subsidiaries, namely HK MAHK, Ningbo MAHK and Singapore MAHK (“Proposed Acquisition”). On 13 April 2009, MAHK submitted to the Tokyo District Court (the “Court”) a draft business transfer agreement based on the Memorandum of Understanding, and sought the Court’s approval for the Proposed Acquisition. Notwithstanding the submission to the Court, the parties further negotiated the terms of the business transfer agreement. On 21 April 2009, the Company announced that NB Sunrise and MAHK had on 17 April 2009 entered into a business transfer agreement in respect of the Proposed Acquisition for a consideration of JPY900 million (equivalent to S$13,680,000) (the “Agreement”). Based on the market capitalisation of the Company as at 16 April 2009 (being the Market Day preceding the date of the Agreement) amounting to S$46,391,000, the consideration of JPY900 million (or S$13,680,000) was equivalent to approximately 29.5% of the Company’s market capitalisation. The Proposed Acquisition would therefore constitute a major transaction for the purposes of and would be subject to the provisions of Rule 1014 of the Listing Manual. Accordingly, Shareholders’ approval must be obtained. The purpose of this Circular is to provide Shareholders with the relevant information relating to the Proposed Acquisition (including the rationale for the Proposed Acquisition and the financial effects thereof on the Group), and to seek Shareholders’ approval for the Proposed Acquisition at the EGM to be held on 28 July 2009, notice of which is set out on page 28 of this Circular. None of the Company’s Directors or controlling shareholders is related to MAHK or its shareholders.
6
LETTER TO SHAREHOLDERS 1.2
Rule 1006 Relative Figures The relative figures computed on the bases pursuant to Rule 1006(a) to (d) of the Listing Manual in respect of the Proposed Acquisition and based on the audited consolidated financial statements of the Company and the Group for FY2008 are set out as follows: (a)
The net asset value of the assets to be disposed of, compared with the Group’s net asset value. This basis is not applicable to an acquisition of assets.
Not Applicable
(b)
The net profits attributable to the assets acquired or disposed of, compared with the Group’s net profits.
RMB -42,727,000/ RMB95,628,000 x 100% = - 45%(1)
(c)
The aggregate value of the consideration given or received, compared with the Company’s market capitalisation based on the total number of issued shares excluding treasury shares.
S$13,680,000/ S$46,391,000 x 100% = 29%(2)
(d)
The number of equity securities issued by the Company as consideration for the Proposed Acquisition, compared with the number of equity securities previously in issue.
Not Applicable
Notes: (1)
Under Rule 1002(3)(b), “net profit” means profit or loss before income tax, minority interests and extraordinary items. The loss of MAHK Group is based on its unaudited accounts for the period from January to December 2008.
(2)
Based on the Purchase Consideration of S$13,680,000 and the market capitalization of the Company of S$46,391,000 on 16 April 2009.
As the applicable relative figure computed under basis (c) in Rule 1006 exceeds 20%, the Proposed Acquisition is a “major transaction” as defined in Chapter 10 of the SGX-ST Listing Manual and therefore requires the approval of Shareholders. 1.3
Update of Events since Announcement on 21 April 2009 On 22 April 2009, we incorporated a new subsidiary in Japan, CP-MAHK Japan Co., Ltd (the “CP Japan Subsidiary”), directly and wholly-owned by NB Sunrise, to manage and operate the business being transferred by MAHK to our Group from 1 May 2009. Details of the CP Japan Subsidiary are as follows:Company registration no.
:
3903-01-003274
Place of incorporation
:
2421 Hagurominami, Izumi, Nagai-Shi, Yamagata-Ken, Japan
Total number of authorised shares
:
10,000 shares
Total number of issued shares
:
1,000 shares
Issued share capital
:
JPY10 million
Paid-up share capital
:
JPY10 million
Principle activities
:
Manufacturing and sales of optical instruments and precision instruments
Representative directors
:
Zhang Zhongliang Yukio Noda
Directors
:
Shigeru Aoki Hideo Nakato Youngchae Kim Hisao Shimada
7
LETTER TO SHAREHOLDERS Statutory Supervisor
:
Shi Zhongguo
Sole Shareholder
:
NB Sunrise
On 27 April 2009, the Court had convened a hearing session with the creditors of MAHK, and granted its approval for the said transfer of MAHK’s business to NB Sunrise or its nominee. 2.
INFORMATION ON MAHK
2.1
MAHK MAHK was founded in 1965 and is located in Izumi, Nagai-Shi, Yamagata-Ken, Japan. It has grown from a small operation to a global organisation that specialises in the manufacturing of optical lenses and optical components which are widely used in HD-DVDs, DVD/CDs, Blu-Ray Discs, Mini Discs, Magneto Optical Discs, projectors, camera lenses, lighting and white LEDs. MAHK caters to numerous customers worldwide, such as Sharp, Sanyo, Panasonic and Pioneer. MAHK has factories in Japan and Ningbo, China, and sales offices in Hong Kong and Singapore. It also has a research and development centre in Japan. The total number of staff employed in MAHK and its subsidiaries was approximately 200 as at 30 April 2009. The MAHK’s Japan factories are primarily engaged in the manufacturing of optical lens, prism and mirrors. As at 30 April 2009, MAHK has approximately 52 employees. MAHK owns numerous patents and has applied for patent registration for various optical technology. The debt obligations of MAHK as at 30 April 2009 was approximately JPY5 billion (equivalent to S$76,000,000), mainly comprising of bank borrowings of approximately JPY4.6 billion (equivalent to S$69,920,000) and trade payables of approximately JPY0.4 billion (equivalent to S$6,080,000). The bank borrowings of MAHK were secured by mortgages on land use rights and buildings owned by MAHK. Please refer to Section 5.6 of this Circular for more information on the risk of the mortgages on land use rights and buildings owned by MAHK. For the avoidance of doubt, we are only taking over certain liabilities of MAHK amounting to approximately JPY41 million (equivalent to S$623,000), comprising of relocation costs (JPY36.8 million, equivalent to S$559,000) and customers’ deposit for the mould (JPY4.2 million, equivalent to S$64,000). Affected by the global economy downturn and stiff competition, MAHK is undergoing a civil rehabilitation proceeding (a bankruptcy protection plan) in Japan. The Proposed Acquisition is part of MAHK’s civil rehabilitation proceeding, being made by MAHK under Japan’s Civil Rehabilitation Law. Please see Section 2.4 of this Circular for more details on the Japan’s Civil Rehabilitation Law. MAHK’s products are classified into four main categories, namely glass lens, plastic lens, prism and mirrors. Approximately 70% of its products are sold to its customers in the PRC and the remaining 30% are sold to customers in Japan. The revenue of MAHK Group for the two financial years ended 31 March 2007 and 2008, which were prepared in accordance with Japanese GAAP, was JPY3.0 billion and JPY3.2 billion respectively. The losses of MAHK Group for the same periods were JPY407 million and JPY150 million respectively. The revenue and losses of MAHK Group for the nine-month period from April 2008 to December 2008, which was prepared in accordance with Japanese GAAP, was JPY1.7 billion and JPY573 million respectively. The relatively low revenue and higher losses, as compared to previous years, was mainly attributable to the global financial crisis since September 2008 and lower gross profit margin as a result of intense competition.
8
LETTER TO SHAREHOLDERS 2.2
Companies under MAHK Our Group is also acquiring MAHK’s entire equity interests in the following companies: Name
Date of Incorporation
Registered Address
Authorised/ Registered Capital
Paid up Capital
Principal Activities
1
HK MAHK
7 April 2000
Room 706, Podium Plaza, 5 Hanoi Road, Tsim Sha Tsui, Kowloon, Hong Kong
Authorised share capital HK$15m
HK$15m
Sales of precision optical lens and mirrors
2
Ningbo MAHK
24 April 2002
Science and Technology Park, Ningbo City, Zhejiang Province, the PRC
Registered capital US$6.9m
US$6.9m
Manufacturing and sales of precision optical lens and mirrors
3
Singapore MAHK
7 December 1993
3 International Business Park, #02-15 Nordic European Centre, Singapore 609927
Not applicable
S$200,000
Manufacturing and sales of optical lenses and mirrors for audio video equipments
(1)
HK MAHK HK MAHK is primarily engaged in the sales of precision optical lens and mirrors. As at 6 May 2009, it engaged two management personnel. Its main customers are Wuxi Sharp Electronic Components Co., Ltd and TopRay Technologies Inc. HK MAHK does not own any land and building except machinery for manufacturing purposes.
(2)
Ningbo MAHK Ningbo MAHK is primarily engaged in the manufacturing and sales of precision optical lens and mirrors. As at 6 May 2009, Ningbo MAHK engaged 146 personnel. Prior to the Proposed Acquisition, the major supplier and customer of Ningbo MAHK had been HK MAHK. HK MAHK supplied Ningbo MAHK with raw materials for the manufacturing of the optical products. Ningbo MAHK in turn sells the finished products to HK MAHK, and ships the finished products to customers nominated by HK MAHK. Ningbo MAHK has obtained the licenses, approvals, certificates, and permits necessary for its operations in the PRC and has also been awarded the following quality assurance certificates: (a)
an Environmental Management System Certificate dated 8 May 2007 (date of expiry 7 May 2010) for its conformity with GB/T24001-2004 idt ISO14001:2004 standard for its production of, and correlative management activities relating to, mirrors, prism and lens;
(b)
a Quality Management System Certificate dated 15 September 2006 (date of expiry 14 September 2009) for its conformity with GB/T19001-2000-ISO9001:2000 standard for its production of mirrors, prism and lens.
9
LETTER TO SHAREHOLDERS Ningbo MAHK owns the following real properties: (i)
(ii)
Land Use Rights Certificate Reference No.
Location
Use
Tenure
Land area (sq m)
Encumbrance
Yong Ke Guo Yong (2003) Zi No.001
Science and Technology Park, Ningbo City, Zhejiang Province
Industrial
Until 22 May 2053
9,387.00
Nil
Use
Area (sq m)
Encumbrance
Building Ownership Rights Certificate Reference No.
(3)
Location
Yong Fang Quan Zheng Yin Zhou Qu Zi No. KJ200601858
No. 89 Lingyun Road, Yinzhou District, Ningbo City, Zhejiang Province
Industrial
6,306.97
Nil
Yong Fang Quan Zheng Yin Zhou Qu Zi No. KJ200601859
No. 89 Lingyun Road, Yinzhou District, Ningbo City, Zhejiang Province
Industrial
166.44
Nil
Singapore MAHK MAHK is primarily engaged in the manufacturing and sales of optical lens and mirrors for audio video equipments. Singapore MAHK sub-contracts the manufacturing process to Wawasan Selatan Sdn Bhd, a company unrelated to MAHK Group located in Johor Bahru, Johor, Malaysia. As at 6 May 2009, Singapore MAHK engaged 5 personnel. Its main customers are MAHK, Pioneer Electronics Asiacentre Pte Ltd, S&O Electronics Sdn Bhd, Sony EMCS (Malaysia) Sdn Bhd and Nikko Video Services Pte Ltd. Singapore MAHK does not own any land and building except machinery for manufacturing purposes.
2.3
MAHK’s Operations
2.3.1 Land-use Rights and Buildings to be acquired by NB Sunrise MAHK owns the following properties in Japan (which will be acquired by NB Sunrise pursuant to the Proposed Acquisition), namely: Certificate No.
Location
Use
Land Area/Built-in Area (sq m)
1.
3903005352057
Land (building land)/2421 Haguro Minami, Izumi, Nagai-Shi(1)
Land
2,962.00
2.
3903005354616
Building/2421 Haguro Minami, Izumi, Nagai-Shi(2)
Factory
2,295.84
3.
3903005352056
Land (building land)/2420 Haguro Minami, Izumi, Nagai-Shi(3)
Land
96.00
4.
3903005352050
Land (building land)/2417 Haguro Minami, Izumi, Nagai-Shi(4)
Land
914.52
5.
3903005354614
Building/2417 Haguro Minami, Izumi, Nagai-Shi(5)
Office
144.72
10
LETTER TO SHAREHOLDERS Certificate No.
Location
Use
Land Area/Built-in Area (sq m)
6.
3903005352051
Land (building land)/2417-1 Haguro Minami, Izumi, Nagai-Shi(6)
Land
1,065.47
7.
3903005354615
Building/2417-1 Haguro Minami, Izumi, Nagai-Shi(7)
Factory
1,349.64
8.
–
Building/ 2417-1 Haguro Minami, Izumi, Nagai-Shi(8)
Factory
–
9.
3903005352052
Land (building land)/2418-1 Haguro Minami, Izumi, Nagai-Shi(9)
Land
1,652.31
10.
3903005352053
Land (building land)/2418-2 Haguro Minami, Izumi, Nagai-Shi(10)
Land
200.68
11.
3903005352054
Land (building land)/2419-1 Haguro Minami, Izumi, Nagai-Shi(11)
Land
2,800.00
12.
3903005352055
Land (building land)/2419-2 Haguro Minami, Izumi, Nagai-Shi(12)
Land
3,000.00
13.
3903005436548
Land (building land)/1974-2 Toyoshiro, Tokiniwa, Nagai-Shi(13)
Land
792.21
14.
3903005436549
Land (building land)/1975 Toyoshiro, Tokiniwa, Nagai-Shi(14)
Land
2,169.00
15.
3903005436550
Land (building land)/1976 Toyoshiro, Tokiniwa, Nagai-Shi(15)
Land
76.00
16.
3903005436551
Land (building land)/1977 Toyoshiro, Tokiniwa, Nagai-Shi(16)
Land
13.00
17.
3903005436552
Land (building land)/1978 Toyoshiro, Tokiniwa, Nagai-Shi(17)
Land
4,594.00
18.
3903005448383
Building/1978 Tokiniwa, Toyonari, Nagai-Shi(18)
Factory
439.20
19.
3903005436553
Land (building land)/1980 Toyoshiro, Tokiniwa, Nagai-Shi(19)
Land
484.00
20.
0116000410735
Land (building land)/3-6 Asahigaoka, Nerima-Ku(20)
Land
90.06
21.
0116000413215
Building/3-6-2 Asahigaoka, Nerima-Ku(21)
Office, house, garage
348.43
Notes:(1)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from The Kirayaka Bank, Ltd.(“Kirayaka Bank”), (3) 2nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum loan amount of JPY250 million from Bank of Tokyo-Mitsubishi UFJ (“BTMU”), (5) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (6) 5th revolving mortgage for a maximum loan amount of JPY150 million from The Yamagata Bank, Ltd.(“Yamagata Bank”).
(2)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (2) 2nd revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (3) 3rd revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (4) 4th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(3)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 2 nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (5) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (6) 5th revolving mortgage for a maximum amount of JPY150 million from Yamagata Bank.
11
LETTER TO SHAREHOLDERS (4)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 2 nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum amount of JPY250 million from BTMU, (5) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (6) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(5)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 3rd revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (4) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (5) 5th revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (6) 6th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(6)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 2 nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (5) 4th revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (6) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(7)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (3) 3rd revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (4) 4th revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank.
(8)
This building has not been registered. As it is a carpark entrance, there is a possibility that it cannot be registered as an independent building. Assuming that the structure can be registered, the purchaser (in this case, NB Sunrise) can, in the future, transfer or mortgage the property as the rightful owner, even if it does not register the title to the property. However, it cannot perfect the mortgage without registering the title to the property and, generally, mortgagees will not accept a mortgage without perfection of title. We will seek the necessary legal advice to register the title to the property after completion of the Proposed Acquisition.
(9)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 2 nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (5) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (6) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(10)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 2 nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (5) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (6) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(11)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 2 nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (5) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (6) 5th revolving mortgage for a maximum amount of JPY150 million from Yamagata Bank.
(12)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 1st revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 2 nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (4) 3rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (5) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (6) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(13)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (3) 3rd revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(14)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 3 rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (4) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (5) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(15)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 3 rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (4) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (5) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
12
LETTER TO SHAREHOLDERS (16)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 3 rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (4) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (5) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(17)
Charged to secure (1) 1st revolving mortgage for a maximum amount: JPY50 million from Shoko Chukin Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY50 million from Kirayaka Bank, (3) 3rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (4) 4th revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (5) 5th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(18)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY50 million from Shoko Chukin Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (3) 3rd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (4) 4th revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(19)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY300 million from Kirayaka Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY250 million from BTMU, (3) 3rd revolving mortgage for a maximum loan amount of JPY150 million from Yamagata Bank.
(20)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY125 million from Tokyo Tomin Bank, Limited (“Tokyo Tomin Bank”), (2) 2nd revolving mortgage for a maximum loan amount of JPY300 million from BTMU.
(21)
Charged to secure (1) 1st revolving mortgage for a maximum loan amount of JPY125 million from Tokyo Tomin Bank, (2) 2nd revolving mortgage for a maximum loan amount of JPY300 million from BTMU.
Please refer to Section 5.6 of this Circular for other details on the encumbrances on these properties.
2.3.2 Intellectual Property Rights to be acquired by NB Sunrise The details of the patents registered in Japan under the name of MAHK (which will be acquired by NB Sunrise pursuant to the Proposed Acquisition) are shown in the following table: Nature of Patent
Application No.
Registration No.
Date of Expiry
Image Forming Lens for Compensating Temperature Variation
H03-210320
2046457
26 July 2011
Wide-Angle Image Forming
H04-245857
2582017
21 August 2012
Lens for Reading
H05-032548
2592033
29 January 2013
Image Forming Lens
H05-187306
2689303
30 July 2013
Image-Forming Lens Large in Diameter of Finite System
H06-204393
2779771
5 August 2014
Zoom Lens for Copying
H07-039289
2875964
3 February 2015
Objective Lens System for Disk Substrate Variable in Thickness
H07-319546
3014311
14 November 2015
Retrofocusing Wide-Angle Lens
H09-293560
3281583
9 October 2017
Retrofocusing Wide-Angle Lens Having Large Diameter Ratio
H09-303784
3295027
17 October 2017
Small-Sized Lens Array for Preventing Stray Light
2000-056993
3355170
2 March 2020
Light Condensing Optical System for Optical Pickup and Optical Pickup Apparatus
2006-131849
Application to register patent
Not applicable
13
LETTER TO SHAREHOLDERS 2.4
Japan’s Civil Rehabilitation Law Civil rehabilitation proceedings (minji saisei tetisuki), carried out under the Civil Rehabilitation Law (minji saisei ho) are a type of insolvency proceedings in Japan. Such rehabilitation proceedings are available to companies (i) at risk of insolvency, that is, is unable to make payments when due, or is at risk to have liabilities exceeding its assets, or (ii) at risk to have the continuation of its business substantially impeded by paying a debt which is due. The aim of rehabilitation proceedings is to enable a company to recover economically, paying its debts by way of restructuring the claims of creditors (such as reduction or exemption of claims and extension of due dates). Once found to be insolvent by a court, the company prepares a civil rehabilitation plan under control of a court-appointed supervisor. Civil rehabilitation plans must be approved both by (i) a majority of unsecured creditors attending a creditors’ meeting and by (ii) creditors holding a majority of the unsecured claims, and also be authorized by the court. Under civil rehabilitation proceedings, management of the company can be continued by the existing management, although it can also be undertaken by a rehabilitation trustee. The court can appoint a trustee if it determines such is necessary, and even where there is no such appointment the former management often resigns upon filing of a petition for civil rehabilitation proceedings. It is envisaged that the management of MAHK will continue to manage MAHK for the time being. In civil rehabilitation proceedings, although claims secured by certain types of security (such as mortgages and pledges) do not have to be enforced as part of the proceedings, certain secured creditors can, in principle, enforce their claims independently of the creditor-approved and courtauthorised rehabilitation plan. However, the rehabilitation debtor or the trustee may extinguish security interests in collateral by paying the court money equivalent to the court-approved value of the collateral for payment to the creditor. We believe that the creditors have informally agreed with MAHK not to foreclose on their collateral.
2.5
Transfer of Business from 1 May 2009 On 1 May 2009, MAHK transferred the business and assets to CP Japan Subsidiary. In the course of negotiations for the Agreement, MAHK had impressed upon NB Sunrise that the transfer of the assets and business of MAHK had to take place on 1 May 2009 to prevent the deterioration in the value of the business to be acquired and to ensure continuity in its operations and its dealings with suppliers and customers. NB Sunrise has on 22 April 2009 incorporated the CP Japan Subsidiary to undertake the business of MAHK. Pending completion of the Proposed Acquisition, MAHK will lease its premises at 2-47 Higashi Machi, Nagai City, Yamagata Prefecture, 993-0003 Japan to the CP Japan Subsidiary. The CP Japan Subsidiary has the right to use MAHK’s plant, equipment and machinery during the period from 1 May 2009 to the completion of the Proposed Acquisition. Under the Agreement, MAHK will formally effect the transfer of its business and assets after all the conditions provided in the Agreement set out in Section 3 of this Circular have been fulfilled (completion is scheduled on 31 July 2009, which date can be extended up to 31 October 2009 if the conditions are not fulfilled by 31 July 2009 provided that NB Sunrise provides to MAHK reasonable grounds for its failure to fulfill the conditions). The purpose of such interim measures pending completion of the Proposed Acquisition is to minimise disruption to the operations of the business of MAHK which NB Sunrise is acquiring. NB Sunrise will fund part of the operating and working capital expenses of CP Japan Subsidiary. NB Sunrise will not be making any payment to MAHK until completion of the Proposed Acquisition.
14
LETTER TO SHAREHOLDERS 3.
SUMMARY OF THE TERMS OF THE AGREEMENT The main terms of the Agreement are as follows: 1.
MAHK will transfer to NB Sunrise (or its nominee) certain of its assets and liabilities with effect from 1 May 2009, or such other date as the parties may agree. For details and the effect of this transfer, please refer to Section 2.5 of this Circular.
2.
Completion of the Proposed Acquisition on 31 July 2009 is subject to the fulfillment of certain conditions, including the following: (a)
completion of legal and financial due diligence by NB Sunrise and the legal and financial due diligence findings are satisfactory to NB Sunrise;
(b)
approval for the Proposed Acquisition being obtained by MAHK from the Court;
(c)
MAHK shall release mortgages on the land use rights and buildings owned by MAHK; and
(d)
approval for the Proposed Acquisition being obtained from the Shareholders in a general meeting.
In the event that the conditions are not fulfilled by 31 July 2009, either party may terminate the Agreement. However, the completion date may be extended up to 31 October 2009 if NB Sunrise provides to MAHK reasonable grounds for its failure to fulfill the conditions. As at the Latest Practicable Date, the conditions (a) and (b) above have been fulfilled. 3.
The consideration for the Proposed Acquisition is JPY900 million (equivalent to S$13,680,000), out of which JPY850 million (equivalent to S$12,920,000) is to be paid to MAHK and the remaining JPY50 million (equivalent to S$760,000) is to be paid, at the direction of MAHK, to Dynamic Goal Finance Limited. The JPY50 million payment to Dynamic Goal Finance Limited is equivalent to the amount of an interest free loan extended by Dynamic Goal Finance Limited to MAHK in February 2009 for its working capital purposes. Dynamic Goal Finance Limited is an investment-holding company wholly-owned by Zhang Zhongliang, our Executive Chairman and CEO. Subject to the fulfillment of the conditions, the payment of the Purchase Consideration of JPY900 million shall be made as follows on completion: (a)
JPY50 million (equivalent to S$760,000) to be paid to Dynamic Goal Finance Limited; and
(b)
JPY670 million (equivalent to S$10,184,000) to be paid to MAHK.
NB Sunrise will retain an amount of JPY180 million (being 20% of the Purchase Consideration)(equivalent to S$2,736,000)(“Retention Sum”) until 30 September 2009 or in the event the completion date is extended to a date later than 1 October 2009, 1 month after the extended completion date. For avoidance of doubt, it is provided under the Agreement that the Purchase Consideration will only be paid upon fulfillment of all the conditions set out in para 2 of Section 3 above. 4.
The Purchase Consideration may be revised downwards, depending on the results of the due diligence undertaken by NB Sunrise. Any deduction from the Purchase Consideration can be made from the Retention Sum.
15
LETTER TO SHAREHOLDERS 4.
RATIONALE AND BENEFITS OF THE PROPOSED ACQUISITION
4.1
Financial The consideration of JPY900 million was derived at an approximate 30% discount from the net worth of the assets to be acquired from MAHK and the net asset value of HK MAHK, Ningbo MAHK and Singapore MAHK as at 28 February 2009. The 30% discount was computed based on the draft report prepared by KPMG AZSA & Co. (“KPMG”) engaged by MAHK for the purpose of determining the net worth of the assets to be acquired from MAHK and the net asset value of its subsidiaries as at 28 February 2009. The parties negotiated the Purchase Consideration based on the adjusted balance sheet from the draft report prepared by KPMG.
4.2
Non-Financial (a)
Laying the foundation for strategic development of the Group The Proposed Acquisition is in line with the Group’s aim of becoming one of the primary suppliers to the world’s leading players in the electronics and telecommunications industry within the next three years. The Proposed Acquisition benefits the Group in two ways: Firstly, it enhances the Group’s current technological capabilities. The Group currently has competency in the fields of precision moulding and plastic injection moulding. With the Proposed Acquisition, the Group will be able to merge its current technologies with those of MAHK and set a foundation for future technological advancements. Through these enhancement, the Group hopes to be able to make significant inroads into the fields of mobile phone and digital camera technology and lay a stable foundation to be an OEM and an ODM. Secondly, the Group foresees growth and development in the fields of optical lenses and optical components, which are widely used in lighting, white LEDs, projectors, camera lenses, Blu-Ray Discs, HD-DVDs, DVD/CDs, Mini Discs and Magneto Optical Discs. This can propel the Group’s progress in the lens industry and create more market opportunities for the Group.
(b)
Advancing our technological capabilities Through the Proposed Acquisition, the Group hopes to be able to attain the technological capabilities previously owned by MAHK by retaining the key management, supervisory and technical personnel of MAHK and by owning the patents registered under the name of MAHK. The success of the CP Japan Subsidiary is dependent, to a large extent, on our employment and retention of the key personnel aforementioned. The Group hopes to build on its current technological assets and capabilities, and thereby increase its competitive edge in the production of metal and plastic parts.
(c)
Enhancing service for our key customer Prior to the Proposed Acquisition, MAHK had a 30-year business relationship with Sharp, which is also one of the Group’s key customers. The Proposed Acquisition will enable the Group to provide more comprehensive suite of services to its key customers. In merging the operations of MAHK with the Group’s operations, we hope to achieve greater operational efficiency as we acquire technological expertise from Japan and benefit from lower costs of operations in the PRC. By introducing new products such as lens unit, LED backlight and white LEDs, the Group hopes to be able to garner more market exposure and increase its market share in the consumer electronics industry.
16
LETTER TO SHAREHOLDERS (d)
The streamlining effect MAHK has been in the optics industry for over 40 years and has been considered one of the leading players in the field. The Group will undertake the following consolidation efforts to generate growth and profitability in the near future: (i)
Market Consolidation 70% of MAHK’s revenue is currently derived from Sharp group (which includes Sharp’s subsidiaries incorporated in the PRC), while other clients contribute a negligible share. The tuner industry on the other hand, has a larger clientele list, ranging from Sharp, Sony and Panasonic, to Sanyo, Samsung and LG. These clients bring with them broad and diversified requirements for products like the pick-up lens and camera lens units. The Proposed Acquisition will enable the Group to consolidate the tuner and lens businesses.
(ii)
Cost Consolidation The Group believes that in the near term, PRC will be the world’s manufacturing hub. The Group intends to relocate production in Japan to PRC. By doing so, costs can also be reduced. The Proposed Acquisition will integrate the low manufacturing costs that China provides with Japan’s advanced technology, and hasten the pace of growth for the Group. The operations in China will be production-intensive, while those in Japan will be focused on research and development, trial production and local market development. The Group will apply its experience of effective cost management to the business of MAHK (which will be acquired by NB Sunrise) for greater cost efficiency.
(iii)
Financial Consolidation MAHK had fallen into financial difficulties due to its heavy financial commitments. Through the Group’s strategic acquisition of the business and assets of MAHK as part of MAHK’s civil rehabilitation plan, MAHK’s debts and liabilities can be eradicated, leaving a strong technical foundation for future growth and development.
In view of the above, the Board of Directors of the Company is of the view that the Proposed Acquisition is in the best interests of the Group. 5.
RISK FACTORS
5.1
We do not have any operating track record in optics industry The Group’s core business is the manufacturing and sale of the mechanical parts of the electronic tuners, various precision components and connectors for the consumer electronics, telecommunications and office automation equipment industries and exterior parts of automobiles (including the surface treatment of such exterior parts). Hence, there are risks and uncertainties in our ability to execute and expand optics business. Our inability to address relevant risks and uncertainties in a timely manner may adversely affect the Group’s financial performance and financial position.
5.2
We operate in a competitive optics industry and if we are unable to maintain our competitive position, our results of operations may be adversely affected We are subject to competition from both existing manufacturers and new market entrants in the optics industry. Competitive factors in the optics industry include range and quality of products, pricing and research and development capability. There is no assurance that we will continue to remain competitive in the future. In the event we are unable to stay ahead in the face of intense competition from the competitors, our business and results of operation will be adversely affected.
17
LETTER TO SHAREHOLDERS 5.3
We face challenges in integrating the different cultures of Japan and the PRC and integrating the business operations The success of the Proposed Acquisition, to a large extent, depends on our ability to integrate the business and assets of MAHK with that of our Group, and to integrate the corporate cultures and work ethics of the two different groups of companies. The original customers of MAHK may have doubts over the continuity of supplies, quality and service of CP Japan Subsidiary. In addition, the existing customers of the Company may have reservations with the reliability of CP Japan Subsidiary, with whom they have not dealt before. As the Company plans to reallocate production resources after the Proposed Acquisition, there might be additional expenses incurred in the process of integrating resources, risks of machinery breakdown and loss of talent. As the transaction in question involves a cross border acquisition, there might be clashes in terms of corporate cultures and ideologies. If we are unable to integrate the cultures and operations in a timely manner, the employees of MAHK that the CP Japan Subsidiary plans to re-hire might reject the Proposed Acquisition and subsequently affect our productivity and profitability.
5.4
We are exposed to finance risks The Purchase Consideration will be funded with internal sources of funds and external borrowings from financial institutions. Future adverse fluctuations of the interest rate would have a negative impact on the Group’s payment of interest and principal and adversely affect the Group’s financial performance.
5.5
The success of CP Japan Subsidiary is dependent on certain key personnel and management continuity The success of the CP Japan Subsidiary is dependent, to a large extent, on our employment and retention of key management and technical personnel of MAHK, including Yukio Noda, Hideo Nakato, Shigeru Aoki and key supervisory and technical personnel. The loss of these personnel without suitable and timely replacement, or our inability to attract and retain relevant suitable employees will affect our operations and adversely affect our financial performance and profitability. CP Japan Subsidiary currently does not have any service agreements with its key management personnel, but the Group intends to enter into service agreements with these personnel after the Proposed Acquisition is completed.
5.6
All the land use rights and buildings owned by MAHK are mortgaged All the land use rights and buildings owned by MAHK are mortgaged. As at 30 April 2009, the aggregate amount of loan mortgage of the properties owned by MAHK shown in section 2.3.1 was approximately JPY4.6 billion (equivalent to S$69,920,000). The Agreement was conditional upon, inter alia, MAHK (as the mortgagor) procuring that the land use rights and buildings be released from such mortgages. Under the Agreement, if the mortgagees refuse to release the mortgages by the end of July 2009 or if NB Sunrise expects that the consents of the mortgagees for the release of the mortgages will not be obtained by the end of July 2009, MAHK shall, under the instruction of NB Sunrise, petition for authorization of a competent Japanese court to extinguish the mortgages. However, the court retains discretion whether to allow the release of the mortgages. It may authorize the mortgagor to extinguish all the mortgages by paying the price of the properties to the court if the properties are essential to continuation of the business. The mortgagee, however, can express an objection to the price MAHK (as mortgagor) submitted to the court. If the court authorises the mortgages to be extinguished, the mortgagees can file a motion to appeal the decision. In the event the court’s approval for the release of the mortgages on the land use rights and buildings is not obtained for any reason whatsoever, NB Sunrise is entitled to terminate the Agreement via written notice to MAHK.
18
LETTER TO SHAREHOLDERS 5.7
We are exposed to contingent liabilities of HK MAHK, Ningbo MAHK and Singapore MAHK We are acquiring MAHK’s equity interests in its subsidiaries, namely HK MAHK, Ningbo MAHK and Singapore MAHK. We are thus exposed to risks of inheriting certain contingent liabilities which may not be known as at the date of this Circular. Such liabilities may include financial obligations or legal litigations occurred prior to the Proposed Acquisition. Although the Company will take necessary actions to mitigate such risks, such as conducting legal and financial due diligences, there may still be risks that may materialise in the future. As at the Latest Practicable Date, the legal and financial due diligence have been completed. To the best of its knowledge, the Company is not aware of any material contingent liabilities from the legal and financial due diligence. If any contingent liability present in these subsidiaries should materialise or if the subsidiaries incur losses on their off-balance sheet items after completion of the Proposed Acquisition, the attractiveness of the Proposed Acquisition and our Group’s financial position will be adversely affected.
5.8
It may be relatively difficult to enforce the Agreement in Japan In the event MAHK fails to perform its obligations under the Agreement (a summary of which appears in Section 3 of this Circular), we may incur substantial costs and expenses to enforce its rights against MAHK, with little or no assurance that it will be successful in its claim(s) or in the enforcement of any judgment or award against MAHK. In such an event, the financial and operational performance of the Group will be adversely affected.
5.9
We are dependent on major customers The major customers of MAHK are Sharp Corporation, Pioneer Corporation, Panasonic Corporation, Technica Fukui Co., Ltd and Sanyo Electronics Co., Ltd. The major customers of MAHK in aggregate accounted for approximately 65.7%, 82.6% and 80.0% of the total revenue of MAHK Group for each of the financial year ended 31 March 2007, 2008 and 2009 respectively. The sales of MAHK were heavily dependent on its major customers. In the event that the major customers of MAHK do not continue to purchase from us, reduce their purchases from us, or develop their own ability to manufacture the products that we sell to them such as Optical Pick-up Unit, and if we are unable to secure new contracts or new customers that can replace the loss of these customers within a short time frame, our business and profitability will be affected. In addition, any delays and/or defaults on payments or business difficulties on the part of our major customers will adversely affect our cashflow, financial position and profitability.
5.10 We are exposed to the risk of rising labour costs in PRC The Employment Contract Law (promulgated by the National People’s Congress’ Standing Committee of the PRC on 29 June 2007 and took effect on 1 January 2008) governs labour relations and employment contracts (including the entry into, performance, amendment, termination and determination of employment contracts) between domestic enterprises (including foreign invested companies), individual economic organizations and private non-enterprise units and their employees. Such law increases the power of individual employee by granting them greater rights. From the perspective of an employer, implementation of the law may substantially increase labour costs and reduce flexibility. 5.11 We are subject to foreign exchange risks The Group operates mainly in the PRC and our functional currency is predominantly denominated in RMB. The sales and purchases of MAHK and its subsidiaries are transacted in their respective functional currencies which include Singapore Dollars, United States Dollars and Hong Kong Dollars. Any significant adverse fluctuations in the exchange rates between the various foreign currencies and the RMB will expose the Group to foreign exchange risks. As a result, our earnings may be materially and adversely affected.
19
LETTER TO SHAREHOLDERS 5.12 Our operations in Japan may be adversely affected by changes to the laws and regulations and the political and economic conditions of Japan After the Proposed Acquisition, we will be operating the optics business using the CP Japan Subsidiary and we will maintain some production facilities in Japan to cater for the needs of the local customers based in Japan. Hence, we will be subject to and have to operate within the framework of the Japanese legal system. Any changes in the laws or policies of Japan or the implementation thereof, for example in areas such as foreign exchange controls, tariffs, trade barriers, taxes, export licence requirements, employee protection, industrial relations, and environmental protection may have a material impact on our operations and financial performance. As part of our revenue is and will be derived from Japan, any significant or prolonged slowdown in the Japanese economy, unfavourable changes in the socio-economic conditions in Japan, or any decline in demand for our products from customers in Japan will have an adverse effect on our financial performance and results of operations. 6.
SOURCE OF FUNDS The Company intends to fund the Purchase Consideration with a combination of internal funds and external borrowings from financial institutions. Approximately two third of the Purchase Consideration (equivalent to approximately RMB42 million) will be funded by external borrowings.
7.
FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION The proforma financial effects of the Proposed Acquisition on the EPS and NTA per share of the Group are set out below. The proforma financial effects have been prepared based on the audited consolidated financial statements of the Group for FY2008 and the unaudited consolidated financial results of MAHK Group for the period from 1 January to 31 December 2008, are purely for illustration purposes only and do not reflect the actual financial result and financial position of the Group after the Proposed Acquisition. The financial effects of the Proposed Acquisition as presented: (a)
assume that the Proposed Acquisition is completed, in respect of income statements of the Group on 1 January 2008, and in respect of the balance sheets of the Group on 31 December 2008;
(b)
have not taken into account the impact of purchase price allocation and any goodwill or negative goodwill that may arise from the Proposed Acquisition thereon. Accordingly, the fair value of individually identifiable assets and liabilities acquired at the date of completion of the Proposed Acquisition may be substantially different from their values used in the preparation of the unaudited proforma financial effects;
(c)
have not taken into account the differences in generally accepted accounting standards of Singapore and Japan for which the financial statements of the Company and MAHK respectively have been prepared, as well as for the differences in the accounting policies used in the preparation of the unaudited proforma financial effects; and
(d)
assume that the Proposed Acquisition is financed partly by external borrowings of RMB42 million, the financing costs of RMB3 million have been accounted for in the preparation of the unaudited proforma financial effects.
20
LETTER TO SHAREHOLDERS 7.1
Earnings per share
Profit attributable to equity shareholders–RMB ’000 Number of shares (1) – ’000 EPS – RMB cents
Before the Proposed Acquisition
After the Proposed Acquisition
80,224 356,855 22.48
52,272 356,855 14.65
Note: (1)
7.2
Based on number of Shares in issue (excluding treasury shares) as at 31 December 2008.
Net Tangible Asset per share
NTA(1) – RMB ’000 Number of shares (2) – ’000 NTA per share – RMB cents
Before the Proposed Acquisition
After the Proposed Acquisition
483,714 356,855 135.55
501,489 356,855 140.53
Notes:
7.3
(1)
Based on shareholders’ funds excluding intangible assets and deferred income tax assets/liabilities.
(2)
Based on number of Shares in issue (excluding treasury shares) as at 31 December 2008.
Gearing
Gearing
Before the Proposed Acquisition
After the Proposed Acquisition
9.6%
17.7%
Notes: (1)
7.4
Gearing ratio equals to total borrowings divided by shareholders’ fund.
Share capital The Proposed Acquisition has no impact on the share capital of the Company.
21
LETTER TO SHAREHOLDERS 8.
VALUATION The Group engaged Ernst & Young Transactions Limited, Hong Kong (“EY”), to value the land and buildings, machinery, inventories and patents as of 30 April 2009, for financial reporting purposes. Internationally recognized valuation methodologies were adopted in the valuation analysis. The summary of EY’s valuation report is enclosed as “Appendix 1” at page 27 of this Circular. A summary of the valuation results and the valuation methodology adopted are set out below: Tangible Assets Land and buildings
Machinery and equipment
Fair Value (JPY ’000)
Primary Valuation Methodology
893,000
808,100
22
(i)
Land use right in the PRC and land value in Japan – Direct comparison method. This method leads to an estimation of value based on what other purchasers and vendors in the market have agreed to as the value for comparable properties. In the direct comparison method, data is gathered based on reasonably substitutable properties and adjust their current market value for various factors, including the time of sale, zoning, location and conditions of sale. The resulting indications of value lead to an estimate of the price one might expect to realize upon the sale of the property.
(ii)
Buildings and structures in the PRC and Japan – Depreciated replacement cost method. The method involves establishing the gross replacement cost of the asset, and then depreciating this value to reflect the anticipated effective working life of the asset from new and the age of the asset at the end of the asset’s working life.
(i)
Cost approach – The cost approach establishes value based on the cost of reproducing or replacing the asset, less depreciation from physical deterioration, functional and economic or external obsolescence, if present and measurable.
(ii)
Market approach – In the market approach, the value of the appraised asset is estimated through analysis of recent sales of comparable items of the asset. It is employed in the valuation of the asset for which there is a known used market. Under the premise of continued use assuming adequate earnings, consideration is given to the cost to acquire similar items in the second hand market; an allowance then is made to reflect the costs for freight and installation, if applicable.
LETTER TO SHAREHOLDERS Tangible Assets Inventories
Patents
Total
Fair Value (JPY ’000)
Primary valuation methodology
154,502
12,852
(i)
Finished goods – Finished goods at estimated selling prices of finished goods less the sum of (a) costs of disposal, and (b) a reasonable profit allowance for completing the selling effort based on profit for similar finished goods.
(ii)
Work-in-progress – Work-in-progress at estimated selling prices of finished goods less the sum of (a) costs to complete, (b) costs of disposal, and (c) a reasonable profit allowance for completing the selling effort based on profit for similar finished goods.
(iii)
Raw materials – Raw materials at current replacement costs.
Cost approach – The cost approach establishes value based on the cost of constructing a similar patent of equivalent utility at price applicable at the time of the valuation analysis. This estimate may then be adjusted by losses in value attributable to physical, functional and economic or external obsolescence, if present and measurable.
1,868,454
As mentioned in Section 4.1 above, the parties negotiated the Purchase Consideration based on the adjusted balance sheet from the draft report prepared by KPMG. The differences in the figures shown in the KPMG draft report and the valuation report of EY are set out as follows:-
SUMMARY
KPMG’s EY’s Draft Report Valuation Report (as at 28 Feb 2009) (as at 30 Apr 2009) JPY'000 JPY'000 (A) (B)
Land and buildings Machinery and equipment Inventories Patents Other current assets Other non-current assets Other current liabilities Other non-current liabilities
554,599 1,206,124 345,198 – 77,310 7,251 (856,667) (50,000)
Purchase Consideration Difference %
Difference JPY'000 (A)-(B)
893,000 808,100 154,502 12,852 – – – –
(338,401) 398,024 190,696 (12,852) 77,310 7,251 (856,667) (50,000)
1,283,815
1,868,454
(584,639)
900,000 383,815 30%
900,000 968,454 52%
Notes: (1)
The value of the land and building in KPMG’s draft report was relied on the valuation report prepared by Assets Research and Development Inc. in Japan, which had included an extra "physical deterioration discount" on the value of the Izumi factory. However, based on its site inspection and analysis, EY considered that such extra "physical deterioration discount" is not required.
(2)
The value of machinery and equipment in KPMG’s draft report are based on their depreciated book value. However, the machinery and equipment was valued by EY by taking into consideration their physical conditions and obsolescence.
23
LETTER TO SHAREHOLDERS (3)
The difference in inventories is mainly due to movement in inventories between 28 February 2009 and 30 April 2009.
(4)
The value of patents is not provided in KPMG's draft report.
(5)
Other current and non-current assets and liabilities did not form part of EY valuation scope.
In view of the above, there is a difference in figures between the KPMG’s draft report and EY’s report. 9.
INTERESTS OF CONTROLLING SHAREHOLDERS AND DIRECTORS The consideration for the Proposed Acquisition of JPY900 million (equivalent to S$13,680,000), includes an amount of JPY50 million (equivalent to S$760,000) to be paid to Dynamic Goal Finance Limited. The JPY50 million payment to Dynamic Goal Finance Limited is equivalent to the amount of an interest free loan extended by Dynamic Goal Finance Limited to MAHK in February 2009 as its working capital. Dynamic Goal Finance Limited is an investment-holding company wholly-owned by Zhang Zhongliang, our Executive Chairman and CEO. As at the Latest Practicable Date, the shareholdings of the Directors and the Substantial Shareholders in the Company, based on the Register of Director’s Shareholdings and the Register of Substantial Shareholders, are as follows:Direct Interest (No. of Shares)
Deemed Interest (No. of Shares)
Total Interest (%)
– – – – 550,000 – – – –
236,393,592 – – 3,257,000 – – – – –
66.24 – – 0.91 0.15 – – – –
236,393,592
–
66.24
Directors Zhang Zhongliang(1) Shi Zhongguo Chen Songjie Lu Hong(2) Wee Chow Hou Tan Soo Kiat Yeung Kwok On Peng Yinghong Seah Kian Wee Substantial Shareholders Dynamic Goal Finance Limited(3) Notes: (1)
Zhang Zhongliang is deemed to be interested in the 236,393,592 Shares held by Dynamic Goal Finance Limited.
(2)
Lu Hong is deemed to be interested in the 3,257,000 shares held by Welgrow Profits Inc.
(3)
Dynamic Goal Finance Limited Shares of 236,393,592 in the share capital of the Company are held in the name of nominee companies.
Save as disclosed in this Circular, none of the controlling shareholders or the Directors have any interest, direct or indirect, in the Proposed Acquisition. 10.
JUSTIFICATION BY THE BOARD OF DIRECTORS The Proposed Acquisition was first introduced by Sharp (a key customer to both our Group and MAHK) to the Company in February 2009. The Board has deliberated on the prospects and merits of the Proposed Acquisition. The Audit Committee and the Board have not been subject to the influence of Mr Zhang Zhongliang (our Executive Chairman and CEO) in the approval of the Proposed Acquisition. Several measures have been taken by the Audit Committee and the Board to assess the commercial viability and risks of the Proposed Acquisition.
24
LETTER TO SHAREHOLDERS Mr Zhang Zhongliang had informed the Board of the Proposed Acquisition in February 2009 and is convinced of the business case for the acquisition. He had extended the loan through Dynamic Goal Finance Limited out of his conviction that the MAHK Group is one that is worth investing in. Before Mr Zhang granted the loan through Dynamic Goal Finance Limited, the sales of MAHK was declining and MAHK was facing cash flow difficulties as a result of global economy downturn and stiff competition. At that time, MAHK and some of its creditors agreed to delay the repayment of MAHK’s debts. However, MAHK was still falling short of JPY50 million of cash flow, as a result of which MAHK will face the consequence of winding-up in the absence of any financial support. Mr Zhang Zhongliang was approached by Sharp and became aware of MAHK’s conditions. Mr Zhang was of the view that there are prospect and merits to the business of MAHK. As such, Mr Zhang, through its wholly-owned investment holding company, Dynamic Goal Finance Limited, came to MAHK’s rescue by granting an interest free loan of JPY50 million for its working capital purposes. It should be noted that the Proposed Acquisition is arrived at arm’s length basis. Proper valuation has been carried out by international reputable accounting firm and the Purchase Consideration is below the valuation. The receipt of the JPY50 million by Dynamic Goal Finance Limited (as part payment of the Purchase Consideration at the direction of MAHK) is not detrimental or prejudicial to the interests of the Company and its minority Shareholders. Mr Zhang owns a substantial stake in the Company and is its founder, Executive Chairman and CEO. His interests are aligned with the interests of the Company and the Shareholders. In view of the above, the Board is of the view that Mr Zhang’s interest in the Proposed Acquisition does not conflict with the interests of the Company and its minority Shareholders. All the Board members have also approved the resolution for the Proposed Acquisition. 11.
DIRECTORS' RECOMMENDATIONS The Proposed Acquisition Having considered the terms, rationale and benefits of the Proposed Acquisition, the Directors are of the view that the Proposed Acquisition is in the interests of the Company and accordingly recommend that Shareholders vote in favour of the Resolution.
12.
AUDIT COMMITTEE’S VIEW Having considered the risks, rationale, terms and potential benefits of the Proposed Acquisition, the Audit Committee of the Company is of the view that the Proposed Acquisition is on an arm’s length basis and is not prejudicial to the interests of the Company and its minority shareholders.
13.
EXTRAORDINARY GENERAL MEETING The EGM, the notice of which is set out on page 28 of this Circular, will be held on 28 July 2009 at 10.00 a.m. at 80 Raffles Place #25-01 UOB Plaza 1, Singapore 048624 for the purpose of considering and, if thought fit, passing with or without any modifications, the Resolution.
14.
ACTION TO BE TAKEN BY SHAREHOLDERS Appointment of Proxies. If a Shareholder is unable to attend the EGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the attached Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach the Company’s registered office at 80 Raffles Place #25-01 UOB Plaza 1, Singapore 048624 not later than 10.00 a.m. on 26 July 2009. Completion and return of the Proxy Form by a Shareholder will not prevent him from attending and voting at the EGM if he so wishes.
25
LETTER TO SHAREHOLDERS When Depositor regarded as Shareholder. A Depositor shall not be regarded as a Shareholder entitled to attend and vote at the EGM unless he is shown to have Shares entered against his name in the Depository Register as at 48 hours before the time fixed for holding the EGM, as certified by CDP to the Company. 15.
CONSENTS Ernst & Young Transactions Limited (Hong Kong) has given and not withdrawn its written consent to the issue of this Circular with the inclusion of its name and all references thereto, in the form and context in which they appear.
16.
INSPECTION OF DOCUMENTS A copy of (1) the Agreement, (2) the Memorandum and Articles of Association of the Company, (3) the annual report 2008 of the Company and (4) the Valuation Report dated 25 June 2009 by EY are available for inspection at the registered office of the Company at 80 Raffles Place #25-01 UOB Plaza 1, Singapore 048624 during normal business hours from the date of this Circular up to the date of the EGM.
17.
DIRECTORS’ RESPONSIBILITY STATEMENT The Directors collectively and individually accept responsibility for the accuracy of the information given in this Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Circular are fair and accurate and that there are no material facts the omission of which would make any statement in this Circular misleading.
Yours faithfully For and on behalf of the Board of Directors of CHINA PRECISION TECHNOLOGY LIMITED
Zhang Zhongliang Executive Chairman and Chief Executive Officer
26
APPENDIX 1
CHINA PRECISION TECHNOLOGY LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 200406029N)
The following is a summary of the valuation report dated 25 June 2009 prepared by Ernst & Young Transactions Limited, Hong Kong in respect of the Proposed Acquisition:China Precision Technology Limited (“CPT”) engaged Ernst & Young Transactions Limited (“EY”) to cover the valuation of assets, includes land and buildings, Inventories, machinery and equipment and identified intangible assets (“IAs”) (collectively “Selected Assets”) acquired from MAHK Co., Ltd. (“MAHK”) as of 30 April 2009 (“Valuation Date”). MAHK is a privately held company with operations in the following locations: Locations
Business / Operations
PRC
A factory and production base in Ningbo, Zhejiang Province
Singapore
A sales office; and Certain production machinery and equipment consigned to Wawasan Selatan Sdn Bhd, a company unrelated to MAHK located in Malaysia
Japan
A branch in Tokyo; and A factory and production base in Izumi
Hong Kong
A sales office
CPT engaged EY to analyse the indicative value of the Selected Assets owned by MAHK as of the Valuation Date:
Land use right in the PRC and land value in Japan Buildings and structures in various production bases of MAHK Machinery and equipment in various offices and production bases of MAHK Inventories in various offices and production bases of MAHK Identified intangible assets of MAHK
The fair values recommended by EY as of the Valuation Date assigned to the Selected Assets are presented in the table below: Selected Assets PRC – Land PRC – Buildings Japan – Tokyo branch Japan – Izumi factory
Local Currency (‘000) RMB 8,190 RMB 13,982 JPY 81,000 JPY 491,000
Subtotal M&E M&E M&E M&E
– – – –
PRC Singapore Japan Hong Kong
RMB 11,091 SGD 2,874 JPY 227,900 HKD 17,844
Subtotal Inventories Inventories Inventories Inventories
– – – –
PRC Singapore Japan Hong Kong
Rmb 204 SGD 497 JPY 111,542 HKD 524
Subtotal IAs - Patents
JPY 12,852
Total
27
Japanese Yen (JPY’000) Singapore Dollar (S$’000) 118,600 202,400 81,000 491,000
1,773 3,027 1,211 7,344
893,000
13,355
160,600 192,200 227,900 227,400
2,401 2,874 3,409 3,402
808,100
12,086
2,960 33,300 111,542 6,700
44 497 1,668 100
154,502
2,309
12,852
192
1,868,454
27,942
NOTICE OF EXTRAORDINARY GENERAL MEETING
CHINA PRECISION TECHNOLOGY LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 200406029N)
NOTICE OF EXTRAORDINARY GENERAL MEETING NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of China Precision Technology Limited (the “Company”) will be held at 10.00 a.m. on 28 July 2009 at 80 Raffles Place #25-01 UOB Plaza 1, Singapore 048624 for the purpose of considering and, if thought fit, passing with or without modifications, the following resolution, which will be proposed as ordinary resolution: Ordinary Resolution 1: The Proposed Acquisition That: (1)
approval be and is hereby given, for the purpose of Chapter 10 of the listing manual (the “Listing Manual”) of the Singapore Exchange Securities Trading Limited (“SGX-ST”), for the proposed acquisition of the business and assets of MAHK Co., Ltd, including its entire equity interests in its subsidiaries, namely Hong Kong MAHK Limited, Ningbo MAHK Optics Co., Ltd and MAHK Optics (S) Pte Ltd in accordance with the terms of the business transfer agreement dated 17 April 2009; and
(2)
the Directors of the Company be and are hereby authorized to implement, execute, perfect or give effect to complete and do all such acts and things (including executing all such documents as may be required) as they may in their absolute discretion consider expedient, desirable or necessary in the interests of the Company to complete the transactions contemplated in the proposed acquisition and to give effect to this Resolution.
BY ORDER OF THE BOARD
Ch’ng Li-Ling/Chew Kok Liang Company Secretaries Singapore 13 July 2009
Notes: 1.
A member of the Company entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint not more than two proxies to attend and vote on his behalf. Such proxy need not be a member of the Company.
2.
The instrument appointing a proxy together with the power of attorney (if any) under which it is signed or a notarially certified or office copy thereof must be lodged at the registered office of the Company at 80 Raffles Place #25-01 UOB Plaza 1, Singapore 048624 not less than 48 hours before the time appointed for the Extraordinary General Meeting.
28
CHINA PRECISION TECHNOLOGY LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 200406029N)
PROXY FORM (Please see notes overleaf before completing this Form)
IMPORTANT: 1. For investors who have used their CPF monies to buy China Precision Technology Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them. 3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.
(Name)
I/We,
(Address)
of being a member/members of the abovementioned company hereby appoint: Name
NRIC/Passport No.
Proportion of Shareholdings No. of Shares
%
Address
and/or (delete as appropriate) Name
NRIC/Passport No.
Proportion of Shareholdings No. of Shares
%
Address
or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Extraordinary General Meeting (the “Meeting”) of the Company to be held at 80 Raffles Place, #25-01 UOB Plaza 1, Singapore 048624 on 28 July 2009 at 10.00 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolution proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. ORDINARY RESOLUTION 1.
For
To approve the Proposed Acquisition.
Dated this
day of
2009
Total number of Shares in: (a) CDP Register (b) Register of Members
Signature of Shareholder(s) or, Common Seal of Corporate Shareholder
Against
No. of Shares
NOTES: 1.
Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.
2.
A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.
3.
Where a member appoints two proxies, he/she shall specify the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy. If the proportion of shareholding is not indicated, the second proxy will be deemed as alternate.
4.
Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.
5.
The instrument appointing a proxy or proxies must be deposited at the Registered Office of the Company at 80 Raffles Place, #25-01 UOB Plaza 1, Singapore 048624 not less than forty-eight (48) hours before the time appointed for holding the Meeting.
6.
The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument.
7.
A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.
General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at forty-eight (48) hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.
1st fold here
Please Affix Postage Stamp
The Company Secretary
CHINA PRECISION TECHNOLOGY LIMITED 80 Raffles Place #25-01 UOB Plaza 1 Singapore 048624
2nd fold here and seal
