Osim Ipo

Osim International Ltd
A lead ing marketer, d istrib utor and franc hisor of home health- c are, health- c hec k and
healthy lifestyle produc ts in Asia, we have more than 200 point- of- sales outlets around
the world .
regional p layer. . . going glob al
W e have m ade an application to the S ingapore Exchange S ecurities Trading
Lim ited (the SG X-ST) for perm ission to deal in and for quotation of our ordinary
shares of $0.05 each (Shares)already issued and the new Shares w hich are
the subject of the Invitation. S uch perm ission w ill be granted w hen w e have
been adm itted to the O fficial List of the SG X-ST.
Acceptance of applications w ill be conditional upon perm ission being granted
to deal in and for quotation of all the issued Shares and the new Shares w hich
are the subject of the Invitation. If the said perm ission is not granted, m onies
paid in respect of any application accepted w ill be returned w ithout interest
or any share of revenue or other benefit arising therefrom and at the applicants
risk. A dm ission to the O fficial List of the S G X-S T is not to be taken as an
indication of the m erits of the Invitation, the C om pany, its subsidiaries,
associated com pany or the Shares.
The S G X-S T assum es no responsibility for the correctness of any of the
statem ents m ade, reports set out or opinions expressed in this P rospectus.
A copy of this P rospectus has been lodged w ith and registered by the
R egistrar of C om panies and B usinesses in Singapore w ho takes no responsibility
for its contents.
our glob al p resenc e (as of May 3 1 , 2 0 0 0 )
(Incorporated in Singapore)
Applications should be received by 12.00 noon on 27 July 2000 or such later date and time as the
Company and the Vendor may, in their absolute discretion, decide.
OSIM INTERNATIONAL LTD
(Incorporated in the Republic of Singapore on 27 August 1983)
INVITATION IN RESPECTOF 58,000,000 ORDINARY SHARES OF
$0.05 EACH (INVITATION SHARES) COMPRISING 38,000,000 NEW SHARES
AND 20,000,000 VENDOR SHARES AS FOLLOWS:
(A) 5,800,000 OFFER SHARES AT $0.52 FOR EACH OFFER SHARE BY WAY OF PUBLIC OFFER;
AND
(B) 52,200,000 PLACEMENT SHARES BY WAY OF PLACEMENT, COMPRISING:
(I) 46,400,000 PLACEMENT SHARES AT $0.52 FOR EACH PLACEMENT SHARE; AND
(II) 5,800,000 RESERVED SHARES AT $0.47 FOR EACH RESERVED SHARE RESERVED
FOR DIRECTORS AND EMPLOYEES OF THE GROUP,
PAYABLE IN FULL ON APPLICATION
Manager, Underwriter and Placement Agent
Oversea-Chinese Banking Corporation Limited
Singapore
O s im In t e rn a t io n a l L t d
5 7 G e n t in g L a n e
O s im Ind ustrial B u ild in g
S in g a p o re 3 4 9 5 6 4
Te l: (6 5 ) 7 4 7 - 6 8 6 6
Fa x : (6 5 ) 8 4 6 - 4 9 1 9
OSIM Global Network
H o n g K o n g
Ta iw a n
PRC
In d o n e s ia
M a la y s ia
Th a ila n d
U S A
U AE
Fo r m o re in f o rm a t io n o n O s im In t e rn a t io n a l, v is it o u r w e b s it e a t h t t p : / / w w w. o s im . c o m . s g
financ ial highlights
10.8
3.2
4.4
3.7
1.6
103.1
69.7
60.8
42.9
31.4
1999
1998
1997
1996
1995
Turnover Profit Before Taxation
We aim to inc rease our p oint- of- sales outlets
world wid e to 3 0 0 b y 2 0 0 1 , 5 0 0 b y 2 0 0 3 and
1 , 0 0 0 b y 2 0 0 8 .
Singapore: 37
Malaysia: 21
Thailand: 5
Indonesia: 14
Taiwan: 30
Hong Kong: 40
PRC: 44
UAE: 1
USA: 11
1000
500
300
2008E
2003E
2001E
No. of outlets
Total Number of Outlets: 203
(S$ million)
the world .
for its contents.
AND
Singapore
S in g a p o re 3 4 9 5 6 4
Te l: (6 5 ) 7 4 7 - 6 8 6 6
Fa x : (6 5 ) 8 4 6 - 4 9 1 9
OSIM Global Network
H o n g K o n g
Ta iw a n
PRC
In d o n e s ia
M a la y s ia
Th a ila n d
U S A
U AE
10.8
3.2
4.4
3.7
1.6
103.1
69.7
60.8
42.9
31.4
1999
1998
1997
1996
1995
1 , 0 0 0 b y 2 0 0 8 .
Singapore: 37
Malaysia: 21
Thailand: 5
Indonesia: 14
Taiwan: 30
Hong Kong: 40
PRC: 44
UAE: 1
USA: 11
1000
500
300
2008E
2003E
2001E
No. of outlets
(S$ million)
A) Expansion of Business
Penetrate new geographical markets
Inc rease p oint- of- sales outlets
Ap p oint franc hisees in Australia, the Philip p ines,
United Kingd om, South Afric a and Korea
Introduce new product lines
Fitness eq uip ment
Health sup p lements
Expand wholesale distribution
Target hosp itals, p harmac ies, Chinese med ic al halls,
health c lub s, b eauty c enters and fitness c enters
Expand coverage of the consumer market
Develop our "NORO" b rand
Lower- p ric ed p rod uc ts to target
d ifferent market segment
B) Upgrading of IT Infrastructure
Enhance our Enterprise Resource Planning and
Customer Relationship Management systems
C) Venturing into E-Commerce Activities
D) New Corporate Headquarters
Operate & Control our Supply Chain
Design
Proc urement
Distrib ution
Established Brand Name
Well- known b rand name in Singap ore
& Hong Kong
Strong Marketing Capabilities
Strategic marketing foc us
Nic he b usiness c onc ep t
Extensive Distribution Network
More than 200 point- of- sales outlets c overing
Asia & USA
Stores are loc ated in major d ep artmental
stores and sub urb an shop p ing malls
Ab ility to d ic tate what to sell & how to sell
Experienced, Hands-on Management Team
Exec utive Direc tors have more than
4 0 years of c omb ined exp erienc e
We p rovid e a c omp rehensive range of home health- c are
p rod uc ts whic h are b road ly c ategorised und er:
our vision:
Growth strategies
to b e a glob al lead er in home health- c are
& healthy lifestyle p rod uc ts
Core b usiness and p rod uc ts
Comp etitive strengths
Millennium Chair Pro- Reflexologist eHuman Logic Blood
Pressure Monitor
Healthy Lifestyle
Health Care Health Chec k
Management Team
Fitness eq uip ment
Design
Proc urement
Distrib ution
& Hong Kong
Asia & USA
our vision:
Growth strategies
Pressure Monitor
Healthy Lifestyle
Management Team
Fitness eq uip ment
Design
Proc urement
Distrib ution
& Hong Kong
Asia & USA
our vision:
Growth strategies
Pressure Monitor
Healthy Lifestyle
Management Team
CONTENTS
Page
CORPORATE INFORMATION .................................................................................................... 3
DEFINITIONS .............................................................................................................................. 4
DETAILS OF THE INVITATION
Listing on the SGX-ST ................................................................................................................. 8
Tentative Timetable for Listing ..................................................................................................... 9
PROSPECTUS SUMMARY ......................................................................................................... 10
RISK FACTORS .......................................................................................................................... 12
INVITATION STATISTICS ............................................................................................................ 17
SUMMARY OF FINANCIAL INFORMATION
Results ......................................................................................................................................... 19
Financial Position ......................................................................................................................... 20
INFORMATION ON THE COMPANY AND THE GROUP
Share Capital ............................................................................................................................... 22
Our Shareholders ......................................................................................................................... 24
Moratorium ................................................................................................................................... 25
Restructuring Exercise ................................................................................................................. 25
Group Structure ........................................................................................................................... 27
History .......................................................................................................................................... 27
Business ....................................................................................................................................... 29
Franchise Model .......................................................................................................................... 35
Intellectual Property Rights .......................................................................................................... 36
Product And Service Quality Control ........................................................................................... 37
New Products/Activities ............................................................................................................... 38
Research and Development ........................................................................................................ 38
Year 2000 Compliance ................................................................................................................. 38
Insurance ..................................................................................................................................... 38
Group Training Policy .................................................................................................................. 39
Analysis of Turnover and Profits .................................................................................................. 39
Review of Past Earnings Performance ........................................................................................ 41
Prospects and Future Plans ........................................................................................................ 45
Review of Financial Position ........................................................................................................ 47
Dividends ..................................................................................................................................... 50
Foreign Exchange Exposure ....................................................................................................... 50
1
Page
Competition .................................................................................................................................. 50
Competitive Strengths .................................................................................................................. 51
Major Suppliers and Customers .................................................................................................. 52
Properties and Fixed Assets ........................................................................................................ 53
Directors, Management and Staff ................................................................................................ 53
Osim Share Option Scheme ........................................................................................................ 59
Corporate Governance ................................................................................................................ 61
Interest of Management and Others in Certain Transactions ..................................................... 62
Potential Conflicts of Interest ....................................................................................................... 70
DIRECTORS REPORT ............................................................................................................... 71
ACCOUNTANTS REPORT ......................................................................................................... 72
GENERAL AND STATUTORY INFORMATION .......................................................................... 95
APPENDIX A SUMMARY OF THE PRINCIPAL TERMS OF OSIM SHARE OPTION
SCHEME (THE SCHEME) .................................................................... 113
RULES OF THE OSIM SHARE OPTION SCHEME ................................... 118
APPENDIX B TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS . 136
2
CORPORATE INFORMATION
Board of Directors : Dr Ron Sim Chye Hock (Chairman & Chief Executive Officer)
Teo Chay Lee (Chief Operating Officer)
Leow Lian Soon (Regional General Manager)
Teo Sway Heong (Non-executive Director)
Khor Peng Soon (Non-executive Director)
Michael Kan Yuet Yun, PBM (Independent Director)
Ong Kian Min (Independent Director)
Company Secretary : Juliet Ang, LLB (Hons)
Registered Office and
Principal Office
: 57 Genting Lane
Osim Industrial Building
Singapore 349564
Registrar and Share Transfer
Office
: B.A.C.S. Private Limited
63 Cantonment Road
Singapore 089758
Manager, Underwriter and
Placement Agent
: Oversea-Chinese Banking Corporation Limited
65 Chulia Street #29-02/04
OCBC Centre
Singapore 049513
Auditors and Reporting
Accountants
: Arthur Andersen
Certified Public Accountants
10 Hoe Chiang Road #18-00
Keppel Towers
Singapore 089315
Solicitors to the Invitation : Wong Partnership
80 Raffles Place #58-01
UOB Plaza 1
Singapore 048624
Principal Bankers : Oversea-Chinese Banking Corporation Limited
65 Chulia Street #29-02/04
OCBC Centre
Singapore 049513
The Development Bank of Singapore Ltd
6 Shenton Way
DBS Building Tower One
Singapore 068809
3
DEFINITIONS
In this Prospectus, the accompanying Application Forms and in relation to Electronic Applications, the
instructions appearing on the screens of the ATMs of Participating Banks, the following definitions apply
throughout where the context so admits:
Act : Companies Act, Chapter 50 of Singapore
Application Forms : Official printed application forms for the Invitation Shares
which are the subject of the Invitation and which form part of
this Prospectus
Application List : List for the application to subscribe for the Invitation Shares
ATM : Automated teller machine
CDP : The Central Depository (Pte) Limited
Company or Osim (S) : Osim International Ltd
Controlling Shareholder : A Shareholder exercising control over the Company and
unless rebutted, a person who controls directly or indirectly
a shareholding of fifteen (15) per cent. or more of our issued
share capital shall be presumed to be a Controlling
Shareholder of the Company
Directors : The Directors of the Company as at the date of this
Prospectus
Electronic Applications : Applications for the Invitation Shares made through an ATM
of one of the Participating Banks in accordance with the
terms and conditions of this Prospectus
EPS : Earnings per Share
e-commerce : Electronic commerce
FY : Financial year ended or ending 31 December
Investor : Century Private Equity Holdings (S) Pte Ltd, a wholly-owned
subsidiary of Temasek Holdings (Private) Limited
Invitation : Invitation in respect of the Invitation Shares, subject to and
on the terms and conditions of this Prospectus
Invitation Shares : 58,000,000 Shares comprising 38,000,000 New Shares and
20,000,000 Vendor Shares
Market Day : A day on which the SGX-ST is open for trading in securities
New Shares : 38,000,000 new Shares for which the Company invites
applications to subscribe pursuant to the Invitation, subject
to and on the terms and conditions of this Prospectus
NTA : Net tangible assets
OCBC Bank, Manager,
Underwriter or Placement
Agent
: Oversea-Chinese Banking Corporation Limited
4
Offer : Invitation in respect of the Offer Shares to the public at the
Offer Price, subject to and on the terms and conditions of this
Prospectus
Offer Price : $0.52 for each Offer Share
Offer Shares : 5,800,000 Invitation Shares which are the subject of the
Offer
Participating Banks : OCBC Bank group (comprising OCBC Bank and Bank of
Singapore Limited), The Development Bank of Singapore
Ltd (DBS Bank) including its POSBank Services division,
Keppel TatLee Bank Limited (KTB), Overseas Union Bank
Limited, and United Overseas Bank Limited (UOB) group
(comprising UOB, Far Eastern Bank Ltd and Industrial &
Commercial Bank Limited)
PER : Price earnings ratio
PRC : Peoples Republic of China
Placement : Placement of the Placement Shares at the Placement Price,
subject to and on the terms and conditions of this
Prospectus
Placement Agent : OCBC Bank as placement agent who shall subscribe for
and/or purchase, or procure subscription for and/or
purchase of, the Placement Shares
Placement Price : $0.52 for each Placement Share and $0.47 for each
Reserved Share
Placement Shares : 52,200,000 Invitation Shares which are the subject of the
Placement (including the Reserved Shares)
Proforma Group or Group : The Company and its subsidiaries assuming that the group
structure had been in place since 1 January 1995
Reserved Shares : 5,800,000 Placement Shares reserved for the Directors and
employees of the Group at the price of $0.47 for each
Reserved Share
Restructuring Exercise : The restructuring exercise of the Group undertaken in
connection with the Invitation as described on pages 25 and
26 of this Prospectus
Securities Account : Securities account maintained by a Depositor with CDP
SGX-ST : Singapore Exchange Securities Trading Limited
Shares : Ordinary shares of $0.05 each in the capital of the Company
Shareholder : Shareholder holding shares in the capital of the Company
Subscription Agreement : Agreement dated 17 July 2000 between Investor, Dr Ron
Sim Chye Hock and the Company under which Investor
agreed to subscribe for 11,600,000 new Shares,
representing approximately 5 per cent. of the post-Invitation
enlarged share capital of the Company, at $0.47 per Share
(Investor Subscription)
Vendor : Dr Ron Sim Chye Hock
5
Vendor Shares : 20,000,000 issued and fully-paid Shares for which the
Vendor invites applications to purchase pursuant to the
Invitation
USA or United States : United States of America
sq m : Square metres
$ or S$ and cents : Singapore dollars and cents, respectively, unless otherwise
stated
HK$ : Hong Kong dollars
NT$ : New Taiwan dollars
RM : Malaysian Ringgit
RMB : Renminbi, the lawful currency of the Peoples Republic of
China
US$ : United States dollars
Yen : Japanese Yen
Group Companies
Osim (Msia) : Osim (M) Sdn Bhd
Osim (HK) : Osim (HK) Company Limited
Osim (Shanghai) : Osim International Trading (Shanghai) Co., Ltd.
Osim (Taiwan) : Osim GHC (Taiwan) Co., Ltd
Daito-Osim (Suzhou) : Daito-Osim Healthcare Appliance (Suzhou) Co., Ltd.
Non-Group Companies
HCC (Langfang) : Health Check and Care (Langfang) Co., Ltd (has since
12 May 2000 been renamed as Osim GHC (Langfang) Co.,
Ltd)
ODCPL : Osim Distribution Centre (S) Pte Ltd
Osim (Beijing) : Osim (Beijing) Co., Ltd
Osim GHC (SH) : Osim GHC (Shanghai) Co., Ltd
Osim (Thai) : Osim GHC (Thailand) Co., Ltd
Osim (USA) : Osim (USA) Inc.
PT Sharon : PT Sharon Samaru
RSH : R.S.H. (Middle East) L.L.C.
6
The exchange rates used to translate the accounts of foreign subsidiaries, as applied in this Prospectus
are as follows:
FY1995 FY1996 FY1997 FY1998 FY1999
Profit and Loss
RM1 : S$ 0.564 0.558 0.528 0.428 0.447
HK$1 : S$ 0.183 0.182 0.193 0.215 0.219
NT$1 : S$ 0.054 0.052 0.053 0.050 0.052
RMB1 : S$ 0.170 0.184 0.202 0.205
Balance Sheet
RM1 : S$ 0.555 0.552 0.431 0.436 0.439
HK$1 : S$ 0.182 0.180 0.216 0.214 0.215
NT$1 : S$ 0.052 0.051 0.053 0.051 0.052
RMB1 : S$ 0.168 0.206 0.200 0.201
The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed
to them respectively in Section 130A of the Act.
The term associate shall have the meaning ascribed to it by the Singapore Exchange Securities
Trading Limiteds Listing Manual, which is defined to include an immediate family member (that is, the
spouse, child, adopted child, step-child, sibling or parent) of such director, chief executive officer or
substantial shareholder, the trustees, acting in their capacity as such trustees, of any trust of which the
director, chief executive officer or substantial shareholder or his immediate family is a beneficiary or, in
the case of a discretionary trust, is a discretionary subject and any company in which the director/his
immediate family, the chief executive officer/his immediate family or substantial shareholder/his
immediate family has an aggregate interest (directly or indirectly) of 25 per cent. or more, and, where a
substantial shareholder is a corporation, its subsidiary or holding company or fellow subsidiary or a
company in which it and/or they have (directly or indirectly) an interest of 25 per cent. or more.
Words importing the singular shall, where applicable, include the plural and vice versa and words
importing the masculine gender shall, where applicable, include the feminine and neuter genders.
Any reference in this Prospectus and the Application Forms to any enactment is a reference to that
enactment as for the time being amended or re-enacted. Any word defined in the Act, or any statutory
modification thereof and used in this Prospectus and the Application Forms shall have the meaning
assigned to it in the Act, or such statutory modification, as the case may be.
A reference to a time of day in this Prospectus shall be a reference to Singapore time unless otherwise
stated.
7
DETAILS OF THE INVITATION
1. LISTING ON THE SGX-ST
We have applied to the SGX-ST for permission to deal in and for quotation of all our Shares already
issued (including Vendor Shares) and the New Shares. Such permission will be granted when the
Company has been admitted to the Official List of the SGX-ST. Acceptance of applications will be
conditional upon permission being granted to deal in and for quotation of all the issued Shares
(including Vendor Shares) and the New Shares. If the said permission is not granted, moneys paid
in respect of any application accepted will be returned without interest or any share of revenue or
other benefit arising therefrom and at the applicants risk.
The SGX-ST assumes no responsibility for the correctness of any statements made, reports set out
or opinions expressed or reports contained in this Prospectus. Admission to the Official List of the
SGX-ST is not to be taken as an indication of the merits of the Invitation, the Company, its
subsidiaries, associated company or the Shares.
Our Directors and the Vendor collectively and individually accept full responsibility for the accuracy
of the information given in this Prospectus and confirm, having made all reasonable enquiries, that
to the best of their knowledge and belief, the facts stated and opinions expressed in this Prospectus
are fair and accurate in all material respects as at the date of this Prospectus and that there are no
other material facts the omission of which would make any statement in this Prospectus misleading.
No person is authorised to give any information or to make any representation not contained in this
Prospectus in connection with the Invitation and, if given or made, such information or representation
must not be relied upon as having been authorised by us, the Vendor or OCBC Bank. Neither the
delivery of this Prospectus and the Application Forms nor the Invitation shall, under any
circumstances, constitute a continuing representation or create any suggestion or implication that
there has been no change in our affairs or any statement of fact or information contained in this
Prospectus since the date of this Prospectus. Where such changes occur, we may make an
announcement of the same to the SGX-ST. All applicants should take note of any such
announcement and, upon release of such an announcement, shall be deemed to have notice of such
changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as,
a promise or representation as to our future performance or policies. This Prospectus has been
prepared solely for the purpose of the Invitation and may not be relied upon by any persons other
than the applicants in connection with their application for Invitation Shares or for any other purpose.
This Prospectus does not constitute an offer of, or invitation to subscribe for, the Invitation Shares
in any jurisdiction in which such offer or invitation is unauthorised or unlawful or to any person to
whom it is unlawful to make such offer or invitation.
Copies of this Prospectus and the Application Forms may be obtained on request, subject to
availability, during office hours from:
65 Chulia Street
OCBC Centre
Singapore 049513
and from selected branches of OCBC Bank, members of the Association of Banks in Singapore,
merchant banks in Singapore and members of the SGX-ST.
The Application List will open at 10.00 a.m. on 27 July 2000 and will remain open until 12.00
noon on 27 July 2000, or such later date and time as the Company and the Vendor may, in
their absolute discretion, decide.
8
2. TENTATIVE TIMETABLE FOR LISTING
In accordance with the SGX-STs News Release of 28 May 1993 on the trading of initial public
offering shares on a when issued basis, an indicative timetable is set out below for the reference
of applicants:
Indicative Time and Date Event
27 July 2000, 12.00 noon Close of Application List
28 July 2000 Balloting of applications, if necessary
31 July 2000, 9.00 a.m. Commence trading on a when issued basis
10 August 2000 Last day for trading on a when issued basis
11 August 2000, 9.00 a.m. Commence trading on a ready basis
16 August 2000 Settlement date for all trades done on a when issued basis
and for all trades done on a ready basis on 11 August 2000
The above timetable is only indicative and is subject to the closing date for the Invitation being 27
July 2000, the date of our admission to the Official List of the SGX-ST being 11 August 2000, the
SGX-STs shareholding spread requirement being complied with and the New Shares being issued
and fully paid up prior to 11 August 2000. The actual date on which the Shares will commence trading
on a when issued basis will be announced when it is confirmed by the SGX-ST.
The above timetable and procedure may be subject to such modifications as the SGX-ST may in its
discretion decide, including the decision to permit trading on a when issued basis and the
commencement date of such trading. All persons trading in the Shares on a when issued basis, if
implemented, do so at their own risk. In particular, persons trading in the Shares before their
Securities Accounts with CDP are credited with the relevant number of Shares do so at the
risk of selling Shares which neither they nor their nominees have been allotted and/or
allocated or are otherwise beneficially entitled to. Such persons are exposed to the risk of
having to cover their net sell positions earlier if trading on a when issued basis ends
sooner than the indicative date set out above. Persons who have net sell positions traded on
a when issued basis should close their positions on or before the first day of trading on a
ready basis.
Investors should consult the SGX-ST announcement on ready trading date on the Internet (at
SGX-ST website http://www.singaporeexchange.com), INTV or the newspapers or enquire fromtheir
brokers the date on which trading on a ready basis will commence.
9
PROSPECTUS SUMMARY
The information contained in this summary is derived from and should be read in conjunction with the full
text of this Prospectus. In addition to this summary, we urge you to read the entire Prospectus carefully,
especially the discussion on Risk Factors, before buying our Shares. References in this Prospectus to
Osim (S), Company, we, our and us refer to Osim International Ltd or, where the context admits,
the Group.
The Company
We were incorporated in the Republic of Singapore on 27 August 1983 as a limited exempt private
company under the name of R. Sim Trading Co. Pte Ltd. Subsequently, we changed our name firstly, to
R. Sim & Company Pte Ltd and then, to Osim International (S) Pte Ltd on 24 November 1988 and 2
September 1996 respectively. On 4 July 2000, we were converted to a public limited company, and the
name of the Company was changed to Osim International Ltd.
We are in the business of marketing, distributing and franchising of a comprehensive range of home
health care, health check and healthy lifestyle products. Other than Daito-Osim (Suzhou), all the Groups
production needs are out-sourced to contract manufacturers in Japan and Taiwan as we believe in
focusing on our strengths in marketing and brand management.
As at 31 May 2000, our Group had 128 point-of-sales outlets in Singapore, Malaysia, Hong Kong and
Taiwan, and through our franchisees, another 75 point-of-sales outlets in Thailand, Indonesia, PRC,
United Arab Emirates and the United States. Barring unforeseen circumstances, we aim to increase the
number of point-of-sales outlets worldwide to 300 by 2001, 500 by 2003 and 1,000 by 2008. In order for
us to achieve this rate of growth, we will be gradually moving away from being a retailer and are
beginning to position ourselves as a franchisor of our OSIM products. We believe that over time this will
lower the capital risk in penetrating new geographical markets and enable our management to
concentrate on strategic marketing and brand cultivation which are our main strengths.
In the next phase of our future growth, we intend to expand our business by marketing and distributing
other related home health-care products like health food and supplements, and fitness equipment. We
also intend to increase our wholesale distribution sales by looking into, inter alia, wholesale distribution
to hospitals, pharmacies, Chinese medical halls, health clubs, beauty centres and fitness centres.
The Invitation
Size : 58,000,000 Shares comprising 38,000,000 New Shares and
20,000,000 Vendor Shares. The Vendor Shares and the
New Shares, will, upon issue, rank pari passu in all respects
with the then existing issued Shares.
Offer Price and Placement Price : $0.52 for each Offer Share and Placement Share and $0.47
for each Reserved Share.
Purpose of the Invitation : We consider that the listing and quotation of the Shares on
the SGX-ST will enhance the public image of the Group and
will enable us to tap the capital markets for the expansion of
our business. It will also give the general public, employees,
Directors and business associates of the Group an
opportunity to participate in the equity of the Company. The
Invitation will enlarge our capital base for continued
expansion of our businesses.
10
Use of Proceeds : The net proceeds of the issue of New Shares will amount to
approximately $18 million. We propose to utilise the net
proceeds of the Invitation as follows:
(i) approximately $1.5 million to enhance and upgrade
our Groups information technology systems in order to
facilitate our enterprise resource planning (ERP) and
customer relationship management (CRM) (as more
particularly described under PROSPECTS AND
FUTURE PLANS Upgrading of IT Infrastructure on
pages 46 and 47 of this Prospectus);
(ii) approximately $6 million for the expansion of our
point-of-sales outlets in existing and new geographic
markets, the development of new product lines and for
strategic investments in e-commerce initiatives (as
more particularly described under PROSPECTS
AND FUTURE PLANS Expansion of Business and
E-Commerce on pages 45, 46 and 47 of this
Prospectus respectively);
(iii) approximately $8 million to partially finance the
acquisition of land and construction costs of a new
corporate headquarters in Singapore at Ubi Avenue 1
(as more particularly described under PROSPECTS
AND FUTURE PLANS New Corporate
Headquarters on page 45 of this Prospectus); and
(iv) the balance of approximately $2.5 million for additional
working capital for our Group.
Pending the deployment of the net proceeds from the New
Shares for the above purposes, we may place the net
proceeds in deposits with financial institutions, invest them
in short-term money market instruments, and/or add to our
working capital as our Directors, may in their absolute
discretion, deem appropriate.
Reserved Shares : Of the Placement Shares, 5,800,000 Shares will be reserved
for our Directors and employees of the Group. In the event
that any of the Reserved Shares are not taken up, they will
be made available to satisfy applications made for the
Placement Shares or, in the event of an under-subscription
for the Placement Shares, to satisfy applications made by
members of the public for the Offer Shares.
Listing Status : The Shares will, on admission of the Company to the Official
List of SGX-ST and permission for dealing in and for
quotation of the Shares being granted by the SGX-ST, be
quoted on the SGX-ST.
11
RISK FACTORS
Investing in our Shares involves certain risks and you should consider carefully all the information
contained in this Prospectus, especially the following, in evaluating whether to purchase our Shares. To
the best of our belief and knowledge, all risk factors that are material to investors in making an informed
judgement on our Group are set out below. Any of the following factors, depending upon the severity and
circumstances of a particular occurrence, could result in a material adverse effect on our business,
prospects, financial condition and results of operations.
Industry Specific Risks
(a) Changes in Consumer Tastes
As with all other consumer products, sales of our products are dependent on consumers demand
for our products and are susceptible to changes in consumer tastes. There is no assurance that in
the future we will continue to be successful in keeping ourselves ahead of, and being up-to-date
with, the latest health-care trends through constant market research and sourcing of feed-back from
our customers. We can give no assurance that our intensive efforts in strategic marketing and
product innovation will continue to enable us to satisfy the evolving consumer tastes. If we are not
able to do so, our sales to consumers would be reduced and this will have a material adverse impact
on our Groups turnover and profitability.
(b) Health Regulations in New Markets
We do not consider ourselves to be in the medical or para-medical field. While our business is
currently not subject to any governmental health regulations in our major geographical markets, the
regulatory environment in new geographical markets may pose an obstacle to our plans to expand
our geographical presence (our expansion plans are more particularly described under the section
on PROSPECTS AND FUTURE PLANS Expansion of Business on pages 45 and 46 of this
Prospectus). Furthermore, we cannot discount the possibility that new health regulations that apply
to our products may come into force in our existing major markets. If we are unable to comply with
any such health regulations in any particular country, we may be prevented from effectively
marketing our products in that country. This will have a material adverse impact on our overall
turnover and profitability.
(c) Exposure to Product Liability Laws
As with other consumer product manufacturers, we are exposed to product liability laws in the
countries where our products are marketed and may face lawsuits arising from alleged injuries to
users caused by any alleged defects in our products. We may have to do substantial product recalls
in respect of a product if there are allegations of that product being found to be unsafe in the future.
We are also exposed to the product liability laws of the United States which, we believe, may
impose much higher quantum of damages, whether compensatory or punitive, compared to the
laws on product liability in other countries where we market our products. To mitigate this risk, we
have obtained product liability insurance in the United States and Canada. The details of the
insurance coverage are more particularly described under the section on INSURANCE on
page 38 of this Prospectus. As we are not insured for product liability in any other jurisdictions, if we
are ever unsuccessful in defending a product liability suit in one of these jurisdictions, we may have
to pay substantial monetary damages which would have an adverse impact on our reputation and
profitability.
We have begun marketing our products in the United States since late 1997. To date, we have not
encountered any legal suit, or threat of a legal suit, involving product liability in the United States or
any other jurisdictions.
(d) High Susceptibility to Downturns in Economic Cycles
The nature of our home health-care products make us more susceptible to reduced demand in
times of economic downturn than other kinds of businesses because our products may not be
considered as essential medical or health products. Our profitability will therefore be adversely
affected by downturns in economic cycles in any of our significant markets.
12
(e) Prohibitive National Laws on Foreign Ownership
Under the franchise business model which we have adopted (as more particularly described under
the section on FRANCHISE MODEL on pages 35 and 36 of this Prospectus), it is not our business
strategy to acquire equity interests in our franchisees. Nevertheless, where having an equity
interest in a certain franchisee would enable us to have a share in their profits, we may decide to
acquire ownership of that franchisee. However, this may be difficult, if not impossible, in certain
jurisdictions. Currently we face prohibitive or restrictive laws in PRC, Indonesia and Thailand which
do not permit us to have ownership or full ownership of our franchisees. As we expand our franchise
network to more countries in the future, we may face similar prohibitive national laws that would
affect our ability to acquire equity interests in our franchisees.
In Malaysia, under the Guidelines for the Regulation of Acquisition of Assets, Mergers and
Take-overs (the Guidelines) established by The Foreign Investment Committee of Malaysia
(FIC), the approval of the FIC is required for a foreign company to own more than a 15 per cent.
interest in a Malaysian company. Foreign involvement in Malaysian companies engaging in the
business of specialty stores is also subject to Guidelines on Wholesale and Retail Trade (the
GWRT). The GWRT stipulates that the foreign ownership of such Malaysian company should be
restricted to 30 per cent., with another 30 per cent. of the equity to be held by bumiputeras. The
GWRT also requires the capitalisation of such Malaysian company to be at least RM1,000,000.
We are of the view that the Guidelines and GWRT are not established under any statutory laws in
Malaysia and non-compliance with the Guidelines and GWRT does not have any statutory
implications. Therefore, we have not made any application to the FIC or the Committee of
Wholesale and Retail Trade (the Committee) for us to hold our 60 per cent. interest in the equity
of Osim (Msia). In the future, we may face the possibility of being directed by the FIC and/or the
Committee to comply with the Guidelines and GWRT respectively. If so directed, we will seek
consultations with the FIC and/or the Committee, as the case may be, for the appropriate
compliance. Our non-compliance with the Guidelines and GWRT may lead to the non-renewal of
our business premise licences in Malaysia which would result in a disruption or cessation of our
operations. In such event, we would have to either dilute our shareholdings to comply with the
Guidelines and/or the GWRT, or appoint a franchisee who is qualified to undertake the business in
Malaysia.
If the operations of Osim (Msia) are not taken into account in preparing our financial statements,
our Groups profit after taxation and minority interests for FY1997, FY1998 and FY1999 would have
been increased by 4.1 per cent. and reduced by 1.0 per cent. and 5.9 per cent. respectively, and
our Groups NTA as at 31 December 1997, 31 December 1998 and 31 December 1999 would have
been reduced by 0.8 per cent., 1.1 per cent. and 5.9 per cent. respectively.
Company Specific Risks
(a) Dependence on Key Personnel
Our continued success is dependent to a very large extent on our ability to retain key management
personnel. The loss of the services of a substantial number of our key management personnel
without adequate replacements, or the inability to attract or retain qualified personnel would have
an unfavourable and material impact on our business. Furthermore, in connection with our future
plans (as more particularly described under the section on PROSPECTS AND FUTURE PLANS
Future Plans on pages 45 to 47 of this Prospectus), we may need to recruit a greater number
of experienced personnel in the future.
Dr Ron Sim Chye Hock, our founder, has been the main contributor to our success and provides
strategic leadership and vision for our Group. He will also hold, as direct and deemed interests, 69.0
per cent. of our share capital after the Invitation. The loss of Dr Ron Sim Chye Hocks services as
our Chairman and Chief Executive Officer would adversely affect our business and future plans.
13
(b) Reliance on Key Suppliers
We are highly dependent on 3 suppliers (as disclosed in the section on MAJOR SUPPLIERS AND
CUSTOMERS Major Suppliers on pages 52 and 53 of this Prospectus) who are our suppliers
or contract manufacturers for products contributing 75.5 per cent., 60.4 per cent. and 78.7 per cent.
of our purchases for FY1997, FY1998 and FY1999 respectively. The involuntary or unexpected loss
of any of our key suppliers/contract manufacturers will temporarily disrupt our supplies and have a
material adverse impact on our Groups turnover and profitability.
Furthermore, there can be no assurance that the 3 key suppliers/contract manufacturers will
continue to fulfil our needs and expectations in terms of cost and product quality although to date,
we have not experienced any significant problems with our 3 key suppliers/contract manufacturers
in these areas since we began our business relationship. In the event that the 3 key suppliers/
contract manufacturers are not able to fulfil our requirements, we will incur costs in switching to new
suppliers which would result in disruption to our business and profitability in the short term.
(c) Failure of Franchising as a Business Model
We have only recently since the last quarter of 1999 begun to adopt franchising group-wide (except
for our Singapore and PRC operations) as a business model. Therefore, the results of our franchise
business model have not been time-tested for long. More details on our franchise business model
are set out in the section on FRANCHISE MODEL on pages 35 and 36 of this Prospectus. Our
franchise business model is dependent on the quality of our franchisees, their financial strength and
ability to penetrate new markets. Presently, of our 7 franchisees, 3 are our subsidiaries, 3 are our
affiliated companies controlled by our Controlling Shareholders and the remaining 1 is an unrelated
company. We cannot give any assurance that we will be able to attract suitable non-related
companies as our franchisees or that such franchisees will continue with our franchise. The loss of
our franchisee in any particular market will result in a decrease of our revenues in that market while
we seek alternative franchisee or undertake to carry on the business ourselves if the domestic
regulations permit. The loss of our franchisee may also present an opportunity to competitors to
increase their market share in that market at our expense. We have not experienced any loss of
franchisee in any particular market since the implementation of our franchise business model.
(d) Increased Competition
Currently, in our major markets such as Hong Kong, Singapore and Taiwan, we do not consider
ourselves to have a major competitor as most of the distributors and manufacturers of home
health-care products do not have a comparable distribution network where the distributor or
manufacturer directly controls the supply chain from the design of the products to the marketing of
these products. However, we cannot give any assurance that no competitor will arise in the future
who has the marketing expertise or a comparable distribution network to pose a significant
competitive threat. As we expand into new geographical markets or new product lines (as more
particularly described under the section on PROSPECTS AND FUTURE PLANS Expansion of
Business on pages 45 and 46 of this Prospectus), we may face significant competition in these new
markets which will erode or eliminate our profit margins.
We face competitive pressures from manufacturers of low-priced products, especially in PRC. To
handle these competitive pressures, we have developed NORO as a secondary brand to sell
lower-priced massage chairs and kneading massagers in PRC to the segment of the consumer
market which is sensitive to pricing.
Our Directors believe that e-commerce is emerging as a very major marketing and distribution
channel for businesses although the extent of the impact of e-commerce cannot be conclusively
assessed today. We have the intention of tapping into the vast potential of e-commerce and other
health-care retailers may also follow. We cannot give any assurance that the expansion of
e-commerce initiatives by other distributors or contract manufacturers will not result in us losing
market share.
14
(e) Difficulty of Expanding Distribution Network
It is our business strategy to expand our network of brick-and-mortar point-of-sales outlets in the
region and eventually, the world. Our franchisees and we, in the event that we establish our own
outlets to penetrate and/or establish ourselves in new markets, may face considerable difficulties or
high costs in securing suitable retail locations to expand our distribution network. Rental is one of
our major operating expenses and is subject to inflationary pressure if property prices increase. In
the event that we are unable to improve our revenue per square foot on our rented premises, any
increase in rentals will adversely affect our net operating profit margins.
(f) Intellectual Property Rights Disputes
Unauthorised use of our trademarks, brand names and other intellectual property may damage the
brand and name recognition, and reputation of our Group. We have as at 31 May 2000, filed
trademark applications for the registration of OSIM and NORO in 26 jurisdictions. The details of
the trademark registrations are more particularly described in the section on INTELLECTUAL
PROPERTY RIGHTS on pages 36 and 37 of this Prospectus.
Although we have registered OSIM as a trademark in the countries where our products are
marketed and where we intend to expand our business to, it may be possible for third parties to
unlawfully pass-off their products as ours or to counterfeit our products. In certain jurisdictions which
do not have clear laws protecting intellectual property rights or a consistent record of protecting
intellectual property rights, we may face considerable difficulties and costly litigation in order to
enforce our intellectual property rights. In the event that we are not able to protect our intellectual
property rights, we cannot discount the possibility of our brand reputation or sales volume being
adversely affected by passing-off or counterfeiting. This will have a material adverse impact on our
turnover and profitability.
(g) Exposure to the Emerging Markets of Malaysia, Thailand, Indonesia and PRC
Our sales in the emerging markets of Malaysia, Thailand, Indonesia and PRC accounted for 18.4
per cent. of our Groups revenues in FY1997, 7.7 per cent. in FY1998 and 12.3 per cent. in FY1999.
Our Directors expect the contribution from these 4 countries to our Groups revenues to increase in
the future. Therefore, to a certain extent, our business may be affected by economic conditions in
these emerging markets. The economies of these emerging markets have only recently begun to
recover from the Asian financial crisis and the recovery may not be sustainable. If the high interest
rate environment and drastic devaluation of regional currencies seen in the Asian financial crisis
were to recur in the future, this will have an adverse effect on the financial performance of our
Groups business in these countries. It will also greatly magnify the risk to us from our foreign
exchange exposure (as described in paragraph (h) below).
(h) Foreign Exchange Risks
In line with the country of incorporation, the accounts of our overseas subsidiaries are prepared in
the local currency (i.e. RM, HK$, RMB and NT$). This represents a translation risk in that any
material fluctuation in the relevant currency rates against the S$ will have an effect on our
consolidated financial statements which are presented in S$.
While our sales are mainly denominated in the respective local currencies in which the sales arise,
namely the S$, RM, HK$, RMB and NT$, our costs of procurement of products from our contract
manufacturers are incurred mainly in US$ and Yen, which accounted for 33% and 64% of our total
purchases respectively for FY1999.
(i) Country Risks
Our business is conducted in many countries outside Singapore, including Indonesia and PRC,
through our franchise network and our foreign-based business activities are subject to the particular
risks of the country in which they operate.
15
Indonesia and PRC are countries which have experienced significant political, social and economic
uncertainties in recent years. Our performance may be adversely affected by political, social,
economic and regulatory uncertainties in these regions. For example, changes in policies by the
respective government authorities of these regions may materially affect us through (i) changes in
laws and regulations; (ii) changes in customs and import tariffs; (iii) restrictions on currency
conversions and remittances; and (iv) instability of the banking system.
Under current Indonesian and PRC laws, we are prohibited from owning companies that engage in
retailing. As disclosed earlier under Industry Specific Risks, this precludes us from acquiring our
franchisees in these countries in order to have a share in their profits.
In addition, in PRC, there can be no assurance that exchange rates of the RMB against the US$ or
S$ will not become volatile or that the RMB will not be devalued against the US$ or S$. Our PRC
licensees will be adversely affected by a RMB devaluation as their purchase costs are denominated
in US$ while their sales are denominated in RMB. If the financial condition of any of our PRC
licensees deteriorates, this would affect the level of their purchases from us and our business with
our PRC licensees will be adversely affected.
(j) Expansion of Business
As described under the section on PROSPECTS AND FUTURE PLANS Expansion of
Business on pages 45 and 46 of this Prospectus, we intend to penetrate deeper into the consumer
markets, expand to new geographical markets, diversify into new product lines and venture into
wholesale distribution. If we are unsuccessful in the above business expansion, our long-term
growth prospects will be adversely affected.
(k) E-commerce
Despite the enthusiasm among many merchants to embrace e-commerce, we cannot give any
assurance that there will be a market for our home health-care products on the Internet. The Internet
has yet to evolve as an important and widespread means of buying and selling products and
services. Furthermore, e-commerce business models remain largely untested and yet to be proven
to be profitable. Because on-line procurement of business products and services is still in its growth
stage, it is difficult for us to estimate the size of the home health-care products market on the
Internet and its growth rate, if any. By nature of the industry, any e-commerce venture that we may
enter into would be highly capital intensive and would have a high burn rate for capital in the early
stages of the venture. We cannot give any assurance that the capital we invest in e-commerce
which will come from the proceeds of the Invitation, would not be quickly used up without yielding
any financial gain for us.
(l) Conflicts of Interest Between Us and Our Controlling Shareholders
Companies owned and/or controlled by our Controlling Shareholders (the Controlled Companies)
are our franchisees. These arrangements will give rise to situations where there are potential
conflicts of interests between us and our Controlling Shareholders, which are set out in the sections
on INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS and
POTENTIAL CONFLICTS OF INTERESTS on pages 62 to 69 of this Prospectus respectively. The
Audit Committee of our Board of Directors will review the implementation of the franchise
agreements between us and the Controlled Companies to ensure that they are entered into on
arms length basis and are on normal commercial terms. If the franchise agreements are not
entered into on arms length basis and their terms are less favourable to us than what we would
have offered to independent third party franchisees, we will suffer financial loss and this will have
a significant adverse impact on our turnover and profitability.
Had we been able to charge our affiliated companies the franchise fee, royalties (in the case of
Controlled Companies which are our franchisees) or licensing fee (in the case of Controlled
Companies which are our licensees) at rates similar to those charged to our subsidiaries and RSH
(our unrelated franchisee), and had we been able to sell certain of our main products at prices
similar to those sold to our subsidiaries and RSH, we would not have to suffer a reduction in income.
For FY1999, the impact to our Group was a reduction in income of approximately $471,000 which
represented 4.3 per cent. of our PBT.
16
INVITATION STATISTICS
Offer Price
(1)
: $0.52
Placement Price for Placement Shares : $0.52
Placement Price for Reserved Shares : $0.47
NTA
NTA per Share based on:
(a) the audited NTA of the Group as at 31 December 1999 before adjusting
for the proceeds from the Investor Subscription and the estimated net
proceeds of the New Shares and based on the pre-Investor
Subscription and pre-Invitation issued share capital of 180,984,000
Shares (the Pre-Adjusted NTA per Share)
: 5.67 cents
(b) after adjusting for the proceeds from the Investor Subscription and the
estimated net proceeds of the New Shares and based on the post-
Investor Subscription and post-Invitation issued share capital of
230,584,000 Shares (the Adjusted NTA per Share)
: 14.57 cents
Premium of the Offer Price over:
(a) the Pre-Adjusted NTA per Share as at 31 December 1999 of 5.67 cents : 817 per cent.
(b) the Adjusted NTA per Share of 14.57 cents : 257 per cent.
Earnings
Historical EPS based on the audited results of the Proforma Group for
FY1999 and the pre-Investor Subscription and pre-Invitation issued share
capital of 180,984,000 Shares
: 4.11 cents
Historical EPS had the Service Agreements as set out under the section on
DIRECTORS, MANAGEMENT AND STAFF Service Agreements on
pages 55 and 56 of this Prospectus been in effect for FY1999 and based on
the pre-Investor Subscription and pre-Invitation issued share capital of
180,984,000 Shares
: 3.87 cents
PER
Historical PER based on the Offer Price and the historical EPS of 4.11 cents
for FY1999
: 12.65 times
Historical PER based on Offer Price and the historical EPS had the Service
Agreements as set out under the section on DIRECTORS, MANAGEMENT
AND STAFF Service Agreements on pages 55 and 56 of this Prospectus
been in effect for FY1999
: 13.44 times
Net Operating Cash Flow
(2)
Historical net operating cash flow per Share for FY1999 based on the
pre-Investor Subscription and pre-Invitation share capital of 180,984,000
Shares
: 5.31 cents
17
Price to Net Operating Cash Flow Ratio
Ratio of Offer Price to historical net operating cash flow per Share for FY1999
based on the pre-Investor Subscription and pre-Invitation share capital of
180,984,000 Shares
: 9.79 times
Market Capitalisation
Market capitalisation of our Company based on the Offer Price of $0.52 and
based on the post-Investor Subscription and post-Invitation share capital of
230,584,000 Shares
: $119.90 million
Notes:
(1) The Offer Price of $0.52 has been used for the purpose of presenting the Invitation Statistics.
(2) Net operating cash flow is defined as profit attributable to the members of the Company with depreciation added back.
18
SUMMARY OF FINANCIAL INFORMATION
The following selected financial information should be read in conjunction with the Accountants Report
and the full text of this Prospectus.
RESULTS
The audited consolidated profit and loss statements of the Proforma Group for the past five financial
years ended 31 December 1999, including EPS, are set out below:
Year ended 31 December
1995 1996 1997 1998 1999
$000 $000 $000 $000 $000
Turnover 31,432 42,897 60,837 69,747 103,138
Other income
(1)
2 12 18 46 28
Earnings before depreciation, interest expense
and taxation 2,841 5,104 5,917 5,411 14,148
Depreciation (313) (406) (569) (1,440)
(4)
(2,166)
(4)
Interest expense (896) (839) (929) (1,355) (1,468)
Operating profit 1,632 3,859 4,419 2,616 10,514
Share of (loss)/profit of associated company (191) (17) 583 334
Profit before taxation and minority interests 1,632 3,668 4,402 3,199 10,848
Taxation (541) (1,177) (1,156) (912) (3,123)
Profit after taxation 1,091 2,491 3,246 2,287 7,725
Minority interests (49) (61) 84 (28) (284)
Profit after taxation, minority interests but
before extraordinary item 1,042 2,430 3,330 2,259 7,441
Extraordinary item
(2)
1,759
(2)

Profit attributable to Shareholders 1,042 4,189 3,330 2,259 7,441
(5)
Earnings per Share
(3)
(cents) 0.58 1.34 1.84 1.25 4.11
Notes:
(1) Other income relates to interest income.
(2) The extraordinary item relates to net gain on disposal of leasehold properties.
(3) For comparative purposes, the historical EPS for FY1995 to FY1999 have been computed based on the profit after taxation
and minority interests but before extraordinary item divided by the pre-Investor Subscription and pre-Invitation issued share
capital of 180,984,000 Shares.
(4) During FY1998, we had revised the estimated useful lives of certain fixed assets for depreciation purposes to more accurately
reflect the economic useful lives of these fixed assets. The impact of the change in the accounting estimate is to decrease
profit before taxation for FY1998 and FY1999 by approximately $182,000 and $68,000 respectively.
During FY1999, a subsidiary, Osim (Msia), had revised the estimated useful lives of certain fixed assets for depreciation
purposes to be consistent with the Groups accounting policy. The impact of the change in the accounting estimate is to
decrease profit before taxation for FY1999 by approximately $105,000.
(5) Had the Service Agreements referred to in the section on DIRECTORS, MANAGEMENT AND STAFF Service
Agreements on pages 55 and 56 of this Prospectus been in place for FY1999, the profit attributable to Shareholders for
FY1999 would have been $7.0 million.
19
FINANCIAL POSITION
The audited consolidated balance sheets of the Proforma Group as at the end of each of the past five
financial years ended 31 December 1999, including NTA per Share, are set out below:
As at 31 December
1995 1996 1997 1998 1999
$000 $000 $000 $000 $000
Fixed assets 17,272 12,349 13,455 16,607 18,276
Investment in associated company 303 333 905 1,068
Current assets
Stocks 3,750 5,808 7,706 5,452 12,089
Trade debtors 2,168 3,204 6,094 5,818 8,846
Other debtors, deposits and
prepayments 1,140 2,126 3,893 2,360 2,574
Due from affiliated companies
trade 3,236 3,300 7,039 4,634 8,587
non-trade 380 1,040 288 10
(2)
Due from directors 2,776 3,436 3,345
Fixed deposits 558 236
Cash and bank balances 227 2,311 5,668 3,080 4,265
10,901 21,123 34,124 24,689 36,607
Current liabilities
Trade creditors 2,462 6,633 2,228 3,222 4,658
Bills payable to banks (secured) 259 2,870 11,381 8,328 12,017
Other creditors and accruals 1,399 1,585 5,046 1,967 8,925
Due to an associated company
trade 15 361
Due to affiliated companies
trade 4 321 260
non-trade 559 46
(2)
Due to directors 2,112 2,361 830 1,600
(2)
Term loans, current portion 1,279 2,123 537 660 646
Short term bank loans 1,489 1,207 1,497 379 760
Hire purchase liabilities, current
portion 36 118 112 115
Proposed dividend 370 370 370 75
Provision for taxation 1,044 1,620 2,461 2,291 4,022
Bank overdrafts (secured) 1,992 1,203 630 3,297
(12,036) (18,210) (26,950) (18,434) (36,522)
Net current (liabilities)/assets (1,135) 2,913 7,174 6,255 85
20
As at 31 December
1995 1996 1997 1998 1999
$000 $000 $000 $000 $000
Less:
Non-current liabilities
Hire purchase liabilities, non-current
portion (80) (169) (145) (240)
Term loans, non-current portion (8,837) (4,175) (6,886) (7,820) (7,255)
Provision for pension benefits (157)
Deferred taxation (102) (294) (147) (38) (369)
(8,939) (4,549) (7,202) (8,003) (8,021)
7,198 11,016 13,760 15,764 11,408
Proforma shareholders equity
Share capital 3,000 3,000 3,000 3,100 3,100
Revenue reserves 3,571 7,343 9,508 11,157 6,375
Enterprise expansion fund 31 114 125 149
Capital reserve 16 91 347 466
Translation reserves (154) (204) 294 208 179
6,417 10,186 13,007 14,937 10,269
Minority interests 781 830 753 827 1,139
7,198 11,016 13,760 15,764 11,408
NTA per Share
(1)
(cents) 3.55 5.63 7.19 8.25 5.67
Notes:
(1) For comparative purposes, the historical NTA per Share as at 31 December 1995 to 1999 have been computed based on the
pre-Investor Subscription and pre-Invitation issued share capital of 180,984,000 Shares.
(2) Subsequent to the year ended 31 December 1999, these amounts have been repaid in June 2000.
21
INFORMATION ON THE COMPANY AND THE GROUP
SHARE CAPITAL
We were incorporated on 27 August 1983 in the Republic of Singapore under the Act, as a limited exempt
private company. We have only one class of shares. As at 31 December 1999, our authorised share
capital was $5,000,000 divided into 5,000,000 ordinary shares of $1.00 each and our issued and paid-up
share capital was $3,100,000 divided into 3,100,000 ordinary shares of $1.00 each.
At the extraordinary general meeting held on 26 June 2000, our Shareholders approved, inter alia, the
following:
(a) the increase of our authorised share capital from $5,000,000 divided into 5,000,000 ordinary shares
of $1.00 each to $50,000,000 divided into 50,000,000 ordinary shares of $1.00 each;
(b) the capitalisation of $5,921,000 from our revenue reserves for a bonus issue of 5,921,000 ordinary
shares of $1.00 each in our capital, credited as fully paid, to the Shareholders of the Company on
the basis of 1,910 new ordinary shares for every 1,000 ordinary shares held (the Bonus Issue);
(c) the subdivision of each of the existing ordinary shares of $1.00 each in the authorised share capital
and issued and paid-up share capital of the Company into 20 shares of $0.05 each (the Stock
Split);
(d) our conversion to a public limited company and the change of our name to Osim International Ltd;
(e) the adoption of a set of new Articles of Association;
(f) the issue of 564,000 new ordinary shares of $0.05 each to Mr Chen Chuan I and Ms Ho Jui Mei as
consideration for the acquisition of their aggregate 10 per cent. equity in Osim (Taiwan) pursuant to
the Restructuring Exercise;
(g) the issue of 11,600,000 new ordinary shares of $0.05 each to Investor pursuant to the Subscription
Agreement;
(h) the issue of the New Shares which form part of the Invitation;
(i) a shareholders mandate authorising Osim (S) to enter into recurrent transactions of a revenue
and/or trading nature firstly, in the form of sales of our products to Osim (Thai), Osim (USA), PT
Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang) and secondly, warehousing and
freight forwarding contracts with ODCPL (these transactions are more particularly described on
pages 62 to 69 of this Prospectus under INTEREST OF MANAGEMENT AND OTHERS IN
CERTAIN TRANSACTIONS);
(j) the Osim Share Option Scheme (the Scheme) (details of which are set out on pages 59 to 61 of
this Prospectus and in Appendix A on pages 113 to 136 of this Prospectus) and the authorisation to
our Board of Directors to implement and administer the Scheme, to modify and/or amend the
Scheme, to offer and grant options and to allot and issue new Shares pursuant to the exercise of
options granted pursuant to the Scheme subject to the rules of the Scheme; and
(k) the authorisation of the Directors, pursuant to Section 161 of the Act and the provisions of the new
Articles of Association becoming effective, to allot and issue such further shares in the Company at
any time to such persons, upon such terms and conditions and for such purposes as the Directors
may in their absolute discretion deem fit provided that the aggregate number of shares to be issued
shall not exceed 50 per cent. of the issued share capital of the Company immediately prior to the
proposed issue, provided that the aggregate number of shares to be issued other than on a pro-rata
basis to the then existing Shareholders of the Company shall not exceed 20 per cent. of the issued
share capital of the Company immediately prior to the proposed issue, and, unless revoked or
varied by the Company in general meeting, such authority shall continue in force until the conclusion
of the Annual General Meeting of the Company or the date by which the next Annual General
Meeting of the Company is required by law to be held, whichever is the earlier.
22
As at the date of this Prospectus, we have only one class of shares, being ordinary shares of $0.05 each.
The rights and privileges of these Shares are stated in our Articles of Association. There are no founder,
management or deferred shares reserved for issuance for any purpose.
Our Companys present and paid-up share capital is $9,629,200 comprising 192,584,000 Shares. Upon
the allotment of the New Shares, our resultant issued and paid-up share capital will be increased to
$11,529,200 comprising 230,584,000 Shares.
The details of our Companys issued and paid-up capital since 31 December 1999, being the date of our
last audited accounts, and our issued and paid-up share capital immediately after the Invitation are as
follows:
Number
of Shares $
Issued and fully paid ordinary shares of $1.00 each as at 31 December 1999 3,100,000 3,100,000
Bonus Issue 5,921,000 5,921,000
9,021,000 9,021,000
Stock Split 180,420,000 9,021,000
Shares issued pursuant to the Restructuring Exercise 564,000 28,200
Shares issued pursuant to the Subscription Agreement 11,600,000 580,000
Pre-Invitation issued share capital 192,584,000 9,629,200
Issue of New Shares 38,000,000 1,900,000
Post-Invitation issued share capital 230,584,000 11,529,200
Our Companys authorised share capital and shareholders funds as at 31 December 1999, before and
after adjustments to reflect the increase in authorised share capital, the Bonus Issue, the Stock Split, the
issue of Shares pursuant to the Restructuring Exercise and the Subscription Agreement, and the issue
of the New Shares are set out below. This should be read in conjunction with the Accountants Report
set out on pages 72 to 94 of this Prospectus.
As at 31 December 1999 As adjusted
$000 $000
Authorised Share Capital
Ordinary shares of $1.00 each 5,000
Ordinary shares of $0.05 each 50,000
Shareholders Funds
Issued and fully paid Shares 3,100 11,529
Share premium 21,107
Accumulated profits 17,423 11,502
Total shareholders funds 20,523 44,138
23
OUR SHAREHOLDERS
Our Shareholders and their respective direct shareholdings immediately before and after the Invitation
are as follows:
Immediately
Before Invitation
Immediately
After Invitation
Number of
Shares %
Number of
Shares
(4)
%
Shareholders
Directors
Ron Sim Chye Hock
(1)
178,615,800 92.7 157,315,800 68.2
Teo Sway Heong 1,804,200 0.9 1,804,200 0.8
Teo Chay Lee
(2)
500,000
(3)
0.2
Leow Lian Soon
(2)
500,000
(3)
0.2
Khor Peng Soon
Michael Kan Yuet Yun
(2)

Ong Kian Min
(2)

Substantial Shareholders (other than Directors)
Investor 11,600,000 6.0 11,600,000 5.0
Other Shareholders (of less than 5% who are
related to Directors or substantial Shareholders)
Chiang See Thong 100,000 **
Other Shareholders (of less than 5% who are not
related to Directors or substantial Shareholders)
Others
(4)
564,000 0.3 764,000 0.3
Public (including Reserved Shares) 58,000,000 25.2
192,584,000 100.0* 230,584,000 100.0*
Notes:
(1) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo Chay Lee and
Mr Leow Lian Soon (our executive Directors), Ms Lim Choon Hui (our Executive Officer) and Mr Chiang See Thong (Dr Ron
Sim Chye Hocks brother-in-law, who provided corporate secretarial services to us from 1993 to 1999) respectively by way
of a gift as a token of his appreciation of their contributions to our Group. These transfers will be completed immediately after
the Invitation is completed.
(2) Mr Teo Chay Lee and Mr Leow Lian Soon, both executive Directors, have each been allocated 500,000 Reserved Shares in
recognition of their substantial contributions to the Group in their past 11 and 13 years of service to us respectively. The
Reserved Shares are offered at $0.47 for each Reserved Share, representing approximately 10 per cent. discount to the Offer
Price.
Mr Michael Kan Yuet Yun and Mr Ong Kian Min, our independent Directors, have each been allocated 100,000 Reserved
Shares. The Reserved Shares are offered at $0.47 for each Reserved Share, representing approximately 10 per cent.
discount to the Offer Price in recognition of their future contributions to our Group as members of the Audit Committee.
The above executive and independent Directors have no present intention of selling their Reserved Shares within 6 months
after the Invitation.
(3) The shareholdings of Mr Teo Chay Lee and Mr Leow Lian Soon do not include the Reserved Shares allocated to them. In
addition, the shareholding of Mr Leow Lian Soon does not include 30,000 Reserved Shares allocated to his wife, Ms Tao Dong
Mei, in recognition of her past and continuing contributions to the Group as a consultant.
(4) The shareholding held by Others include the Shares issued to the minority shareholders of Osim (Taiwan) pursuant to the
Restructuring Exercise and the 200,000 Shares held by Ms Lim Choon Hui after the Invitation.
*The total may not add up to 100 per cent. due to rounding.
**Less than 0.1 per cent.
None of our Directors or substantial Shareholders is related to each other except that Ms Teo Sway
Heong is the wife of Dr Ron Sim Chye Hock.
24
MORATORIUM
As evidence of their commitment to the Group, Dr Ron Sim Chye Hock and Ms Teo Sway Heong, who
will in aggregate own or have an interest in 159,120,000 Shares representing 69.0 per cent. of our issued
and paid-up capital immediately after the Invitation, do not intend to dispose of or transfer any part of their
respective shareholdings for a period of 6 months commencing from the date of our admission to the
Official List of the SGX-ST. In addition, Investor has given an undertaking not to dispose of or transfer
any part of its shareholding for a period of 6 months commencing from the date of our admission to the
Official List of the SGX-ST.
In the subsequent 6 months thereafter, Dr Ron Sim Chye Hock and Ms Teo Sway Heong do not intend
to reduce their aggregate shareholdings to below 51.0 per cent. of our enlarged share capital.
RESTRUCTURING EXERCISE
In connection with the Invitation, we undertook a Restructuring Exercise which consisted of a series of
reconstruction agreements entered with our Directors and substantial Shareholders, Dr Ron Sim Chye
Hock and Ms Teo Sway Heong. To complete the Restructuring Exercise, we entered into 4 separate
share sale agreements with Mr Leow Lian Soon, Ms Tan Poh Khim, Mr Chen Chuan I and Ms Ho Jui Mei
respectively. Save for Mr Leow Lian Soon who is one of our Directors, Ms Tan Poh Khim, Mr Chen Chuan
I and Ms Ho Jui Mei are not related to any of our Directors or substantial Shareholders. Prior to the
Restructuring Exercise, we were the holding company of Osim (Shanghai) and the owner of 30 per cent.
of the total registered capital of Daito-Osim (Suzhou), our associated company. Osim (Shanghai) is a
trading company that imports our products in PRC for wholesale distribution and we are not prohibited
by PRC laws to have full ownership of Osim(Shanghai). Resulting fromthe Restructuring Exercise, Osim
(HK), Osim (Msia) and Osim (Taiwan) became our subsidiaries. The rationale of carrying out the
Restructuring Exercise was to reorganise all the various companies under a single holding company.
The Restructuring Exercise involved the following steps:
(a) Acquisition of Osim (Msia)
Pursuant to a reconstruction agreement dated 25 February 2000, we acquired from Dr Ron Sim
Chye Hock all the issued and paid up shares owned by Dr Ron Sim Chye Hock in Osim (Msia) that
represented 60 per cent. of the issued and paid up share capital of Osim (Msia). The transfer of
these shares was stated to be effective as of 31 December 1999. The purchase consideration paid
by us was $2,500,000 and was arrived at on a willing buyer-willing seller basis. When calculated
with reference to the audited profits after taxation of Osim (Msia) for FY1999, the purchase
consideration was equivalent to a PER of approximately 5.6 times. We believe that the purchase
consideration is reasonable given the established business and customer base of Osim (Msia). The
purchase consideration was satisfied by off-setting an amount of $2,500,000 from a directors loan
owed by Dr Ron Sim Chye Hock to us.
The remaining 40 per cent. of the issued and paid up capital of Osim (Msia) are held by Mr Tay Sim
Kim who holds 35 per cent. and Ms Ho Yoke Wah who holds 5 per cent., both of whom are not
related to any of our Directors or substantial Shareholders. Mr Tay Sim Kim and Ms Ho Yoke Wah
are husband and wife, and are the general manager and assistant general manager of Osim (Msia)
respectively. They are also directors of Osim (Msia).
(b) Acquisition of Osim (HK)
In accordance with reconstruction agreements dated 31 December 1999, we acquired from Dr Ron
Sim Chye Hock and Ms Teo Sway Heong all their issued and paid up shares in Osim (HK),
representing in aggregate 95.1 per cent. of the issued and paid up share capital of Osim (HK). The
aggregate purchase consideration was $10,770,000 which was arrived at on a willing buyer-willing
seller basis. When calculated with reference to the audited profits after taxation of Osim (HK) for
FY1999 and adding back the 3 per cent. royalty fees paid by Osim (HK) to Osim (S) in FY1999, the
aggregate purchase consideration was equivalent to a PER of approximately 5.6 times. We believe
that the above basis is reasonable given the established business and customer base of Osim (HK).
The aggregate purchase consideration was satisfied by off-setting an amount of $10,770,000 from
a loan owed by Dr Ron Sim Chye Hock to us.
25
We have also entered into a share sale agreement dated 20 March 2000 with Ms Tan Poh Khim to
purchase the entire remaining minority interest in Osim (HK) which then became our wholly-owned
subsidiary. The purchase consideration for Ms Tan Poh Khims shares was $1,300,000 payable in
cash which was arrived at on a willing buyer-willing seller basis, and was equivalent to a PER of
approximately 13 times. We were prepared to pay a higher PER valuation for the acquisition of the
above remaining minority interest so that Osim (HK) would become our wholly-owned subsidiary.
We also believe that the above basis is reasonable as the acquisition gave us full management
control of Osim (HK) which will enable us to formulate business plans and chart strategic directions
of Osim (HK) expeditiously and exploit business opportunities as and when they arise. Our
Directors believe having total management control of Osim (HK) is highly desirable to our Group as
Hong Kong is one of our major markets.
(c) Acquisition of Osim (Taiwan)
Pursuant to a reconstruction agreement dated 9 December 1999, we acquired from Dr Ron Sim
Chye Hock all his issued and paid up shares in Osim (Taiwan) representing 58 per cent. of the
issued and paid up share capital of Osim (Taiwan). The purchase consideration was $230,000
which was arrived at on a willing buyer-willing seller basis. When calculated with reference to the
audited profits after taxation of Osim (Taiwan) for FY1999, the purchase consideration was
equivalent to a PER of approximately 5.6 times. We believe that the purchase consideration is
reasonable given the established business and customer base of Osim (Taiwan). The purchase
consideration was satisfied by off-setting an amount of $230,000 from a loan owed by Dr Ron Sim
Chye Hock to us.
Concurrently, we also entered into 3 share sale agreements with Mr Leow Lian Soon, Mr Chen
Chuan I and Ms Ho Jui Mei and purchased from them 2 per cent., 5 per cent. and 5 per cent.
respectively of the issued and paid up share capital of Osim (Taiwan). The purchase consideration
we paid for Mr Leow Lian Soons interest was $8,000 which was arrived at on a willing buyer-willing
seller basis, and was satisfied in cash. The purchase consideration is equivalent to the
consideration paid for Dr Ron Sim Chye Hocks interest on a price per share basis. The purchase
consideration we paid for Mr Chen Chuan Is and Ms Ho Jui Meis shares was $146,500 each which
was arrived at on a willing buyer-willing seller basis, and which was satisfied by the allotment and
issue of 282,000 Shares based on the Offer Price credited as fully paid up to each of them
respectively. The purchase consideration represents a premium of approximately 13 per cent.
above the audited NTA of Osim (Taiwan) as at 31 December 1999.
The remaining 30 per cent. of the equity interest in Osim (Taiwan) are held by Mr Chen Chuan I (13
per cent.), Mr Teng Seng Sung (10 per cent.), Ms Ho Jui Mei (5 per cent.), Mr Liu Shih Wen (1 per
cent.), Ms Chen Shin Chen (0.5 per cent.) and Ms Huang Chi Jane (0.5 per cent.). None of them
is related to any of our Directors or substantial Shareholders. Mr Chen Chuan I and Ms Huang Chi
Jane are husband and wife, and are the general manager and finance manager of Osim (Taiwan)
respectively. Ms Chen Shin Chen is the daughter of Mr Chen Chuan I and Ms Huang Chi Jane. Mr
Chen Chuan I is also a director of Osim (Taiwan).
26
GROUP STRUCTURE
The structure of our Group immediately after the Invitation is set out below:
Our subsidiaries and our associated company are not listed on any stock exchange.
HISTORY
The origins of our business began in November 1980 when Dr Ron Sim Chye Hock commenced his sole
proprietor business of retailing an array of household goods such as knives, knife-sharpeners and mobile
drying rods under R. Sim Trading Co. We were subsequently incorporated in 1983 under the name R.
Sim Trading Co. Pte Ltd to take over the sole proprietorship. Operating from our first premises at a shop
at Peoples Park, we were then only selling 2 health-care related products, namely, hand-held
massagers and foot reflexology rollers. By 1987, we had created a distribution network of 10 outlets in
Singapore, Hong Kong and Taiwan marketing household goods and health-care related products.
Our founder, Dr Ron Sim Chye Hock then felt that there was market potential for specialty home health
care products in an increasingly affluent Asia. As early as 1987, we saw that the home healthcare
products sector was dominated by a disparate group of equipment manufacturers with little or no
emphasis on marketing and as a result there was a lack of brand consciousness among consumers.
Hence, in 1989 we decided to bring together different home health-care products from different
equipment manufacturers and market them using specialty branding. For this purpose, we created the
brand Health Check & Care to build and exploit a niche market in home health-care products. Our
business grew rapidly and by 1994 we had approximately 60 point-of-sales outlets in Asia.
In our business strategy we believe that marketing and strengthening our brand equity is of vital
importance. As Health Check & Care was a generic name and was difficult to be registered as a
trademark in many countries, in 1996 we officially launched our OSIM brand name which we had been
using since the early 1990s. OSIM is a combination of our founders surname and the letter O which
symbolises our vision to become a globally recognised brand. As at 31 May 2000, we have registered
the name OSIM as a trademark in 26 countries spanning Asia (including Australia), Europe, North and
South America, South Africa and Israel. We have also made trademark applications for OSIM in 10
other countries.
27
Dr Ron Sim Chye Hock
and
Ms Teo Sway Heong
Investor Others
Public
(including Reserved
Shares)
Osim
(HK)
Osim
(Taiwan)
Osim
(Msia)
Osim
(Shanghai)
Daito-Osim
(Suzhou)
69.0% 5.0% 0.8% 25.2%
100% 70% 60% 100% 30%
A major tenet of our marketing strategy is to have an extensive point-of-sales network and geographical
coverage in our markets. Presently, we have point-of-sales outlets in Singapore located in all major
departmental stores and suburban shopping malls. We began developing our overseas distribution
network in 1986 when we ventured into Hong Kong and in the following year, into Taiwan. To ride on the
rapid development of the Asian economies in the early 1990s, we expanded our operations to Thailand
in 1990, Malaysia in 1992, Indonesia and Beijing in 1993, and Shanghai in 1994 by opening
point-of-sales outlets in these countries either directly or through our franchisees and distributors. We
expanded our markets to the United States in 1997 and Dubai in 1999 through the appointment of
franchisees/licensees to market and sell our products in these countries. At present, of our 10
franchisees/licensees, 3 are our subsidiaries, 6 are affiliated companies controlled by our Controlling
Shareholders and the remaining 1 is an unrelated company.
Our point-of-sales outlets in Singapore, Hong Kong, Taiwan and Malaysia are operated by our Company
and our subsidiaries. The rest of our point-of-sales outlets are franchised outlets with the exception of
outlets in the PRC for which we have trademark and licensing agreements with the owners. It is our
business strategy that future expansion of our point-of-sales network will be substantially undertaken by
franchising. We have begun to gradually move away from being a retailer to being a franchisor and, in
furtherance of this strategy, we have also entered into franchise agreements with our subsidiaries, Osim
(HK), Osim (Taiwan) and Osim (Msia). We believe that franchising gives us the ability to focus our
attention on conceptualising and developing new products, improving existing products and brand
management. Further, franchising will allow us to expand and multiply our point-of-sales outlets to more
geographical markets at a faster pace with significantly less capital exposure. Franchising is also less
taxing on our managements time than operating self-owned outlets in penetrating new markets. A more
detailed description of our business model as a franchisor is given under the section on FRANCHISE
MODEL on pages 35 and 36 of this Prospectus.
To diversify our sources of revenue, in 1998 we ventured into wholesale distribution of health-check and
health-care products such as blood pressure monitors, thermometers and pulse massagers, in
Singapore to hospitals like Tan Tock Seng Hospital and Kandang Kerbau Womens and Childrens
Hospital, pharmacies like the Apex Pharmacy and the Guardian Pharmacy chains, and Chinese medical
halls. While wholesale distribution is currently only carried out in Singapore which contributes between
1 and 2 per cent. to our turnover in Singapore, we intend to develop this business and carry out
wholesale distribution in all our principal markets eventually.
As part of our business strategy to extend our control over our business process and to exercise greater
involvement and participation in the source of supply for our products, in 1995 we entered into a joint
venture with Daito Electric Machine Industry Company Limited (Daito), a Japanese supplier to our
Group, to take up a 30 per cent interest in Daito-Osim (Suzhou) with Daito taking up the remaining 70
per cent.. Presently, Daito-Osim (Suzhou) has a plant in the Singapore-Suzhou Industrial Park in
Jiangsu, PRC that manufactures products like hand-held massagers and foot reflexology rollers mainly
for re-export and distribution to the markets in Japan and USA. Under the joint venture agreement, Daito
has the right to appoint 3 directors of Daito-Osim (Suzhou) while we have the right to appoint 2 directors
as we are the minority shareholder. However, Daito-Osim (Suzhou) shall not change the scope of its
business activities from that as described in the aforegoing, without the consent of Daito and us. Any
material financial commitment which is above US$100,000 or material contract to be entered by
Daito-Osim (Suzhou) also requires the consent of Daito and us. The joint venture agreement is of
unlimited duration but may be terminated with the consent of Daito and us. Neither Daito nor us can
transfer an interest in the shares in Daito-Osim (Suzhou) without first making an offer to sell the interest
to the other shareholder.
On 28 March 2000, our founder Dr Ron Sim Chye Hock was conferred an honorary doctorate in business
administration by the Wisconsin International University in recognition of his prominent achievements in
business.
28
In July 2000, pursuant to the Subscription Agreement, Investor, a wholly-owned subsidiary of Temasek
Holdings (Private) Limited, subscribed for 11,600,000 new Shares, representing approximately 5 per
cent. of the post-Investor Subscription and post-Invitation enlarged share capital of the Company, at the
price of $0.47 per Share, representing a discount of approximately 10 per cent. to the Offer Price. We
believe that the investment by Investor is a milestone in our corporate development and an endorsement
of our Group. Investor has given an undertaking not to dispose of or transfer any part of its respective
shareholding for a period of 6 months commencing from the date of our admission to the Official List of
the SGX-ST. Mr Khor Peng Soon, a nominee of Investor, was appointed as our non-executive Director
in June 2000.
BUSINESS
Range of Products
We are in the business of marketing, distributing and franchising of a comprehensive range of home
health-care, health-check and healthy lifestyle products. We have in the last quarter of FY1999 adopted
franchising as a business model, the details of which are set out in the section on FRANCHISE MODEL
on pages 35 and 36 of this Prospectus. Other than Daito-Osim (Suzhou), all the Groups production
needs are out-sourced to contract manufacturers in Japan and Taiwan as we believe in focusing on our
strengths in marketing and brand management. Our products can be broadly classified into 3
categories:
Healthy Lifestyle
To cater to the needs of an increasingly affluent society, we market massage chairs, massage
mattresses, personal home saunas, slimming belts and fitness equipment like bicycles and riders, which
are aimed at providing customers with relaxation techniques and luxurious comfort.
Health Care
To help relieve muscular and stress-induced strains, we provide foot reflexology rollers, pulse
massagers, hand-held massagers, eye massagers, massaging hairbrushes, and hot and cold gel packs.
We also market mechanical rotary toothbrushes and hearing aids.
Health Check
We also market a range of diagnostic equipment like blood pressure monitors, pedometers which are
used for measuring calories burned during exercise, glucometers which are used for monitoring blood
sugar levels for diabetics, electronic weight and height measuring machines, digital thermometers and
ear scan thermometers. The ear scan thermometer is popular for use in paediatric care (i.e. child care)
as the device consists of a short probe which can be gently inserted into the outer ear canal to take an
accurate reading of the body temperature. Apart from the above products, we plan over the next 2 years
to market in Singapore, posters, literature, music compact discs and tapes on the theme of health and
healthy living to provide a total health experience to our customers. If this is well received in Singapore,
we may extend the sale of these products to our overseas outlets.
29
Business Process
We operate a comprehensive business process which can be schematically represented below:
(a) Design
We internally conceptualise features and design outlooks for products such as portable hand
massagers, pulse massagers and foot reflexology rollers which we believe can be marketed in our
primary markets of Singapore, Hong Kong and Taiwan. We then invite design professionals and
contract manufacturers with whom we have close relationships to submit designs in respect of
these new products. Following a review process with the design professionals and contract
manufacturers, we will approve designs and submit them to the contract manufacturers for the
manufacture of the products.
We have an understanding with these design professionals and contract manufacturers that they
will not use these designs in the manufacture of competing products by other customers without our
consent. In the past, we have consented to the use of these designs for other customers for markets
in which we have no presence, e.g. Japan and Europe. In light of the above, we did not see a need
to claim ownership rights over the designs.
30
M
M
M
M
M
M
Design
Procurement &
Supply
Advertising &
Promotion
Distribution &
Sales
After-Sales
Service &
Customers
Feedback
Product
Development and
Innovation
(b) Procurement and Supply
Substantially all of our products, representing 99 per cent. of our turnover in FY1999, are sold under
our own brand names, including major products like massage chairs, blood pressure monitors and
slimming belts. Other than Daito-Osim (Suzhou), all the Groups production needs are out-sourced
to contract manufacturers in Japan and Taiwan as we believe in focusing on our strengths in
marketing and brand management.
In order to exercise more control over the source and quality of products, we may enter into joint
venture arrangements with our contract manufacturers to take up an equity stake in their
operations. Currently, as disclosed in the section on HISTORY on pages 27 to 29 of this
Prospectus, we have a joint venture agreement with Daito Electric Machine Industry Company
Limited under which we took up a 30 per cent. equity interest in Daito-Osim (Suzhou).
(c) Advertising and Promotion
We promote and market our brand name aggressively as we recognise that we are tapping into a
consumer-oriented market. We do direct advertising through television commercials, printed
advertisements and product launches and other more indirect marketing through sponsoring of
television programmes and health documentaries, and participating in exhibitions. We expended
$4.5 million, $7.1 million and $10.5 million on advertising and promotion in FY1997, FY1998 and
FY1999 respectively, representing 7.4 per cent., 10.2 per cent. and 10.2 per cent. of our Groups
turnover in those financial years respectively.
(d) Distribution and Sales
We believe that we have one of the largest distribution networks of home health-care products retail
stores in Asia. As at 31 May 2000, we had 37 point-of-sales outlets in Singapore, 21 in Malaysia,
40 in Hong Kong, 30 in Taiwan, and through our franchisees and business partners, our products
are also sold in 5 point-of-sales outlets in Thailand, 14 in Indonesia and 44 in PRC. We have also
established access points in the Middle East and United States markets with 1 franchised outlet in
Dubai and 11 franchised outlets in Los Angeles, San Diego and Orange County, California.
(e) After-Sales Service and Customers Feedback
Our point-of-sales outlets strive to achieve the one-stop shop concept. Not only do our outlets carry
our entire comprehensive range of home health-care products, they also provide servicing and
repair services to customers, except for bulky products like massage chairs for which we provide
on-site servicing.
We also have in our organisation a customer management system which captures our customers
data in key markets at our point-of-sales outlets mainly through the warranty cards returned by our
customers and comments given by our customers through Internet e-mails and product hotlines.
The customers data is compiled to form a customer data-base and then datamined by our
management feeding valuable information to our various functional divisions like marketing, sales
and order fulfilment, and service and support.
(f) Product Development and Innovation
We add value to the supply-to-sales chain by constantly innovating new product concepts such as
by improving the aesthetic features (such as the colours, designs, finishings, functions and fabric)
of our products. We also continuously seek feed-back from our customers in order to better
understand their needs and modify our existing products accordingly. In line with our emphasis on
marketing, we constantly seek creative marketing approaches to promote our new products.
Currently, we are in the process of obtaining ISO 9002 certification of our business processes and are
targeting to complete by the third quarter of 2000. The purpose of obtaining ISO 9002 certification is to
obtain an external endorsement of our business processes and practices.
31
Strategic Marketing
Through taglines like Health is An Attitude To Life and Good Health Begins With Care, we encourage
consumers to be pro-active and to enhance the quality of life by leading a healthy lifestyle and cultivating
a healthy mindset. Our strategic marketing efforts focus on the above.
To build the image of the OSIM brand among the general public, we engage popular television and movie
artistes like Carina Lau, Lydia Sum and Moses Lim who have a strong following among the Chinese
population in Asian countries to endorse our products. To enhance public awareness of our name, we
also sponsor or participate in popular Hong Kong television entertainment programmes, special events
and charities like for instance, in Singapore, The President Star Charity, Star Search, the Health Tips
documentary series and the National Healthy Lifestyle Campaign. Ultimately, the aim of our marketing
efforts is to strengthen the positioning of our OSIM brand in the markets we operate.
To help us further enhance the value of our OSIM brand through wider recognition, and to assist us in
positioning ourselves for further growth, we commissioned the services of Interbrand Pte Ltd in early
1999. Interbrand Pte Ltd is a global brand consultant whose clientele includes leading consumer
multi-nationals like IBM, British Airways, Proctor & Gamble and Philips, and the Singapore Tourism
Board and Singapore Trade Development Board.
To handle competitive pressures from manufacturers of low-priced products, we have developed NORO
as a secondary brand to sell lower-priced massage chairs and kneading massagers to cater to the
segment of consumers in PRC which is sensitive to pricing.
With the assistance of Interbrand Pte Ltd, we have unveiled a new corporate logo in April 2000 to replace
our previous logo. The new logo seeks to portray a more international and forward-looking image. The
tri-colours of the arcs around our name in the new logo symbolise our quest for global expansion through
blue which signifies the blue sky, green which signifies the green land and orange which signifies the
vibrancy of light and spirit. We have made applications to register our new corporate logo as a trademark
in the countries where required under the law, the details of which are more particularly set out in the
section on INTELLECTUAL PROPERTY RIGHTS on pages 36 and 37 of this Prospectus.
Under the new modern image, we are working towards adopting a new shop layout concept by
re-classifying the products that we currently market under the themes of relaxation, healthy living,
beauty/fitness and spirit. This will be carried out gradually and in tandem with new product lines that
we intend to introduce (as more particularly described under the section on PROSPECTS AND
FUTURE PLANS on pages 45 to 47 of this Prospectus).
32
Organisational Management
We have moved away from the conventional hierarchical form of management which emphasises central
command and control to one which is predicated on an open and interactive management style. Our
management concept can be schematically represented as follows:
establishing the vision
We have established a vision for ourselves to be a global leader in home health-care and healthy lifestyle
products. Guided by this vision, our management has steered the Group from being a retailer of
household products to being one of the leading brand names in Asia today in home health-care products.
To achieve the status as a global player, barring unforeseen circumstances, we plan to have worldwide,
300 point-of-sales outlets by the year 2001, 500 point-of-sales outlets by the year 2003 and 1,000
point-of-sales outlets by the year 2008. This would be in addition to our intention to build a significant
presence on the Internet by engaging in e-commerce.
communicating the vision
We strive to communicate our vision to every employee in the Group and to get the employees to
appreciate how their individual actions support our corporate objective to be a global leader in home
health-care products.
To emphasise the importance of our strategies to achieve our corporate vision, senior management
adopt a pro-active, hands-on and lead by example style of management. We also communicate our
vision and business strategies through holding regular sales talks with our marketing staff and annual
group conferences that involve all senior executives and managers in our organisation.
33
Establishing
the vision
Goal-setting
and
strategising
Communicating
the vision
Feedback and
re-learning
M
M
M
M
goal-setting and strategising
To realise our vision, each functional division in our organisation is involved in the following process:
(i) benchmarking targets;
(ii) identifying strategic measures to improve the divisions performance and efficiency that are in line
with our overall corporate strategy and direction; and
(iii) allocating our resources towards achieving our benchmarked targets and investing in strategic
initiatives.
feedback and re-learning
As a marketing-oriented company, we believe that our business environment is complex and we strive
to be a learning organisation in order to apply the most effective business strategies. Our management
believes that the development of our business strategies is a process to which all employees can
contribute. We actively seek feedback from our staff at all levels to test the assumptions made in our
strategies and to see if they are consistent with the practical experience and observations of our front line
staff.
Distribution Network
We have developed, and will continue to further develop, an extensive distribution network in order to
have control over our point-of-sales outlets. This is because we believe that the quality of sales service
and strategic marketing are as important as the quality of our products. Our franchisees are obliged
under our franchise agreements to follow our retail concept and advertising guidelines rigorously. More
details on our franchise model are given in the section FRANCHISE MODEL on pages 35 and 36 of
this Prospectus.
We also believe our extensive distribution channels give us an important competitive edge as we reap
economies-of-scale in procurement of products, product development, and brand and service quality
developments.
Our present distribution network consists of point-of-sales outlets in retail locations. In addition, in
Singapore, our distribution network also consists of wholesale distribution channels through hospitals
like Tan Tock Seng Hospital and Kandang Kerbau Womens and Childrens Hospital, pharmacies like the
Apex Pharmacy and the Guardian Pharmacy chains, and Chinese medical halls. The point-of-sales
outlets in Singapore, Hong Kong, Taiwan and Malaysia are operated by us predominantly out of rented
premises. Our point-of-sales outlets in USA, Indonesia, Thailand and Dubai are operated by our
franchisees for which more details are set out in the section on FRANCHISE MODEL on pages 35
and 36 of this Prospectus. Our point-of-sales outlets in PRC are operated by PRC companies, namely,
Osim (Beijing), Osim GHC (SH) and HCC (Langfang) which are not members of our Group and with
which we have entered into licensing and distribution agreements (the Licensing and Distribution
Agreements) as present PRC laws do not permit foreign companies to grant franchises in the country.
We do not own the point-of-sales outlets in USA, Indonesia, Thailand, Dubai and PRC.
Under the Licensing and Distribution Agreements, we charge Osim (Beijing), Osim GHC (SH) and HCC
(Langfang) a licensing fee of between 0.25 and 5 per cent. of their turnover for use of our trademarks.
The licensees are contractually bound to distribute our products exclusively and must purchase the
products from us directly and not through any third parties. They are not permitted to distribute the
products outside PRC. We presently sell our products at cost plus a mark-up to Osim (Beijing), Osim
GHC (SH) and HCC (Langfang). Therefore, under the Licensing and Distribution Agreements, we have
2 revenue sources, namely, (i) the licensing fees and (ii) the sale of our products. The Licensing and
Distribution Agreements are of 5 years duration each and may be renewed with the consent of the
licensees and us.
34
FRANCHISE MODEL
Our long-term growth strategy is to position ourselves as a franchisor. We believe that through
franchising we can expand and multiply our point-of-sales outlets to cover more geographical markets
at a more rapid rate than we have ever experienced. We have, since the last quarter of FY1999, adopted
the franchise business model to allow us to focus on our marketing strengths.
In line with our new business model, we had, in May 2000 entered into franchising arrangements with
Osim (HK), Osim (Taiwan) and Osim (Msia) notwithstanding that they are our subsidiaries. Our other
franchisees are Osim (USA), Osim (Thai) and PT Sharon (who are not members of our Group but are
controlled by our Controlling Shareholders) and RSH in Dubai who is not a member of our Group and
is an independent third party. As described in the section on BUSINESS Distribution Network on
page 34 of this Prospectus, for the PRC market, we did not appoint any franchisees because of PRC
laws but we had, in May 2000, licensed Osim (Beijing), Osim GHC (SH) and HCC (Langfang) to be our
distributors under the Licensing and Distribution Agreements. The shareholders of Osim (Beijing), Osim
GHC (SH) and HCC (Langfang) are disclosed under the section on INTEREST OF MANAGEMENT
AND OTHERS IN CERTAIN TRANSACTIONS on pages 62 to 69 of this Prospectus.
The advantages of adopting franchising as a business model, in our opinion, are that it will entail less
capital risk in penetrating new geographical markets and will consume less management resources as
compared to operating self-owned outlets. It will also allow us to concentrate on what we believe are our
main strengths which are strategic marketing and brand enhancement. Franchising is also widely
recognised as a business model which has been capitalised by major consumer brands like
Bodyshop
TM
, McDonalds
TM
, Pizza Hut
TM
and Guess?
TM
to attain penetration in major global markets.
Under the terms of our standard franchise agreement (which may be subject to modifications depending
on the circumstances of the franchisee and the markets concerned), we charge our franchisee a
one-time franchise fee. As in all franchise agreements, we also charge royalties (as more described in
the paragraphs below) for use of our brand name. Our franchisees must purchase the franchised
products from us directly and not through any third parties. We presently sell our products at cost plus
a mark-up to our franchisees. Our franchisees are contractually bound to market our products exclusively
and follow our retail concept and store lay-out in their point-of-sales outlets. The franchises we have
awarded are all currently restricted to the country in which the franchisee is incorporated, save for the
franchise to RSH which covers Kuwait as well as United Arab Emirates where RSH is incorporated.
Presently, our franchise agreements are each of 5 years duration and may be renewed with the consent
of the franchisee and us.
The revenue sources under our franchise model are as follows:
(a) franchise fee
In our standard franchise agreement, our current franchise fee ranges from US$10,000 to
US$100,000. For our subsidiaries who have been appointed as our franchisees, i.e. Osim (Msia),
Osim (Taiwan) and Osim (HK), we have not levied the franchise fee. For franchisees who are
previously our distributors and are appointed as our franchisees when we adopted the franchise
business model, we have not charged them the franchise fee either. For the above reasons, the
contribution of franchise fees to our profit before taxation was insignificant in FY1999. Moving
forward, we intend to charge new franchisees the franchise fee. However, depending on our
assessment of the market conditions and the difficulty of market penetration, we are prepared to
waive or suspend the franchise fee.
(b) royalties
We currently collect royalties based on the sales made by the franchisees of between 0.25 per cent.
and 5 per cent., depending on the size of the potential markets they operate in for our products. In
order to assist our franchisees to obtain a foothold in the market and lower the start-up costs, we
are prepared to impose a graduated scale for royalty payments until such time as the franchisees
businesses have achieved performance targets set by us. The performance targets, which will be
based on turnover, will be determined on a case-by-case basis, depending on the size and maturity
of the markets in which the franchisees operate.
35
(c) management fees
For providing technical assistance, management and consultancy services to our franchisees, we
are entitled to be reimbursed for all costs incurred by us such as travel costs, accommodation,
time-costs charged for the services of our employees and overseas allowances paid to our
employees.
(d) sale of products
We sell our products at cost plus a mark-up to the franchisees, thereby generating additional profits
for us.
Brand management and strategic marketing of our brand and concept are crucial for our franchising
business. As the franchisor, we control the type and quality of promotion and marketing to be undertaken
by our franchisees. Our present franchisees are obliged to allocate from 2 to 10 per cent. (depending on
the market in which they operate) of the value of the total sales made by them for their advertising and
promotion budget every year. We reserve the right to review the amount allocated from time to time.
Presently, none of our franchisees are allowed to sub-franchise. In future, for large markets like the
United States, we may appoint master-franchisees who will have the right to sub-franchise. In such large
territories, it may be preferable for us to appoint an entity which has a substantial distribution network and
knowledge of the domestic markets.
INTELLECTUAL PROPERTY RIGHTS
We regard our trademarks and other intellectual property as being a significant factor of the brand
recognition of our products. To protect our trademarks and brand names, we have, as at 31 May 2000,
obtained trademark registrations for OSIM and NORO in the following jurisdictions:
OSIM trademark
ASIA
Australia
Brunei
PRC
Hong Kong
Indonesia
Malaysia
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
AFRICA
South Africa
AMERICA
United States of America
Argentina
EUROPE
Belgium
Netherlands
Luxembourg
Denmark
Norway
Russia
Spain
United Kingdom
France
Turkey
MIDDLE EAST
Israel
NORO trademark
PRC
Indonesia
Hong Kong
36
As described earlier in the section on BUSINESS Strategic Marketing on page 32 of this Prospectus,
we have made applications to register our new corporate logo as a trademark in PRC, USA and Canada
as the laws of these countries require us to do so. The trademark applications in these countries are
pending. We do not have to apply to register our new corporate logo as a new trademark in the other
countries where we already had registered OSIM as a trademark.
Pursuant to the Licensing and Distribution Agreements, we have granted Osim (Beijing), Osim GHC (SH)
and HCC (Langfang) rights to use our trademarks. Pursuant to the franchise agreements, we have
granted our franchisees rights to use our trademarks. More details of the Licensing and Distribution
Agreements and the franchise agreements are set out under the sections on BUSINESS Distribution
Network and FRANCHISE MODEL on pages 34 to 36 of this Prospectus respectively.
As disclosed in the section on BUSINESS Business Process (a) Design on page 30 of this
Prospectus, at present we do not have ownership rights over the designs of the products for which we
are involved in the designing process. Based on our mutual understanding with the design professionals
and contract manufacturers, they have sought our consent whenever they wish to use such designs for
other customers.
Save as disclosed in the above paragraphs of this section, our business is not dependent on any
trademarks, copyrights, registered designs, patents or other intellectual property rights.
PRODUCT AND SERVICE QUALITY CONTROL
We have the following quality controls:
(a) Product Quality Assurance
We subject the prototype of any product to be marketed under our brand to a review by our in-house
quality engineer to ensure high material quality and functionality.
Our Product Development & Procurement (PDP) department provides feed-back to the contract
manufacturer like suggesting ways to improve the aesthetic design or to make the product more
user-friendly. In addition, we conduct quarterly visits to the factories of our key contract
manufacturers in Japan, Taiwan and PRC as part of a process of close consultation with them to
ensure maintenance of quality standards.
We also conduct batch testing of the new products we order from our contract manufacturers to
ensure the products measure up to our quality standards. If the quality does not measure up to our
standards, we will not accept the products for delivery. While we have required minor modifications
or repairs to be made, we have not encountered any significant faults with the products
manufactured by our contract manufacturers.
As a reflection of our confidence in the quality of our products, all our products are covered by
product warranties given by us. The warranty period for massage chairs is 2 years while the
warranty period for other major products we sell like hand-held massagers, pulse massagers, foot
reflexology rollers and blood pressure monitors, is 1 year. Our costs of repairing products covered
under warranty have been insignificant so far, and we have obtained replacement parts from our
contract manufacturers at no additional cost to us.
(b) Service Quality Assurance
We emphasise marketing and quality service. Our service-oriented culture is adopted at all levels
of our organisation. To incentivise our staff to achieve service quality excellence, we have monthly
staff recognition awards for deserving employees.
To instil our service mindset and oversee our service quality initiatives, we have an in-house service
quality (SQ) manager to conduct SQ training for both our sales team and back-end office staff.
Our front-line staff are trained to provide courteous, efficient and knowledgeable service to
customers and to encourage customers to have hands-on experience with our comprehensive
range of home health-care products. By doing so, we strive to make shopping at our point-of-sales
outlets an informative and satisfying experience.
37
NEW PRODUCTS/ACTIVITIES
As described under the section on BUSINESS Business Process (f) Product Development and
Innovation on page 31 of this Prospectus, we are constantly engaged in product development and
innovation by regularly introducing to the market improved and newer models of our products with better
aesthetic or more sophisticated features such as touch button controls.
We have the intention to introduce new product lines under our OSIM brand. In the future, we may also
engage in an extension of our current business activities. These proposed new product lines and
activities are described in greater detail under the section on PROSPECTS AND FUTURE PLANS
Expansion of Business on pages 45 and 46 of this Prospectus.
RESEARCH AND DEVELOPMENT
To date, we have not engaged in any significant research and development activities.
YEAR 2000 COMPLIANCE
We understand Year 2000 Compliance or Y2K Compliance to mean that neither the performance nor
functionality of critical computerised equipment or systems will be affected by information relating to
dates prior to, during and after the year 2000.
Our computer system is used internally for accounting, processing of purchasing and sales orders, and
managing of stocks. Our computers are Y2K compliant and should not be materially affected by the Y2K
issue. We do not link our computer system to any external system of our suppliers or customers, hence
reducing our exposure to the Y2K problem. We have also received Y2K compliant assurances from
majority of our Groups major contract manufacturers and suppliers, and other business associates such
as freight forwarders. We have incurred approximately $30,000 for expenses related to the Groups Y2K
compliance exercise which had been completed before 31 December 1999.
Presently, to the best of our knowledge and based on the information currently available, we do not
anticipate the Y2K issue to have a significant impact on our operations, costs and revenue. As at the date
of this Prospectus, we have not experienced any problems relating to the Y2K issue.
INSURANCE
As disclosed under the section on RISK FACTORS Industry Specific Risks (c) Exposure to
Product Liability Laws, we are exposed to the product liability laws of the United States which, we
believe, may impose much higher quantum of damages in the form of punitive damages compared to the
product liability laws in the other countries where our products are marketed. Our USA franchisee, Osim
(USA), has taken out product liability insurance in California, USA to cover the risks of paying damages
arising out of a breach of product liability laws of the USA. Pursuant to the franchise agreement entered
with Osim (USA), Osim (USA) has undertaken to indemnify us of any product liability which we may
suffer as its products supplier and to hold the product liability insurance for our benefit as well.
The premia for the product liability insurance are borne by Osim (USA) and the insurance covers any
sum of damages which the insured becomes legally obligated to pay by reason of liability imposed by law
provided that the responsibility to pay damages is determined in a law suit brought in the USA, its
territories or possessions, Canada or Puerto Rico.
38
GROUP TRAINING POLICY
We provide in-house training for our employees in Singapore and our overseas subsidiaries by our
in-house SQ manager. In addition, our sales force undergoes a training programme as described
below:
(a) Product Training
We have 2 in-house trainers dedicated to train our sales force on our range of home health-care
products to meet the needs of our customers.
(b) Salesmanship Training
We engage external professionals to conduct customised salesmanship training to impart
marketing skills to our sales staff. We also send our staff for external courses on general
salesmanship training.
(b) On-the-Job Training
As practical experience is very important in training our sales staff, all newly-recruited sales
personnel at our outlets will understudy the shop managers to learn the finer points of the job.
Apart from the above training, we organise talks by health-care professionals in our corporate
headquarters for our sales staff. Periodically, we also send senior management staff overseas to attend
seminars and exhibitions.
Our Groups training expenses for FY1999 amounted to $72,000, representing 0.5 per cent. of our
payroll costs in FY1999.
ANALYSIS OF TURNOVER AND PROFITS
Overview
Our revenue from FY1995 to FY1999 was generated:
(1) Through the Groups distribution network comprising mainly point-of-sales outlets operated by us in
Hong Kong, Taiwan, Singapore and Malaysia. Our subsidiaries in Hong Kong, Taiwan and Malaysia
are also appointed as our franchisees. In addition, since FY1998, we have sold our products
through wholesale distribution in Singapore to hospitals, pharmacies and Chinese medical halls.
While wholesale distribution in Singapore currently contributes less than 1 per cent. to our Groups
turnover, we intend to develop this business and carry out wholesale distribution in all our principal
markets eventually;
(2) From sales to affiliated companies (who are our franchisees/licensees in PRC, Thailand, Indonesia
and USA) and to third party distributors (who are our franchisees). The affiliated companies are
companies in which our Controlling Shareholders have an equity interest, namely Osim (USA) and
Osim (Thai), or over which our Controlling Shareholders could exercise management control,
namely, PT Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang); and
(3) Through franchise fees. Since the last quarter of FY1999, our Group has adopted the franchising
model and has been collecting franchise fees. In FY1999, the franchise fees were in relation to
amounts collected from third party franchisees and were insignificant.
Geographically, our turnover can be classified under:
(1) North Asia, where our primary markets are Hong Kong, PRC and Taiwan;
(2) South Asia, where our primary markets are Singapore, Indonesia, Thailand and Malaysia; and
(3) Others which represents principally USA.
39
All our products are purchased directly from our suppliers and/or contract manufacturers. Almost all of
our products sold are sourced through our Singapore headquarters. Further details on our major
suppliers are set out in the section on MAJOR SUPPLIERS AND CUSTOMERS Major Suppliers on
pages 52 and 53 of this Prospectus. Our main management, marketing, product development,
administration and other support functions are also centralized in Singapore. Hence, a breakdown of
profit before taxation (PBT) by geographical region and activities is not meaningful.
In general, our most popular Healthy Lifestyle products are our massage chairs which have higher unit
selling prices, while pulse and hand-held massagers in our Health Care products category have lower
unit selling prices but yield higher margins.
Our sales are dependent, to a large extent, on the number of point-of-sales outlets and our advertising
and promotion efforts, and may be affected by consumer demand for our products in the various markets
that we operate in, which may be brought about by political, economic and social changes. In general,
sales through the Groups distribution network yield higher gross profit margins than sales to affiliated
companies and third party distributors as products sold through the Groups distribution network are sold
directly to end consumers. However, for sales through the Groups distribution network, we have to bear
the operating and overhead expenses.
Besides our cost of sales (represented entirely by purchases from our suppliers and/or contract
manufacturers), our main operating expenses are payroll expenses (which represented an average of
27.5 per cent of total operating expenses from FY1997 to FY1999), advertising and promotion expenses
(17.9 per cent), counter commissions i.e. commissions we pay to departmental stores on sales made at
our point-of-sales outlets at these stores (22.5 per cent) and rental expenses (12.3 per cent).
By Activities
The breakdown of the Proforma Groups turnover, and profit before taxation by activities for the past five
financial years ended 31 December 1999 is set out below:
1995 1996 1997 1998 1999
$000 $000 $000 $000 $000
Turnover
Sales of goods
Through the Groups distribution network 25,799 33,767 50,747 65,908 93,798
To affiliated companies and third party
distributors
(1)
5,633 9,130 10,090 3,839 9,323
Franchise fees 17
31,432 42,897 60,837 69,747 103,138
1995 1996 1997 1998 1999
$000 % $000 % $000 % $000 % $000 %
Gross profit/Gross profit margin
Sales of goods
Through the Groups
distribution network 15,531 60.2 20,902 61.9 32,833 64.7 40,731 61.8 62,563 66.7
To affiliated companies and
third party distributors 1,617 28.7 2,474 27.1 2,734 27.1 683 17.8 1,659 17.8
Note:
(1) For FY1995 to FY1999, over 90 per cent. of our sales to affiliated companies and third party distributors consisted of sales
to affiliated companies.
40
1995 1996 1997 1998 1999
PBT ($000) 1,632 3,668 4,402 3,199 10,848
PBT margin 5.2% 8.6% 7.2% 4.6% 10.5%
By Geographical Region
The contribution by geographical region to the Proforma Groups turnover for the past five financial years
ended 31 December 1999 is set out below:
1995 1996 1997 1998 1999
$000 % $000 % $000 % $000 % $000 %
Turnover
North Asia 22,789 72.5 30,581 71.3 47,444 78.0 53,081 76.1 72,871 70.7
South Asia 8,643 27.5 12,316 28.7 12,941 21.3 16,446 23.6 28,150 27.3
Others 452 0.7 220 0.3 2,117 2.0
31,432 100.0 42,897 100.0 60,837 100.0 69,747 100.0 103,138 100.0
REVIEW OF PAST EARNINGS PERFORMANCE
Areview of the year to year earnings performance of the Company and its major subsidiaries for the past
three financial years ended 31 December 1999 is set out below:
FY1996 to FY1997
Turnover
Sales of goods through our Groups distribution network increased by $16.9 million or 50.0 per cent. from
$33.8 million in FY1996 to $50.7 million in FY1997. Prior to FY1997, we had minimal advertising
campaigns for our products. In FY1997, we carried out an aggressive advertising campaign to launch our
new model massage chair in Hong Kong and Singapore. The sale of approximately 5,000 units of the
above new model massage chair contributed mainly to the increase in our sales during the year through
the Groups distribution network.
Similarly, as a result of the above aggressive advertising campaign in FY1997, our sales of goods to our
affiliated companies and third party distributors increased by $1.0 million or 11.0 per cent from $9.1
million in FY1996 to $10.1 million in FY1997.
Turnover in North Asia increased by $16.8 million or 54.9 per cent. from $30.6 million in FY1996 to $47.4
million in FY1997. This was mainly attributed to an increase in sales in Hong Kong from $17.1 million in
FY1996 to $31.0 million in FY1997 and sales in Taiwan from $6.0 million in FY1996 to $8.4 million in
FY1997. The increase in turnover of $0.6 million or 4.9 per cent. in South Asia from $12.3 million in
FY1996 to $12.9 million in FY1997 was mainly attributed to increase in sales in Singapore from $9.3
million in FY1996 to $9.8 million in FY1997. The above increase in turnover in our primary markets (of
Singapore, Hong Kong and Taiwan) was the result of our aggressive advertising campaign for our new
model massage chair and the increase in the number of our Group-owned point-of-sales outlets from
approximately 60 to 80.
We also achieved new sales of $0.5 million under Others due mainly to sales to our affiliated company
in the USA which commenced operations in FY1997.
41
Profit Before Taxation
PBT increased by 18.9 per cent. from $3.7 million to $4.4 million in line with the increase in turnover.
However, while we achieved higher profit contribution from higher sales during the year, our operating
expenses increased substantially by $11.6 million or 59.5 per cent. from $19.5 million in FY1996 to $31.1
million in FY1997. This resulted in the decrease in PBT margin from 8.6 per cent. in FY1996 to 7.2 per
cent. in FY1997.
Our higher profit contribution achieved during the year was due mainly to higher gross profit (GP)
margin for sales through our Groups distribution network from 61.9 per cent. in FY1996 to 64.7 per cent.
in FY1997 while we maintained our GP margin of 27.1 per cent. in FY1997 for sales to our Groups
affiliated companies and third party distributors. The higher GP margin of 64.7 per cent. in FY1997 for
sales through our Groups distribution network was due mainly to the launch of our new model massage
chair which yielded higher gross profit margin.
The increase in operating expenses was due mainly to:
(i) an increase in advertising and promotion expenses by $1.7 million from $2.8 million in FY1996 to
$4.5 million in FY1997. This increase was due mainly to the aggressive advertising campaigns to
launch the new model of our OSIM massage chair;
(ii) the increase in counter commission by $3.0 million from $4.3 million in FY1996 to $7.3 million in
FY1997. This increase was in line with the increased volume of counter sales at departmental
stores;
(iii) a $3.3 million increase in directors remuneration, fees and payroll-related expenses from $5.9
million in FY1996 to $9.2 million in FY1997. This increase is attributed to the increase in directors
remuneration and fees ($1.1 million), and payroll-related expenses ($2.2 million). The higher
payroll-related expenses were due to an increase in salesmens commission resulting from
increase in turnover, as well as an increased number of employees due to expansion of our Groups
operations;
(iv) provision for stock obsolescence of $0.5 million. In FY1997, we decided to concentrate on selling
OSIM brand products and hence, we made a provision for non-OSIM brand products left in our
stocks in FY1997;
(v) an increase in rental expenses by $1.0 million from $2.5 million in FY1996 to $3.5 million in FY1997
due to the addition of approximately 20 point-of-sale outlets; and
(vi) write-off of fixed assets, amounting to $0.6 million, incurred when we shifted from our former
headquarters at Pines Industrial Building to our current premises at Genting Lane.
The increase in operating expenses was offset, to some extent, by a net foreign exchange gain of $0.9
million in FY1997 against a net foreign exchange loss of $93,000 in FY1996. This was mainly a result
of the strengthening of the US dollar against the Singapore dollar during FY1997 attributable to our
export sales which were billed in US dollars.
FY1997 to FY1998
Turnover
Sales of goods through our Groups distribution network comprising point-of-sales outlets operated by us
and wholesale distribution in Singapore increased by $15.2 million or 30.0 per cent. from $50.7 million
in FY1997 to $65.9 million in FY1998. This was due mainly to additional sales of 2,300 units of this new
model massage chair and the additional sales of 5,600 units of the pulse massager during the year
through the Groups distribution network.
Sales of goods to our affiliated companies and third party distributors decreased significantly in FY1998
by $6.3 million or 62.4 per cent. from $10.1 million in FY1997 to $3.8 million in FY1998. This decrease
was due mainly to the lower sales by us to the PRC licensees who were affected by the regional
economic crisis and the effect of overstocking of goods by the PRC licensees in FY1997. This resulted
in lower sales orders from them as they were selling down their existing stocks during FY1998.
42
Turnover in North Asia increased by $5.7 million or 12.0 per cent. from $47.4 million in FY1997 to $53.1
million in FY1998. This was due mainly to an increase in sales in Hong Kong from $31.0 million in
FY1997 to $33.9 million in FY1998. Another new model of our OSIM massage chair was launched in
Taiwan in the third quarter of FY1998, resulting in an increase in sales in Taiwan from $8.4 million in
FY1997 to $16.1 million in FY1998 . These increases were partially offset by the decrease in sales in
PRC by $5.0 million from $8.0 million in FY1997 to $3.0 million in FY1998, as a result of the regional
economic crisis and the effect of overstocking of goods by the PRC licensees in FY1997 as mentioned
above.
The increase of $3.5 million or 27.1 per cent. in South Asia sales from $12.9 million in FY1997 to $16.4
million in FY1998 was mainly attributed to increased sales of our pulse massagers and massage chairs.
The above increases in turnover in our primary markets (of Singapore, Hong Kong and Taiwan) were the
result of our continuing aggressive advertising campaign for our products and the increase in the number
of our Group-owned point-of-sales outlets from approximately 80 to approximately 100.
PBT decreased from $4.4 million in FY1997 to $3.2 million in FY1998. PBT margins also declined from
7.2 per cent in FY1997 to 4.6 per cent in FY1998. This was due mainly to the decrease in GP margins
for sales through our Groups distribution network and sales to affiliated companies, third party
distributors and franchisees.
GP margins for sales through our Groups distribution network declined from 64.7 per cent. in FY1997
to 61.8 per cent. in FY1998. This decline was largely due to the increase in our cost of sales. Asubstantial
part of our purchases from our major suppliers are denominated in Yen which had strengthened against
the regional currencies. The GP margin for our sales to our affiliated companies and third party
distributors declined from 27.1 per cent. in FY1997 to 17.8 per cent. in FY1998 for the above reasons.
The increase in operating expenses of $7.7 million, from $31.1 million in FY1997 to $38.8 million in
FY1998, was due mainly to:
(i) an increase of $2.6 million in advertising and promotion expenses from $4.5 million in FY1997 to
$7.1 million in FY1998. This was due mainly to the higher advertisement production cost and new
advertisement for our OSIM massage chair which was first launched in Taiwan in FY1998;
(ii) a $1.7 million increase in counter commissions from $7.3 million in FY1997 to $9.0 million in
FY1998. This increase was in line with the higher counter sales at departmental stores;
(iii) an increase in payroll and related expenses of $1.4 million from $7.3 million in FY1997 to $8.7
million in FY1998. This increase was due to the increase in salesmens commission resulting from
increase in turnover, as well as an increased number of employees to cater to our expanding Group
operations; and
(iv) variance in the foreign exchange differences (from a gain of $1.0 million in FY1997 to a loss of $0.6
million in FY1998). The foreign exchange loss in FY1998 was due mainly to the Japanese Yen
strengthening against the Hong Kong dollar during the year. Approximately 60 per cent. of our total
purchases were denominated in Japanese Yen.
FY1998 to FY1999
Turnover
Sales of goods through our Groups distribution network increased by $27.9 million or 42.3 per cent. from
$65.9 million in FY1998 to $93.8 million in FY1999. This was due mainly to the additional sales of
approximately 48,000 units of the pulse massagers which were officially launched in FY1999 and
approximately 3,500 units of massage chairs due to our aggressive advertising through media (like TV,
newspapers and magazines), promotion fairs held at shopping centres and an increase in the number
of our Group-owned point-of-sales outlets from approximately 100 to approximately 120.
43
Sales to our affiliated companies and third party distributors and franchisees increased significantly by
$5.5 million or 144.7 per cent from $3.8 million in FY1998 to $9.3 million in FY1999. The increase was
attributed to increased sales to PT Sharon ($1.3 million), Osim (USA) ($1.7 million) and PRC licensees
($2.1 million). The increase was due mainly to more intensive effort in marketing the massage chairs as
evidenced by the additional 2,300 units sold from FY1998 to FY1999. In addition, the economic recovery
in the region contributed to the increase in sales, particularly in the second half of FY1999.
Turnover in North Asia increased by $19.8 million or 37.3 per cent from $53.1 million in FY1998 to $72.9
million in FY1999. This was mainly attributed to an increase in sales in Hong Kong from $33.9 million to
$49.7 million, sales in Taiwan from $16.1 million to $18.0 million and sales in PRC from $3.0 million to
$5.1 million during the year. The increase was mainly due to the additional sales of our OSIM massage
chair and the pulse massager.
Sales in South Asia increased by $11.8 million or 72.0 per cent. from $16.4 million in FY1998 to $28.2
million in FY1999. This increase was mainly attributable to increase in sales in Singapore from $14.1
million to $20.5 million, sales in Malaysia from $1.9 million to $5.8 million, and sales to Indonesia from
$0.4 million to $1.7 million during the year supported by the economic recovery in the region.
Overall, the above increase in our sales was a result of our aggressive advertising campaign for our
products through media (like TV, newspapers and magazines), promotion fairs held at shopping centres,
and an increase in the number of our Group-owned point-of-sales outlets from approximately 100 to
approximately 120.
Increase in sales of S$1.9 million under Others was due mainly to the increased sales to the USAfrom
$0.2 million in FY1998 to $1.9 million in FY1999 as the business of our affiliated distributor in the USA
improved.
PBT increased by $7.6 million from $3.2 million to $10.8 million in line with the increase in turnover. PBT
margin also increased from 4.6 per cent in FY1998 to 10.5 per cent. in FY1999. This was due mainly to
the 42.3 per cent. increase in turnover, higher GP margin from sales through the Groups distribution
network and a lower increase of 39.2 per cent. in operating expenses. The operating expenses increased
by $15.2 million from $38.8 million in FY1998 to $54.0 million in FY1999.
Our higher profit contribution achieved during the year was due mainly to higher GP margin for sales
through our Groups distribution network from 61.8 per cent. in FY1998 to 66.7 per cent. in FY1999 while
we maintained our GP margin at 17.8 per cent. in FY1999 for sales to our Groups affiliated companies
and third party distributors. The higher GP margin of 66.7 per cent. in FY1999 for sales through our
Groups distribution network was due mainly to a change in sales mix, with a higher proportion of sales
achieved on our pulse and hand-held massagers, which yielded higher margins.
The increase in operating expenses was due mainly to:
(i) increase in advertising and promotion expenses of $3.4 million from $7.1 million in FY1998 to $10.5
million in FY1999 in our key markets of Singapore, Hong Kong, Taiwan and Malaysia;
(ii) increase in rental by $3.8 million from $4.2 million in FY1998 to $8 million in FY1999, mainly due
to the increased number of our Group-owned point-of-sales outlets from approximately 100 in
FY1998 to approximately 120 in FY1999;
(iii) higher payroll expenses, which increased by $4.3 million, from $8.7 million in FY1998 to $13.0
million in FY1999, due mainly to increase in salesmens commission resulting from the significant
increase in turnover, as well as an increase in the number of employees to cater to the expanding
operations;
(iv) higher counter commissions of $1.3 million, from $9.0 million in FY1998 to $10.3 million in FY1999,
attributed to the higher counter sales at departmental stores; and
44
(v) higher foreign exchange losses, from $0.6 million in FY1998 to $1.9 million in FY1999. The higher
foreign exchange loss was due mainly to the strengthening of the Japanese Yen against the
Singapore, Hong Kong and Taiwan dollars during the year. We procured approximately 64 per cent.
of our products from our Japanese contract manufacturers in Yen and sold them in the respective
outlets in local currencies.
PROSPECTS AND FUTURE PLANS
Prospects
Our Directors believe that the economic recovery of Asian economies which began in 1999 will continue
in 2000. We feel that it is an opportune time to further expand our distribution network in Singapore and
the rest of Asia as consumer sentiment is expected to improve in tandem with the economic recovery.
To achieve the status as a global player and barring unforeseen circumstances, we plan to have
worldwide, 300 point-of-sales outlets by the year 2001, 500 point-of-sales outlets by the year 2003 and
1,000 point-of-sales outlets by the year 2008. In view of the above, we believe that, barring any
unforeseen circumstances, the growth prospects of our Group are good.
Future Plans
To enhance our future growth, our Directors intend to embark on the following initiatives: (1) move to
a new corporate headquarters, (2) embark on business expansion plans, (3) upgrade our IT
infrastructure and (4) engage in e-commerce by marketing and distributing our products on the Internet.
New Corporate Headquarters
We intend to move our corporate headquarters from 57 Genting Lane, Singapore which has a gross floor
area (GFA) of 2,610 sq m to a larger complex at Ubi Avenue 1, Singapore with GFA of approximately
18,000 sq m. We have, on 12 May 2000, signed an agreement with GBI Realty Pte Ltd of 63 Ubi Avenue
1, #06-01, Boustead House, Singapore 408937, to sell to us the land and construct the building on a
turnkey project basis at a total cost of $36.3 million. We have earmarked $8 million from the proceeds
of the New Shares to finance the acquisition of the new corporate headquarters and intend to use bank
borrowings to finance the balance.
Our new corporate headquarters will continue to centralise our corporate functions. In addition, the
increased facilities in the new corporate headquarters such as classrooms and auditorium will facilitate
our training program for our staff and franchisees staff. This is in line with our vision to expand our
distribution network through our franchise model (as described under the section on FRANCHISE
MODEL on pages 35 and 36 of this Prospectus).
Expansion of Business
We believe that there are opportunities for us to expand our existing business in the following areas:
(a) New Geographical Markets
We intend to extend our geographical reach by appointing franchisees in Australia, the Philippines,
United Kingdom, South Africa and Korea. Discussions are underway on these arrangements and
we hope to appoint a franchisee in the Philippines in the last quarter of FY2000. When discussions
are more advanced, we will appoint legal counsel to advise on regulatory compliance issues in
these jurisdictions. For the potentially bigger markets like the United States, we may appoint
master-franchisees who have the right to sub-franchise to others to build up our distribution network
more rapidly.
A wide distribution network will remain a cornerstone of our business strategy as we believe that it
gives us an important competitive edge as we reap economies-of-scale in procurement of products,
product development, and brand and service quality developments. Barring unforeseen
circumstances, we plan to have worldwide, 300 point-of-sales outlets by the year 2001, 500
point-of-sales outlets by the year 2003 and 1,000 point-of-sales outlets by the year 2008.
45
(b) New Product Lines
We intend to diversify our range of home health-care products by branching into the marketing of
related products like fitness equipment and health supplements like vitamins. We have identified
potential sources of supply for these products and plan to introduce them in our primary markets.
Barring any unforeseen circumstances, we hope to launch them over the next 2 years.
(c) Wholesale Distribution
As mentioned under the section on HISTORY on pages 27 to 29 of this Prospectus, we have
already ventured into wholesale distribution in Singapore to hospitals, the Apex Pharmacy and
Guardian Pharmacy chains and Chinese medical halls. Our intention is for the entire Group to
undertake wholesale distribution more extensively in our other primary markets of Hong Kong and
Taiwan through the following channels:
(1) hospitals;
(2) pharmacies;
(3) Chinese medical halls;
(4) health clubs;
(5) beauty centres; and
(6) fitness centres.
We believe that wholesale distribution will also enhance our marketing presence substantially as it
is a relatively new market for us.
(d) Deeper Penetration of Consumer Markets
Over the years, we have targeted the middle to high end of the product price range in the consumer
market in order to achieve higher profit margins and as part of our marketing efforts to build a global
brand. We believe that we can expand our coverage of the consumer market while maintaining the
position of the OSIM brand by developing a secondary brand called NORO to sell lower-priced
products to serve a different segment of the consumer market who are more sensitive to pricing.
However, we will be careful to differentiate the products marketed under the NORO brand to prevent
cannibalising the sales of our main OSIM brand. We intend to differentiate NORO brand products
by having less complex designs and fewer features.
We currently retail lower-priced massage chairs and kneading massagers under the NORO brand.
As at this date, we have registered NORO as a trademark in PRC, Hong Kong and Indonesia, and
have trademark applications pending in Singapore and Malaysia.
Upgrading of IT Infrastructure
As disclosed in the section on Use of Proceeds on page 11 of this Prospectus, we intend to use
approximately $1.5 million from the proceeds of the New Shares to enhance and upgrade our Groups
information technology systems in order to facilitate our enterprise resource planning (ERP) and
customer relationship management (CRM). We are currently conducting evaluation studies on our
needs for ERP and CRM.
Through ERP we aim to strengthen the use of our resources in the following ways:
Area Objective
Forecasting and Planning Optimise levels of service and logistic support
Purchasing and Material
Management
Improve links to point-of-sales outlets
Warehousing and Inventory
Management
Shift to demand-driven management from a stock-driven approach
46
Area Objective
Product Distribution Standardise reporting of sales by marketing outlets
Accounting and Finance
departments
Improve internal reporting
Through CRM we hope to attract more repeat sales from existing customers as well as to win new
customers through the strengthening of the following areas:
Area Objective
Sales Provide real-time access to customer profiles and history to sales
staff
Service Improve customer service
Marketing Create new sales opportunities
E-commerce
We believe that e-commerce will be an important avenue of doing business in the new millennium and
our Directors believe that the expansion of our presence to the Internet is a logical extension of our
business and will enhance our brand name in the global market.
We have registered a website www.osim.com.sg to market ourselves on the Internet. E-commerce is
a new and developing business and we are in the process of drawing up a definitive e-commerce
strategy under which we may undertake, among other things, any or all of the following activities:
dissemination of information on our products on the Internet
marketing and sale of our products to consumers through Business-to-Consumer e-commerce
wholesale distribution of our products through Business-to-Business e-commerce
establishing a presence on Internet medical and health-care portals or web communities by forming
synergistic alliances with other related health-care players like medical information providers and
alternative medicine providers
We intend for our e-commerce business to complement and augment our existing brick-and-mortar
distribution network. We envisage that high visibility on the Internet would also lead to wider customer
base.
While we are in the process of having discussions with a leading Japanese investment bank, presently
we have no understanding, commitments or agreements to make any acquisitions or investments or
enter into any joint ventures for e-commerce. As and when such strategic initiatives are identified and
crystallised, we intend to use part of the proceeds of this Invitation to substantially finance our strategic
investments as disclosed in the section on PROSPECTUS SUMMARY Use of Proceeds on
page 11 of this Prospectus.
REVIEW OF FINANCIAL POSITION
Shareholders equity
Shareholders equity increased from $10.2 million in FY1996 to $13.0 million in FY1997 and to $14.9
million in FY1998. This was in line with the retention of our Groups profit after taxation in each financial
year, less net dividend and translation reserve. A net dividend of $0.4 million per year was declared in
FY1996, FY1997 and FY1998. In FY1999, shareholders equity was reduced to $10.3 million. This was
a result of the retained profit for that year amounting to $7.4 million being offset by the write-off of goodwill
amounting to $12.4 million arising from the difference between the NTAof the subsidiaries and the actual
cost of investment in the subsidiaries in connection with the Restructuring Exercise.
47
Fixed assets
Fixed assets comprise mainly freehold land and buildings, leasehold buildings, and shop renovations
and fittings. Fixed assets increased from $12.3 million in FY1996 to $13.5 million in FY1997 mainly due
to the construction of our present headquarters at Genting Lane. In FY 1997, fixed assets increased
further to $16.6 million in FY1998 due to the final completion of the above headquarters as well as
renovation costs of the additional shop outlets of approximately $1.0 million each in Hong Kong and
Singapore during the financial year. In FY1999, fixed assets further increased to $18.3 million due
primarily to the costs associated with renovating additional outlets. The net book value of shop
renovations increased by $1.2 million in FY1999. In line with the increase in fixed assets, depreciation
expenses were $0.6 million, $1.4 million and $2.2 million in FY1997, FY1998 and FY1999 respectively.
Investment in associated company
This refers to our investment in Daito-Osim. Our investment increased from $303,000 in FY1996 to
$333,000 in FY1997, to $905,000 in FY1998, and to $1.07 million in FY1999. The increase of $767,000
over the past 3 years was due to our share of post-acquisition reserves of Daito-Osim.
Current assets
Current assets consist mainly of stocks, trade debtors and amount due from affiliated companies which
are trade in nature, other debtors, cash and bank balances.
Current assets increased from $21.1 million in FY1996 to $34.1 million in FY1997 due to increase in
stocks by $1.9 million from $5.8 million in FY1996 to $7.7 million in FY1997. This increase is in line with
the expanded operation evidenced by the increase in number of outlets and higher turnover. In addition,
trade debtors and trade amount due from affiliated companies increased by $6.6 million from $6.5 million
in FY1996 to $13.1 million in FY1997, largely due to slow debt collections from the PRC affiliated
companies as a result of lower than expected sales performance. Fixed deposits, cash and bank balance
increased by $2.8 million from $2.9 million in FY1996 to $5.7 million in FY1997 due to cash generated
from operating profits and proceeds from term loans.
Current assets reduced by $9.4 million from $34.1 million in FY1997 to $24.7 million in FY1998. This was
attributed mainly to decrease in the stock balance by $2.2 million from $7.7 million in FY1997 to $5.5
million in FY1998 due to our gradual effort in reducing the average stock holding period. Trade debtors
and trade amount due from affiliated companies decreased from $13.1 million in FY1997 to $10.5 million
in FY1998 despite an increase in sales turnover in the corresponding period. This was the result of an
improvement in debt collection largely from the PRC market as their sales performance picked up
towards the end of the year. Our average stock holding and debtors turnover period are approximately
3 months and 2 months respectively. Cash and bank balance also decreased from $5.7 million in FY1997
to $3.1 million in FY1998 due to higher investment in fixed assets.
In FY1999, current assets increased by $11.9 million or 48.2 per cent. to $36.6 million, mainly in line with
the increase in sales turnover and expansion of the operations. The increase was contributed mainly by
increase in stocks from $5.5 million in FY1998 to $12.1 million in FY1999, and trade debtors and trade
amount due from affiliated companies from $10.5 million in FY1998 to $17.4 million in FY1999. The
increase in trade debtors and trade balances from affiliated companies were in line with our increased
sales through the Groups distribution network from $65.9 million in FY1998 to $93.8 million in FY1999
and sales to affiliated companies from $3.8 million in FY1998 to $9.3 million in FY1999. In spite of the
above increases in stocks and trade balances, the stocks and debtors turnover periods remained
substantially the same in FY1999 versus FY1998 which were approximately 3 months and 2 months
respectively. Cash and bank balance rose by $1.2 million to $4.3 million in FY1999 pursuant to significant
improvement in the Groups profitability in FY1999 when it recorded profit after taxation but before
minority interest of $7.7 million. The above increase in current assets were offset, to some extent, by the
full repayment of amounts due from directors of $3.3 million by the end of FY1999.
48
Current liabilities
Current liabilities comprise mainly creditors, bills payable, bank borrowings and provision for taxation.
Current liabilities increased by $8.8 million from $18.2 million in FY1996 to $27.0 million in FY1997. This
was due primarily to increase in bills payable by $8.5 million from $2.9 million in FY1996 to $11.4 million
in FY1997, offset by decrease in trade creditors by $4.4 million from $6.6 million in FY1996 to $2.2 million
in FY1997. The overall net increase in trade payable was in line with the increased purchase of stocks
and the expansion of operations. Other creditors increased by $3.4 million from $1.6 million in FY1996
to $5.0 million in FY1997 mainly due to higher accrued operating expenses in line with the expanded
operations. Increase in provision of taxation by $0.9 million from $1.6 million in FY1996 to $2.5 million
in FY1997 was due to higher net profits for FY1997. Amount due to directors of $2.4 million in FY1997
from nil in FY1996 further contributed to the overall increase in current liabilities. These increases were
offset by a decrease in bank overdraft and bank borrowings of $1.8 million from $4.5 million in FY1996
to $2.7 million in FY1997.
Current liabilities fell from $27.0 million in FY1997 to $18.4 million in FY1998, representing a decrease
of $8.6 million. This was due largely to a decrease in trade and other creditors from $7.6 million in
FY1997 to $5.5 million in FY1998, and bills payable from $11.4 million in FY1997 to $8.3 million in
FY1998, representing a decrease of $2.1 million and $3.1 million respectively. This was in line with lower
purchase of stocks at the end of the financial year. Bank overdrafts and short-term portion of borrowings
also decreased from $2.7 million in FY1997 to $ 1.0 million in FY1998. This was due mainly to repayment
of short-term bank loan and clearance of bank overdraft by end of FY1998.
In FY1999, current liabilities increased by $18.1 million, or 98.4 per cent., to $36.5 million. The increase
was attributable mainly to increase in creditors of $8.5 million or a 156 per cent. increase. Bills payable
also increased by $3.6 million to $12.0 million. Creditors payment period reduced from 165 days in
FY1998 to 135 days in FY1999 due to the improved cash flow of the Group. The increase in creditors
and bills payable was in line with the increase in stock balances as at the end of FY1999 to support the
Groups sales. Accordingly, bank overdraft and borrowings increased to $4.7 million in FY1999 with an
increase by $3.3 million in bank overdraft. This was required to provide additional working capital for the
expanded operations of the Group. Amount due to directors increased to $1.6 million in FY1999. Such
amount was fully repaid in June 2000. With the improved profit before taxation from $3.2 million in
FY1998 to $10.8 million in FY1999, provision for taxation increased correspondingly from $2.3 million to
$4.0 million.
Non-current liabilities consist mainly of hire purchase creditors, term loans and deferred taxation.
Non-current liabilities increased by $2.7 million from $4.5 million in FY1996 to $7.2 million in FY1997
attributed to net increase in term loans. From FY1997 to FY1998, non-current liabilities increased from
$7.2 million to $8.0 million. This was due mainly to the increase in bank borrowings from $6.9 million in
FY1997 to $7.8 million in FY1998 for additional working capital. In FY1999, non-current liabilities
remained at $8.0 million.
Commitments and contingent liabilities
Non-cancellable operating lease commitments refer to lease agreements that the Group has entered into
in respect of the shop units leased by the Group for its point-of-sales outlets. As at 31 December 1999,
our non-cancellable operating lease commitments due within 1 year and due within 2 to 5 years were
$9.7 million and $8.1 million respectively as disclosed in the Accountants Report on page 92 of this
Prospectus. As at 31 May 2000, our non-cancellable operating lease commitments due within 1 year and
due within 2 to 5 years were $8.8 million and $5.3 million respectively.
As at 31 December 1999, we had outstanding letters of credit totalling $0.3 million and bank guarantees
amounting to $0.7 million. The letters of credit were issued in relation to our purchases and the bank
guarantees were in lieu of rental deposits for our point-of-sales outlets. Details of these securities are
disclosed in the Accountants Report on page 92 of this Prospectus. As at 31 May 2000, we had
outstanding letters of credit totalling $0.3 million and bank guarantees amounting to $0.8 million.
49
Bank borrowings
As at 31 December 1999, our Group had secured bank borrowings, hire purchase liabilities and bills
payable amounting in aggregate to approximately $24.3 million. Details of the securities provided for
these bank borrowings are disclosed in the Accountants Report on pages 90 and 91 of this Prospectus.
As at 31 May 2000, our Group had secured bank borrowings, hire purchase liabilities and bills payable
amounting in aggregate to approximately $29.0 million.
DIVIDENDS
Our Company declared net dividends of $74,500 for the year ended 31 December 1999. No dividends
were paid by the subsidiaries in that year. For the year ended 31 August 1996, we declared net dividends
of $370,000. The same amount was declared in each of the years ended 31 December 1997 and 31
December 1998. We currently do not have a dividend policy. Our past dividend payments should not be
taken as an indication of dividends to be paid by us in future. In future, the amount of dividend payable
will be determined by the Directors and is dependent upon the aggregate distributable profits and the
Groups capital requirements for the ensuing year.
FOREIGN EXCHANGE EXPOSURE
The accounts of some of our subsidiaries are prepared in RM, HK$, RMB and NT$. This represents a
translation risk in that any material fluctuation in the relevant currency rates against the S$ will have an
effect on our consolidated financial statements which are presented in S$. While our sales are
denominated mainly in the respective local currencies in which the sales arise, namely the S$, RM, HK$,
RMB and NT$, our costs of procurement of products fromour contract manufacturers are incurred mainly
in US$ and Yen which accounted for 33 per cent. and 64 per cent. of our total purchases respectively for
FY1999. This has resulted in us reporting the following net foreign exchange gains/(losses) for the last
three financial years:
FY1997 FY1998 FY1999
Net foreign exchange gains/(losses) ($000) 968 (647) (1,893)
Percentage of Groups PBT (%) 22.0 20.2 17.5
We are therefore vulnerable to currency risks arising from the fluctuations of the foreign currencies
against S$. In the past, we did not adopt a hedging policy but since May 2000, we have begun hedging
our foreign exchange exposure by entering into forward contracts to cover up to 70 per cent. of our
Groups purchases in Yen and US$ up to 3 months prior to the date of payment. Between May and June
2000, we had entered into 1-month forward contracts with financial institutions to hedge our Yen and US$
purchases amounting to approximately S$2.6 million.
COMPETITION
Our Directors are of the view that currently, in our primary markets of Singapore, Hong Kong and Taiwan,
no company poses a significant threat to us as a major competitor. We believe that we currently have a
competitive edge over our competitors in our primary markets as our extensive distribution network of
outlets is dedicated to home health-care products. We exercise full control over our point-of-sales
network and dictate to our distribution chain how to sell and not only what to sell. We also control our
supply chain, from the design of the products to the marketing of the products. In general, we regard
National, Sanyo and Omron to be our competitors.
Singapore, Hong Kong and Taiwan are our largest markets and their aggregate domestic sales
accounted for 85.6 per cent. of our Groups revenues in FY1999. In Singapore, IPS Brothers Enterprise
Pte Ltd and Goh Joo Hin Pte Ltd market similar home health-care products under the brands of Oto and
Lifestyle respectively. In Hong Kong, National and Omron are our competitors. In Taiwan, there are many
retailers in the home health-care products industry and we do not believe that any company is a major
competitor to us.
50
Currently, as there are no published statistics or official sources of information on companies engaged
in the retail and distribution of home health-care products in our primary markets, we are unable to
determine our market share. However, we believe that we are one of the leaders in Asia in this business
based on 2 market surveys in 1999 which we had commissioned international survey firms, The Gallup
Organisation and ACNielsen (China) Ltd (ACNielsen), to undertake to determine our market positions
in Singapore and Hong Kong respectively.
The Gallup Organisations survey revealed that in Singapore, we are the number 1 brand for electronic
home health-care products when compared to other brands like National, Omron, Oto and Lifestyle, in
terms of the following:
brand awareness;
market share; and
perceived image in terms of quality, trustworthiness, brand preference, technology, designs and
features, range of products, customer service and value for money.
The ACNielsens survey revealed that in Hong Kong we are number 1 in terms of overall brand
preference for massage chairs, foot reflexology rollers, pulse massagers and pulse monitors. In the
ACNielsens survey, we were compared with brands like National, Oto, Sharp and Philips.
To handle competitive pressures from manufacturers of low-priced products in the PRC market, we have
developed NORO as a secondary brand to sell lower-priced massage chairs and kneading massagers
to the segment of the consumer market which are more sensitive to pricing.
While the barriers to entry into the home health-care products industry are not prohibitive, new entrants
may face high start-up costs and will have to compete against established brands. New entrants may
also lack the knowledge of how to sell and where to sell. We are convinced that in this industry,
strategic marketing and branding are crucial. Furthermore, new entrants might find it more difficult to
establish a distribution network. For example, owners of strategic departmental stores and suburban
shopping malls normally prefer the more well-established names.
COMPETITIVE STRENGTHS
We regard the following to be our main competitive strengths:
(a) We operate and control our supply chain
We operate and control our supply chain from the design and sourcing of our products to the
distribution of our products. Our influence and control in the supply-side and more importantly, our
distribution network through our point-of-sales outlets allows us to plan future product launches with
a horizon of as far as 1 to 2 years. This, to some extent, buffers us from the impact of cyclical
changes in business cycles. In fact, in the recent Asian financial crisis, our business has managed
to grow in revenue and remain profitable.
(b) We have an established brandname
Through our efforts in strategic marketing, we have emerged as one of the more recognisable
brands in the home health-care industry, especially in our primary markets of Singapore, Hong Kong
and Taiwan. This is demonstrated by the results of the market surveys we have commissioned The
Gallup Organization and ACNielsen (China) Ltd to undertake in Singapore in August 1999 and in
Hong Kong in January 1999 respectively. The surveys are described in more detail in the section
on COMPETITION on pages 50 and 51 of this Prospectus. Brand preference among consumers
is valuable to us in our industry as the products in the industry are not highly differentiated.
(c) We have an established strategic marketing focus and niche business concept
We have an established strategic marketing focus and niche business concept which have been the
main thrusts of our growth, enabling us to increase our turnover from $31 million in FY1995 to $103
million in FY1999, control a distribution network of more than 200 point-of-sales outlets today and
build our own home grown OSIM brand.
51
(d) We have an extensive regional distribution network
At present, we have more than 200 point-of-sales outlets spanning Asia, the Middle East and the
United States. Our extensive distribution network enhances our competitiveness as it gives us
extensive marketing presence and economies-of-scale in procurement of products, product
development, and brand and service quality developments. In addition, our distribution network is
dedicated to the sale of our products and is controlled by us through franchise agreements or, in the
case of the PRC market, through licensing and distribution agreements. This allows us to dictate
what to sell and how to sell.
(e) We have an experienced management team
Dr Ron Sim Chye Hock, our Chairman and Chief Executive Officer, has 17 years experience in the
home health-care products industry. Our executive Directors have been with us since the formative
years of our business and have witnessed the growth of the home health-care products industry in
Asia from its infancy to the present phase. The 41 years of combined experience and in-depth
knowledge of the industry of Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon give
us an advantage in planning strategies and charting future directions.
(f) We provide good customer service
We train our sales staff to provide courteous, knowledgeable, efficient and prompt service to our
customers. We have an in-house Service Quality Manager to provide such training to our
frontline staff and our franchisees sales staff. In the survey by The Gallup Organisation (as
more particularly described in the section on COMPETITION on pages 50 and 51 of this
Prospectus), we emerged as the No. 1 brand that offers good customer service.
MAJOR SUPPLIERS AND CUSTOMERS
Major Suppliers
The suppliers which accounted for 5 per cent. or more of our Proforma Groups purchases for the past
three financial years ended 31 December 1997 to 1999 are as follows:
1997 1998 1999
% % %
Oriental Export & Import Co. Ltd (OEI) 51.8 44.5 55.9
Daito-Electric Machine Industry Company Ltd. (DEMI) 10.3 5.1 11.6
Red Time Trading Ltd (RT) 13.4 10.8 11.2
OEI is a privately-owned Japanese trading company based in Tokyo which supplies us with massage
chairs manufactured by Family Company Limited, another privately-owned Japanese company which
operates out of Osaka. DEMI is a privately-owned Japanese company and is our contract manufacturer
for pulse massagers. DEMI is also our joint venture partner in Daito-Osim (Suzhou) (the joint venture is
more particularly described in the section on HISTORY on page 28 of this Prospectus). RT is a
privately-owned Taiwanese company and is our contract manufacturer for foot reflexology rollers.
Our association with each of OEI, DEMI and RT goes back 15 years, 18 years and 13 years respectively.
To date, we have never experienced any involuntary loss of our suppliers or contract manufacturers.
Nonetheless, to reduce our vulnerability from this dependency, we are taking the following measures:
sourcing for new contract manufacturers;
having more than 1 contract manufacturer for our key products; and
entering into joint ventures with our contract manufacturer to buttress our business relationship.
52
Most of our purchases from our suppliers and contract manufacturers are settled on payment upon
delivery basis except for purchases from DEMI which are settled on 60 days credit terms. Where
payment is settled upon delivery basis, we have utilised our trust receipts banking facilities which gives
us up to 150 days credit terms.
None of the Directors or substantial Shareholders have any interest, direct or indirect, in OEI, DEMI and
RT, or any of our other suppliers and contract manufacturers.
Major Customers
We do not have any single customer accounting for 5 per cent. or more of our turnover. Overall,
approximately 70 per cent. of sales are on credit terms of 30 to 90 days while the balance is on cash
terms. To date, we have not encountered any significant difficulties in collecting receivables from our
customers. For the last 3 financial years, our provision for doubtful debts/bad debts written off was nil in
FY1997, $194,000 in FY1998 and $32,000 in FY1999.
PROPERTIES AND FIXED ASSETS
We own the following major properties, the details of which are set out below:
No. Location Description Area Tenure
Unexpired
Term
Annual
Rental
Net Book Value
(as at
31 December 1999)
1
57 Genting Lane
Singapore 349564
11-storey
industrial building
2,657 sq m
(gross floor
area)
Freehold NA NA $9.5 million
2
Rochor Canal Road
#01-08 and #01-41
Sim Lim Square
Singapore 188504
Strata units in
commercial
building
86 sq m 99 years 82 years NA $1.6 million
3
6 Xuanwumenwai
Street, J unefield Plaza
Tower 1 15th Floor,
unit 1526 and 1527
Beijing, PRC
Strata units in
commercial
building
186.1 sq m 50 years 45 years NA S1.1 million
4
Unit 8C, 1523-2 Dong
Fang Road, Pudong
New Development
Zone, Shanghai, PRC
Residential
condominium
165.40 sq m 68 years 63 years NA NA
(2)
5
25F-2 and B2-B4,
No. 508, Section 5,
Chung Hsiao E. Road,
Taipei, Taiwan
Strata units in
commercial
building
244.83 sq m Freehold NA NA $0.9 million
6
Third subsection,
Fu-De section,
Hsin-Yi district,
Taipei, Taiwan
(1)
Land
(82/10000
share of
2,275 sq m)
Freehold NA NA $0.5 million
Notes:
(1) This is the land on which the building at 25F-2 and B2-B4, No. 508, Section 5, Chung Hsiao E. Road was constructed on.
(2) We purchased the property on 3 March 2000 at a cost of RMB790,000.
The net book value of other fixed assets of the Group as at 31 December 1999 (as more particularly set
out in the Accountants Report on page 86 of this Prospectus) was $4.7 million.
53
DIRECTORS, MANAGEMENT AND STAFF
Directors
The names, addresses, ages and principal occupations of our Directors are as follows:
Name Address Age Position
Dr Ron Sim Chye
Hock
55 Jalan Kampong Chantek
Singapore 588627
41 Chairman & Chief Executive
Officer
Teo Chay Lee Blk 222 Loyang Avenue #01-06
Singapore 509068
41 Chief Operating Officer
Leow Lian Soon Blk 210 Loyang Avenue #01-05
Singapore 509063
40 Regional General Manager
Teo Sway Heong 55 Jalan Kampong Chantek
Singapore 588627
37 Non-executive Director
Khor Peng Soon 20J East Coast Avenue
Singapore 459219
50 Non-executive Director
Michael Kan Yuet Yun 48 Poole Road
Singapore 437535
61 Independent Director
Ong Kian Min 16-D Chatsworth Road
Singapore 249778
39 Independent Director
The business and working experience of each of the Directors are as follows:
Dr Ron Sim Chye Hock is our founder, Chairman and Chief Executive Officer and has been
instrumental in our success. He is responsible for the overall strategic and marketing direction, and
management policies of our Group. Dr Sim has 17 years of experience in the home health-care industry
as he has founded the Groups home health-care business in 1983. The Wisconsin International
University conferred on him on 28 March 2000 an honorary doctorate in business administration in
recognition of his prominent achievements in business.
Mr Teo Chay Lee joined us in 1989 as a sales personnel, advancing to Assistant General Manager in
1993 and Chief Operating Officer in February 2000. He was appointed to the Board in June 2000. Mr Teo
is also responsible for managing the operations in Singapore and South Asian countries including
Malaysia, Thailand and Indonesia. Mr Teo was instrumental in establishing our Singapore headquarters
as a role model for our subsidiaries. From 1979 to 1988, Mr Teo was working with Smith Corona as a
production supervisor.
Mr Leow Lian Soon has been our Regional General Manager for the last 7 years and is in charge of our
operations in countries in North Asia including Taiwan, PRC and Hong Kong. He was appointed to the
Board in June 2000. Mr Leow had spearheaded our foray into these 3 countries and was responsible for
building up our established operations there. Prior to joining us in 1987, he worked in the retail industry
as a sales supervisor from 1983 to 1986.
Ms Teo Sway Heong is the wife of our founder, Dr Ron Sim Chye Hock, and has made valuable
contributions to us in the formative stages of our business. From 1987 to February 2000, she was one
of our executive Directors with responsibility for our administrative and human resource management
functions of the Group. Ms Teo assumed the role of a non-executive Director since March 2000.
54
Mr Khor Peng Soon was appointed as our director in June 2000. He has held the position of
Vice-President, Direct Investments in Temasek Holdings (Private) Limited since March 1999 and was
Director, Special Projects in Investor from November 1997 to February 1999. Mr Khor was also
managing director of Sembawang Aviation Pte Ltd where he worked from August 1991 to November
1997 and group corporate planning director of Sembawang Holdings Pte Ltd where he worked from
November 1990 to February 1992. Prior to that date, he had held positions in Ernst & Young, Economic
Development Board and Telecoms Malaysia (October 1973 to June 1979). Mr Khor was awarded the
Colombo Plan Scholarship in 1969 and was conferred a Bachelor of Engineering (First Class Honours)
(Mechanical) by the University of Auckland, New Zealand in 1972 and a Masters of Engineering Science
(Industrial Engineering) from the University of New South Wales, Australia in 1981.
Mr Michael Kan Yuet Yun was appointed our independent Director in June 2000. Mr Kan was previously
the finance director of British-American Tobacco Co (Singapore) Ltd and Singapore Tobacco Co (Pte) Ltd
(BAT group). He was with the BAT group from 1969 to October 1999. Mr Kan graduated with a
Bachelor of Economics (Honours) from University of Sydney and is a member of the Institute of
Chartered Accountants in England and Wales and the Institute of Certified Public Accountants of
Singapore. For his community work, Mr Kan is the chairman of the management committee of the
Tanjong Pagar Community Club, a member of Tanjong Pagar Citizens Consultative Committee and the
Silver Jubilee Fund committee of management. He is also the Vice-Chairman of the Childrens Aid
Society. Mr Kan was conferred The Pingkat Bakti Masyarakat (PBM) in the 1998 National Day Awards.
Mr Ong Kian Min was appointed our independent Director in June 2000. He is an Advocate and Solicitor
and a partner in Shook Lin & Bok where he practises corporate law. He has been with Shook Lin & Bok
since 1993. Mr Ong is also a Member of Parliament for Pasir Ris Group Representation Constituency
(GRC). Mr Ong was awarded the Presidents Scholarship and Police Force Scholarship in 1979. He
graduated with a Bachelor of Science (Honours) degree from the Imperial College of Science and
Technology, London in 1982. Thereafter, he read law and obtained a Bachelor of Laws (Honours) degree
from the University of London. He was called to the Bar of England and Wales in 1988 and to the
Singapore Bar the following year.
Audit Committee
The Audit Committee comprises Mr Michael Kan Yuet Yun, Mr Ong Kian Min and Mr Teo Chay Lee. The
Audit Committee will be chaired by Mr Michael Kan Yuet Yun. Mr Teo Chay Lee is our executive Director,
and Mr Michael Kan Yuet Yun and Mr Ong Kian Min are our independent Directors.
Service Agreements
In June 2000, we entered into separate service agreements (Service Agreements) with the executive
Directors, Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon (collectively, the
Appointees). The Service Agreements are each for a duration of 2 years but may be terminated by
either party giving the other at least six months notice and shall be automatically renewed thereafter on
an annual basis unless either party indicates otherwise. The Service Agreements took effect from
1 January 2000.
We may summarily terminate the Service Agreement if the Appointee commits a breach of the Service
Agreement, such as being convicted of an offence involving fraud or dishonesty or being adjudicated
bankrupt. Each Appointee has covenanted that in the event the Service Agreement is terminated for
whatever reason, he shall not within the following 1 year engage in any capacity in any business that
competes with our businesses.
Under the terms of the Service Agreements, the basic monthly remuneration of Dr Ron Sim Chye Hock,
Mr Teo Chay Lee and Mr Leow Lian Soon are $80,000, $15,000 and $15,000 respectively. We shall
provide a motor car to Dr Ron Sim Chye Hock and pay for all related running expenses during his
employment. We shall also acquire a country club membership for Dr Ron Sim Chye Hock and pay for
his monthly subscription expenses.
55
Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon shall be entitled to participate in an
Executive Profit Sharing Scheme (EPSS) for the financial years beginning from FY2000. The amount
we are setting aside for the EPSS is set at 4.5 per cent. of the audited consolidated profit before taxation,
minority interests, extraordinary items and the sum set aside for the EPSS.
The entitlements of Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon under the EPSS
are 4 per cent., 0.25 per cent. and 0.25 per cent. respectively.
The total remuneration packages of the Appointees under the Service Agreements will be annually
reviewed by the Compensation Committee. We will renew the Service Agreements only with the
recommendation of the Compensation Committee.
Had the service agreements provided to the Appointees been in place for FY1999, the aggregate
remuneration (including contributions to CPF and other benefits) paid or provided to the Appointees
would be approximately $1.9 million instead of approximately $1.3 million and our profit before taxation
for FY1999 would have been approximately $10.2 million instead of approximately $10.8 million.
Directors Remuneration
Details of the remuneration (including salary, bonus, profit sharing and other benefits in kind) paid by our
Group to Dr Ron Sim Chye Hock and Ms Teo Sway Heong, our Directors in FY1998 and FY1999, for
each of the past two financial years ended 31 December 1999 are set out below:
FY1998 FY1999
Executive
Directors
Non-executive
Directors Total
Executive
Directors
Non-executive
Directors Total
$000 $000 $000 $000 $000 $000
1,524 1,524 1,317 1,317
Number of Directors in Remuneration Bands
FY1998 FY1999
Executive
Directors
Non-executive
Directors Total
Executive
Directors
Non-executive
Directors Total
$500,000 and above 1 1 1 1
$250,000 to $499,999 1 1 1 1
Below $250,000
Total 2 2 2 2
Remuneration of employees related to our Directors, substantial Shareholders and Executive
Officers
For FY1997 to FY1999, the aggregate remuneration (including CPF contributions and benefits) of
employees who are related to our Directors and substantial Shareholders amounted to approximately
$55,000, $70,000 and $160,000 respectively. These represent approximately 1.3 per cent., 2.2 per cent.
and 1.5 per cent. respectively of our profit before taxation for FY1997 to FY1999. These employees are
Mr Teo Yeong Ann, Ms Tao Dong Mei, Mr Leow Lian Teck, Mr Leow Lian Cheong and Mr Heah Hwee
Meng.
56
Mr Teo Yeong Ann is our Executive Officer and is the brother of Ms Teo Sway Heong and the
brother-in-law of Dr Ron Sim Chye Hock. Mr Teo Yeong Ann who joined us in April 1999, is our Corporate
Planning Manager and his remuneration is in line with other employees of the same level. Ms Tao Dong
Mei is the wife of Mr Leow Lian Soon and is employed as a business consultant to our Group since July
1999. Mr Leow Lian Teck and Mr Leow Lian Cheong are Mr Leow Lian Soons brothers. Mr Leow Lian
Teck assists the business development manager and Mr Leow Lian Cheong is a sales executive, and
they have been employed by us since October 1995 and January 1999 respectively. Mr Heah Hwee
Meng is Dr Ron Sim Chye Hocks nephew and joined us in June 1997 as a sales executive. The
remuneration of Ms Tao Dong Mei, Mr Leow Lian Teck, Mr Leow Lian Cheong and Mr Heah Hwee Meng
are in line with other employees of the same level.
The remuneration of the executive Directors, and Executive Officers and employees who are related to
the Directors and substantial Shareholders will be reviewed annually by the Compensation Committee
and subject to approval by the independent Directors to ensure that their remuneration packages are in
line with our prevailing remuneration levels and commensurate with their respective job scope and level
of responsibility. The total remuneration paid to these persons will be disclosed in our annual reports.
Had the service agreements provided to the Appointees been in place for FY1999, the aggregate
remuneration (including contributions to CPF and other benefits) paid or provided to the executive
Directors, and Executive Officers and employees who are related to the Directors, substantial
Shareholders and Executive Officers in FY1999 would be approximately $2.4 million and would
represent 22.2 per cent. of the profit before taxation of the Group in FY1999.
Management
The day-to-day operations of our Group are entrusted to our team of Executive Officers whose names,
addresses, ages and designations are set out below:
Lim Choon Hui 5 West Coast Walk #06-04
Westpeak
Singapore 127146
48 Financial Controller
Teo Yeong Ann Blk 148 Bedok Reservoir
#13-1687
Singapore 470148
32 Corporate Planning Manager
Lim Ching Chye Blk 455 Sin Ming Avenue
#02-481
Singapore 570455
44 Business Development Manager
Cha Mui Hwang Blk 129 Lorong Ah Soo
#09-340
Singapore 530129
33 Merchandising Manager
Chee Fook Curn Blk 59 Circuit Road #06-169
Singapore 370059
32 MIS Manager
Tang Sheh Yow Blk 117 Pasir Ris Street 11
#06-519
Singapore 510117
40 Project Manager
Yeo Khee Chye Blk 665 Choa Chu Kang
Crescent #08-279
Singapore 680665
31 Assistant Operations Manager
Soh Eng Ann Blk 108 Bukit Purmei Road
#08-103
Singapore 090108
28 Regional Accountant
57
Lie Heu Cheng Blk 211 Tampines Street 23
#12-105
Singapore 520211
26 Regional Accountant
The business and working experience of each of the Executive Officers are as follows:
Ms Lim Choon Hui joined us in 1995 as Financial Controller. She oversees the implementation of
financial and accounting policy, computerization of point-of-sales and accounting system for our Group.
Prior to joining us, Ms Lim worked in various business industries including retail, trading, manufacturing,
hospital health care and government body. Her last held positions before joining us was Finance
Manager of Balestier Medical Centre for 1 year, Finance Manager of Hwa Kay Thai (S) Pte Ltd for 1 year
and Administration and Financial Controller of Telemecanique Manufacturing Singapore Pte Ltd for 4
years. Altogether, Ms Lim has more than 25 years of finance, administration and IT applications
experience. She holds a Bachelor of Commerce, Accountancy degree from Nanyang University in
Singapore and is a Certified Public Accountant.
Mr Teo Yeong Ann joined us in April 1999 as Corporate Planning Manager. He is responsible for
streamlining our support operations, including re-engineering of work processes, and setting up system
policy and procedure. Mr Teo is also our ISO project quality management representative. Prior to joining
us, Mr Teo was with the Defence Science Organisation as an R&D engineer for 3
1
2 years. He holds a
first class honours degree in Mechanical Engineering from National University of Singapore and a MBA
from Australian Graduate School of Management, University of New South Wales.
Mr Lim Ching Chye is our Business Development Manager and spearheads our franchise development
overseas. He first joined us as an Operations Manager in 1992 and was responsible for formulating and
developing our franchising system. In 1995, Mr Lim was appointed our Marketing Manager to oversee
sales performance and outlets expansion in Singapore. Mr Lims prior working experience was with
Middle Curtain and Carpet Supplier Pte Ltd where he was an operations manager for 2 years.
Ms Cha Mui Hwang joined us in 1995. She is presently our Merchandising Manager and is responsible
for centralised purchasing as well as design and development of our products and packaging. Ms Cha
has been instrumental in the development of our products for the past few years. Prior to joining us, Ms
Cha worked as a purchaser in Lee-Ila Traders Pte Ltd, an import/export local firm, for 3 years.
Mr Chee Fook Curn joined us recently in January 2000 as our MIS Manager and is responsible for the
alignment of the use of information technology with our Groups business development. Mr Chee has
over 7 years of IT experience with Lotus Development (Asia Pacific) Pte Ltd, Wafer Systems Pte Ltd and
Netband Pte Ltd. He holds a Bachelor of Engineering from Nanyang Technological University and a MBA
from National University of Singapore.
Mr Tang Sheh Yow joined us in 1985 and presently is our project manager handling our business
operations in Malaysia. Through his 15 years of service with us, Mr Tang has accumulated extensive
experience in sales and marketing. His contributions have led to a strong growth of our Malaysian
operations in the past 2 years.
Mr Yeo Khee Chye joined us in November 1999 as Assistant Operations Manager with responsibility for
warehousing and delivery, technical service, customer service and shipping. Mr Yeo has 6 years of
experience in warehousing and distribution with CWT Distribution Limited. He graduated from National
University of Singapore with an honours degree in Business Administration in 1994.
Mr Soh Eng Ann joined us in 1998 as a Regional Accountant for our Hong Kong, Taiwan and PRC
operations. Prior to joining us, Mr Soh had 2 years of audit experience with Ernst & Young. He graduated
from Nanyang Technological University in 1996 with a Bachelor degree in Accountancy.
Ms Lie Heu Cheng joined us in October 1999 as a Regional Accountant. Prior to joining us, Ms Lie had
3
1
2 years of audit experience with Ernst & Young. Ms Lie graduated from Nanyang Technological
University in 1996 with a Bachelor of Accountancy (Honours). She is a Certified Public Accountant.
58
Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Mr Teo Yeong Ann, our
Executive Officer is the brother of Ms Teo Sway Heong and the brother-in-law of Dr Ron Sim Chye Hock.
Save as disclosed, none of our Directors and Executive Officers are related to one another or to any of
our substantial Shareholders.
Staff
As at 31 May 2000, our Group had a total of 588 full-time employees. Relations between the
management and the staff are good and we have not suffered any major work stoppages as a result of
industrial action in the past three years.
OSIM SHARE OPTION SCHEME
The Osim Share Option Scheme (the Scheme) was approved by our Shareholders at an Extraordinary
General Meeting held on 26 June 2000. This Scheme will provide an opportunity for our employees,
executive and non-executive Directors, other than Dr Ron Sim Chye Hock and Ms Teo Sway Heong, to
participate in our equity.
Purpose of the Scheme
Our Directors believe that our human resources are critical to us. The recruitment and retention of
experienced employees and the motivation of such employees are paramount to our operations. We
believe that with this Scheme in place, it can be used as an effective incentive tool to attract, recruit,
retain and motivate employees. We hope to use the Scheme as an incentive to recruit and retain
qualified personnel to grow with the business.
Size of the Scheme
We are of the view that the size of the Scheme of 15 per cent. of our issued share capital is reasonable,
after taking into account the nature of the industry, the contributions to the Group made by the Directors
and employees of the Group, the number of executive employees in the Group and the size of the share
capital of the Company. In order for the Scheme to achieve its objective, the Scheme must be of sufficient
size to allow adequate options to be issued to existing and new hires in the Group and sufficiently
attractive in comparison with schemes offered by other companies.
Eligibility
Rationale for participation by employees and non-executive Directors
In addition to executive Directors and employees of the Group, we are proposing to allow our
non-executive Directors, to participate in the Scheme. It is not proposed for Dr Ron Sim Chye Hock or
Ms Teo Sway Heong to participate in the Scheme as Controlling Shareholders and their associates are
not eligible to participate in the Scheme.
It is our long term objective to pursue continuous growth and expansion in our business and operations.
At the same time, conscious efforts are directed towards streamlining and rationalisation of our objective
to preserve financial strength for future business developments as well as for difficult times.
Consequently, we are constantly striving to contain remuneration for our key employees which forms one
of the major components of our operating cost.
In order to maintain the quality of service of our key employees, it is necessary for us to formulate
incentive plans with features that may reduce the impact of the strict salary controls adopted by us,
encourage staff retention and allow us to remain attractive and competitive as an employer. It is therefore
desired that the Scheme, by allowing all eligible employees and non-executive Directors (other than Ms
Teo Sway Heong) to participate, be implemented so as to give us the flexibility to use options as a means
of promoting long term staff retention and also to make our remuneration for these employees and
non-executive Directors more flexible, building a variable component into their remuneration package in
the form of stock options so that we can better manage our fixed overhead costs without compromising
their performance, standard and efficiency.
59
Our non-executive Directors, although not involved in the day to day running of our business, can also
play an invaluable role in the success of the Company by contributing the wealth of their experience and
expertise to our Board of Directors for the benefit of the Group. Currently, 2 of our non-executive
Directors are also members of the Audit Committee of the Board of Directors and 1 non-executive
Director is also a member of the Compensation Committee of the Board of Directors. The audit
committee is an important function of our corporate governance and the duties and responsibilities of the
audit committee are included in the Companies Act. It is therefore desirable that they be allowed to
participate in the Scheme as well. The Compensation Committee also plays an important role in ensuring
that the executive Directors are competitively and fairly remunerated for their services to us. Through the
participation of the non-executive Directors in the Scheme, we may acknowledge and give recognition
to outstanding services and contributions made by a non-executive director of the Company. Through
this way, it will also allow us to continue to attract directors of great ability and aptitude onto our Board.
This will help enhance the growth and long term profitability of our business.
We are of the view that our executive Directors remuneration package (including the profit sharing and
the share options that they will be granted under the Scheme) is fair given the value which they have
contributed to the Group. Our executive Directors provide leadership, management skills, business
networks, market contacts and strategic directions and vision to us, and are able to bring the Group into
the global health-care market. Furthermore, because some of our executive Directors have nurtured the
Group from conception, the executive Directors have forgone other opportunities and have committed
themselves to our future. Accordingly, we consider that the remuneration packages offered to them are
fair and not excessive.
The cost to us of granting options under the Scheme
Any options granted for Shares (whether or not the exercise price is set at a discount to the market price)
have a fair market value. Where such options are granted at a consideration which is less than fair value,
there will be a cost to us, the amount of which will depend on whether the options are granted at a market
price or at a discount.
Our cost of granting options, with or without a discounted exercise price under the Scheme, would be as
follows:
(i) the effect of the issue of new Shares upon the exercise of options on our net tangible asset per
share is accretive if the exercise price is above the net tangible asset per share, but dilutive
otherwise. The dilutive effect is even greater if the exercise price is at a discount to the market price;
(ii) if the options were granted with a discounted exercise price, the exercise of an option at a
discounted exercise price would translate into a reduction of the proceeds from the exercise of such
option, as compared to the proceeds that we would have received from such exercise had the
exercise been made at the prevailing market price of the Shares. Such reduction of the exercise
proceeds would represent the monetary cost to us of granting options with a discounted exercise
price; and
(iii) as the monetary cost of granting options with a discounted exercise price is borne by us, our
earnings would effectively be reduced by an amount corresponding to the reduced interest
earnings that we would have received from the difference in proceeds from exercise price with no
discount versus the discounted exercise price. Such reduction would, accordingly, result in the
dilution of our earnings per share.
It should be noted that the costs discussed in (i), (ii) and (iii) above would materialise only upon the
exercise of the relevant options. Measured against these costs would be the desirable effect of the
Scheme to attract, recruit, retain and motivate directors and employees which could, in the long term,
yield greater returns for us and our shareholders.
60
Issue Price
Under the Osim Share Option Plan, we may issue option shares at a discount of up of 20 per cent. to
the market price at the time of grant of the option, as presently prescribed by the SGX-ST listing rules.
Factors which will be taken into consideration in determining the quantum of such discount include, but
are not limited to, our performance, the individual performance of the participant and the contribution of
the participant to the success and development of our Group. The ability to offer options at a discount
to the prevailing market price of the Shares may be utilised as a means to recognise participants for their
outstanding performance as well as to motivate them to continue to excel while encouraging them to
have greater dedication and loyalty to us through a longer vesting period before the option may be
exercised. Such a discretion was requested in view of the following:
(a) An additional method of compensating employees other than through salary, salary increments,
cash bonuses and wage supplements would be available to us. This would enable us to introduce
an effective manner of motivating participants to maximise their performance, which we believe
would in turn create better value for our shareholders.
(b) Share options are like cashless bonuses and would not have an immediate direct financial impact
on our profitability as no cash outlay would be expended by us in the grant of such options.
However, when share options are exercised, the share capital base of the Company will increase.
Share options granted with a discount would be subject to a longer vesting period of up to 2 years
as presently prescribed by the SGX-ST listing rules than those granted at the prevailing market
price. Therefore holders of such options would be encouraged to have a longer term view of us,
thereby promoting staff retention and reinforcing their ties to us.
(c) It is not possible for us to grant options only when share prices are low and not grant options when
share prices are high. For a share option scheme to function effectively as an incentive tool, options
should be granted on a regular basis throughout the duration of the scheme based on the
participants performance for the period under review and on our expectations of their, and our,
future performance. However, it is not always the case that the share price would correlate with our
financial performance as measured by financial parameters such as return on equity and/or
earnings growth. Having the discretion to grant options at a discount to the market price will make
us less vulnerable to market sentiments which affect the share price and/or stock market volatility
at the time that offers of the grant of options are to be made to participants.
Conclusion
While the Scheme is structured such that we have the discretion to make the appropriate allotments
depending on the prevailing circumstances of the Group, the Scheme conforms with the requirements
as set out in the Practice Note of the SGX-ST listing rules.
In-principle approval has been obtained from the SGX-ST for the listing and quotation for the new Shares
to be issued pursuant to the Scheme. Such in-principle approval is not to be taken as an indication of the
merits of the Scheme, the Company, its subsidiaries, associated company or the Option Shares.
The principal terms of the Scheme are summarised in Appendix A of this Prospectus. The rules of the
Scheme are also set out in Appendix A of this Prospectus. Details of the number of options granted, the
number of options exercised and the subscription price (as well as the discount involved, if any) will be
disclosed in our annual report. A committee of the Board of Directors, the Osim Share Option Scheme
Committee will implement and administer the Scheme.
As at the date of this Prospectus, no options have been granted under the Scheme.
CORPORATE GOVERNANCE
Our Directors and management are committed to high standards of corporate governance in order to
protect the interests of our Shareholders, and will follow closely the best practices outlined in the Best
Practices Guide issued by the SGX-ST.
61
Board of Directors
Our Board of Directors, comprising seven members at the time of listing, is made up of 3 executive
Directors and 4 non-executive Directors. The Board will meet periodically throughout the year. To assist
the Board of Directors to discharge its responsibilities, we have the following Committees:
(i) the Executive Committee which shall comprise the 3 executive Directors and the Financial
Controller. The Committee will assist the Board to strengthen our management culture and direct
the Group towards fulfilling our vision of being a global brand name in home health-care products.
The Committee will also assist the Board to allocate resources of the Group after considering the
risks and returns associated with our operations, including business and financial risks;
(ii) the Audit Committee which shall comprise 2 independent Directors and 1 executive Director. The
Committee will meet periodically to review: (a) with the assistance of the external auditors, the audit
plan, their evaluation of our internal accounting controls and audit report; (b) the assistance given
by our officers to the external auditors; (c) the scope and results of the internal audit procedures;
(d) the financial statements of the Group, including the half year and full year results; (e) our
compliance with such functions and duties as may be required under the relevant laws or the Listing
Manual; and (f) all interested person transactions to ensure that they are carried out on normal
commercial terms and are not prejudicial to the interest of our Shareholders;
(iii) the Compensation Committee shall comprise 2 independent Directors and 3 executive Directors.
The Committee will annually review and the independent Directors shall approve the remuneration
packages and terms of employment of each executive Director and each employee who is related
to the executive Directors, substantial Shareholders or Executive Officers (see Service
Agreements and Remuneration of Employees Related to Directors, substantial Shareholders and
Executive Officer on pages 55 to 57 of this Prospectus); and
(iv) the Osim Share Option Scheme Committee shall comprise 2 independent Directors and 2
executive Directors. The Committee will administer the Scheme in accordance with the Rules of the
Scheme as set out in Appendix A of this Prospectus.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Ongoing and Past Related Party Transactions
Save as disclosed below and on pages 25 and 26 of this Prospectus under Restructuring Exercise,
none of our Directors, substantial Shareholders and Executive Officers have any interest in any material
transactions undertaken by our Group in the past three financial years:
(a) Purchase of Property from Director
On 3 March 2000, we entered into a sale and purchase agreement with Dr Ron Sim Chye Hock, our
Director, to purchase a residential condominium in Shanghai, PRC owned by him for RMB790,000
(approximately S$164,000). We decided to acquire this property at Unit 8C, 1523-2 Dong Fang
Road, Pudong New Development Zone as we have been using it as accommodation for our senior
management personnel based in Shanghai since 1995 rent-free. The purchase consideration was
supported by a desk-top valuation of the property of RMB790,000 as at 3 February 2000 done by
First Pacific Davies Integrated Property Services (Shanghai) Company Limited.
(b) Transactions with Related Companies
In relation to affiliated companies which are Osim (USA), Osim (Thai), PT Sharon, Osim (Beijing),
Osim GHC (SH) and HCC (Langfang), Dr Ron Sim Chye Hock has an equity interest in, or could
exercise management control over or direct the transfer of the shares to him in certain
circumstances in these companies. Mr Teo Chay Lee, our Director, is the registered owner of 1 per
cent. of the equity in Osim (Thai). Mr Leow Lian Soon, our Director, has a deemed interest in Osim
(Beijing), Osim GHC (SH) and HCC (Langfang) as his wife, Ms Tao Dong Mei holds 90 per cent. in
Osim GHC (SH) and HCC (Langfang). These 2 companies are in turn the shareholders of Osim
(Beijing). Therefore, the affiliated companies are companies related to the Group.
62
Osim (USA) is not included as part of the Group as part of the Restructuring Exercise because it is
presently a loss-making company. As stated in the section on RISK FACTORS Industry Specific
Risks (e) Prohibitive National Laws on Foreign Ownership on page 13 of this Prospectus, due
to restrictive laws in Thailand, Indonesia and PRC, we are not permitted to include Osim (Thai), PT
Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang) as members of the Group.
We have in May 2000 entered into franchise agreements with Osim (USA), Osim (Thai) and PT
Sharon (the Related Franchisees) on materially the same terms and conditions as those we have
entered with Osim (Msia), Osim (HK) and Osim (Taiwan) which are our subsidiaries and RSH which
is our third party franchisee in Dubai. None of our Directors or substantial Shareholders has any
interest in RSH. The franchising arrangements with the Related Franchisees are consistent with our
franchise business model as described under the section on FRANCHISE MODEL on pages 35
and 36 of this Prospectus.
As with Osim (Msia), Osim (HK) and Osim (Taiwan), the Related Franchisees pay us a royalty fee.
We have waived the payment of the one-time franchise fee from the Related Franchisees on the
same ground as that for waiving the franchise fee for Osim (Msia), Osim (HK) and Osim (Taiwan)
as the Related Franchisees were our existing distributors prior to being appointed as our
franchisees. The franchise agreements entered with the Related Franchisees are of 5-year duration
and may be renewed with the consent of the Related Franchisees and us, as the case with the
franchise agreements entered with Osim (Msia), Osim (HK) and Osim (Taiwan). The royalties and
the prices at which we sell certain of our main products to Osim (USA) are lower than the royalties
and prices of certain main products sold to Osim (Msia), Osim (HK), Osim (Taiwan) and RSH
because firstly, our brand name is not that established in the United States and secondly, Osim
(USA) operates in a higher-cost environment. These reasons translate to a higher break-even sales
level for Osim (USA) and therefore, we charge a royalty rate which is approximately 92% lower than
the royalty rates charged to Osim (Msia), Osim (HK), Osim (Taiwan) and RSH and we sell certain
of our main products to Osim (USA) at prices averaging 20 to 28 per cent. lower than the prices of
similar product items sold to Osim (Msia), Osim (HK), Osim (Taiwan) and RSH. Currently, Osim
(USA) is making losses in its operations due to high start-up costs and the inability to reap
economies of scale. For these reasons, we believe our franchise agreement with Osim (USA) and
our sale transactions with Osim (USA) are on arms length basis notwithstanding the lower royalty
rate and sale prices of certain main products.
We have in May 2000 entered into a licensing and distribution agreement each with Osim (Beijing),
Osim GHC (SH) and HCC (Langfang) (the PRC Related Companies). Existing PRC laws do not
permit us to appoint the PRC Related Companies to be our franchisees in the PRC market. The
licensing fees charged and the prices at which we sell certain of our main products to the PRC
Related Companies are lower than the royalties charged to and prices of those certain main
products sold to Osim (Msia), Osim (HK), Osim (Taiwan) and RSH because firstly, the PRC Related
Companies face hefty customs duties and consumption taxes and secondly, due to the lower
disposable income of consumers in PRC. These reasons translate to a higher break-even sales
level for the PRC Related Companies. The PRC Related Companies are incurring losses in their
operations as their retail prices are reduced following the Asian financial crisis. For these reasons,
we believe our licensing and distribution agreements with the PRC Related Companies and our sale
transactions with the PRC Related Companies are on arms length basis notwithstanding the
licensing fees charged to the PRC Related Companies is approximately 92% lower than the royalty
rates charged to Osim (Msia), Osim (HK), Osim (Taiwan) and RSH and notwithstanding the prices
of certain of our main products sold to the PRC Related Companies average 20 to 25 per cent. lower
than the prices of similar product items sold to RSH.
In our opinion, RSH is not in a comparable situation as Osim (USA) or the PRC Related Companies
as it has a retail business in sporting goods which was established since 1995 with 38 point-of-sales
outlets in the United Arab Emirates. RSH does not face start-up costs unlike Osim (USA) and the
PRC Related Companies. It does not face operating costs as high as for instance, manpower costs
as in Osim (USA) or customs duties as heavy as the PRC Related Companies.
63
We charge the same royalty rate to PT Sharon as Osim (Msia), Osim (HK), Osim (Taiwan) and
RSH. Our products are also sold to PT Sharon with the same mark-up margin as those sold to Osim
(Msia), Osim (HK), Osim (Taiwan) and RSH. PT Sharon is currently profitable in its operations.
Osim (Thai) is presently a dormant company. Once it commences business, we may charge a lower
royalty rate and sell our products at prices lower than those sold to Osim (Msia), Osim (HK), Osim
(Taiwan) and RSH because firstly, Osim (Thai) would face high start-up costs and is expected to be
unprofitable and secondly, in view of the lower disposable income of consumers in Thailand.
We recognise that the markets our franchisees/licensees operate in are different due to differences
in operating costs like manpower and rental costs, tax structure and consumers purchasing power.
Therefore, in the long term, although we would strive to charge the same royalty rates to Osim
(USA), Osim (Thai) and the PRC Related Companies, once they are firmly established and are all
profitable in their operations, as those charged to our subsidiaries and RSH, it may not be
commercially possible to charge a uniform royalty rate to all our franchisees/licensees or sell our
products to them at uniform sale prices.
At the time of our entering into the franchise agreements with our subsidiaries, we are able to
charge our subsidiaries royalty rates which are 12 times higher than the royalty and licensing rates
charged to Osim (USA) and the PRC Related Companies respectively as our subsidiaries have
been our established distributors and they do not face the high operating-cost environment as in the
case of Osim (USA) or the hefty customs duties and consumption taxes as in the case of the PRC
Related Companies.
The amount of sales which we have transacted with the Related Franchisees and PRC Related
Companies for the past three financial years and the extent of these sales as a percentage of our
Groups turnover are shown below:
FY1997 FY1998 FY1999
sales amount ($000)
Osim (USA) 452 220 1,875
Osim (Thai) Nil Nil Nil
PT Sharon 1,524 369 1,659
PRC Related Companies 8,011 3,036 5,113
as a percentage of our Groups turnover
Osim (USA) 0.7% 0.3% 1.8%
Osim (Thai) Nil Nil Nil
PT Sharon 2.5% 0.5% 1.6%
PRC Related Companies 13.2% 4.4% 5.0%
We have entered into the following arrangements whereby we are given options to purchase the
interest of our executive Directors in the Related Franchisees and the PRC Related Companies.
Although it is our general strategy not to acquire equity stakes in our franchisees, we have taken the
options in order to mitigate the conflicts of interest between ourselves and our executive Directors,
and to prevent such conflicts-of-interest from prejudicing the interest of the minority Shareholders.
Such arrangements will still be in line with our overall long-term strategy to franchise as we will
exercise the options only when it is in our interest to do so, for instance, where having an equity
interest in the Related Franchisees and/or the PRC Related Companies would enable us to have
a share in their profits. Going forward, we intend to expand our distribution network through
independent third-party franchisee arrangements and it is not our present intention to take up equity
interest in third-party franchisees. However, from time to time, we may acquire equity stakes in our
third-party franchisees if it is to our benefit to do so.
64
(1) Osim (USA)
The entire share capital of Osim (USA) is beneficially owned by Dr Ron Sim Chye Hock. The
business of Osim (USA) which began in 1997 has not been profitable and our sales to Osim
(USA) is insignificant when compared to our Groups turnover for the past 3 financial years. Dr
Ron Sim Chye Hock had granted to us in May 2000 a call option (the US Call Option)
whereby in the event that Osim (USA)s business becomes profitable in the future, we may
require Dr Ron Sim Chye Hock to transfer all his shares in Osim (USA) to us at a price (the
Option Price) to be determined by Dr Ron Sim Chye Hock and us, and approved by our Audit
Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the
SGX-ST.
To assist Osim (USA) to obtain a foothold in the market and lower its start-up costs, we have
imposed in the franchise agreement a graduated scale for royalty payments until such time as
the business of Osim (USA) achieves performance targets set by us. Eventually, we expect the
royalty payments charged to Osim (USA) to be comparable to those charged to our
independent third party franchisee after the different maturity of the target markets and
consumers purchasing power are factored in.
We gauge the maturity of the target markets and consumers purchasing power by comparing
the sales achieved by the franchisee against the break even sales level.
(2) Osim (Thai)
Currently, Osim (Thai) is a dormant company. 51 per cent. of the share capital of Osim (Thai)
is owned by Thai nationals who are not related to any of our Directors or substantial
Shareholders. Dr Ron Sim Chye Hock and Mr Teo Chay Lee own 48 per cent. and 1 per cent.
of the share capital of Osim (Thai) respectively.
Dr Ron Sim Chye Hock had in May 2000 granted a call option (the First Thai Call Option) to
us whereby in the event that Osim (Thai)s business turns out to be profitable in the future, we
may acquire his aggregate 48 per cent. interest at a price be determined by Dr Ron Sim Chye
Hock and us, and approved by our Audit Committee in accordance with the requirements of
Chapter 9Aof the Listing Manual of the SGX-ST. Mr Teo Chay Lee had also in May 2000 given
us a call option (the Second Thai Call Option) over his shares on materially the same terms.
Mr Krit Suktachan, one of the above Thai shareholders in Osim (Thai) had in June 2000
granted us a call option (the Third Thai Call Option) over his shares whereby we have the
right to require Mr Krit Suktachan to transfer his entire 6 per cent. interest in Osim (Thai) to us
in the event that Thai laws are revised to allow majority ownership of Osim (Thai) by foreign
persons. The option price payable under the Third Thai Call Option is on the same basis as the
First and Second Thai Call Option.
As in the case of Osim (USA), to assist Osim (Thai) to obtain a foothold in the market and lower
its start-up costs, we have imposed in the franchise agreement a graduated scale for royalty
payments until such time as the business of Osim (Thai) achieves performance targets set by
us. Eventually, we expect the royalty payments charged to Osim (Thai) to be comparable to
those charged to our independent third party franchisee after the different maturity of the target
markets and consumers purchasing power are factored in.
Our present business in Thailand is undertaken by Health Check and Care (Thailand) Co., Ltd
(HCC (Thai)) which is not owned by any of our Directors or substantial Shareholders. None
of our Directors is a director of HCC (Thai). Our sales to HCC (Thai) have been insignificant
for the past 3 years and amounted to an average of approximately 0.17 per cent. of our
Groups turnover in each of our past 3 financial years.
Going forward, we intend to grow our business in Thailand and, in line with this plan, it is
intended that the undertaking of HCC (Thai) will be transferred to Osim (Thai). We envisage
that Osim (Thai) will become our sole franchisee in Thailand and the franchise agreement
signed with Osim (Thai) in May 2000 will take effect upon the injection of the assets of HCC
(Thai) into Osim (Thai).
65
(3) PT Sharon
Our franchisee for the Indonesian market is PT Sharon which commenced business in 1993.
Currently, the operations of PT Sharon are profitable. Under existing Indonesian laws, we are
not permitted to own any equity interest in PT Sharon. None of our Directors or substantial
Shareholders owns any share or is a director of PT Sharon. However, Dr Ron Sim Chye Hock
is deemed to have an interest in PT Sharon because he has an oral agreement with Mr
Chandra Makmuri, who owns 51 per cent. of PT Sharon, for Mr Chandra Makmuri to transfer
10 per cent. of the share capital of PT Sharon owned by him to Dr Ron Sim Chye Hock in the
event that Indonesian laws are revised to permit foreign shareholding in PT Sharon.
To eliminate any perceived conflicts of interest between us and Dr Ron Sim Chye Hock, in
consideration of Dr Ron Sim Chye Hock relinquishing his right under the oral agreement, we
have procured Mr Chandra Makmuri to grant us in May 2000 a call option (the Indonesian Call
Option) whereby we have the right to require Mr Chandra Makmuri to transfer 10 per cent. of
the share capital of PT Sharon owned by him to us in the event that Indonesian laws are
revised to allow foreign shareholding in PT Sharon. The option price under the Indonesian Call
Option is to be determined by Mr Chandra Makmuri and us, and approved by our Audit
SGX-ST.
(4) PRC Related Companies
As set out in the section on BUSINESS Distribution Network on page 34 of this
Prospectus, we have in May 2000 entered into a licensing and distribution agreement with
each of the PRC Related Companies, namely, Osim (Beijing), Osim GHC (SH) and HCC
(Langfang). They have commenced business in PRC since 1995 but their operations have
resulted in losses for the past 2 years. Under existing PRC laws, we are not permitted to own
any equity interest in the PRC Related Companies as they are engaged in retailing. However,
we can own Osim (Shanghai) under existing PRC laws as it is a trading company which
imports our products into PRC for distribution to the PRC Related Companies. There is
therefore no conflict of interest in us owning Osim (Shanghai) and not the PRC Related
Companies. The shareholders of Osim (Beijing) are Osim GHC (SH) (owning 50 per cent.) and
HCC (Langfang) (owning 50 per cent.). Ms Tao Dong Mei (owning 90 per cent.) and Ms Han
Shu Nong (owning 10 per cent.) are the shareholders of HCC (Langfang). Mr Wang Bang Zhi
(owning 10 per cent.) and Ms Tao Dong Mei (owning 90 per cent.) are the shareholders of
Osim GHC (SH).
Dr Ron Sim Chye Hock is deemed to have an interest in the PRC Related Companies because
he has an oral agreement with the shareholders of the PRC Related Companies whereby they
have agreed to transfer the entire share capital of the PRC Related Companies to Dr Ron Sim
Chye Hock in the event that PRC laws are revised to permit foreign ownership of the
companies. Mr Leow Lian Soon is deemed to have an 90 per cent. interest in each of HCC
(Langfang), Osim GHC (SH) and Osim (Beijing) through the direct and indirect interests of his
wife, Ms Tao Dong Mei.
To eliminate any perceived conflicts of interest between us, and Dr Ron Sim Chye Hock and
Mr Leow Lian Soon, the following measures have been taken. In consideration of Dr Ron Sim
Chye Hock relinquishing his right under the oral agreement, the shareholders in the Related
PRC Companies have in May 2000 granted us call options (the PRC Call Options) whereby
we have the right to require them to transfer the entire share capital of the PRC Related
Companies to us in the event that PRC laws are revised to allow foreign ownership of the PRC
Related Companies. The option price under each of the PRC Call Options is to be determined
by the shareholders of the PRC Related Companies and us, and approved by our Audit
SGX-ST.
66
As in the case for Osim (USA) and Osim (Thai), to assist the PRC Related Companies to
obtain a foothold in the PRC market and lower their start-up costs, we have imposed in the
licensing and distribution agreements a graduated scale for royalty payments until such time
as the businesses of the PRC Related Companies achieve performance targets set by us.
Eventually, we expect the royalty payments charged to them to be comparable to those
charged to our independent third party franchisee after the different maturity of the target
markets and consumers purchasing power are factored in.
The Audit Committee will continuously monitor our transactions with the Related Franchisees and
the PRC Related Companies on a quarterly basis to ensure that our sales to them and the fees and
royalties charged to them are on arms length basis and on normal commercial terms. The Audit
Committee will review the financial and operating performance of and the sales achieved by (as
against the break-even sales level necessary to cover all operating costs and overheads) our
respective Related Franchisees and the PRC Related Companies so as to determine firstly,
whether our sales to them and the royalties rates/licensing fees charged to them are on arms length
basis and secondly, whether the royalty rates/licensing fees and the selling prices should be
adjusted to the levels and prices comparable to those charged to our subsidiaries or our third party
distributor.
Had we, in FY1999, been able to charge the Related Franchisees and the PRC Related Companies
the same franchise fee and royalty rate presently charged to RSH and had we been able to sell
certain of our main products at prices similar to those sold to RSH, we would not have to suffer a
reduction in income of approximately $471,000, representing 4.3 per cent. of PBT in FY1999.
(c) Lease to Related Company
With effect from 1 January 2000, our property at 6 Xuanwumenwai Street, Junefield Plaza Tower 1,
15th Floor, unit 1526 and 1527, Beijing, PRC has been leased to Osim (Beijing) for 2 years at a
monthly rental of RMB18,000 (the Lease). As disclosed under sub-section (b) above, Dr Ron Sim
Chye Hock and Mr Leow Lian Soon are deemed to have an interest in Osim (Beijing) and the Lease
is a related party transaction. However, our Directors are of the opinion that the rentals received by
us under the Lease is reasonable and on arms length basis based on the assessment of market
rental value of the leased property by Beijing C.Y. Leung Property Service & Consultancy Co., Ltd.
In the future, we may renew the Lease if it is in our interest to do so, subject to the review of the Audit
Committee in accordance with the requirements of Chapter 9Aof the Listing Manual of the SGX-ST.
(d) Transaction with Osim Distribution Centre Pte Ltd (ODCPL)
Since FY1998, we have used the services of ODCPL to warehouse our products and handle our
freight forwarding. ODCPL is 70 per cent. owned by Dr Ron Sim Chye Hock and the remaining
equity is owned by Dr Ron Sim Chye Hocks brother, Mr Sim Chye Choon. The warehouse rentals
and freight forwarding fees paid by us to ODCPL since FY1998 and as a percentage of our Groups
operating expenses are shown below:
FY1998 FY1999
Rentals and Fees $124,000 $272,000
% of our Groups operating expenses 0.3% 0.5%
Our Directors are of the opinion that the commercial terms of the services provided by ODCPL to
us are fair and on arms length basis. It is our intention to continue with this arrangement subject to
the review of the Audit Committee in accordance with the requirements of Chapter 9A of the Listing
Manual of the SGX-ST.
(e) Previous Related Party Transactions
Dr Ron Sim Chye Hock and Ms Teo Sway Heong are the owners of Global Health Pte Ltd (GHPL)
and Health Check & Care Company Limited (HCCCL) which are now dormant. In the last 3
financial years, we have sold products to GHPL and HCCCL totalling $233,000 in FY1997. In the
same year, we have also purchased the fixed assets of GHPL and HCCCPL for $179,000.
67
In addition, Dr Ron Sim Chye Hock was a director and shareholder of HCC (Thai) (owning 30 per
cent. of the share capital) before September 1998. He has since ceased to be a director and
shareholder of HCC (Thai). In FY1997 and FY1998, we sold products to HCC (Thai) totalling
$213,000.
In the last 3 financial years, amount owing to or from directors or affiliated companies as disclosed
in the Financial Position on page 20 of this Prospectus are as follows:
FY1997 FY1998 FY1999
$000 $000 $000
trade 7,039 4,634 8,587
non-trade 288 10
(1)
Due from directors 3,436 3,345
trade (321) (260)
non-trade (46)
(1)
Due to directors (2,361) (830) (1,600)
(1)
Net amount owing from/(to) directors/affiliated
companies 8,081 6,889 6,951
Note:
(1) These were fully repaid in June 2000.
The trade amount due to/from affiliated companies are in relation to the purchase and sale of our
products from/to them. We sell to our affiliated companies on credit periods of 60 to 90 days, similar to
the credit periods extended to our subsidiaries and third-party distributor.
Trade balances due from affiliated companies decreased from $7.0 million at end of FY1997 to $4.6
million at end of FY1998 mainly due to the decrease in sales to the PRC Related Companies from $8.0
million in FY1997 to $3.0 million in FY1998 and the PRC Related Companies selling down their existing
stockholdings during FY1998. Further details are disclosed on page 42 of the Prospectus.
However trade balances due from affiliated companies increased from $4.6 million at end of FY1998 to
$8.6 million at end of FY1999 as a result of an overall increase in sales to PRC and South Asia following
the economic recovery in the region and increase in sales to Osim (USA) as a result of its improved
business. Further details are disclosed on page 44 of the Prospectus. For FY1999, approximately 68.7
per cent. and 27.5 per cent. of the trade amount due from affiliated companies were due from the PRC
Related Companies and Osim (USA) respectively for the sale of mainly massage chairs and foot
reflexology rollers to them.
Non-trade amount due to/from affiliated companies are in relation to expenses incurred on our/their
behalf. Amount due to/from directors are in relation to cash advances to/from us and we do not intend
to have any of such transactions in the future.
Future Related Party Transactions
Our Directors envisage that our Group, in our ordinary course of business, will enter into interested party
transactions with interested persons of the Company in the future. Pursuant to this, a shareholders
mandate (the Shareholders Mandate) was granted by our Shareholders at an extraordinary general
meeting held on 26 June 2000 whereby authority was given to Osim (S) to firstly, enter into recurrent
transactions of revenue and trading nature in order to sell our products to Osim (Thai), Osim (USA), PT
Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang), and secondly, to enter into warehousing
and freight forwarding contracts with ODCPL.
68
The grant of the Shareholders Mandate and its renewal on an annual basis would eliminate the need to
convene separate general meetings from time to time to seek shareholders approval as and when
potential interested person transactions with a specified class of interested persons arise, thereby
reducing substantial administrative time and expenses in convening such meetings, without
compromising our corporate objectives and adversely affecting the business opportunities available to
our Group.
The Shareholders Mandate is intended to facilitate transactions in the normal course of business of our
Group which are transacted from time to time with the specified classes of interested persons, provided
that they are carried out at arms length and on normal commercial terms and are not prejudicial to our
Shareholders.
The terms of the Shareholders Mandate stipulate that the methods of determining the purchase price of
the trading transactions and the commercial terms of the warehousing and freight forwarding contracts
shall be subject to the review of the Audit Committee who must be satisfied that they are on arms length
basis, taking into consideration the different maturity of the target markets and consumers purchasing
power where appropriate, and on normal commercial terms and will not be prejudicial to the interests of
our Shareholders.
Unless renewed, the Shareholders Mandate shall lapse after the impending annual general meeting of
our Shareholders. The renewal of the Shareholders Mandate shall be subject to the requirements in
Chapter 9A10(2) of the Listing Manual of the SGX-ST. This means, among other things, that we shall
disclose in our annual report, the aggregate value of transactions conducted pursuant to the
Shareholders Mandate during the preceding financial year.
Besides the transactions conducted pursuant to the Shareholders Mandate, the Audit Committee will
review all other future related party transactions to ensure that they are carried out on an arms length
basis and on normal commercial terms and will not be prejudicial to us or our Shareholders. To enable
the Audit Committee to do so, the following procedures will be undertaken:
(a) market rates will be used as benchmarks for interested party transactions like rental of properties,
and warehousing and freight forwarding charges. Where possible, 2 or 3 quotations will be obtained
from unrelated third parties for the purpose of comparison;
(b) all interested party transactions will be reviewed at least annually by the Audit Committee (excluding
interested parties) or as and when the Audit Committee deems necessary; and
(c) the financial performance of the Related Franchisees and Related PRC Companies will be reviewed
by the Audit Committee to ensure that the terms of the franchise agreements and the licensing and
distribution agreements respectively are not prejudicial to us or our shareholders.
Each interested party transaction will be properly documented and submitted to the Audit Committee
which will periodically review such transactions to ensure that they are carried out on normal arms length
and commercial terms. In the event that a member of the Audit Committee is interested in any interested
party transaction, he will abstain from reviewing that particular transaction. The Audit Committee will
include the review of interested party transactions as part of its standard procedures while examining the
adequacy of internal controls of our Group. It will also ensure that all disclosure requirements on
interested party transactions, including those required by prevailing legislation, SGX-ST listing rules and
accounting standards are complied with. If required under the SGX-STs Listing Manual or the Act, we
will seek Shareholders approval for such transactions. In addition, if during the periodic reviews by the
Audit Committee, the Audit Committee is of the view that the established guidelines and procedures are
not sufficient to ensure that the interested person transactions will be on normal commercial terms and
will not be prejudicial to the interests of our Shareholders, we will revert to our Shareholders for a fresh
mandate based on new guidelines and procedures for transactions with interested persons.
69
POTENTIAL CONFLICTS OF INTEREST
Save as disclosed in the section on INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS on pages 62 to 69 of this Prospectus, none of our Directors, substantial Shareholders
and Executive Officers have any interest, direct or indirect, in any company carrying on the same
business or similar trade as the Group.
None of our Directors, substantial Shareholders and Executive Officers have any interest, direct or
indirect, in any company which is our major supplier, contract manufacturer or customer.
70
DIRECTORS REPORT
19 July 2000
The Shareholders
57 Genting Lane
Singapore 349564
Dear Sirs
This report has been prepared for inclusion in the prospectus to be dated 19 July 2000 (the
Prospectus) in connection with the invitation in respect of 58,000,000 ordinary shares of $0.05 each
(Shares) in the capital of Osim International Ltd (the Company) comprising 38,000,000 new Shares
and 20,000,000 existing Shares.
On behalf of the Directors of the Company, I report that, having made due inquiry in relation to the period
between 31 December 1999, the date to which the last audited consolidated accounts of the Company
and its subsidiaries were made up, and the date hereof, being a date not earlier than 14 days before the
issue of the Prospectus:
(a) the business of the Company and its subsidiaries has, in the opinion of the Directors, been
satisfactorily maintained;
(b) since the last Annual General Meeting of the Company, no circumstances have arisen which, in the
opinion of the Directors, would adversely affect the trading or the value of the assets of the
Company or any of its subsidiaries;
(c) the current assets of the Company and its subsidiaries appear in the books at values which are
believed to be realisable in the ordinary course of business;
(d) no contingent liabilities have arisen by reason of any guarantees given by the Company or any of
its subsidiaries; and
(e) save as disclosed on pages 12 to 16, 23, 93 and 94 of this Prospectus there has been no change
in the published reserves or any unusual factors affecting the profits of the Company and its
subsidiaries since the last audited accounts.
Yours faithfully
for and on behalf of
the Board of Directors
Dr Ron Sim Chye Hock
Chairman & Chief Executive Officer
71
ACCOUNTANTS REPORT
19 July 2000
The Board of Directors
57 Genting Lane
Singapore 349564
Dear Sirs
A. INTRODUCTION
This report has been prepared for inclusion in the Prospectus of Osim International Ltd (the
Company) to be dated 19 July 2000 in connection with the Invitation in respect of 58,000,000
ordinary shares of S$0.05 each comprising 38,000,000 New Shares and 20,000,000 Vendor Shares
in the capital of the Company, payable in full on application.
B. THE COMPANY
The Company was incorporated in Singapore on 27 August 1983 as a limited exempt private
company under the name of R. Sim Trading Co Pte Ltd. On 24 November 1988, the Company
changed its name to R. Sim & Company Pte Ltd. On 2 September 1996, the Company changed its
name to Osim International (S) Pte Ltd. On 4 July 2000, the Company was converted to a public
limited company and changed its name to Osim International Ltd. The principal activities of the
Company are those of marketing, distributing and franchising of home health check, health care and
healthy lifestyle products.
The Company was incorporated with an authorised share capital of S$1,000,000 comprising
1,000,000 ordinary shares of S$1 each and 2 initial subscriber shares of S$1 each. The movements
in authorised and paid-up share capital thereafter were as follows:
Date
Authorised
share capital
Issued and
paid-up capital Shares issued and consideration
9 January 1984 S$1,000,000 S$100,000 Issue of 99,998 ordinary shares of S$1 each at
par for cash.
15 August 1988 S$1,000,000 S$200,000 Issue of 100,000 ordinary shares of S$1 each at
par for cash.
16 May 1990 S$1,000,000 S$500,000 Issue of 300,000 ordinary shares of S$1 each at
par for cash.
4 October 1994 S$1,000,000 S$1,000,000 Issue of 500,000 ordinary shares of S$1 each at
par for cash.
17 February 1995 S$5,000,000 S$3,000,000 Increase in authorised share capital via the
creation of 4,000,000 ordinary shares of S$1
each.
Issue of 2,000,000 ordinary shares of S$1 each
at par via the capitalisation of amount owing to
director.
23 July 1998 S$5,000,000 S$3,100,000 Issue of 100,000 ordinary shares of S$1 each at
par for cash.
72
On 31 December 1999, pursuant to a Group restructuring exercise, the Company acquired its
various subsidiaries from their then existing shareholder for cash as follows:
Name of subsidiary Equity acquired
Purchase
consideration
%
Osim (HK) Company Limited 95.1 S$10,770,000
Osim GHC (Taiwan) Co., Ltd 58.0 S$ 230,000
Osim (M) Sdn Bhd (Formerly known as Osim Global
Health Care (M) Sdn Bhd)
60.0 S$ 2,500,000
The above consideration was arrived at by applying a price earnings ratio of approximately 5.6 times
to the net profit after taxation of the various subsidiaries for the financial year ended 31 December
1999 except for Osim (HK) Company Limited (Osim (HK)) where the consideration was arrived at
with reference to the net profit after taxation of Osim (HK) for the financial year ended 31 December
1999 and adding back the 3% royalty payments and management fees paid by Osim (HK) to Osim
International Ltd in the financial year ended 31 December 1999.
Subsequent to 31 December 1999, the Company acquired additional equity interest in the following
subsidiaries:
Name of subsidiary
Equity
acquired Purchase consideration
%
Osim (HK) Company Limited 4.9 S$1,300,000 for cash
Osim GHC (Taiwan) Co., Ltd 2.0 S$8,000 for cash
10.0 S$293,000 via the issue of 564,000 ordinary shares of
S$0.05 each in the Company
At an Extraordinary General Meeting held on 26 June 2000, the shareholders of the Company
approved, inter alia, the following:
(i) the increase in the authorised share capital of the Company from S$5,000,000 comprising
5,000,000 ordinary shares of S$1 each to S$50,000,000 comprising 50,000,000 ordinary
shares of S$1 each;
(ii) the capitalisation of S$5,921,000 from the revenue reserves of the Company for a bonus
issue of 5,921,000 ordinary shares of S$1 each in the capital of the Company, credited as
fully paid, to the shareholders of the Company on the basis of 1,910 new ordinary shares for
every 1,000 ordinary shares held;
(iii) the subdivision of each existing ordinary share of S$1 each in the authorised and issued and
paid-up share capital of the Company into 20 ordinary shares of S$0.05 each;
(iv) the conversion of the Company into a public limited company and the change of the
Companys name to Osim International Ltd;
(v) the adoption of a new set of Articles of Association;
(vi) the issue of an additional 564,000 new ordinary shares of S$0.05 each to certain
shareholders of Osim GHC (Taiwan) Co., Ltd as consideration for the acquisition of a 10%
equity in Osim GHC (Taiwan) Co., Ltd;
(vii) the issue of 11,600,000 new ordinary shares of S$0.05 each to Century Private Equity
Holdings (S) Pte Ltd at S$0.47 per share, pursuant to the Subscription Agreement;
(viii) the issue of 38,000,000 new ordinary shares of S$0.05 each pursuant to the Invitation which
when fully paid, allotted and issued, will rank pari-passu in all respects with the existing
issued shares of the Company;
73
(ix) a shareholders mandate authorising Osim International Ltd to enter into recurrent
transactions of a revenue and/or trading nature firstly, in the form of sales of the Companys
products to its affiliated companies, Osim GHC (Thailand) Co., Ltd, Osim (USA), Inc., PT
Sharon Samaru, Osim (Beijing) Co., Ltd, Osim GHC (Shanghai) Co., Ltd and Health Check
and Care (Langfang) Co., Ltd and secondly, warehousing and freight forwarding contracts
with its affiliated company, Osim Distribution Centre (S) Pte Ltd;
(x) the Osim Share Option Scheme (the Scheme) and the authorisation of the Board of
Directors to implement and administer the Scheme, to modify and/or amend the Scheme, to
offer and grant options and to allot and issue new shares pursuant to the exercise of options
granted pursuant to the Scheme subject to the rules of the Scheme; and
(xi) the authorisation of the Directors, pursuant to Section 161 of the Act and the provisions of the
new Articles of Association becoming effective, to allot and issue such further shares in the
Company at any time to such persons, upon such terms and conditions and for such
purposes as the Directors may in their absolute discretion deem fit provided that the
aggregate number of shares to be issued shall not exceed 50 per cent of the issued share
capital of the Company immediately prior to the proposed issue, provided that the aggregate
number of shares to be issued other than on a pro-rata basis to the then existing shareholders
of the Company shall not exceed 20 per cent of the issued share capital of the Company
immediately prior to the proposed issue, and, unless revoked or varied by the Company in
general meeting, such authority shall continue in force until the conclusion of the Annual
General Meeting of the Company or the date by which the next Annual General Meeting of
the Company is required by law to be held, whichever is the earlier.
C. THE GROUP
At the date of this report, the Company had the following subsidiaries and associated company
(referred to collectively with the Company as the Proforma Group):
Name of company Principal activities
Place and Date
of incorporation
Registered/
Issued and
paid-up capital
Equity
interest held
by the Group
%
Subsidiaries
Held by the Company
Osim International Trading (Shanghai)
Co., Ltd. (Formerly known as
R. Sim International Trading
(Shanghai) Co., Ltd.)
Import, trading, franchising
and distribution of home
health check and health
care products
Peoples Republic
of China
28 J une 1995
RMB1,666,000 100
Osim (HK) Company Limited Distribution of home health
check, health care and
healthy lifestyle products
Hong Kong
10 October 1996
HK$4,100,000 100
Osim (M) Sdn Bhd (Formerly known as
Osim Global Health Care (M)
Sdn Bhd)
Distribution of home health
Malaysia
16 J uly 1997
RM500,000 60
Osim GHC (Taiwan) Co., Ltd Distribution of home health
Taiwan
29 J uly 1997
NT$25,000,000 70
Associated company
Daito-Osim Healthcare Appliances
(Suzhou) Co., Ltd
Manufacturer and exporter
of home health check and
health care products
Peoples Republic
of China
22 December 1995
RMB6,986,746 30
74
We have acted as auditors of the Company with effect from the financial year ended 31 December
1997. The financial statements of the Company prior to the financial year ended 31 December 1997
were audited by Soh, Wong & Partners. The financial statements of Osim (HK) Company Limited
have been audited by our associated firm in Hong Kong with effect from the financial year ended 31
December 1998. The financial statements of *Osim (HK) Company Limited from the date of
incorporation to 31 December 1997 were audited by BDO Binder. The financial statements of Osim
(M) Sdn Bhd have been audited by our associated firm in Malaysia with effect from the financial year
ended 31 December 1999. The financial statements of Osim (M) Sdn Bhd from the date of
incorporation to 31 December 1998 were audited by Tan Wong & Co. The financial statements of
Osim GHC (Taiwan) Co., Ltd have been audited by our associated firm in Taiwan with effect from
the financial year ended 31 December 1999. The financial statements of Osim GHC (Taiwan) Co.,
Ltd prior to the financial year ended 31 December 1999 have not been audited as no statutory audit
was required to be performed under the laws of its country of incorporation. The financial statements
of Osim International Trading (Shanghai) Co., Ltd. (Osim Shanghai) prior to the financial year
ended 31 December 1997 were audited by Shanghai Jia Hua Certified Public Accountants. The
financial statements of Osim Shanghai for financial year ended 31 December 1997 have been
audited by Shanghai Zhonghua & SASS. With effect from financial year ended 31 December 1998,
the financial statements of Osim Shanghai were audited by Zhongzhou Certified Public Accountants
(formerly known as Shanghai Jia Hua Certified Public Accountants).
*The audited financial statements of Asia Growth Company Limited for the financial years ended 31 December 1995 to 1996
have been included in the Proforma Group as prior to the incorporation of Osim (HK) Company Limited and during the
financial year ended 31 December 1997, the business in Hong Kong was carried out by Asia Growth Company Limited. The
business was transferred to Osim (HK) Company Limited in 1997 and Asia Growth Company Limited became dormant. The
financial statements of Asia Growth Company Limited were audited by Peter W. H. Mah & Co.
The financial statements of Health Check & Care Sdn Bhd for the financial years ended 31 December 1995 to 1997 have
been included in the Proforma Group as prior to the incorporation of Osim (M) Sdn Bhd, the business in Malaysia was
carried out by Health Check & Care Sdn Bhd. The business was transferred to Osim (M) Sdn Bhd from the date of its
incorporation and Health Check & Care Sdn Bhd became dormant. The financial statements of Health Check and Care Sdn
Bhd were audited by Kiat & Associates.
The financial statements of Asia Growth Company Ltd for the financial years ended 31 December 1995 to 1998 have been
included in the Proforma Group as prior to the incorporation of Osim GHC (Taiwan) Co., Ltd, the business in Taiwan was
carried out by Asia Growth Company Ltd. Asia Growth Company Ltd merged with Osim GHC (Taiwan) Co., Ltd with effect
from 1 January 1999, the date of incorporation of Osim GHC (Taiwan) Co., Ltd.
The auditors report on the financial statements of the associated company, Daito-Osim Healthcare
Appliances (Suzhou) Co. Ltd. for the financial year ended 31 December 1996 was qualified on
grounds that the associated company was unable to provide shipping documents to support the
import of materials amounting to RMB29,000,000. Subsequent to the financial year ended 31
December 1996, the associated companys auditors sighted the above shipping documents and
noted that the transactions have been properly recorded.
Other than as disclosed above, there were no other audit qualifications in respect of the audited
financial statements of the Company, its subsidiaries and associated company for the financial
periods covered by this report.
The financial information set out in this report is based on the audited financial statements of the
companies in the Proforma Group for the period from 1 January 1995 or their respective dates of
incorporation, whichever is later, to 31 December 1999. It has been prepared in accordance with the
accounting policies of the Proforma Group set out in Section I of this report and on the basis that the
Proforma Group had been in place throughout the financial periods covered by this report.
Where the reporting year ends of certain subsidiaries were not co-terminous with the reporting year
end of the Company, we have properly accounted for on a consistent basis the audited financial
statements of these subsidiaries drawn up to the different year ends after making such adjustments
which we considered necessary in presenting the Proforma Group financial information.
75
Osim (HK) Company Limited was incorporated on 10 October 1996. As its business was transferred
from Asia Growth Company Limited, we have used the audited financial statements of Asia Growth
Company Limited for the proforma periods prior to the transfer of business to Osim (HK) Company
Limited for inclusion in the Proforma Group financial statements. Accordingly, we have made a
notional adjustment to adjust for the proforma shareholders equity of Asia Growth Company Limited
upon the incorporation of Osim (HK) Company Limited.
Osim (M) Sdn Bhd was incorporated on 16 July 1997. As its business was transferred from Health
Check & Care Sdn Bhd, we have used the audited financial statements of Health Check & Care Sdn
Bhd for the proforma periods prior to the transfer of business to Osim (M) Sdn Bhd for inclusion in
the Proforma Group financial statements. Accordingly, we have made a notional adjustment to
adjust for the proforma shareholders equity of Health Check & Care Sdn Bhd upon the incorporation
of Osim (M) Sdn Bhd.
Osim GHC (Taiwan) Co., Ltd was incorporated on 29 July 1997. As Asia Growth Company Ltd was
merged with Osim GHC (Taiwan) Co., Ltd, we have used the audited financial statements of Asia
Growth Company Ltd for the proforma periods prior to the merger with Osim GHC (Taiwan) Co., Ltd
for inclusion in the Proforma Group financial statements.
In arriving at the Proforma Group financial information, we have made such adjustments as we
considered necessary in order to present the financial statements on a consistent and comparable
basis, including notional adjustments to reflect the investments and share capital of the Company
as if the Proforma Group had existed from 1 January 1995.
D. STATEMENTS OF PROFORMA GROUP RESULTS
The results of the Proforma Group after making such adjustments as we considered appropriate are
set out below:
Note 1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Turnover 1 31,432 42,897 60,837 69,747 103,138
Operating profit 2 1,632 3,859 4,419 2,616 10,514
Share of (loss) profit of associated
company (191) (17) 583 334
Profit before taxation and minority
interests 1,632 3,668 4,402 3,199 10,848
Taxation 3 (541) (1,177) (1,156) (912) (3,123)
Profit after taxation but before minority
interests 1,091 2,491 3,246 2,287 7,725
Minority interests (49) (61) 84 (28) (284)
Profit after taxation and minority interests
but before extraordinary item 1,042 2,430 3,330 2,259 7,441
Extraordinary item 4 1,759
Profit attributable to the Members of the
Company 1,042 4,189 3,330 2,259 7,441
76
E. NOTES TO THE STATEMENTS OF PROFORMA GROUP RESULTS
1. Turnover represents revenue from the sale of home health check, health care and healthy
lifestyle products net of discounts and returns, and franchise fees from franchising activities as
follows:
1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Sale of goods 31,432 42,897 60,837 69,747 103,121
Franchise Fees 17
31,432 42,897 60,837 69,747 103,138
The Group has significant transactions with related parties on terms agreed between the parties
as follows:
1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Income
Sales to affiliated companies 6,248 9,677 10,323 3,736 8,828
Management fee income from affiliated
companies 48 42 24 20 22
Expenses
Purchases from associated company 97 512 1,906
Rental and service fees paid/payable to
an affiliated company 124 272
Others
Purchases of fixed assets from an
affiliated company 179
77
2. Operating profit has been determined after charging (crediting) the following:
1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Depreciation of fixed assets 313 406 569 1,440 2,166
Directors remuneration and fees
directors of the Company 872 824 1,373 1,524 1,317
directors of subsidiaries 51 68 675 105 195
Provision for doubtful trade debts
affiliated companies 194
Provision for warranty cost 222 178
Provision for stock obsolescence 536 383 201
Interest expense
bank overdrafts 280 228 77 223 235
term loans 602 574 619 694 858
hire purchase 4 16 44 29 19
trust receipts 10 21 183 402 356
other creditors 6 7
Interest income
fixed deposits (11) (17) (7) (14)
bank balances (2) (1) (1) (39) (14)
Exchange loss (gain), net 157 93 (968) 647 1,893
Fixed assets written off 596 8
Loss on disposal of fixed assets 9 3 2 4
Bad trade debts written off 12 32
Write back of provision for stock
obsolescence (34)
3. Taxation comprises:
1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Current tax
current year 501 1,131 1,090 1,021 2,717
under/(over) provision of taxation in
respect of prior year (4) 67 74
Deferred tax
current year 40 50 38 332
reversal of prior year deferred tax (1) (147)
541 1,177 1,156 912 3,123
78
3. Taxation (continued)
Osim International Trading (Shanghai) Co., Ltd
The company is subject to Enterprise Income Tax (EIT) at a rate of 15% as approved by the
tax bureau of Pudong New Area, Peoples Republic of China. It is entitled to preferential
treatment of EIT and has been granted full exemption from EIT for fiscal years 1996 and 1997
and 50% reduction of EIT for fiscal years 1998 to 2000.
Osim GHC (Taiwan) Co., Ltd
Pursuant to the amended Income Tax Law (ITL), which took effect on 1 January 1998, the
income tax paid by the company for fiscal year 1998 and onwards may be used by the individual
resident stockholders of the company or its corporate shareholders as individual income tax
credits.
Pursuant to the ITL, beginning with financial year 1998, annual distributable net earnings as
determined under the ITL that are not distributed to shareholders in the following year are
subject to an additional income tax at a rate of 10%. The additional income tax paid may be used
by the shareholders (with the exception of the domestic corporate shareholders for which
dividends received from domestic investee companies are exempt from income tax) as tax
credits when the then undistributed earnings are ultimately distributed.
4. Extraordinary item relates to gain on disposal of leasehold properties of the Company during the
financial year ended 31 December 1996 amounting to approximately S$2,335,000 net of
taxation of approximately S$576,000.
5. Statement of Adjustments
The following adjustments have been made in arriving at the Statements of Proforma Group
results:
1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Turnover
From summation of audited financial
statements/ management accounts of
individual companies 39,308 54,025 80,022 91,416 143,960
Elimination of sales within Proforma
Group (7,876) (11,128) (19,185) (21,669) (40,822)
Adjusted turnover as stated in the
Statement of Proforma Group results 31,432 42,897 60,837 69,747 103,138
Profit before taxation and minority
interests
From summation of audited financial
statements/ management accounts of
individual companies 1,991 4,093 4,397 3,215 12,292
Unrealised profit on closing stocks, net (359) (425) 5 (16) (1,444)
Adjusted profit before taxation and
minority interests as stated in the
Statements of Proforma Group results 1,632 3,668 4,402 3,199 10,848
79
F. SUMMARISED PROFORMA GROUP BALANCE SHEETS
The summarised balance sheets of the Proforma Group as at 31 December 1995 to 31 December
1999 as set out below have been prepared based on audited financial statements/management
accounts and on the basis that the Proforma Group structure had been in place since 1 January
1995:
As at 31 December
1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Proforma shareholders equity 6,417 10,186 13,007 14,937 10,269
Minority interests 781 830 753 827 1,139
7,198 11,016 13,760 15,764 11,408
Represented by:
Fixed assets 17,272 12,349 13,455 16,607 18,276
Investment in associated company 303 333 905 1,068
Current assets 10,901 21,123 34,124 24,689 36,607
Current liabilities (12,036) (18,210) (26,950) (18,434) (36,522)
Net current (liabilities)/assets (1,135) 2,913 7,174 6,255 85
Less:
Hire purchase liabilities, non-current portion (80) (169) (145) (240)
Term loans, non-current portion (8,837) (4,175) (6,886) (7,820) (7,255)
Provision for pension benefits (157)
Deferred taxation (102) (294) (147) (38) (369)
7,198 11,016 13,760 15,764 11,408
80
G. MOVEMENTS IN PROFORMA SHAREHOLDERS EQUITY
The movements in the shareholders equity of the Proforma Group for each of the five years ended
31 December 1995 to 1999 are as follows:
1995 1996 1997 1998 1999
S$000 S$000 S$000 S$000 S$000
Balance brought forward 5,528 6,417 10,186 13,007 14,937
Add (less):
Net profit attributable to the Proforma Group 1,042 4,189 3,330 2,259 7,441
Notional adjustment to adjust for proforma
shareholders equity of Asia Growth
Company Limited (Note (a)) (635)
Notional adjustment to adjust for proforma
shareholders equity of Health Check &
Care Sdn Bhd (Note (b)) 27
Increase in share capital/share premium of
the Company 100
Goodwill written off (Note (c)) (12,421)
Dividends, net (370) (370) (370) (75)
Translation reserve (153) (50) 496 (86) 387
Balance carried forward 6,417 10,186 13,007 14,937 10,269
Notes:
(a) Osim (HK) Company Limited was incorporated on 10 October 1996. As its business was transferred from Asia Growth
Company Limited, we have used the audited financial statements of Asia Growth Company Limited for the proforma
periods prior to the transfer of business to Osim (HK) Company Limited for inclusion in the Proforma Group financial
statements. Accordingly, we have made a notional adjustment to adjust for the proforma shareholders equity of Asia
Growth Company Limited upon the incorporation of Osim (HK) Company Limited.
(b) Osim (M) Sdn Bhd was incorporated on 16 July 1997. As its business was transferred from Health Check & Care Sdn
Bhd, we have used the audited financial statements of Health Check & Care Sdn Bhd for the proforma periods prior to
the transfer of business to Osim (M) Sdn Bhd for inclusion in the Proforma Group financial statements. Accordingly, we
have made a notional adjustment to adjust for the proforma shareholders equity of Health Check & Care Sdn Bhd upon
the incorporation of Osim (M) Sdn Bhd.
(c) Relates to goodwill on consolidation arising from the acquisition of the various subsidiaries written off directly against
reserves.
81
H. STATEMENT OF NET ASSETS
The statement of net assets of the Group and of the Company as at 31 December 1999 are set out
below with the notes thereon, set out in Section J.
Note Group Company
S$000 S$000
Proforma shareholders equity 1 10,269 20,816
Minority interests 1,139
11,408 20,816
Represented by
Fixed assets 2 18,276 13,391
Investment in subsidiaries 3 15,396
Investment in associated company 4 1,068 495
Current assets
Stocks 5 12,089 4,155
Trade debtors 6 8,846 1,567
Other debtors, deposits and prepayments 7 2,574 613
Due from subsidiaries
trade 15,426
non-trade 9 491
trade 8 8,587 2,688
non-trade 9 10 10
Fixed deposits 236
Cash and bank balances 4,265 2,117
36,607 27,067
Less:
Current liabilities
Trade creditors 4,658 4,470
Bills payable to banks (secured) 10 12,017 12,017
Other creditors and accruals 11 8,925 3,047
Due to an associated company
trade 361 221
non-trade 9 46 46
Due to a director 9 1,600 1,073
Term loans, current portion 12 646 558
Short term bank loans 13 760
Hire purchase liabilities, current portion 14 115 104
Proposed dividend 75 74
Provision for taxation 4,022 3,814
Bank overdrafts (secured) 10 3,297 3,297
36,522 28,721
Net current assets (liabilities) 85 (1,654)
Less:
Hire purchase liabilities, non-current portion 14 240 213
Term loans, non-current portion 12 7,255 6,427
Provision for pension benefits 15 157
Deferred taxation 369 172
11,408 20,816
82
I. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies have been consistently applied in the preparation of the
Proforma Group and Company financial information.
Basis of accounting
The financial statements, expressed in Singapore dollars, have been prepared in accordance with
the historical cost convention and Statements of Accounting Standard in Singapore.
Income recognition
Income from sale of goods is recognised upon delivery of goods and acceptance by customers.
Franchise fees are recognised on an accrual basis.
Basis of consolidation
The Proforma Group financial statements include the financial statements of the Company and its
subsidiaries made up to the end of each financial year. The results of subsidiaries acquired or
disposed of during the financial year are included in or excluded from the Proforma Group financial
statements on the basis that the Proforma Group had been in place since 1 January 1995.
Significant intercompany balances and transactions have been eliminated on consolidation.
When subsidiaries are acquired, any excess of the purchase consideration over the net assets of
subsidiaries at the date of acquisition represents goodwill on consolidation and is written off directly
against reserves. Similarly, any excess of the net assets of subsidiaries at the date of acquisition
over the purchase consideration represents reserve on consolidation which is credited directly to
reserves.
In the preparation of the consolidated financial statements, the financial statements of the foreign
subsidiaries are translated at the rates of exchange ruling at the balance sheet date except for the
share capital and reserves which are translated at historical exchange rates and profit and loss
items which are translated at the average exchange rates for the year. Foreign currency translation
differences are taken directly to translation reserve.
Subsidiaries and associated company
Investments in subsidiaries and associated company are stated in the financial statements of the
Company at cost. Provision is made where there is a decline in value that is other than temporary.
An associated company is defined as a company, not being a subsidiary, in which the Proforma
Group has a long term equity interest of not less than 20% and in whose financial and operating
policy decisions the Proforma Group exercises significant influence.
The Proforma Groups share of profits less losses of the associated company is included in the
consolidated statement of profit and loss. The Groups share of the post-acquisition accumulated
profits and reserves of the associated company is adjusted against the cost of investment in the
consolidated balance sheet.
83
Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight
line basis to write-off the cost over their estimated useful lives. The annual rates of depreciation are
as follows:
Freehold buildings 2%3%
Leasehold buildings 3%
Computers 20%100%
Motor vehicles 20%
Electrical appliances 33
1
3%
Shop renovations 33
1
3%
Furniture and fittings 10%
Office equipment 10%20%
No depreciation is provided on freehold land.
During the financial year ended 31 December 1998, the Company revised its estimated useful lives
of certain fixed assets for depreciation purposes to more accurately reflect the economic useful lives
of these fixed assets. The impact of the change in accounting estimate is to decrease profit before
taxation for the financial year ended 31 December 1998 and 31 December 1999 by approximately
S$182,000 and S$68,000 respectively.
During the financial year ended 31 December 1999, a subsidiary, Osim (M) Sdn Bhd, revised its
estimated useful lives of certain fixed assets for depreciation purposes to be consistent with the
group accounting policy. The impact of the change in the accounting estimate is to decrease profit
before taxation for the financial year ended 31 December 1999 by approximately S$105,000.
Stocks
Stocks are stated at the lower of cost (determined on a weighted average basis) and net realisable
value. Provision is made for deteriorated, damaged, obsolete and slow-moving stocks.
Taxation
Income tax expense is determined on the basis of tax effect accounting, using the liability method
and is applied to all significant timing differences. Deferred tax benefits are not recognised unless
there is reasonable expectation of their realisation.
Affiliated company
An affiliated company is defined as a company, not being a subsidiary or an associated company,
in which the directors of the Company have an equity interest or exercise significant influence over.
Hire purchase
Where assets are financed by hire purchase agreements that give rights approximating to
ownership, the assets are capitalised as if they had been purchased outright at the values equivalent
to the present values of the total rental payable during the periods of the hire purchase and the
corresponding hire purchase commitments are included under liabilities. The excess of the hire
purchase payments over the recorded hire purchase obligations is treated as finance charges,
which are allocated over each hire purchase term to give a constant rate of interest on the
outstanding balance at the end of each period.
84
Foreign currency transactions and balances
The accounting records of the companies in the Proforma Group are maintained in their respective
functional currencies.
Transactions in foreign currencies during the year are recorded in the respective functional
currencies using exchange rates approximating those ruling at transaction dates. Foreign currency
monetary assets and liabilities at the balance sheet date are translated into the respective functional
currencies at exchange rates approximating those ruling at that date. All resultant exchange
differences are dealt with through the profit and loss account.
J. NOTES TO THE STATEMENT OF NET ASSETS
1. Proforma shareholders equity
Included in this balance is an amount of approximately $149,000 and $466,000 relating to
Enterprise Expansion Fund and capital reserve respectively, which are non-distributable.
In accordance with the relevant laws and regulations of the Peoples Republic of China (PRC),
Osim International Trading (Shanghai) Co., Ltd (the subsidiary) is required to set up an
Enterprise Expansion Fund by way of appropriation from its statutory net profit. The amount to
be appropriated to the Enterprise Expansion Fund is determined by the board of directors based
on the profitability of the subsidiary.
The Enterprise Expansion Fund may be used to increase the registered capital of the subsidiary,
subject to approval from the PRC authorities. The Enterprise Expansion Fund is not available
for dividend distribution to the shareholders.
85
2. Fixed assets
(a) Group
1999
(S$000)
Freehold
land
Freehold
buildings
Leasehold
buildings Computers
Motor
vehicles
Electrical
appliances
Shop
renovations
Furniture
and
fittings
Office
equipment Total
$ $ $ $ $ $ $ $ $ $
Cost
As at 1 January 1999 482 10,587 3,379 293 737 73 2,690 669 205 19,115
Additions 167 171 280 56 2,476 332 152 3,634
Disposals/write-off (262) (9) (1) (272)
Translation difference 16 32 (1) 2 3 2 2 56
As at 31 December 1999 498 10,786 3,379 463 757 129 5,160 1,003 358 22,533
Accumulated depreciation
As at 1 January 1999 231 534 268 380 22 665 105 66 2,271
Charge for the year 182 101 114 157 38 1,344 179 51 2,166
Disposals/write-off (167) (4) (1) (172)
Translation difference 2 (1) (1) (9) (1) 2 (8)
As at 31 December 1999 415 635 382 369 59 1,996 283 118 4,257
Net book value
As at 31 December 1999 498 10,371 2,744 81 388 70 3,164 720 240 18,276
8
6
2. Fixed assets (continued)
(b) Company
1999
(S$000)
Freehold
building
Leasehold
buildings Computers
Motor
vehicles
Electrical
appliances
Furniture
and
fittings
Shop
renovations
Office
equipment Total
$ $ $ $ $ $ $ $ $
Cost
As at 1 January 1999 9,649 3,379 264 394 36 333 868 93 15,016
Additions 167 97 150 19 102 604 29 1,168
Disposals/write-off (209) (9) (218)
As at 31 December 1999 9,816 3,379 361 335 55 435 1,463 122 15,966
Accumulated depreciation
As at 1 January 1999 159 535 264 232 22 33 477 10 1,732
Charge for the year 165 101 97 71 16 43 487 12 992
Disposals/write-off (145) (4) (149)
As at 31 December 1999 324 636 361 158 38 76 960 22 2,575
Net book value
As at 31 December 1999 9,492 2,743 177 17 359 503 100 13,391
As at 31 December 1999, the Group and the Company had fixed assets under hire purchase with a net book value of approximately S$340,000 and
S$236,000 respectively. In addition, the Group and the Company had freehold land, buildings and leasehold buildings with a net book value of
approximately S$13,613,000 and S$12,235,000 respectively, which were mortgaged as security for the banking facilities as disclosed in Notes 10 and
12.
8
7
3. Investment in subsidiaries
Name of company Principal activities
Country of
incorporation
and place of
business
Equity
interest
held by
the Group
Cost of
investment
% S$000
Subsidiaries
Held by the Company
Osim International
Trading (Shanghai)
Co., Ltd. (Formerly
known as R. Sim
International Trading
(Shanghai) Co., Ltd.)
Import, trading,
franchising, and
distribution of home
health check and
health care products
Peoples Republic
of China
100 295
Osim (HK) Company
Limited
Distribution of home
health check, health
care and healthy
lifestyle products
Hong Kong 100 12,070
Osim (M) Sdn Bhd
(Formerly known as
Osim Global Health
Care (M) Sdn Bhd)
care and healthy
lifestyle products
Malaysia 60 2,500
Osim GHC (Taiwan)
Co., Ltd
care and healthy
lifestyle products
Taiwan 70 531
15,396
4. Investment in associated company
(a) This comprises:
Group Company
S$000 S$000
Unquoted equity shares, at cost 346 346
Add: Share of post-acquisition profits of associated company 709
1,055 346
Translation reserve (136)
Loan to associated company 149 149
1,068 495
(b) The Company had the following associated company as at 31 December 1999:
Associated company Principal activity
Country of
incorporation
and place of
business
Percentage
of equity
held
Cost of
investment
% S$000
Daito-Osim Healthcare
Appliances
(Suzhou) Co., Ltd
Manufacturer and
exporter of home
health check and
health care
products
Peoples Republic
of China
30 346
88
(c) Loan to associated company is unsecured and interest-free. The loan is not expected to be
repaid within the next twelve months.
5. Stocks
Group Company
S$000 S$000
Finished goods 13,386 4,683
Goods-in-transit 123 123
13,509 4,806
Less provision for stock obsolescence (1,420) (651)
12,089 4,155
Movements in provision for stock obsolescence are as follows:
At beginning of year 1,251 651
Provision for the year 201
Write back of provision (34)
Translation difference 2
At end of year 1,420 651
6. Trade debtors
Group Company
S$000 S$000
Trade debtors 8,846 1,567
Less provision for doubtful debts
8,846 1,567
7. Other debtors, deposits and prepayments
Group Company
S$000 S$000
Deposits 2,249 501
Prepayments 246 97
Advances to employees 15 14
Sundry debtors 64 1
2,574 613
89
8. Due from affiliated companies (trade)
Group Company
S$000 S$000
Due from affiliated companies 8,781 2,882
Less provision for doubtful debts (194) (194)
8,587 2,688
Movements in provision for doubtful debts are as follows:
At beginning of year 194 194
Provision for the year
At end of year 194 194
9. Due from (to) affiliated companies/subsidiaries/director
These amounts are non-trade in nature, unsecured, interest-free and have no fixed terms of
repayment.
10. Bills payable to banks and bank overdrafts
The banking facilities granted to the Company are secured by:
(a) legal mortgage on the freehold and leasehold buildings of the Company;
(b) legal mortgage on the leasehold building of an affiliated company; and
(c) joint and several personal guarantee given by certain directors of the Company.
11. Other creditors and accruals
Group Company
S$000 S$000
Other creditors 4,236 1,927
Accrued operating expenses 3,324 433
Provision for warranty costs 572 367
Accrued payroll costs 793 320
8,925 3,047
12. Term loans
Group Company
S$000 S$000
Term loan A 5,500 5,500
Term loan B 864 864
Term loan C 621 621
Term loan D 768
Term loan E 148
7,901 6,985
Due within 12 months (646) (558)
Due after 12 months 7,255 6,427
90
Term loans A and B are repayable in equal monthly instalments over a period of 15 years from
the date of draw down and term loan C is repayable in equal monthly instalments over a period
of 10 years from the date of draw down. Term loans D and E are taken up by a subsidiary. Term
loan D is repayable in equal monthly instalments over a period of 18 years from the date of
draw down and term loan E is repayable in equal monthly instalments over a period of 5 years
from the date of draw down. Interest on term loan A is charged at the banks prevailing prime
lending rate plus 0.75% per annum, interest on term loan B is charged at 6.75% per annum
and interest on term loan C is charged at 12.75% per annum. Interest on term loan D and E
are charged at 9.05% per annum.
Term loans A and B are secured by:
(a) legal mortgage over the freehold and leasehold buildings of the Company;
(b) legal mortgage over the leasehold building of an affiliated company; and
(c) joint and several personal guarantee given by certain directors of the Company.
Term loan C is secured by a legal mortgage on the leasehold building of the Company.
Term loans D and E are secured by legal mortgages over the subsidiarys freehold land and
building.
13. Short term bank loans
These loans are secured by (i) a guarantee of certain shareholders of a subsidiary; and (ii) a
corporate guarantee provided by the Company for the loan taken by a subsidiary, at interest
rates ranging from 3.75% to 7.25% per annum and are repayable within the next twelve
months.
14. Hire purchase liabilities
Group Company
S$000 S$000
Minimum payments under hire purchase
within 1 year 133 121
within 2 to 5 years 286 247
419 368
Finance charges allocated to future periods (64) (51)
355 317
Hire purchase liabilities are classified as follows:
current portion 115 104
non-current portion 240 213
355 317
15. Provision for pension benefits
This relates to the amount of pension cost provided for in the current financial year for a
subsidiary. This subsidiary has a retirement plan covering all full-time employees beginning
1999. Benefits under the plan are based on length of service and estimated base pay at the
time of retirement.
91
16. Commitments and contingent liabilities
(a) Non-cancellable operating lease commitments
Group Company
S$000 S$000
Due within 1 year 9,663 2,206
Due within 2 to 5 years 8,095 1,445
17,758 3,651
(b) Contingent liabilities, secured
Group Company
S$000 S$000
Letters of credit 300 300
Bank guarantees 709 509
1,009 809
The details of the securities are disclosed in Note 10.
(c) Options
The Company has been granted options to purchase 100% of Osim (USA), Inc., 55% of
Osim GHC (Thailand) Co., Ltd, 10% of PT Sharon Samaru, 100% of Health Check and
Care (Langfang) Co, Ltd, Osim (Beijing) Co., Ltd and Osim GHC (Shanghai) Co., Ltd (all
being affiliated companies) at fair market values to be determined and subject to the laws
of the countries of these companies permitting foreign shareholdings in these companies.
17. Subsequent events
Subsequent to 31 December 1999,
(a) the Company entered into an agreement with GBI Realty Pte Ltd to purchase a piece of
land and construct a building on a turnkey project basis, at Ubi Avenue 1, Singapore, for
a consideration of S$36,282,540. This building is to be used as the new Group
headquarters.
(b) at an Extraordinary General Meeting held on 26 June 2000, the shareholders of the
Company approved, inter alia, the following:
(i) the increase in the authorised share capital of the Company from S$5,000,000
comprising 5,000,000 ordinary shares of S$1 each to S$50,000,000 comprising
50,000,000 ordinary shares of S$1 each;
(ii) the capitalisation of S$5,921,000 from the revenue reserves of the Company for a
bonus issue of 5,921,000 ordinary shares of S$1 each in the capital of the
Company, credited as fully paid, to the shareholders of the Company on the basis
of 1,910 new ordinary shares for every 1,000 ordinary shares held;
(iii) the subdivision of each existing ordinary share of S$1 each in the authorised and
issued and paid-up share capital of the Company into 20 ordinary shares of S$0.05
each;
(iv) the conversion of the Company into a public limited company and the change of
the Companys name to Osim International Ltd;
(v) the adoption of a new set of Articles of Association;
(vi) the issue of additional 564,000 new ordinary shares of S$0.05 each to certain
shareholders of Osim GHC (Taiwan) Co., Ltd as consideration for the acquisition
of a 10% equity in Osim GHC (Taiwan) Co., Ltd;
92
(vii) the issue of 11,600,000 new ordinary shares of S$0.05 each to Century Private
Equity Holdings (S) Pte Ltd at S$0.47 per share pursuant to the Subscription
Agreement;
(viii) the issue of 38,000,000 new ordinary shares of S$0.05 each pursuant to the
Invitation which when fully paid, alloted and issued, will rank pari-passu in all
respects with the existing issued shares of the Company;
(ix) a shareholders mandate authorising Osim International Ltd to enter into recurrent
transactions of a revenue and/or trading nature firstly, in the form of sales of the
Companys products to its affiliated companies, Osim GHC (Thailand) Co., Ltd,
Osim (USA), Inc., PT Sharon Samaru, Osim (Beijing) Co., Ltd, Osim GHC
(Shanghai) Co., Ltd and Health Check and Care (Langfang) Co., Ltd and secondly,
warehousing and freight forwarding contracts with its affiliated company, Osim
Distribution Centre Pte Ltd;
(x) the Osim Share Option Scheme (the Scheme) and the authorisation of the Board
of Directors to implement and administer the Scheme, to modify and/or amend the
Scheme, to offer and grant options and to allot and issue new shares pursuant to
the exercise of options granted pursuant to the Scheme subject to the rules of the
Scheme; and
(xi) the authorisation of the Directors, pursuant to Section 161 of the Act and the
provisions of the new Articles of Association becoming effective, to allot and issue
such further shares in the Company at any time to such persons, upon such terms
and conditions and for such purposes as the Directors may in their absolute
discretion deem fit provided that the aggregate number of shares to be issued shall
not exceed 50 per cent of the issued share capital of the Company immediately
prior to the proposed issue, provided that the aggregate number of shares to be
issued other than on a pro-rata basis to the then existing shareholders of the
Company shall not exceed 20 per cent of the issued share capital of the Company
immediately prior to the proposed issue, and, unless revoked or varied by the
Company in general meeting, such authority shall continue in force until the
conclusion of the Annual General Meeting of the Company or the date by which the
next Annual General Meeting of the Company is required by law to be held,
whichever is the earlier.
K. NET TANGIBLE ASSET BACKING OF THE PROFORMA GROUP
The net tangible asset backing of the Proforma Group for each ordinary share of S$0.05 each is
based on the statement of net assets of the Proforma Group as at 31 December 1999 and after
taking into account the issue of 11.6 million new ordinary shares of S$0.05 each to Century Private
Equity Holdings (S) Pte Ltd and the issue of 38 million New Shares of S$0.05 each, which forms part
of the subject of the Invitation, and the proceeds and estimated expenses in connection therewith.
S$000
Net tangible assets as at 31 December 1999 10,269
Proceeds from the issue of 11,600,000 new ordinary shares of S$0.05 each at S$0.47
per share to Century Private Equity Holdings (S) Pte Ltd pursuant to the Subscription
Agreement 5,452
Proceeds from the issue of 34,200,000 New Shares of S$0.05 each at S$0.52 per share
which forms part of the subject of this Invitation 17,784
Proceeds from the issue of 3,800,000 Reserved Shares of S$0.05 each at S$0.47 per
share which forms part of the subject of this Invitation 1,786
Less: Estimated expenses of the Invitation payable by the Company (1,700)
33,591
93
Number of shares
000
Issued share capital of 3,100,000 ordinary shares of S$1 each as at 31 December
1999 3,100
Bonus issue of 5,921,000 ordinary shares of S$1 each 5,921
9,021
(a) Subdivision into 180,420,000 ordinary shares of S$0.05 each 180,420
(b) Issue of 564,000 shares of S$0.05 each to certain shareholders of Osim GHC
(Taiwan) Co., Ltd 564
(c) Issue of 11,600,000 shares of S$0.05 each to Century Private Equity
Holdings (S) Pte Ltd pursuant to the Subscription Agreement 11,600
(d) Issue of 38,000,000 New Shares of S$0.05 each which forms part of the
subject of this Invitation 38,000
Issued and paid-up share capital after the Invitation 230,584
Net tangible asset backing per S$0.05 share (in cents) 14.6
L. DIVIDENDS
Dividends declared by the Company and its subsidiaries during the periods under review were as
follows:
Ordinary dividend
Year ended
Gross dividend
per share
Net dividend
S$
31 August 1996 16.67 cents 370,000
31 December 1997 16.67 cents 370,000
31 December 1998 16.13 cents 370,000
31 December 1999 3.23 cents 74,500
No other dividends have been paid or proposed by the Company or its subsidiaries for any of the
periods under review.
M. AUDITED FINANCIAL STATEMENTS
No audited financial statements have been prepared for the Company or its subsidiaries for any
period subsequent to 31 December 1999.
Yours faithfully,
Arthur Andersen
Certified Public Accountants
Singapore
Max Loh Khum Whai
Partner-in-charge
94
GENERAL AND STATUTORY INFORMATION
1. INFORMATION ON THE DIRECTORS AND THE EXECUTIVE OFFICERS
(a) The names, addresses, ages and principal occupations of our Directors and Executive Officers
are set out on pages 54, 57 and 58 of this Prospectus respectively.
(b) The business and working experience of each of our Directors are set out on pages 54 and 55
of this Prospectus.
(c) Our Directors interests in the Shares as at the date of this Prospectus, as recorded in the
register required to be kept by the Company under the Act, are set out below:
Direct Interest Indirect Interest Total Interest
Number of
Shares %
Number of
Shares %
Number of
Shares %
Dr Ron Sim Chye Hock 178,615,800
(2)
92.7 1,804,200
(3)
0.9 180,420,000
(2)
93.6
Teo Sway Heong 1,804,200 0.9 178,615,800
(3)
92.7 180,420,000
(2)
93.6
Teo Chay Lee
(1)

Leow Lian Soon
(1)

Khor Peng Soon
Michael Kan Yuet Yun
(1)

Ong Kian Min
(1)

Notes:
(1) Mr Teo Chay Lee and Mr Leow Lian Soon, both executive Directors, have been allocated 500,000 Reserved
Shares each. In addition, Dr Ron Sim Chye Hock has decided to transfer 500,000 Shares out of his own personal
shareholding to each of Mr Teo Chay Lee and Mr Leow Lian Soon as described in note (2) below. Mr Leow Lian
Soons wife, Ms Tao Dong Mei, has been allocated 30,000 Reserved Shares. Mr Michael Kan Yuet Yun and Mr
Ong Kian Min, both independent Directors, have been allocated 100,000 Reserved Shares each. The above
executive and independent Directors have no present intention of selling their Reserved Shares within 6 months
after the Invitation.
(2) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo
Chay Lee, Mr Leow Lian Soon, Ms Lim Choon Hui and Mr Chiang See Thong respectively by way of a gift as a
token of his appreciation of their contributions to our Group, such transfers to be completed immediately after the
Invitation is completed.
(3) Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Their indirect interests consist of the
interest of their spouse.
(d) The business and working experience of each of our Executive Officers are set out on
page 58 of this Prospectus.
(e) Save for the service agreements referred to on pages 55 and 56 of this Prospectus, there are
no existing or proposed service contracts between our Directors or Executive Officers and us
which are not determinable by us within one year without the payment of compensation (other
than statutory compensation).
(f) The aggregate remuneration and emoluments (including fees, salaries, bonuses and
commissions) paid to our Directors for services rendered in all capacities to the Company and
its subsidiaries for the financial year ended 31 December 1999 was approximately $1.3 million.
For the current financial year ending 31 December 2000, the estimated amount payable to our
Directors under the arrangements in force as at the date of this Prospectus is approximately
$1.9 million.
95
(g) Save as disclosed below, none of our Directors and Executive Officers is or was involved in any
of the following:
(i) a petition under any bankruptcy laws in any jurisdiction filed against him/her in the last
10 years;
(ii) being a partner in any partnership involved in a petition under any bankruptcy laws in any
jurisdiction filed against the partnership in the last 10 years, while he/she was a partner
of that partnership;
(iii) being a director or executive officer of any corporation involved in a petition under any
bankruptcy laws in any jurisdiction filed against the corporation in the last 10 years, while
he/she was such a director or executive officer;
(iv) having an unsatisfied judgements outstanding against him/her;
(v) convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty
punishable with imprisonment for 3 months or more, or charged for violation of any
securities laws or subject to any such pending criminal proceeding;
(vi) convicted of any offence, in Singapore or elsewhere, involving a breach of any securities
or financial market laws, rules or regulations;
(vii) received any judgement against him/her in any civil proceeding in Singapore or
elsewhere in the last 10 years involving fraud, misrepresentation or dishonesty or is
subject to any such pending civil proceeding;
(viii) convicted in Singapore or elsewhere of any offence in connection with the formation or
management of any corporation;
(ix) disqualified from acting as a director of any company, or from taking part in any way
directly or indirectly in the management of any company;
(x) been subject to any order, judgement or ruling of any court of competent jurisdiction,
tribunal or governmental body permanently or temporarily enjoining him/her from
engaging in any type of business practice or activity; and
(xi) to his/her knowledge, in Singapore or elsewhere, been concerned with the management
or conduct of affairs of any company or partnership which has been investigated by an
inspector appointed under the provisions of the Companies Act, or other securities
enactments or by any other regulatory body in connection with any matter involving the
company partnership occurring or arising during the period when he/she was so
concerned with the company or partnership.
(h) Dr Ron Sim Chye Hock and Ms Teo Sway Heong, who are our Directors and substantial
Shareholders, are husband and wife. Mr Teo Yeong Ann, our Executive Officer is the
brother-in-law of Dr Ron Sim Chye Hock and the brother of Ms Teo Sway Heong. Save as
disclosed, none of our Directors and Executive Officers are related to one another or to any
substantial Shareholder.
(i) No option to subscribe for our Shares or debentures or for shares and debentures of any of our
subsidiaries has been granted to, or has been exercised by, any of our Directors or Executive
Officers within the two years preceding the date of this Prospectus.
(j) Save as disclosed on page 70 of this Prospectus, none of our Directors, Executive Officers or
substantial Shareholders have any interest, direct or indirect, in any company carrying on a
similar trade as the Company or any of its subsidiaries.
96
(k) Save as disclosed on pages 62 and 69 of this Prospectus, none of our Directors or expert are
interested, directly or indirectly, in the promotion of, or in any assets which have, within the two
years preceding the date of this Prospectus, been acquired by or disposed of by or leased to
the Company or any of its subsidiaries, or are proposed to be acquired by or disposed of by or
leased to the Company or any of its subsidiaries. None of our Directors are materially interested
in any contract or arrangement, subsisting at the date of this Prospectus, which is significant in
relation to the business of the Company and its subsidiaries taken as a whole.
(l) There is no shareholding qualification for our Directors in the Articles of Association of the
Company.
(m) The directorships, other than that held in Osim (S), of each of our Directors as at 30 June 2000
and for the past five years, and in the case of Dr Ron Sim Chye Hock, to the best of his
knowledge and recollection, are set out below:
Director Present directorships Past directorships
Dr Ron Sim Chye Hock Group Companies
Osim (Msia)
Osim (HK)
Osim (Taiwan)
Osim (Shanghai)
Other Companies
Global Health Pte Ltd
Healthcheck & Care Pte Ltd
Homedics Pte Ltd
Melbourne Townhouse Pty Limited
Osim Distribution Centre (S)
Pte Ltd
Osim Express Singapore Pte Ltd
Osim Investment Pte Ltd
Osim Logistics International Pte Ltd
Osim Pte Ltd
Plasma Precision Technology
Pte Ltd
R. Sim Holding Pte Ltd
R. Sim Hotel & Development
Pty Ltd
Health Check & Care Co., Limited
Asia Growth Company Limited
Osim (USA)
Osim (Thai)
Health Check & Care Sdn Bhd
Health Check & Care (Australia)
Pty Limited
Other Companies
Shen Property & Investment
Pte Ltd
Scenic Resorts Pte Ltd (formerly
Osim Distriplaza Pte Ltd)
Health Check & Care (Thailand)
Co., Ltd
Mr Teo Chay Lee Other Companies
Osim (Thai)
Mr Leow Lian Soon Group Companies
Osim (HK)
Osim (Shanghai)
97
Director Present directorships Past directorships
Ms Teo Sway Heong Group Companies
Osim (Shanghai)
Other Companies
Global Health Pte Ltd
Healthcheck & Care Pte Ltd
Osim Pte Ltd
R Sim Holding Pte Ltd
Group Companies
Osim (HK)
Mr Khor Peng Soon United Test and Assembly Center
Ltd
Fibers Technology Corporation
Pte Ltd
Prosper Development Ltd (B.V.I.)
Sembawang Aviation Pte Ltd
Semair Pte Ltd
Catic Sembawang Aircraft
Development Pte Ltd
Asia Pacific Air Cargo Pte Ltd
Mr Michael Kan Yuet Yun,
PBM
Other Companies
Millennium Group Limited, HK
Other Companies
Singapore Tobacco Co (Pte) Ltd
British-American Tobacco Co
(Singapore) Ltd
Mr Ong Kian Min* Other Companies
ASA Ceramic Limited
GMG Global Ltd
JIT Holdings Limited
Penguin Boat International Limited
Food Empire Holdings Limited
ACE Entrepreneurs & Advisers
Pte Ltd
AdXplorer Pte Ltd
BrokersCapital Pte Ltd
Hwa Ying (Pte.) Ltd
SB China Holdings Pte Ltd
Sinor Invest Pte Ltd
Water Cove Networks (S) Pte Ltd
Other Companies
MG Logic Pte Ltd
CH2M Hill Singapore Private
Limited
*Companies in which Mr Ong Kian Min was appointed as director for the purpose of incorporation or as nominee
director only and in the course of his professional practice have not been included.
(n) Save as disclosed below, none of our Executive Officers currently hold or have held any
directorships during the last five years, in any company as at 30 June 2000:
Executive Officer Present directorships Past directorships
Mr Lim Ching Chye Other Companies
Osim (Thai)
Other Companies
Homedics Pte Ltd
Ms Cha Mui Hwang Nil Other Companies
Fourhin Metal Roofing Pte Ltd
98
2. SHARE CAPITAL
(a) As at the date of this Prospectus, there is only one class of shares in the capital of the Company.
The rights and privileges attached to the Shares are as stated in the Articles of Association of
the Company. There are no founder, management or deferred shares.
(b) Save as disclosed on pages 23, 25 and 26 of this Prospectus and below, there was no change
in the issued share capital of the Company and its subsidiaries within the two years preceding
the date of this Prospectus:
Date
Number
of shares
issued
Par
Value
Purpose of
Issue
Resultant
paid-up
capital
Party to
whom shares
were issued
Osim (S)
23 July 1998 100,000 $1 To increase
working capital;
issued for cash
at par value
$3,100,000 Dr Ron Sim Chye
Hock
(69,001)
Ms Teo Sway Heong
(30,999)
Osim (Msia)
28 December 1998 499,900 RM1 To acquire entire
assets and
liabilities of
Health Check &
Care Sdn Bhd
RM500,000 Health Check &
Care Sdn. Bhd.
Osim (HK)
31 December 1999 3,100,000 HK$1 Capitalisation of
directors loan
HK$4,100,000 Dr Ron Sim Chye
Hock
Osim (Taiwan)
31 December 1998 500,000 NT$10 To acquire entire
assets and
liabilities
of Osim
International
Co., Ltd.
NT$25,000,000 Shareholders of
Osim International
Co., Ltd.
(c) Save as disclosed on pages 25 and 26 of this Prospectus and paragraph 2(b) above, no shares
in or debentures of the Company and its subsidiaries have been issued, or agreed to be issued,
as fully or partly paid-up for cash or for a consideration otherwise than in cash within the two
years preceding the date of this Prospectus.
(d) Save as disclosed under Osim Share Option Scheme on pages 59 to 61 and 113 to 136 of
this Prospectus, no person has been, or is entitled to be, given an option to subscribe for any
shares in or debentures of the Company or of any of its subsidiaries.
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3. ARTICLES OF ASSOCIATION
The following provisions in the Articles of Association of the Company relate to our Directors
remuneration and borrowing powers, restrictions on voting powers of our Directors in interested
transactions, shareholders voting rights, consents for variation of class rights and transfer of
shareholdings:
Directors remuneration
Article 79
The ordinary fees of the Directors shall from time to time be determined by an Ordinary Resolution
of the Company and shall not be increased except pursuant to an Ordinary Resolution passed at a
General Meeting where notice of the proposed increase shall have been given in the notice
convening the General Meeting and shall (unless such resolution otherwise provides) be divisible
among the Directors as they may agree, or failing agreement, equally, except that any Director who
shall hold office for part only of the period in respect of which such fees is payable shall be entitled
only to rank in such division for a proportion of fees related to the period during which he has held
office.
Article 80
(A) Any Director who holds any executive office, or who serves on any committee of the Directors,
or who otherwise performs services which in the opinion of the Directors are outside the scope
of ordinary duties of a Director, may be paid such extra remuneration by way of salary,
commission or otherwise as the Directors may determine.
(B) The fees (including any remuneration under Article 80(A) above) in the case of a Director other
than an Executive Director shall be payable by a fixed sum and shall not at any time be by
commission on or percentage of the profits or turnover, and no Director whether an Executive
Director or otherwise shall be remunerated by a commission on or percentage of turnover.
Article 81
The Directors may repay to any Director all such reasonable expenses as he may incur in attending
and returning from meetings of the Directors or of any committee of the Directors or General
Meetings or otherwise in or about the business of the Company.
Article 82
The Directors shall have power to pay and agree to pay pensions or other retirement,
superannuation, death or disability benefits to (or to any person in respect of) any Director for the
time being holding any executive office and for the purpose of providing any such pensions or other
benefits to contribute to any scheme or fund or to pay premiums.
Article 83
A Director may be party to or in any way interested in any contract or arrangement or transaction to
which the Company is a party or in which the Company is in any way interested and he may hold and
be remunerated in respect of any office or place of profit other than the office of Auditor of the
Company or any subsidiary thereof) under the Company or any other company in which the
Company is in any way interested and he (or any firm of which he is a member) may act in a
professional capacity for the Company or any such other company and be remunerated therefor and
in any such case as aforesaid (save as otherwise agreed) he may retain for his own absolute use
and benefit all profits and advantages accruing to him thereunder or in consequence thereof.
Article 84
(A) The Directors may from time to time appoint one or more of their body to be the holder of any
executive office (including, where considered appropriate, the office of Chairman or Deputy
Chairman) on such terms and for such period as they may (subject to the provisions of the
Statutes) determine and, without prejudice to the terms of any contract entered into in any
particular case, may at any time revoke any such appointment.
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(B) The appointment of any Director to the office of Chairman or Deputy Chairman or Managing or
Joint Managing or Deputy or Assistant Managing Director shall automatically determine if he
ceases to be a Director but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
(C) The appointment of any Director to any other executive office shall not automatically determine
if he ceases from any cause to be a Director, unless the contract or resolution under which he
holds office shall expressly state otherwise, in which event such determination shall be without
prejudice to any claim for damages for breach of any contract of service between him and the
Company.
Article 88
The remuneration of a Managing Director shall from time to time be fixed by the Directors and may,
subject to these presents, be by way of salary or commission or participation in profits or by any or
all these modes but he shall not under any circumstances be remunerated by a commission on or
a percentage of turnover.
Borrowing Powers of Directors
Article 109
Subject as hereinafter provided and to the provisions of the Statutes, the Directors may exercise all
the powers of the Company to borrow money, to mortgage or charge its undertaking, property and
uncalled capital and to issue debentures and other securities, whether outright or as collateral
security for any debt, liability or obligation of the Company or of any third party.
Restrictions on Voting Powers of Directors
Article 102
A Director shall not vote in respect of any contract or proposed contract or arrangement or any other
proposal whatsoever in which he has any personal material interest, directly or indirectly. A Director
shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred
from voting.
Shareholders Voting Rights
Article 48
The holders of stock shall, according to the amount of stock held by them, have the same rights,
privileges and advantages as regards dividend, return of capital, voting and other matters, as if they
held the shares from which the stock arose, but no such privilege or advantage (except as regards
participation in the profits or assets of the Company) shall be conferred by an amount of stock which
would not, if existing in shares, have conferred such privilege or advantage; and no such conversion
shall affect or prejudice any preference or other special privileges attached to the shares so
converted.
Article 65
Subject and without prejudice to any special privileges or restrictions as to voting for the time being
attached to any special class of shares for the time being forming part of the capital of the company,
each member entitled to vote may vote in person or by proxy. On a show of hands, every member
who is present in person or by proxy shall have one vote and on a poll, every member who is present
in person or by proxy shall have one vote for every share which he holds or represents. For the
purpose of determining the number of votes which a member, being a Depositor, or his proxy may
cast at any General Meeting on a poll, the reference to shares held or represented shall, in relation
to shares of that Depositor, be the number of shares entered against his name in the Depository
Register as at forty-eight hours before the time of the relevant General Meeting as certified by the
Depository to the Company.
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Article 66
In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person
or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this
purpose, seniority shall be determined by the order in which the names stand in the Register of
Members or (as the case may be) the Depository Register in respect of the share.
Article 67
Where in Singapore or elsewhere, a receiver or other person (by whatever name called) has been
appointed by any court claiming jurisdiction in that behalf to exercise powers with respect to the
property or affairs of any member on the ground (however formulated) of mental disorder, the
Directors may in their absolute discretion, upon or subject to production of such evidence of the
appointment as the Directors may require, permit such receiver or other person on behalf of such
member to vote in person or by proxy at any General Meeting or to exercise any other right conferred
by membership in relation to meetings of the Company.
Article 68
No member shall, unless the Directors otherwise determine, be entitled in respect of shares held by
him to vote at a General Meeting either personally or by proxy or to exercise any other right conferred
by membership in relation to meetings of the Company if any call or other sum presently payable by
him to the Company in respect of such shares remains unpaid.
Article 69
No objection shall be raised as to the admissibility of any vote except at the meeting or adjourned
meeting at which the vote objected to is or may be given or tendered and every vote not disallowed
at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairman
of the meeting whose decision shall be final and conclusive.
Article 70
On a poll, votes may be given personally or by proxy and a person entitled to more than one vote
need not use all his votes or cast all the votes he uses in the same way.
Article 71
(A) A member may appoint not more than two proxies to attend and vote at the same General
Meeting Provided that if the member is a Depositor, the Company shall be entitled and bound:
(a) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares
entered against his name in the Depository Register as at forty-eight hours before the time
of the relevant General Meeting as certified by the Depository to the Company; and
(b) to accept as the maximum number of votes which in aggregate the proxy or proxies
appointed by the Depositor is or are able to cast on a poll a number which is the number
of shares entered against the name of that Depositor in the Depository Register as at
forty-eight hours before the time of the relevant General Meeting as certified by the
Depository to the Company, whether that number is greater or smaller than the number
specified in any instrument of proxy executed by or on behalf of that Depositor.
(B) The Company shall be entitled and bound, in determining rights to vote and other matters in
respect of a completed instrument of proxy submitted to it, to have regard to the instructions (if
any) given by and the notes (if any) set out in the instrument of proxy.
(C) In any case where a form of proxy appoints more than one proxy, the proportion of the
shareholding concerned to be represented by each proxy shall be specified in the form of proxy.
(D) A proxy need not be a member of the Company.
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Article 72
(A) An instrument appointing a proxy shall be in writing in any usual or common form or in any other
form which the Directors may approve and:
(a) in the case of an individual, shall be signed by the appointor or his attorney; and
(b) in the case of a corporation, shall be either given under its common seal or signed on its
behalf by an attorney or a duly authorised officer of the corporation.
(B) The signature on such instrument need not be witnessed. Where an instrument appointing a
proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly
certified copy thereof must (failing previous registration with the Company) be lodged with the
instrument of proxy pursuant to Article 73, failing which the instrument may be treated as
invalid.
Article 73
An instrument appointing a proxy must be left at such place or one of such places (if any) as may
be specified for that purpose in or by way of note to or in any document accompanying the notice
convening the meeting (or, if no place is so specified, at the Office) not less than forty-eight hours
before the time appointed for the holding of the meeting or adjourned meeting or (in the case of a
poll taken otherwise than at or on the same day as the meeting or adjourned meeting) for the taking
of the poll at which it is to be used, and in default shall not be treated as valid. The instrument shall,
unless the contrary is stated thereon, be valid as well for any adjournment of the meeting as for the
meeting to which it relates; Provided that an instrument of proxy relating to more than one meeting
(including any adjournment thereof) having once been so delivered for the purposes of any meeting
shall not be required again to be delivered for the purposes of any subsequent meeting to which it
relates.
Article 74
An instrument appointing a proxy shall be deemed to include the right to demand or join in
demanding a poll, to move any resolution or amendment thereto and to speak at the meeting.
Article 75
A vote cast by proxy shall not be invalidated by the previous death or insanity of the principal or by
the revocation of the appointment of the proxy or of the authority under which the appointment was
made Provided that no intimation in writing of such death, insanity or revocation shall have been
received by the Company at the Office at least one hour before the commencement of the meeting
or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the
meeting or adjourned meeting) the time appointed for the taking of the poll at which the vote is cast.
Class Rights
Article 4
Subject to the Statutes, no shares may be issued by the Directors without the prior approval of the
Company in General Meeting but subject thereto and to Article 8, and to any special rights attached
to any shares for the time being issued, the Directors may allot or grant options over or otherwise
dispose of the same to such persons on such terms and conditions and for such consideration and
at such time and subject or not to the payment of any part of the amount thereof in cash as the
Directors may think fit, and any shares may be issued with such preferential, deferred, qualified or
special rights, privileges or conditions as the Directors may think fit, and preference shares may be
issued which are or at the option of the Company are liable to be redeemed, the terms and manner
of redemption being determined by the Directors, Provided always that:
(a) no shares shall be issued to transfer a controlling interest in the Company without the prior
approval of the members in a General Meeting;
(b) no shares shall be issued at a discount except in accordance with the Statutes;
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(c) (subject to any direction to the contrary that may be given by the Company in a General
Meeting) any issue of shares for cash to members holding shares of any class shall be offered
to such members in proportion as nearly as may be to the number of shares of such class then
held by them and the provisions of the second sentence of Article 8(A) with such adaptations
as are necessary shall apply; and
(d) the rights attaching to shares of a class other than ordinary shares shall be expressed in the
resolution creating the same.
Article 5
(A) In the event of preference shares being issued, the total nominal value of issued preference
shares shall not at any time exceed the total nominal value of the issued ordinary shares and
preference shareholders shall have the same rights as ordinary shareholders as regards
receiving of notices, reports and balance sheets and attending General Meetings of the
Company, and preference shareholders shall also have the right to vote at any meeting
convened for the purpose of reducing the capital or winding-up or sanctioning a sale of the
undertaking of the Company or where the proposal to be submitted to the meeting directly
affects their rights and privileges or when the dividend on the preference shares is more than
six months in arrear.
(B) The Company has power to issue further preference capital ranking equally with, or in priority
to, preference shares already issued.
Variation of Class Rights
Article 6
(A) Whenever the share capital of the Company is divided into different classes of shares, the
special rights attached to any class may, subject to the provisions of the Statutes, be varied or
abrogated either with the consent in writing of the holders of three-quarters in nominal value of
the issued shares of the class or with the sanction of a Special Resolution passed at a separate
General Meeting of the holders of the shares of the class (but not otherwise) and may be so
varied or abrogated either whilst the Company is a going concern or during or in contemplation
of a winding-up. To every such separate General Meeting, all the provisions of these presents
relating to General Meetings of the Company and to the proceedings thereat shall mutatis
mutandis apply, except that the necessary quorum shall be two persons at least holding or
representing by proxy at least one-third in nominal value of the issued shares of the class and
that any holder of shares of the class present in person or by proxy may demand a poll and that
every such holder shall on a poll have one vote for every share of the class held by him,
Provided always that where the necessary majority for such a Special Resolution is not
obtained at such General Meeting, consent in writing if obtained from the holders of
three-quarters in nominal value of the issued shares of the class concerned within two months
of such General Meeting shall be as valid and effectual as a Special Resolution carried at such
General Meeting. The foregoing provisions of this Article shall apply to the variation or
abrogation of the special rights attached to some only of the shares of any class as if each
group of shares of the class differently treated formed a separate class the special rights
whereof are to be varied.
(B) The repayment of preference capital other than redeemable preference capital, or any
alteration of preference shareholders rights, may only be made pursuant to a Special
Resolution of the preference shareholders concerned Provided Always that where the
necessary majority for such a Special Resolution is not obtained at the General Meeting,
consent in writing if obtained from the holders of three-fourths of the preference shares
concerned within two months of the General Meeting, shall be as valid and effectual as a
special resolution carried at the General Meeting.
(C) The special rights attached to any class of shares having preferential rights shall not, unless
otherwise expressly provided by the terms of issue thereof, be deemed to be varied by the
creation or issue of further shares ranking as regards participation in the profits or assets of the
Company in some or all respects pari passu therewith but in no respect in priority thereto.
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Transfer of Shares
Article 36
All transfers of the legal title in shares may be effected by the registered holders thereof by transfer
in writing in the form for the time being approved by any Stock Exchange upon which the Company
may be listed or any other form acceptable to the Directors. The instrument of transfer of any share
shall be signed by or on behalf of both the transferor and the transferee and be witnessed Provided
that an instrument of transfer in respect of which the transferee is the Depository shall be effective
although not signed or witnessed by or on behalf of the Depository. The transferor shall remain the
holder of the shares concerned until the name of the transferee is entered in the Register of
Members in respect thereof.
Article 37
The Register of Members may be closed at such times and for such period as the Directors may from
time to time determine Provided always that such Register shall not be closed for more than thirty
days in any year Provided always that the Company shall give prior notice of such closure as may
be required to any Stock Exchange upon which the Company may be listed, stating the period and
purpose or purposes for which the closure is made.
Article 38
(A) There shall be no restriction on the transfer of fully paid up shares (except where required by
law, the listing rules of any Stock Exchange upon which the shares of the Company may be
listed or the rules and/or bye-laws governing any Stock Exchange upon which the shares of the
Company may be listed) but the Directors may in their discretion decline to register any transfer
of shares upon which the Company has a lien and in the case of shares not fully paid up, may
refuse to register a transfer to a transferee of whom they do not approve Provided always that
in the event of the Directors refusing to register a transfer of shares, they shall within one month
beginning with the day on which the application for a transfer of shares was made, serve a
notice in writing to the applicant stating the facts which are considered to justify the refusal as
required by the Statutes.
(B) The Directors may in their sole discretion refuse to register any instrument of transfer of shares
unless:
(a) all or any part of the stamp duty (if any) payable on each share certificate and such fee not
exceeding $2 as the Directors may from time to time require pursuant to Article 41, is paid
to the Company in respect thereof;
(b) the instrument of transfer is deposited at the Office or at such other place (if any) as the
Directors may appoint accompanied by the certificates of the shares to which it relates,
and such other evidence as the Directors may reasonably require to show the right of the
transferor to make the transfer and, if the instrument of transfer is executed by some other
person on his behalf, the authority of the person so to do;
(c) the instrument of transfer is in respect of only one class of shares; and
(d) the amount of the proper duty with which each share certificate to be issued in
consequence of the registration of such transfer is chargeable under any law for the time
being in force relating to stamps is tendered.
Article 39
If the Directors refuse to register a transfer of any shares, they shall within one month after the date
on which the transfer was lodged with the Company send to the transferor and the transferee notice
of the refusal as required by the Statutes.
Article 40
All instruments of transfer which are registered may be retained by the Company.
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Article 41
There shall be paid to the Company in respect of the registration of any instrument of transfer or
probate or letters of administration or certificate of marriage or death or stop notice or power of
attorney or other document relating to or affecting the title to any shares or otherwise for making any
entry in the Register of Members affecting the title to any shares such fee not exceeding $2 as the
Directors may from time to time require or prescribe.
Article 42
The Company shall be entitled to destroy all instruments of transfer which have been registered at
any time after the expiration of six years from the date of registration thereof and all dividend
mandates and notifications of change of address at any time after the expiration of six years from the
date of recording thereof and all share certificates which have been cancelled at any time after the
expiration of six years from the date of the cancellation thereof and it shall conclusively be presumed
in favour of the Company that every entry in the Register of Members purporting to have been made
on the basis of an instrument of transfer or other document so destroyed was duly and properly made
and every instrument of transfer so destroyed was a valid and effective instrument duly and properly
registered and every share certificate duly and properly cancelled and every other document
hereinbefore mentioned so destroyed was a valid and effective document in accordance with the
recorded particulars thereof in the books or records of the Company; Provided always that:
(a) the provisions aforesaid shall apply only to the destruction of a document in good faith and
without notice of any claim (regardless of the parties thereto) to which the document might be
relevant;
(b) nothing herein contained shall be construed as imposing upon the Company any liability in
respect of the destruction of any such document earlier than as aforesaid or in any other
circumstances which would not attach to the Company in the absence of this Article; and
(c) references herein to the destruction of any document include references to the disposal thereof
in any manner.
Article 47
The holders of stock may transfer the same or any part thereof in the same manner and subject to
the same Articles and subject to which the shares from which the stock arose might previously to
conversion have been transferred (or as near thereto as circumstances admit) but no stock shall be
transferable except in such units (not being greater than the nominal amount of the shares from
which the stock arose) as the Directors may from time to time determine.
4. BANK BORROWINGS
Save as disclosed in the section on REVIEW OF FINANCIAL POSITION on pages 47 to 50 of this
Prospectus and in Accountants Report on pages 90 and 91 of this Prospectus, we do not have any
bank borrowings at 31 December 1999.
5. WORKING CAPITAL
Our Directors are of the opinion that, after taking into account its existing banking facilities and the
net proceeds of the New Shares, our Group has sufficient working capital for its present operating
requirements.
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6. UNDERWRITING AND PLACEMENT ARRANGEMENTS
(a) Pursuant to the Management and Underwriting Agreement dated 17 July 2000, OCBC Bank
has agreed to underwrite the Offer Shares for an underwriting commission of 1.5 per cent. of
the Offer Price of the Offer Shares. The underwriting commission will be paid by the Company
and the Vendor in the proportion borne by the number of Offer Shares each has offered
pursuant to the Invitation to the total number of Offer Shares offered pursuant to the Invitation.
In addition, OCBC Bank will receive a fee for its services as Manager in connection with the
Invitation.
(b) Pursuant to the Placement Agreement dated 17 July 2000, OCBC Bank agreed to subscribe for
or purchase, or procure the subscription for or purchase of, the Placement Shares for a
placement commission of 1.5 per cent. of the Placement Price of the Placement Shares, to be
paid by the Company and the Vendor in the proportion borne by the number of Placement
Shares each has offered pursuant to the Invitation to the total number of Placement Shares
offered pursuant to the Invitation. The Placement Price is $0.47 for the Reserved Shares and
$0.52 for the remaining Placement Shares.
(c) Brokerage will be paid by the Company and the Vendor, in the proportion borne by the number
of Invitation Shares each has offered pursuant to the Invitation to the total number of Invitation
Shares offered pursuant to the Invitation, to members of the SGX-ST, merchant banks in
Singapore and members of the Association of Banks in Singapore (including OCBC Bank) in
respect of accepted applications made on Application Forms bearing their respective stamps,
or to Participating Banks in respect of successful applications made through Electronic
Applications at ATMs of the relevant Participating Banks, at the rate of 1.0 per cent. of the Offer
Price for the Offer Shares and at a rate of 1.0 per cent. of the Placement Price for the Placement
Shares.
(d) The Management and Underwriting Agreement may be terminated by OCBC Bank at any time
on or prior to the close of the Application List on the occurrence of certain events including, inter
alia, changes in political, financial, monetary or economic conditions in Singapore or abroad
which result, inter alia, in the Singapore stock market and/or stock market overseas being
materially and adversely affected.
In the event the Management and Underwriting Agreement is terminated for any reason, the
Company and the Vendor reserve the right, at their absolute discretion, to cancel the Invitation.
(e) The Placement Agreement is conditional upon the Management and Underwriting Agreement
not having been terminated or rescinded pursuant to the provisions of the Management and
Underwriting Agreement.
7. CONSENTS
(a) The Auditors and Reporting Accountants have given and have not withdrawn their written
consent to the issue of this Prospectus with the inclusion of the Accountants Report and their
name in the form and context in which they are included in this Prospectus and references
thereto in the form and context in which they appear in this Prospectus and to act in such
capacities in relation to this Prospectus.
(b) The Manager, Underwriter and Placement Agent, Solicitors to the Invitation, Principal Bankers
and Share Registrar have each given and have not withdrawn their respective written consents
to the issue of this Prospectus with the inclusion of their respective names and references
thereto in the form and context in which they respectively appear in this Prospectus and to act
in such capacities in relation to this Prospectus.
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8. MATERIAL CONTRACTS
The dates of, parties to, and general nature of all material contracts, not being contracts our Group
had entered into in the ordinary course of our business, within the two years preceding the date of
issue of this Prospectus are as follows:
(a) Merger Agreement dated 16 November 1998 between Osim (Taiwan) and Osim International
Co., Ltd. whereby Osim (Taiwan) purchased the entire undertaking of Osim International Co.,
Ltd. and issued 500,000 new shares of par value NT$10 each as consideration;
(b) Reconstruction Agreements dated 9 December 1999, 31 December 1999 and 25 February
2000 between the Company and Dr Ron Sim Chye Hock whereby the Company acquired the
interests of Dr Ron Sim Chye Hock in Osim (Taiwan), Osim (HK) and Osim (Msia) respectively
as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus and as
amended by the Supplemental Agreement dated 31 March 2000;
(c) Lease Agreement dated 30 December 1999 entered between the Company and Osim (Beijing)
whereby the Company leased out its property at 6 Xuanwumenwai Street, Junefield Plaza
Tower 1, 15th Floor, unit 1526 and 1527, Beijing, PRC for a period of 2 years at a monthly rental
of RMB17,000;
(d) Reconstruction Agreement dated 31 December 1999 between the Company and Ms Teo Sway
Heong whereby the Company acquired the interest of Ms Teo Sway Heong in Osim (HK) as part
of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus and as amended
by the Supplemental Agreement dated 31 March 2000;
(e) Sale and Purchase Agreement dated 18 February 2000 between the Company and Mr Leow
Lian Soon whereby the Company acquired the interest of Mr Leow Lian Soon in Osim (Taiwan)
as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;
(f) Sale and Purchase of Property Agreement dated 3 March 2000 between the Company and Dr
Ron Sim Chye Hock whereby the Company purchased Unit 8C, 1523-2 Dong Fang Road,
Pudong New Development Zone, Shanghai, PRC from Dr Ron Sim Chye Hock for the
consideration of RMB790,000;
(g) Sale and Purchase Agreement dated 20 March 2000 between the Company and Ms Tan Poh
Khim whereby the Company acquired the interest of Ms Tan Poh Khim in Osim (HK) as part of
the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;
(h) Joint Venture Agreement dated 24 March 2000 between the Company and Daito Electric
Machine Industry Company Limited to regulate their relationship as shareholders of Daito-Osim
(Suzhou);
(i) Sale and Purchase Agreement dated 8 May 2000 between the Company and Mr Chen Chuan
I whereby the Company acquired the interest of Mr Chen Chuan I in Osim (Taiwan) as part of
the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;
(j) Sale and Purchase Agreement dated 8 May 2000 between the Company and Ms Ho Jui Mei
whereby the Company acquired the interest of Ms Ho Jui Mei in Osim (Taiwan) as part of the
Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus;
(k) Two Call Option Agreements both dated 8 May 2000 between Dr Ron Sim Chye Hock and the
Company whereby Dr Ron Sim Chye Hock granted the Company call options over his shares
of Osim (USA) and Osim (Thai) respectively as disclosed on page 65 of this Prospectus;
(l) Call OptionAgreement dated 8 May 2000 between Mr Teo Chay Lee and the Company whereby
Mr Teo Chay Lee granted the Company call options over his shares of Osim (Thai) as disclosed
on page 65 of this Prospectus;
(m) Call Option Agreement dated 8 May 2000 between Ms Han Shu Nong and the Company
whereby Ms Han Shu Nong granted the Company call options over her shares of HCC
(Langfang) as disclosed on pages 66 and 67 of this Prospectus;
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(n) Call Option Agreement dated 8 May 2000 between Mr Wang Bang Zhi and the Company
whereby Mr Wang Bang Zhi granted the Company call options over his shares of Osim GHC
(SH) as disclosed on pages 66 and 67 of this Prospectus;
(o) Call Option Agreement dated 10 May 2000 between Mr Chandra Makmuri and the Company
whereby Mr Chandra Makmuri granted the Company call options over his shares of PT Sharon
as disclosed on page 66 of this Prospectus;
(p) Sale and Purchase Agreement dated 12 May 2000 between the Company and GBI Realty Pte
Ltd whereby the Company purchased from GBI Realty Pte Ltd the land at Ubi Avenue 1,
Singapore as disclosed on page 45 of this Prospectus;
(q) Two Call Option Agreements both dated 19 May 2000 between Ms Tao Dong Mei and the
Company whereby Ms Tao Dong Mei granted the Company call options over her shares of
Osim GHC (SH) and HCC (Langfang) respectively as disclosed on pages 66 and 67 of this
Prospectus;
(r) Call Option Agreement dated 19 May 2000 between Osim GHC (SH) and the Company
whereby Osim GHC (SH) granted the Company call options over its shares of Osim (Beijing)
as disclosed on pages 66 and 67 of this Prospectus;
(s) Call Option Agreement dated 19 May 2000 between HCC (Langfang) and the Company
whereby HCC (Langfang) granted the Company call options over its shares of Osim (Beijing)
as disclosed on pages 66 and 67 of this Prospectus;
(t) Call Option Agreement dated 22 June 2000 between Mr Krit Suktachan and the Company
whereby Mr Krit Suktachan granted the Company call options over his shares of Osim (Thai)
as disclosed on page 65 of this Prospectus;
(u) the Subscription Agreement dated 17 July 2000 between the Company, Dr Ron Sim Chye Hock
and Investor;
(v) a depository agreement dated 17 July 2000 between the Company and CDP, pursuant to which
CDP agreed to act as share depository for the Companys securities traded through the
SGX-ST;
(w) the Management and Underwriting Agreement referred to in paragraph 6 on page 107 of this
Prospectus; and
(x) the Placement Agreement referred to in paragraph 6 on page 107 of this Prospectus.
9. LITIGATION
We are not engaged in any litigation as plaintiff or defendant in respect of any claims or amounts
which are material in the context of the Invitation and our Directors have no knowledge of any
proceedings pending or threatened against ourselves or any facts likely to give rise to any litigation,
claims or proceedings which might materially affect the financial position of our business.
109
10. SUBSTANTIAL SHAREHOLDERS
Our substantial Shareholders and their interests in the Shares as at the date of this Prospectus are
as follows:
Direct Interest Indirect Interest Total Interest
Number of
Shares %
Number of
Shares %
Number of
Shares %
Ron Sim Chye Hock 178,615,800
(1)
92.7 1,804,200
(2)
0.9 180,420,000 93.6
Teo Sway Heong 1,804,200 0.9 178,615,800
(1)(2)
92.7 180,420,000 93.6
Investor 11,600,000 6.0 11,600,000 6.0
Notes:
(1) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo Chay
Lee, Mr Leow Lian Soon, Ms Lim Choon Hui and Mr Chiang See Thong respectively by way of a gift as a token of
appreciation of their contributions to our Group, such transfers to be completed immediately after the Invitation is
completed.
(2) Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Their respective deemed interest consists of
their interest in the shares held by the other.
11. MISCELLANEOUS
(a) The nature of our business is set out on pages 29 to 34 of this Prospectus. As at the date of
this Prospectus, all the corporations deemed to be related to us by virtue of Section 6 of the
Act are set out in the Accountants Report on page 74 of this Prospectus.
(b) Save as disclosed in this Prospectus, our Directors are not aware of any material information,
including trading factors or risks which is unlikely to be known or anticipated by the general
public and which could materially affect our Groups profits.
(c) Save as disclosed in this Prospectus, the financial condition and operations of our Group are
not likely to be affected by any of the following:
(i) known trends, demands, commitments, events or uncertainties that will result in or are
reasonably likely to result in the liquidity of our Group increasing or decreasing in any
material way;
(ii) material commitments for capital expenditure;
(iii) any significant economic changes, unusual or infrequent events or transactions that will
materially affect the amount of reported income from operations; and
(iv) known trends or uncertainties that have had or are expected to have a material
favourable or unfavourable impact on revenues or operating income.
(d) The amount payable on application is $0.52 for each Offer Share and Placement Share and
$0.47 for each Reserved Share. There has been no previous issue of shares by us, or offer
for sale of its shares, to the public within the two years preceding the date of this Prospectus.
(e) Application monies received by us and the Vendor in respect of all applications will be placed
in a separate non-interest bearing account with OCBC Bank (the Receiving Bank). Any
refund of all or part of the application monies to unsuccessful or partially successful applicants
will be made without interest or any share of such revenue or any benefit arising therefrom.
(f) The estimated amount of the expenses of the Invitation and of the application for the listing,
including underwriting and placement commission, brokerage, management fee and all other
incidental expenses in relation to the Invitation, is approximately $2.0 million. Other than
brokerage, underwriting and placement commission which will be paid by us and the Vendor
in the proportion borne by the number of Invitation Shares each has offered pursuant to the
Invitation to the total number of Invitation Shares offered pursuant to the Invitation, the listing
and other incidental fees payable to the SGX-ST for the listing application, and the expenses
of the Invitation will be paid by us. No preliminary expenses have been incurred or are payable
by any person in relation to this Invitation.
110
(g) No commission, discount or brokerage has been paid or other special terms granted within the
preceding two years or is payable to any of our Directors, promoter, expert, proposed Director
or any other person for subscribing or agreeing to subscribe, or procuring or agreeing to
procure subscription, for any of our Shares or debentures or any shares in or debentures of
any of our subsidiaries.
(h) No amount, benefit, cash or securities has been paid or given within the two years preceding
the date of this Prospectus or is intended to be paid or given to any promoter.
(i) The time of opening of the Application List is 10.00 a.m. on 27 July 2000.
(j) There is no minimum amount which, in the opinion of our Directors, must be raised by the
Invitation in order to provide for the following items:
(i) the purchase price of any property purchased or to be purchased which is to be defrayed
in whole or in part out of the proceeds of the Invitation;
(ii) any preliminary expenses payable by us and any commission so payable to any person
in consideration of his agreeing to subscribe for, or of his procuring or agreeing to
procure subscriptions for, our Shares;
(iii) the repayment of any money borrowed by us in respect of any of the foregoing matters;
and
(iv) working capital.
Although no minimum amount must be raised from the Invitation in order to provide for the
items set out above, the amount to be provided for those items is proposed to be provided out
of the proceeds of the Invitation and/or out of other sources of funding including banking
facilities and the issuance of securities.
(k) Save as disclosed under Use of Proceeds on page 11 of this Prospectus and under Future
Plans New Corporate Headquarters on page 45 of this Prospectus, no property has been
purchased or acquired by us or our subsidiaries or is proposed to be so purchased or acquired
which is to be paid for wholly or partly out of the proceeds of the Invitation or the purchase or
acquisition of which has not been completed at the date of the issue of this Prospectus, other
than property the contract for the purchase or acquisition whereof was entered into in the
ordinary course of our business or the business of our subsidiaries, the contract not being
made in contemplation of the Invitation nor the Invitation in consequence of the contract.
(l) Our Directors currently have no intention of changing the auditors of the various companies in
our Group after the Invitation or appointing another firm of accountants as joint auditors of the
Company or the various companies in our Group.
(m) No Shares or debentures shall be allotted on the basis of this Prospectus later than 6 months
after the date of issue of this Prospectus.
12. STATEMENT BY THE DIRECTORS AND THE VENDOR
This Prospectus has been seen and approved by the Directors and the Vendor and they collectively
and individually accept full responsibility for the accuracy of the information given in this Prospectus
and confirm that, having made all reasonable enquiries, to the best of their knowledge and belief
this Prospectus constitutes a full and true disclosure of all the material facts about the Invitation and
the Group, and the facts stated and opinions expressed in this Prospectus are fair and accurate in
all material respects as at the date hereof and that there are no other material facts the omission
of which would make any statements herein misleading.
111
13. STATEMENT BY THE MANAGER
OCBC Bank, as the Manager, confirms that, to the best of its knowledge and belief and based on
information made available to it by the Group, this Prospectus constitutes a full and true disclosure
of all the material facts about the Invitation and the Group and it is not aware of any other facts, the
omission of which will make any statements herein misleading.
14. DOCUMENTS FOR INSPECTION
Copies of the following documents may be inspected at the registered office of the Company during
normal business hours for a period of six months from the date of this Prospectus:
(a) the Memorandum and Articles of Association of the Company;
(b) the Directors Report as set out on page 71 of this Prospectus;
(c) the Accountants Report as set out on pages 72 and 94 of this Prospectus;
(d) the letters of consent referred to in paragraph 7 on page 107 of this Prospectus;
(e) the material contracts referred to in paragraph 8 on pages 108 and 109 of this Prospectus; and
(g) the audited accounts of each company in the Group for each of the last two financial years
ended 31 December 1999.
112
APPENDIX A
SUMMARY OF THE PRINCIPAL TERMS OF
OSIM SHARE OPTION SCHEME (THE SCHEME)
The following is a summary of the principal terms of the Scheme and is qualified in its entirety by
reference to the rules of the Scheme (the Rules) as set out on pages 118 to 135. Capitalised terms
used in this summary which are not otherwise defined in this summary bear the same meaning as
ascribed to them in the Rules.
1. Scope
The Scheme covers eligible Employees, Executive and Non-Executive Directors of the Company, its
subsidiaries or associated companies (the Group) who are Employees (each, a Participant).
2. Administration
(i) This Scheme shall be administered by the Committee in its absolute discretion with such
powers and duties as are conferred on it by the Board of Directors.
(ii) The Committee shall have the power, from time to time, to make or vary such regulations (not
being inconsistent with this Scheme) for the implementation and administration of this Scheme
as it thinks fit.
(iii) Any decision of the Committee, made pursuant to any provision of this Scheme (other than a
matter to be certified by the Auditors), shall be final and binding (including any decisions
pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or
procedure thereunder or as to any rights under the Scheme).
(iv) AGrantee who is a member of the Committee shall not be involved in its deliberation in respect
of Options to be granted to him.
3. Eligibility
Directors (both Executive and Non-Executive) of the Company, other than Dr Ron Sim Chye Hock
and Ms Teo Sway Heong, and full-time confirmed employees of the Group, who have attained the
age of twenty-one (21) years on or prior to the relevant Offer Date and are not undischarged
bankrupts and who have not entered into a composition with their respective creditors, shall be
eligible to participate in the Scheme, at the absolute discretion of the Committee. The employees
must have been in the full-time service of the Group (as the case may be).
Notwithstanding the above, Controlling Shareholders and their associates are not eligible to
participate in the Scheme.
4. Size of the Scheme
The aggregate nominal amount of Shares over which the Committee may grant Options on any date,
when added to the nominal amount of Shares issued and issuable in respect of all Options granted
under the Scheme, shall not exceed fifteen (15) per cent. of the issued share capital of the Company
on the day preceding that date.
5. Entitlement
Subject to Rule 4 and Rule 10, the aggregate number of Shares in respect of which Options may be
offered to a Participant for subscription in accordance with the Scheme shall be determined at the
discretion of the Committee which shall take into account (where applicable) criteria such as the rank
and responsibilities within the Group, performance, years of service and potential for future
development of the Grantee, and the performance of the Group.
113
6. Grant of Options
The Committee may, save as provided in Rule 4, Rule 5 and Rule 6, offer to grant Options to such
Grantees as it may select in its absolute discretion at any time during the period when the Scheme
is in force, except that no Options shall be granted during the period of 30 days immediately
preceding the date of announcement of the Companys interim and/or final results (whichever the
case may be). In addition, in the event that an announcement on any matter of an exceptional nature
involving unpublished price sensitive information is made, offers to grant Options may only be made
on or after the third Trading Day on which such announcement is released.
7. Acceptance of Offer
Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged,
transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part
or in any way whatsoever unless approved in writing by the Committee. The grant of an Option by
the Committee to a Grantee shall be accepted within thirty (30) days after the relevant Offer Date.
Upon acceptance of the Option, the Grantee to whom it is granted will pay to the Company a
consideration of S$1.00. Any offer which is not accepted shall, upon the expiry of the thirty (30) days
period, automatically lapse and shall be null and void and of no effect.
8. Exercise Price
(a) Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect of
which an Option is exercisable shall be determined by the Committee at its absolute discretion,
and fixed by the Committee at:
(i) a price (the Market Price) equal to the average of the last dealt prices for a Share, as
determined by reference to the Financial News or other publication published by the
SGX-ST for the 3 consecutive trading days immediately preceding the Offering Date of that
Option, rounded up to the nearest whole cent in the event of fractional prices; or
(ii) a price which is set at a discount to the Market Price, provided that:
(1) the maximum discount shall not exceed 20 per cent. of the Market Price (or such
other percentage or amount as may be determined by the Committee and permitted
by the SGX-ST); and
(2) the Shareholders of the Company in general meeting shall have authorised the
making of offers and grants of Options under the Scheme at a discount not exceeding
the maximum discount as aforesaid.
(b) Where the Exercise Price as determined above is less than the par value of the Share, the
Exercise Price shall be the par value.
9. Alteration of Capital
If a variation in the issued share capital of the Company occurs (whether by way of a capitalisation
of profits or rights issue or reduction (including any reduction arising by reason of the Company
purchasing or acquiring its issued Shares), subdivision or consolidation or distribution or issues for
cash or for shares or otherwise than for cash, or otherwise howsoever), the Exercise Price in respect
of Shares comprised in an Option to the extent unexercised and/or the nominal value, class and/or
number of Shares comprised in an Option to the extent unexercised and the rights attached thereto,
or in respect of which additional Options may be granted to Participants under the Scheme and/or
the maximum entitlement in any Financial Year, may, at the option of the Committee, be adjusted in
such manner as the Committee may determine to be appropriate and, except in relation to a
capitalisation issue, upon the written confirmation of the Auditors (acting only as experts and not as
arbitrators) that in their opinion, such adjustment is fair and reasonable.
114
Provided always no such adjustment shall be made (i) which would result in the Shares to be issued
upon the exercise of an Option being issued at a discount to the nominal value and if such an
adjustment would but for this sub-Clause have so resulted, the Exercise Price payable shall be the
nominal value of a Share, (ii) if, as a result, the number of Shares which a Participant shall be
entitled to subscribe for pursuant to the exercise of Options granted to him shall be reduced and
(iii) unless the Committee after considering all relevant circumstances, considers it equitable to do
so. The issue of securities as consideration for an acquisition of any assets by the Company will not
be regarded as a circumstance requiring adjustment. Additionally, the cancellation of issued Shares
purchased or acquired by the Company during the period when a share purchase mandate (or any
renewal thereof) granted by the Shareholders of the Company is in force by way of a market
purchase of such Shares undertaken by the Company on the SGX-ST shall not normally be
regarded as a circumstance requiring adjustment unless the Committee considers an adjustment
to be appropriate or determines that an adjustment should be made, having regard to market
purchases of Shares undertaken by the Company from time to time during the time the share
purchase mandate (or any renewal thereof) is in force.
10. Option Period
(a) An Option shall only be exercisable, in whole or in part (provided that an Option may be
exercised in part only in respect of 1,000 Shares or any multiple thereof unless the number of
remaining Options held by the Participant correspond to less than 1,000 Shares), at any time,
by a Participant after the first anniversary of the Offer Date during the Option Period, provided
always that Options granted to Executive Directors and other than Employees (other than
Employees of Associated Companies) shall be exercised before the tenth anniversary of the
relevant Offer Date and Options granted to Non-Executive Directors or to Employees of
Associated Companies shall be exercised before the fifth anniversary of the relevant Offer
Date, or such earlier date as may be determined by the Committee, failing which all
unexercised Options shall immediately lapse and become null and void and a Participant shall
have no claim against the Company.
(b) In respect of Options with the Exercise Price set at a discount to Market Price, subject to the
condition that no Options shall be exercisable prior to the second anniversary of the Offer Date
of that Option, the Options granted to Executive Directors and other than Employees (other
than Employees of Associated Companies) shall be exercisable on such terms as may be
determined by the Committee, provided always that all the Options shall be exercised before
the tenth anniversary of the relevant Offer Date and Options granted to Non-Executive
Directors or Employees of Associated Companies shall be exercised before the fifth
anniversary of the relevant Offer Date, or such earlier date as may be determined by the
Committee, failing which all unexercised Options shall immediately lapse and become null and
void and a Participant shall have no claim against the Company.
(c) Special provisions deal with the lapse or earlier exercise of Options in circumstances which
include:
(i) the termination of the Employees employment;
(ii) the bankruptcy of the Grantee or the entering into a composition with the Grantees
creditors;
(iii) the termination of an Executive Directors employment;
(iv) the misconduct of the Grantee;
(v) the death of the Grantee;
(vi) a take-over of the Company;
(vii) the winding up of the Company;
(viii) the reconstruction of the Company; and
(ix) the amalgamation of the Company with another company.
115
11. Rights of New Shares
Shares which are allotted on the exercise of an Option by a Grantee shall be issued, as the Grantee
may elect, in the name of CDP to the credit of the securities account of the Grantee maintained with
CDP or the Grantees securities sub-account with a CDP Depository Agent or in the name of the
Grantee.
Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the
Memorandum and Articles of Association of the Company and shall rank pari passu in all respects
with the then existing issued Shares in the capital of the Company except for any dividends, rights,
allotments or other distributions, the record date of which is prior to the date on which such an
Option is exercised. For this purpose, record date means the date as at the close of business on
which Shareholders must be registered in order to participate in any dividends, rights, allotments
or other distributions (as the case may be).
12. Alterations and Modifications to the Scheme
Subject to the approval of the SGX-ST (and any other stock exchange on which the Shares may
be listed or quoted) and such other regulatory authorities as may be necessary, the provisions of
the Scheme may be amended from time to time by a resolution of the Committee provided that any
amendment which shall alter adversely the rights attached to any Option and which (in the opinion
of the Committee) materially alters the rights attached to the Options granted prior to such
amendment shall only be effected, with the consent in writing of such number of Participants who,
if they exercised their Options in full, would thereby become entitled to not less than three-quarters
(
3
4) in nominal amount of all the Shares which would have to be issued and allotted upon the
exercise in full of all outstanding Options, nor shall any modification or alteration be made to the
advantage of Participants except with the prior approval of Shareholders at a general meeting
provided always the Committee may at any time by resolution (and without any other formality, save
for the prior approval of the SGX-ST) amend or alter the Scheme in any way to the extent
necessary to cause the Scheme to comply with any statutory provision or the provisions or the
regulations of any regulatory or other relevant authority or body (including the SGX-ST).
13. Duration of the Scheme
The Scheme shall continue to be in force at the discretion of the Committee, subject to a maximum
period of ten years, commencing on the date on which the Scheme is adopted by Shareholders in
the Extraordinary General Meeting. Subject to compliance with any applicable laws and regulations
in Singapore, the Scheme may be continued beyond the above-stipulated period with the approval
of the Shareholders in a general meeting and of any relevant authorities which may then be
required.
14. Disclosure in Annual Report
The Company shall make the following disclosure in its annual report:
(a) The names of the members of the Committee;
(b) The information required in the table below for the following Participants:
(i) Directors of the Company;
(ii) Participants, other than those in sub-paragraph (b)(i) and (ii) above, who receive five (5)
per cent. or more of the total number of Options available under the Scheme; and
116
(iii) The number and proportion of options granted at a discount of less than 10% and
options granted at a discount of more than 10% during the financial year under review:
Name of
Participant
Options
granted
during
financial year
under review
(including
terms)
Aggregate
Options granted
since
commencement
of Scheme to
end of financial
year under
review
Aggregate
Options
exercised since
commencement
of Scheme to
end of financial
year under
review
Aggregate
Options
outstanding
as at end of
financial year
under review
117
RULES OF THE OSIM SHARE OPTION SCHEME
1. DEFINITIONS
In this Scheme, unless the context otherwise requires, the following words and expressions shall
have the following meanings:
Act The Companies Act, Chapter 50 of Singapore, as amended or
modified from time to time.
Associated Company A company which the Company has control over and in which at
least twenty (20) per cent. but not more than fifty (50) per cent. of
its shares are held by the Company.
Auditors The auditors of the Company for the time being.
Board The Board of Directors of the Company for the time being.
CDP The Central Depository (Pte) Limited.
Committee A committee of Directors who is duly authorised and appointed by
the Board pursuant to Rule 15 to administer the Scheme.
Company Osim International Ltd.
Control The capacity to dominate decision making, directly or indirectly, in
relation to the financial and operating policies of the Company.
Controlling Shareholder A Shareholder exercising control over the Company and unless
rebutted, a person who controls directly or indirectly a
shareholding of fifteen (15) per cent. or more of the Companys
issued share capital shall be presumed to be a Controlling
Shareholder of the Company.
Director A person holding office as a director for the time being of the
Company.
Employee Any full-time confirmed employee of the Group selected by the
Committee to participate in the Scheme in accordance with Rule
4.
Executive Director A Director who is a full-time employee of the Company and who
performs an executive function.
Exercise Price The price at which a Participant shall subscribe for each Share
upon the exercise of an Option, as determined in accordance with
Rule 8, or such adjusted price as may be applicable pursuant to
Rule 9.
EGM Extraordinary General Meeting.
Grantee Any Employee or Director of the Company who is eligible to
participate in the Scheme in accordance with Rule 4,
notwithstanding that such Employee or Director of the Company is
a Controlling Shareholder.
Group The Company, its Subsidiaries and its Associated Companies (as
they may exist from time to time).
Incentive Option The right to subscribe for Shares granted pursuant to the Scheme
and for the time being subsisting, and in respect of which the
Subscription Price is determined in accordance with Rule 8.1(ii).
Market Day A day on which the SGX-ST is open for trading of shares.
118
Market Price Option The right to subscribe for Shares granted pursuant to the Scheme
and for the time being subsisting, and in respect of which the
Subscription Price is determined in accordance with Rule 8.1(i).
Non-Executive Director A Director who is not an Executive Director.
Offer Date The date on which an offer to grant an Option is made.
Option An Incentive Option or a Market Price Option, as the case may be.
Option Period Subject as provided in Rules 11 and 14, the period for the exercise
of an Option being:
(a) in the case of a Market Price Option, a period commencing
after the first anniversary of the Offer Date and expiring not
later than the tenth anniversary of such Offer Date, subject to
the provisions of the Act, Rules 10 and 11, any other
applicable law or regulation and any other conditions as may
be introduced by the Committee from time to time; and
(b) in the case of an Incentive Option, a period commencing
after the second anniversary of the Offer Date and expiring
not later than the tenth anniversary of such Offer Date,
subject to the provisions of the Act, Rules 10 and 11, any
other applicable law or regulation and any other conditions
as may be introduced by the Committee from time to time.
provided that where the Option is granted to a Non-Executive
Director or to Employees of Associated Companies, the Option
shall expire not later than the fifth anniversary of the Offer Date.
Participant A holder of an Option.
SGX-ST Singapore Exchange Securities Trading Limited.
Scheme The Osim Share Option Scheme as amended from time to time.
Shares Ordinary shares of S$0.05 each in the capital of the Company.
Shareholders The registered holders for the time being of the Shares (other than
the CDP) or in the case of Depositors, Depositors who have
Shares entered against their names in the Depository Register.
Subsidiary A company which is for the time being a subsidiary of the
Company as defined by Section 5 of the Act.
Trading Day A day on which the Shares are traded on the SGX-ST.
$ or S$ Singapore dollars.
The terms Depositor, Depository Register and Depository Agent shall have the meanings
ascribed to them respectively by Section 130A of the Act.
The terms associate shall have the meaning ascribed to it by the Singapore Exchange Securities
Trading Limited Listing Manual which is defined to include an immediate family member (that is, the
spouse, child, adopted child, step-child, sibling or parent) of such director, chief executive officer or
substantial shareholder, the trustees, acting in their capacity as such trustees, of any trust of which
the director, chief executive officer or substantial shareholder or his immediate family is a beneficiary
or, in the case of a discretionary trust, is a discretionary object and any company in which the
director/his immediate family, the chief executive officer/his immediate family or substantial
shareholder/his immediate family has an aggregate interest (directly or indirectly) of 25 per cent. or
more, and, where a substantial shareholder is a corporation, its subsidiary or holding company or
fellow subsidiary or a company in which it and/or they have (directly or indirectly) an interest of 25
per cent or more.
119
Words denoting the singular shall, where applicable, include the plural and vice versa and words
denoting the masculine gender shall, where applicable, include the feminine and neuter gender.
References to persons shall include corporations.
Any reference in the Scheme to any enactment is a reference to that enactment as for the time being
amended or re-enacted. Any word defined under the Act or any statutory modification thereof and
used in this Scheme shall, where applicable, have the same meaning assigned to it under the Act.
Any reference in this Scheme to a time of day shall be a reference to Singapore time unless
otherwise stated.
2. NAME OF THE SCHEME
The Scheme shall be called the Osim Share Option Scheme.
3. OBJECTIVES OF THE SCHEME
It is the Groups long term objective to pursue continuous growth and expansion in its business and
operations, and it recognises that maintaining an experienced workforce is important towards
achieving such objective. Hence, it is desired that the Company should implement a share option
scheme which gives the Company the flexibility to use share options as a means of promoting long
term staff retention. Such flexibility would include a discretion to offer and grant share options at a
discount to the market price of the Shares.
The Scheme is primarily a share incentive scheme. It recognises the fact that the services of such
Employees and Non-Executive Directors are important to the success and continued well-being of
the Group. Implementation of the Scheme will enable the Company to give recognition to the
contributions made by such Employees and Non-Executive Directors. At the same time, it will give
such Employees and Non-Executive Directors an opportunity to have a direct interest in the
Company at no direct cost to its profitability and will also help to achieve the following positive
objectives:
(i) to motivate such Employees and Non-Executive Directors to maintain a high level of
performance and contribution;
(ii) to attract and maintain a group of key Employees whose contributions are important to the long
term growth and profitability of the Group; and
(iii) to improve employer and employee relations.
4. ELIGIBILITY
4.1 The employees eligibility to participate in the Scheme (including Executive Directors) shall be
at the absolute discretion of the Committee and each Participant shall:
(a) be confirmed in his/her employment with the Group and not on probation;
(b) have been in the full-time service of the Group;
(c) have attained the age of twenty-one (21) years on or before the Offer Date; and
(d) not be an undischarged bankrupt and must not have entered into a composition with his
creditors.
4.2 Executive Directors (other than Dr Ron Sim Chye Hock) who satisfy the eligibility requirements
in Rule 4.1(a), (b), (c) and (d) shall also be eligible to participate in the Scheme.
4.3 Non-Executive Directors (other than Ms Teo Sway Heong) who satisfy the eligibility criteria in
Rule 4.1(c) and (d) shall also be eligible to participate in the Scheme.
4.4 For the avoidance of doubt, Dr Ron Sim Chye Hock and Ms Teo Sway Heong or any Controlling
Shareholders or their associates shall not be eligible to participate in the Scheme.
120
4.5 Subject to the Act and any requirement of the SGX-ST or any other stock exchange on which
the Shares may be listed or quoted, the terms of eligibility for participation in the Scheme may
be amended from time to time at the absolute discretion of the Committee.
5. LIMITATIONS UNDER THE SCHEME
5.1 The aggregate number of Shares over which the Committee may grant Options on any date,
when added to the number of Shares issued and issuable in respect of all Options granted
under this Scheme, shall not exceed fifteen (15) per cent. of the issued share capital of the
Company on the day immediately preceding the Offer Date of the Option.
5.2 The number of Shares comprised in Market Price Options or, as the case may be, Incentive
Options, to be offered to any Employee in accordance with the Scheme shall be determined at
the absolute discretion of the Committee, who shall take into account criteria such as the
position, the past performance, years of service and potential for future development of that
employee, provided that:
(a) the aggregate number of Shares which may be offered by way of grant of Options to any
single eligible person under the Scheme shall not exceed 25 per cent. of the total number
of Shares available under the Scheme; and
(b) the aggregate number of Shares which may be offered by way of grant of Options in any
single financial year under the Scheme shall not exceed 25 per cent. of the total number
of Shares available under the Scheme (the Annual Quota), Provided That in the event
that the Annual Quota is not exceeded in any single financial year, Annual Quota for the
following financial year shall be increased by the unused portion of the Annual Quota for
the first-mentioned financial year.
6. OFFER DATE
6.1 The Committee may, subject as provided in Rule 4 and Rule 5, offer to grant Options to such
Grantees as it may select in its absolute discretion at any time during the period when the
Scheme is in force, except that no Options shall be granted during the period of 30 days
immediately preceding the date of announcement of the Companys interim and/or final results
(whichever the case may be). In addition, in the event that an announcement on any matter of
an exceptional nature involving unpublished price sensitive information is made, offers to grant
Options may only be made after the third Trading Day on which such announcement is
released.
6.2 An offer to grant the Option to a Grantee shall be made by way of a letter (the Letter of Offer)
in the form or substantially in the form set out in Schedule 1, subject to such modifications as
the Committee may determine from time to time.
7. ACCEPTANCE OF OFFER
7.1 An Option offered to a Grantee pursuant to Rule 6 may only be accepted by the Grantee within
thirty (30) days after the relevant Offer Date and not later than 5.00 p.m. on the thirtieth (30th)
day from such Offer Date (i) by completing, signing and returning to the Company the
Acceptance Form in or substantially in the form set out in Schedule 2, subject to such
modification as the Committee may from time to time determine, accompanied by payment of
S$1.00 as consideration or such other amount and such other documentation as the
Committee may require and (ii) if, at the date on which the Company receives from the Grantee
the Acceptance Form in respect of the Option as aforesaid, he remains eligible to participate
in the Scheme in accordance with these Rules.
7.2 If a grant of an Option is not accepted strictly in the manner as provided in this Rule 7, such
offer shall, upon the expiry of the thirty (30) day period, automatically lapse and shall forthwith
be deemed to be null and void and be of no effect.
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7.3 The Company shall be entitled to reject any purported acceptance of a grant of an Option made
pursuant to this Rule 7 or Exercise Notice given pursuant to Rule 12 which does not strictly
comply with the terms of the Scheme.
7.4 Options are personal to the Grantees to whom they are granted and shall not be sold,
mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered
in whole or in part or in any way whatsoever without the Committees prior written approval, but
may be exercised by the Grantees duly appointed personal representative as provided in Rule
11.5 in the event of the death of such Grantee.
7.5 The Grantee may accept or refuse the whole or part of the offer. If only part of the offer is
accepted, the Grantee shall accept the offer in multiples of 1,000 Shares. The Committee shall
within fifteen (15) Market Days of receipt of the Acceptance Form and consideration
acknowledge receipt of the same.
7.6 In the event that a grant of an Option results in a contravention of any applicable law or
regulation, such grant shall be null and void and of no effect and the relevant Participant shall
have no claim whatsoever against the Company.
7.7 Unless the Committee determines otherwise, an Option shall automatically lapse and become
null, void and of no effect and shall not be capable of acceptance if:
(a) it is not accepted in the manner as provided in Rule 7.1 within the thirty (30) days period;
or
(b) the Participant dies prior to his acceptance of the Option; or
(c) the Participant is adjudicated a bankrupt or enters into a composition with his creditors
prior to his acceptance of the Option; or
(d) the Grantee being an Executive Director or, as the case may be, an Employee, ceases to
be in the employment of the Group or (being a Non-Executive Director) ceases to be a
Director of the Company, in each case, for any reason whatsoever prior to his acceptance
of the Option; or
(e) the Company is liquidated or wound-up prior to the Grantees acceptance of the Option.
8. EXERCISE PRICE
8.1 Subject to any adjustment pursuant to Rule 9, the Exercise Price for each Share in respect of
which an Option is exercisable shall be determined by the Committee at its absolute discretion,
and fixed by the Committee at:
(i) a price (the Market Price) equal to the average of the last dealt prices for a Share, as
determined by reference to the Financial News or other publication published by the
SGX-ST for the 3 consecutive Trading Days immediately preceding the Offer Date of that
Option, rounded up to the nearest whole cent in the event of fractional prices; or
(ii) a price which is set at a discount to the Market Price, provided that:
(A) the maximum discount shall not exceed 20% of the Market Price (or such other
percentage or amount as may be prescribed or permitted for the time being by the
SGX-ST); and
(B) the Shareholders of the Company in general meeting shall have authorised the
making of offers and grants of Options under the Scheme at a discount not
exceeding the maximum discount as aforesaid.
8.2 Where the Exercise Price as determined above is less than the par value of the Share, the
Exercise Price shall be the par value.
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9. VARIATION OF CAPITAL
9.1 If a variation in the issued ordinary share capital of the Company (whether by way of a
capitalisation of profits or reserves or rights issue, reduction, sub-division or consolidation) shall
take place, then:
(a) the Subscription Price for the Shares; and/or the nominal value, class and/or number of
Shares comprised in the Option to the extent unexercised and the rights attached thereto;
and/or
(b) the nominal value, class and/or number of Shares over which additional Options may be
granted under the Scheme,
shall be adjusted in such manner as the Committee may determine to be appropriate and
except in relation to a capitalisation issue, upon the written confirmation by the Auditors (acting
only as experts and not as arbitrators), that in their opinion, such adjustment is fair and
reasonable.
9.2 Notwithstanding the provisions of Rule 9.1, no such adjustment shall be made:
(a) if as a result, the Subscription Price shall fall below the nominal value of a Share and if
such adjustment would but for this paragraph (a) result in the Subscription Price being
less than the nominal value of a Share, the Subscription Price payable shall be the
nominal value of a Share; and
(b) unless the Committee after considering all relevant circumstances, considers it equitable
to do so.
9.3 The following (whether singly or in combination) shall not be regarded as events requiring
adjustment:
(a) any issue of securities as consideration for or in connection with an acquisition or a private
placement of securities;
(b) any increase in the number of issued Shares as a consequence of the exercise of options
or other convertibles issued from time to time by the Company entitling holders thereof to
acquire new Shares in the capital of the Company (including the exercise of any Options
granted pursuant to the Scheme and any previous scheme(s)); and
(c) any reduction in the number of issued Shares as a result of the cancellation of issued
Shares purchased by the Company by way of market purchase(s) effected on the SGX-ST
pursuant to a share purchase mandate (or any renewal thereof) given by the shareholders
of the Company in general meeting and for the time being in force.
9.4 Upon any adjustment required to be made pursuant to this Rule, the Company shall notify the
Participant (or his duly appointed personal representatives, where applicable) in writing and
deliver to him (or his duly appointed personal representatives, where applicable) a statement
setting forth the Subscription Price thereafter in effect and the nominal value, class and/or
number of Shares thereafter to be issued on the exercise of the Option. Any adjustment shall
take effect upon such written notification being given.
9.5 The restriction on the number of Shares to be offered to any Grantee under Rule 5 above, shall
not apply to the number of additional Shares or Options over additional Shares issued by virtue
of any adjustment to the number of Shares and/or Options pursuant to this Rule 9.
9.6 Upon any adjustment required to be made, the Company shall notify each Participant (or his
duly appointed personal representative(s)) in writing and deliver to him (or his duly appointed
personal representative(s)) a statement setting forth the new Exercise Price thereafter in effect
and the nominal value, class and/or number of Shares thereafter comprised in the Option so
far as unexercised and the maximum entitlement in any one financial year.
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10. TAKE-OVER AND WINDING-UP OF THE COMPANY
10.1 In the event of a take-over offer being made for the Company, Participants (including
Participants holding Options which are then not exercisable pursuant to the provisions of
Rule 11.1) holding Options as yet unexercised shall, notwithstanding Rule 11 and 12 but
subject to Rule 10.5, be entitled to exercise such Options in full or in part in the period
commencing on the date on which such offer is made or, if such offer is conditional, the date
on which the offer becomes or is declared unconditional, as the case may be, and ending on
the earlier of:
(a) the expiry of six (6) months thereafter, unless prior to the expiry of such six (6) month
period, at the recommendation of the offeror and with the approvals of the Committee
and the SGX-ST, such expiry date is extended to a later date (being a date falling not
later than the date of expiry of the Option Period relating thereto); or
(b) the date of the expiry of the Option Period relating thereto,
whereupon any option then remaining unexercised shall immediately lapse and become null
and void, provided always that if during such period the offeror becomes entitled or bound
to exercise the rights of compulsory acquisition of the Shares under Section 215 of the Act
and, being entitled to do so, gives notice to the Participants that it intends to exercise such
rights on a specified date, the Option shall remain exercisable by the Participants until the
specified date or the expiry of the Option Period relating thereto, whichever is earlier. Any
Option not so exercised by the said specified date shall lapse and become null and void
provided that the rights of acquisition or obligation to acquire stated in the notice shall have
been exercised or performed, as the case may be. If such rights of acquisition or obligations
have not been exercised or performed, all Options shall subject to Rule 11.2 remain
exercisable until the expiry of the Option Period.
For the avoidance of doubt, the provisions of this Rule 10.1 shall not come into operation in
the event that a take-over offer which is conditional does not become or is not declared
unconditional.
10.2 If under the Act the court sanctions a compromise or arrangement proposed for the purposes
of, or in connection with, a scheme for the reconstruction of the Company or its
amalgamation with another company or companies, Participants (including Participants
holding Options which are then not exercisable pursuant to the provisions of Rule 11.1) shall
be entitled, notwithstanding Rule 11 and Rule 12 but subject to Rule 10.5, to exercise any
Option then held by them during the period commencing on the date upon which the
compromise or arrangement is sanctioned by the court and ending either on the expiry of
ninety (90) days thereafter or the date upon which the compromise or arrangement becomes
effective, whichever is later (but not after the expiry of the Option Period relating thereto),
whereupon any unexercised Option shall lapse and become null and void, provided always
that the date of exercise of any Option shall be before the tenth anniversary of the Offer
Date.
10.3 If an order or an effective resolution is passed for the winding up of the Company on the
basis of its insolvency, all Options, to the extent unexercised, shall lapse and become null
and void.
10.4 In the event of a members solvent voluntary winding up (other than for amalgamation or
reconstruction), Participants (including Participants holding Options which are then not
exercisable pursuant to the provisions of Rule 11.1) shall, subject to Rule 10.5, be entitled
within ninety (90) days of the passing of the resolution of such winding up (but not after the
expiry of the Option Period relating thereto) to exercise in full any unexercised Option, after
which such unexercised Option shall lapse and become null and void.
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10.5 If in connection with the making of a general offer referred to in Rule 10.1 above or the
scheme referred to in Rule 10.2 above or the winding up referred to in Rule 10.3 and 10.4
above, arrangements are made (which are confirmed in writing by the Auditors, acting only
as experts and not as arbitrators, to be fair and reasonable) for the compensation of
Participants, whether by the continuation of their Options or the payment of cash or the grant
of other options or otherwise, a Participant holding an Option, which is not then exercisable,
may not, at the discretion of the Committee, be permitted to exercise that Option as provided
for in this Rule 10.
10.6 To the extent that an Option is not exercised within the periods referred to in this Rule 10,
it shall lapse and become null and void.
11. OPTION PERIOD
11.1 An Option shall only be exercisable, in whole or in part (provided that an Option may be
exercised in part only in respect of 1,000 shares or any multiple thereof unless the number
of remaining Options held by the Participant correspond to less than 1,000 Shares), at any
time, by a Participant after the first anniversary of the Offer Date during the Option Period (or,
in the case of Options with the Exercise Price set at a discount to Market Price, after the
second anniversary of the Offer Date during the Option Period) provided always that Options
granted to Executive Directors and other than Employees (other than Employees of
Associated Companies) shall be exercised before the tenth anniversary of the relevant Offer
Date and Options granted to Non-Executive Directors or to Employees of Associated
Companies shall be exercised before the fifth anniversary of the relevant Offer Date, or such
earlier date as may be determined by the Committee, failing which all unexercised Options
shall immediately lapse and become null and void and a Participant shall have no claim
against the Company.
11.2 An Option shall, to the extent unexercised, immediately lapse and become null and void and
a Participant shall have no claim against the Company:
(a) subject to Rules 11.2, 11.3 and 11.4, upon the Participant ceasing to be in full-time
employment of the Company or any of the companies within the Group for any reason
whatsoever; or
(b) upon the bankruptcy of the Participant or the happening of any other event which result
in his being deprived of the legal or beneficial ownership of such Option; or
(c) in the event of misconduct on the part of the Participant, as determined by the
Committee in its absolute discretion.
For the purpose of Rule 11.2(a), a Participant shall be deemed to have ceased to be so
employed as of the date the notice of termination of employment is tendered by or is given
to him, unless such notice shall be withdrawn prior to its effective date.
11.3 If a Participant ceases to be employed by the Group by reason of his:
(a) ill health, injury or disability as certified by a medical practitioner approved by the
Committee;
(b) redundancy;
(c) retirement at or after a normal retirement age; or
(d) retirement before that age with the consent of the Committee,
or for any other reason approved in writing by the Committee, he may, at the absolute
discretion of the Committee exercise any unexercised Option within the relevant Option
Period and upon the expiry of such period, the Option shall immediately lapse and become
null and void.
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11.4 If a Participant ceases to be employed by a Subsidiary or an Associated Company:
(a) by reason of the Subsidiary or the Associated Company, as the case may be, by which
he is principally employed ceasing to be a company within the Group or the undertaking
or part of the undertaking of such Subsidiary or Associated Company, as the case may
be, being transferred otherwise than to another company within the Group; or
(b) for any other reason, provided the Committee gives its consent in writing,
he may, at the absolute discretion of the Committee, exercise any unexercised Options
within the relevant Option Period and upon the expiry of such period, the Option shall
immediately lapse and become null and void.
11.5 If a Participant dies and at the date of his death holds any unexercised Option, such Option
may, at the absolute discretion of the Committee, be exercised by the duly appointed legal
personal representatives of the Participant within the relevant Option Period and upon the
expiry of such period, the Option shall immediately lapse and become null and void.
12. EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES
12.1 An Option may be exercised, in whole or in part (provided that an Option may be exercised
in part only in respect of 1,000 Shares or any multiple thereof), by a Participant giving notice
in writing to the Company in or substantially in the form set out in Schedule 3 (the Exercise
Notice), subject to such modifications as the Committee may from time to time determine.
Every Exercise Notice must be accompanied by a remittance for the full amount of the
aggregate Exercise Price in respect of the Shares which have been exercised under the
Option, the relevant CDP charges (if any) and any other documentation the Committee may
require. All payment shall be made by cheque, cashiers order, bank draft or postal order
made out in favour of the Company. An Option shall be deemed to be exercised upon the
receipt by the Company of the said notice duly completed and the receipt by the Company
of the full amount of the aggregate Exercise Price in respect of the Shares which have been
exercised under the Option.
12.2 Subject to:
(a) such consents or other actions required by any competent authority under any
regulation or enactment for the time being in force as may be necessary (including any
approvals required from the SGX-ST); and
(b) compliance with the Rules of the Scheme and the Memorandum and Articles of
Association of the Company,
the Company shall, as soon as practicable after the exercise of an Option by a Participant
but in any event within ten (10) Market Days after the date of the exercise of the Option in
accordance with Rule 12.1, allot the Shares in respect of which such Option has been
exercised by the Participant and within five (5) Market Days from the date of such allotment,
despatch the relevant share certificates to the Participant or CDP for the credit of the
securities account of that Participant (as the case may be) by ordinary post or such other
mode of delivery as the Committee may deem fit.
12.3 The Company shall as soon as practicable after the exercise of an Option, apply to the
SGX-ST or any other stock exchange on which the Shares are quoted or listed for
permission to deal in and for quotation of the Shares which may be issued upon exercise of
the Option and the Shares (if any) which may be issued to the Participant pursuant to any
adjustments made in accordance with Rule 9.
12.4 Shares which are all allotted on the exercise of an Option by a Participant shall be issued,
as the Participant may elect, in the name of CDP to the credit of the securities account of the
Participant maintained with CDP or the Participants securities sub-account with a CDP
Depository Agent or in the name of the Participant.
126
12.5 Shares allotted and issued upon the exercise of an Option shall be subject to all provisions
of the Memorandum and Articles of Association of the Company and shall rank pari passu
in all respects with the then existing issued Shares in the capital of the Company except for
any dividends, rights, allotments or other distributions, the record date of which is prior to the
date such Option is exercised. For this purpose, record date means the date as at the
close of business on which Shareholders must be registered in order to participate in any
dividends, rights, allotments or other distributions (as the case may be).
12.6 Except as set out in Rule 12.2 and subject to Rule 9, an Option does not confer on a
Participant any right to participate in any new issue of Shares.
12.7 The Company shall keep available sufficient unissued Shares to satisfy the full exercise of
all Options for the time being remaining capable of being exercised, provided that such
Shares set apart shall not exceed fifteen (15) per cent. of the total issued capital of the
Company.
13. ALTERATIONS AND MODIFICATIONS TO THE SCHEME
13.1 Any or all of the provisions of the Scheme may be modified and/or altered at any time and
from time to time by resolution of the Committee except that:
(a) no modification or alteration shall alter adversely the rights attaching to any Option
granted prior to such modification or alteration except with the consent in writing of such
number of Participants who, if they exercised their Options in full, would thereby
become entitled to not less than three-quarters (
3
4) in nominal amount of all the Shares
which would fall to be issued and allotted upon exercise in full of all outstanding
Options;
(b) the definitions of Director, Employee, Group and Option Period and the
provisions of Rules 4, 5, 7.1, 8.1, 11.1, 12.5, 15 and this Rule shall not be altered or
modified to the advantage of Participants under the Scheme except with the prior
approval of Shareholders at a general meeting; and
(c) no modification or alteration shall be made without the prior approval of the SGX-ST or
(if required) any other stock exchange on which the Shares are quoted or listed, and
such other regulatory authorities as may be necessary.
13.2 Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any
time by resolution (and without any other formality save for the prior approval of the SGX-ST)
amend or alter the Scheme in any way to the extent necessary to cause the Scheme to
comply with any statutory provision or the provisions or the regulations of any regulatory or
other relevant authority or body (including the SGX-ST).
13.3 Written notice of any modification or alteration made in accordance with this Rule shall be
given to all Participants.
14. DURATION OF THE SCHEME
14.1 The Scheme shall continue to be in force at the discretion of the Committee, subject to a
maximum period of ten (10) years, commencing on the date on which the Scheme is
adopted by Shareholders in the Extraordinary General Meeting. Subject to compliance with
any applicable laws and regulations in Singapore, the Scheme may be continued beyond the
above stipulated period with the approval of the Shareholders by ordinary resolution at a
general meeting and of any relevant authorities which may then be required.
14.2 The Scheme may be terminated at any time by the Committee or by resolution of the
Shareholders at a general meeting subject to all other relevant approvals which may be
required and if the Scheme is so terminated, no further Options shall be offered by the
Company hereunder, but the provisions of the Scheme shall, in relation to the Options then
subsisting, remain in full force and effect.
127
14.3 The termination, discontinuance or expiry of the Scheme shall be without prejudice to the
rights accrued to Options which have been granted and accepted as provided in Rule 8,
whether such Options have been exercised (whether fully or partially) or not.
15. ADMINISTRATION OF THE SCHEME
15.1 This Scheme shall be administered by the Committee in its absolute discretion with such
powers and duties as are conferred on it by the Board of Directors.
15.2 The Committee shall have the power, from time to time, to make or vary such regulations
(not being inconsistent with this Scheme) for the implementation and administration of this
Scheme as it thinks fit.
15.3 Any decision of the Committee, made pursuant to any provision of this Scheme (other than
a matter to be certified by the Auditors), shall be final and binding (including any decisions
pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or
procedure thereunder or as to any rights under this Scheme).
15.4 A Participant who is a member of the Committee shall not be involved in its deliberation in
respect of Options to be granted to him.
16. NOTICES
16.1 Any notice given by a Participant to the Company shall be sent by post or delivered to the
registered office of the Company or such other address as may be notified by the Company
to the Participant in writing.
16.2 Any notice given by the Company to a Participant shall be sent to the Participant by post to
his address stated in the records of the Company and, if sent by post, shall be deemed to
have been given on the day immediately following the date of posting.
17. TERMS OF EMPLOYMENT UNAFFECTED
17.1 This Scheme or any Option shall not form part of any contract of employment between the
Company, any Subsidiary and/or Associated Company and any Participant and the rights
and obligations of any individual under the terms of the office or employment with such
company within the Group shall not be affected by his participation in this Scheme or any
right which he may have to participate in it or any Option which he may hold and this Scheme
or any Option shall afford such an individual no additional rights to compensation or
damages in consequence of the termination of such office or employment for any reason
whatsoever.
17.2 This Scheme shall not confer on any person any legal or equitable rights (other than those
constituting the Options themselves) against the Company, any Subsidiary or Associated
Company directly or indirectly or give rise to any cause of action at law or in equity against
the Company, any Subsidiary and/or any Associated Company.
18. NON-ASSIGNABILITY OF OPTIONS
An Option shall be personal to the Participant to whom it is granted and save as provided in
Rule 11, the Participant shall not transfer or assign to any other person, or create any charge, lien
or other encumbrance whatsoever on or over the Option or any part thereof.
19. TAXES
All taxes (including income tax) arising from the exercise of any Option granted to any Participant
under the Scheme shall be borne by the Participant.
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20. COSTS AND EXPENSES OF THE SCHEME
20.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the
issue and allotment of any Shares pursuant to the exercise of any Option in CDPs name,
the deposit of share certificate(s) with CDP, the Participants security account with CDP or
the Participants securities sub-account with his Depository Agent and all taxes referred to
in Rule 20 which shall be payable by the relevant Participant.
20.2 Save for such costs and expenses expressly provided in this Scheme to be payable by the
Participants, all fees, costs, and expenses incurred by the Company in relation to the
Scheme including but not limited to the fees, costs and expenses relating to the issue and
allotment of the Shares pursuant to the exercise of any Option shall be borne by the
Company.
21. DISCLAIMER OF LIABILITY
Notwithstanding any provisions herein contained and subject to the Act, the Board, the Committee
and the Company shall not under any circumstances be held liable for any costs, losses, expenses
and damages whatsoever and howsoever arising in respect of any matter under or in connection
with the Scheme including but not limited to the Companys delay or failure in issuing and allotting
the Shares or in applying for or procuring the listing of and quotation for the Shares on the SGX-ST
or any other stock exchanges on which the Shares are quoted or listed.
22. DISPUTES
Any disputes or differences of any nature in connection with the Scheme shall be referred to the
Committee and its decision shall be final and binding in all respects.
23. CONDITION OF OPTION
Every Option shall be subject to the condition that no Shares shall be issued pursuant to the
exercise of an Option if such issue would be contrary to any law or enactment, or any rules or
regulations of any legislative or non-legislative governing body for the time being in force in
Singapore or any other relevant country.
24. DISCLOSURE IN ANNUAL REPORT
The Company shall make the following disclosure in its annual report:
(a) The names of the members of the Committee;
(b) The information required in the table below for the following Participants:
(i) Directors of the Company; and
(ii) Participants, other than those in Rule 24(b)(i) above, who receive five (5) per cent. or
more of the total number of Options available under the Scheme;
Name of
Participant
Options
granted
during
financial year
under review
(including
terms)
Aggregate
Options granted
since
commencement
of Scheme to
end of financial
year under
review
Aggregate
Options
exercised since
commencement
of Scheme to
end of financial
year under
review
Aggregate
Options
outstanding
as at end of
financial year
under review
129
(c) (i) the number and proportion of options granted at a discount of the (10) per cent or less to
the Market Price during the financial year under review; and
(ii) the numbers and proportion of options granted at the discount of more than ten (10) per
cent to the Market Price during the financial year under review.
25. GOVERNING LAW
This scheme shall be governed by and construed in accordance with the laws of the Republic of
Singapore. The Company and the Participants, by accepting the offer of the grant of Options in
accordance with the Scheme, submit to the exclusive jurisdiction of the courts of the Republic of
Singapore.
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SCHEDULE 1
LETTER OF OFFER
Serial No:__________________
PRIVATE AND CONFIDENTIAL
Date:
To: Name PRIVATE AND CONFIDENTIAL
Designation
Address
Dear Sir/Madam
We are pleased to inform you that you have been nominated by the Committee of the Board of Directors
of Osim International Ltd (the Company) to participate in the Osim Share Option Scheme (the
Scheme).
Accordingly, an offer is hereby made to grant you an Option (as defined in the Scheme), in consideration
of the payment of a sum of S$1.00, to subscribe for and be allotted ________ ordinary shares of S$0.05
each in the capital of the Company at the price of S$____________ per ordinary share. The Option shall
be subject to the terms of this Letter of Offer and the Scheme (as the same may be amended from time
to time pursuant to the terms and conditions of the Scheme), a copy of which is enclosed herewith.
The Option is personal to you and may not be sold, mortgaged, transferred, charged, assigned, pledged
or otherwise disposed of or encumbered in whole or in part or in any way whatsoever. If you wish to
accept the offer, please sign and return the enclosed Acceptance Form with a sum of S$1.00 not later
than _______ a.m./p.m. on the ______ day of __________________2000 failing which this offer will
forthwith lapse.
Yours faithfully
For and on behalf of
_____________________________
Name:
Designation:
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SCHEDULE 2
ACCEPTANCE FORM
Serial No:__________________
To: The Committee
Osim Share Option Scheme
c/o The Company Secretary
57 Genting Lane
Singapore 349564
Closing Time and Date for Acceptance of Option : __________________________________
No. of Shares in respect of which Option is offered : __________________________________
Exercise Price per Share : S$ ________________________________
Total Amount Payable on acceptance of Option : S$ ________________________________
(exclusive of the relevant CDP charges)
I have read your Letter of Offer dated ________________________ (the Offer Date) and agree to be
bound by the terms thereof and of the Osim Share Option Scheme stated therein. I confirm that my
acceptance of the Option will not result in the contravention of any applicable law or regulation in relation
to the ownership of shares in the Company or options to subscribe for such shares.
I hereby accept the Option to subscribe for ________ ordinary shares of S$0.05 each in the capital of
Osim International Ltd (the Shares) at S$____________ per Share and enclose *cash/bankers
draft/cashiers order/postal order no. __________________ for S$1.00 being payment for the purchase
of the Option.
I understand that I am not obliged to exercise the Option.
I also understand that I shall be responsible for all the fees of CDP relating to or in connection with the
issue and allotment of any Shares in CDPs name, the deposit of share certificates with CDP, my
securities account with CDP or my securities sub-account with a CDP Depository Agent (as the case may
be) (collectively, the CDP charges).
I confirm that as at the date hereof:
(a) I am not less that 21 years old nor an undischarged bankrupt nor have I entered into a composition
with any of my creditors;
(b) I satisfy the eligibility requirements to participate in the Scheme as defined in Rule 4 of the Scheme;
and
(c) I satisfy the other requirements to participate in the Scheme as set out in the Rules of the Scheme.
I hereby acknowledge that you have not made any representation or warranty or given me any
expectation of employment or continued employment to induce me to accept the offer and that the terms
of the Letter of Offer and this Acceptance Form constitute the entire agreement between us relating to
the offer.
I agree to keep all information pertaining to the grant of the Option to me confidential.
132
PLEASE PRINT IN BLOCK LETTERS
Name in full : __________________________________________________________
Designation : __________________________________________________________
Address : __________________________________________________________
Nationality : __________________________________________________________
*NRIC/Passport No. : __________________________________________________________
Signature : __________________________________________________________
Date : __________________________________________________________
*Delete as appropriate.
Notes:
1. Option must be accepted in full or in multiples of 1,000 Shares unless the number of remaining Options held by the Participant
correspond to less than 1,000 Shares.
2. The Acceptance Form must be forwarded to the Company Secretary in an envelope marked Private and Confidential.
3. The Participant shall be informed by the Company of the relevant CDP charges payable at the time of the exercise of an
Option.
133
SCHEDULE 3
EXERCISE NOTICE
To: The Committee
Osim Share Option Scheme
c/o The Company Secretary
57 Genting Lane
Singapore 349564
Total Number of ordinary shares of S$0.05 each (the
Share) at S$____________ per Share under an
Option granted on ________________________
(the Offer Date) : __________________________________
Number of Shares previously allotted and issued
thereunder : __________________________________
Outstanding balance of Shares which may be
allotted and issued thereunder : __________________________________
Number of Shares now to be subscribed (in
multiples of 1,000 unless the number of remaining
Options held by the Participant correspond to less
than 1,000 Shares) : __________________________________
1. Pursuant to your Letter of Offer dated ________________________ (the Offer Date) and my
acceptance thereof, I hereby exercise the Option to subscribe for Shares in Osim International Ltd
(the Company) at S$____________ per Share.
*2. I hereby request the Company to allot and issue to me the number of Shares specified in paragraph
1 in the name of The Central Depository (Pte) Limited (CDP) to the credit of my *Securities
Account with a CDP/* Securities Sub-Account with a CDP Depository Agent specified below and to
deliver the share certificates relating thereto to CDP at my own risk. I further agree to bear such fees
or other charges as may be imposed by CDP (the CDP charges) in respect thereof:
*(a) Direct Securities Account Number : ______________________________________
*(b) Securities Sub-Account Number : ______________________________________
Name of CDP Depository Agent : ______________________________________
3. I enclose a *cheque/cashiers order/bank draft/postal order no. __________________ for
$____________ in payment for the subscription of S$____________ for the total number of the
said Shares and the CDP charges of S$____________.
4. I agree to subscribe for the Shares subject to the terms of the Letter of Offer, the Osim Share Option
Scheme (as the same may be amended pursuant to the terms thereof from time to time) and the
Memorandum and Articles of Association of the Company.
5. I declare that I am subscribing for the Shares for myself and not as a nominee for any other person.
134
PLEASE PRINT IN BLOCK LETTERS
Name in full : __________________________________________________________
Designation : __________________________________________________________
Address : __________________________________________________________
Nationality : __________________________________________________________
*NRIC/Passport No. : __________________________________________________________
Signature : __________________________________________________________
Date : __________________________________________________________
*Delete as appropriate.
Notes:
1. An Option may be exercised in whole or in part provided that an Option may be exercised in part only in respect of 1,000
Shares or any multiple thereof unless the number of remaining Options held by the Participant correspond to less than 1,000
Shares.
2. The form entitled Exercise Notice must be forwarded to the Company Secretary in an envelope marked Private and
Confidential.
135
APPENDIX B
TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS
Applications are invited for the subscription and/or purchase of Invitation Shares subject to the following
terms and conditions:
1. APPLICATIONS FOR THE INVITATION SHARES MUST BE MADE IN LOTS OF 1,000 SHARES
AND HIGHER INTEGRAL MULTIPLES THEREOF. APPLICATIONS FOR ANY OTHER NUMBER
OF SHARES WILL BE REJECTED.
2. Applications for Offer Shares may be made by way of Offer Shares Application Forms or by way of
Electronic Applications through ATMs of the Participating Banks (ATM Electronic Applications).
Applications for the Placement Shares (other than Reserved Shares) may only be made by way of
Placement Shares Application Forms. Applications for Reserved Shares may only be made by way
of Reserved Shares Application Forms. APPLICANTS MAY NOT USE CENTRAL PROVIDENT
FUND (CPF) FUNDS TO APPLY FOR THE INVITATION SHARES.
3. Only one application for either the Offer Shares or the Placement Shares may be made for the
benefit of one person (other than in respect of Reserved Shares). A person submitting an
application for Offer Shares by way of an Application Form MAY NOT submit another
application for Offer Shares by way of an Electronic Application and vice versa. Such
separate applications shall be deemed to be multiple applications and shall be rejected.
A person, other than an approved nominee company, who is submitting an application in his
own name should not submit any other application (other than for Reserved Shares), whether
by way of an Application Form or by way of an Electronic Application, for any other person.
Such separate applications shall be deemed to be multiple applications and shall be rejected.
An applicant who has been procured by a Placement Agent to subscribe for Placement
Shares (other than for Reserved Shares) shall not make any application for Offer Shares
either through an Electronic Application or by way of an Application Form and vice versa.
Such separate applications shall be deemed to be multiple applications and shall be rejected.
An applicant for Reserved Shares using the Reserved Shares Application Form may submit
one separate application for the Offer Shares in his own name either by way of an Application
Form or by way of an Electronic Application provided he adheres to the terms and conditions
of this Prospectus. Such separate applications shall not be treated as multiple applications.
Joint or multiple applications shall be rejected. Persons submitting or procuring
submissions of multiple share applications (whether for Offer Shares, Placement Shares or
both Offer Shares and Placement Shares) may be deemed to have committed an offence
under the Penal Code (Chapter 224) of Singapore and the Securities Industry Act (Chapter
289) of Singapore, and such applications may be referred to the relevant authorities for
investigation.
4. Applications will not be accepted from any person under the age of 21 years, undischarged
bankrupts, sole-proprietorships, partnerships, chops or non-corporate bodies, joint Securities
Account holders of CDP and applicants whose addresses (furnished in their Application Forms or, in
the case of Electronic Applications, contained in the records of the relevant Participating Banks) bear
post office box numbers.
136
5. The existence of a trust will not be recognised. Any application by a trustee or trustees must be
made in his/her/their own name(s) and without qualification. Applications made by way of an
Application Form in the name(s) of an approved nominee company or approved nominee
companies must comply with paragraph 6 below.
6. NOMINEE APPLICATIONS MAY BE MADE BY APPROVED NOMINEE COMPANIES ONLY.
Approved nominee companies are defined as banks, merchant banks, finance companies,
insurance companies, licensed securities dealers in Singapore and nominee companies controlled
by them. Applications made by persons acting as nominees other than approved nominee
companies shall be rejected.
7. FOR NON-NOMINEE APPLICATIONS, EACH APPLICANT MUST MAINTAIN A SECURITIES
ACCOUNT WITH CDP IN HIS OWN NAME AT THE TIME OF HIS APPLICATION. An applicant
without an existing Securities Account with CDP in his own name at the time of his application will
have his application rejected, in the case of an application by way of an Application Form, or will
not be able to complete his Electronic Application, in the case of an Electronic Application. An
applicant with an existing Securities Account who fails to provide his Securities Account number or
who provides an incorrect Securities Account number in section B of the Application Form or in his
Electronic Application, as the case may be, is liable to have his application rejected. Subject to
paragraph 8 below, an application shall be rejected if the applicants particulars such as name,
NRIC/passport number, nationality and permanent residence status provided in his Application
Form or in the records of the relevant Participating Bank at the time of his Electronic Application,
as the case may be, differ from those particulars in his Securities Account as maintained with CDP.
If the applicant possesses more than one individual direct Securities Account with CDP, his
application shall be rejected.
8. If the address of an applicant stated in the Application Form or, in the case of an Electronic
Application, in the records of the relevant Participating Bank, as the case may be, is
different from the address registered with CDP, the applicant must inform CDP of his
updated address promptly, failing which the notification letter on successful allotment and
other correspondence from the CDP will be sent to his address last registered with CDP.
9. The Company and the Vendor reserve the right to reject any application which does not
conform strictly to the instructions set out in the Application Form and this Prospectus or
which does not comply with the instructions for Electronic Applications or with the terms
and conditions of this Prospectus or, in the case of an application by way of an Application
Form, which is illegible, incomplete, incorrectly completed or which is accompanied by an
improperly drawn remittance. The Company and the Vendor further reserve the right to treat
as valid any applications not completed or submitted or effected in all respects in
accordance with the terms and conditions of this Prospectus and also to present for
payment or other processes all remittances at any time after receipt and to have full access
to all information relating to, or deriving from, such remittances or the processing thereof.
10. The Company and the Vendor reserve the right to reject or accept any application or to accept any
application in part only without assigning any reason thereof, and no enquiry and/or
correspondence on the decision of the Company and the Vendor will be entertained. This right
applies to applications made by way of Application Forms and by way of Electronic Applications. In
deciding the basis of acceptance, due consideration will be given to the desirability of allotting the
Shares to a reasonable number of applicants with a view to establishing an adequate market for the
Shares.
137
11. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It is
expected that CDP will send to each successful applicant, at his own risk, within 15 Market Days
after the close of the Application List, a statement of account stating that his Securities Account has
been credited with the number of Invitation Shares allotted and/or allocated to him. This will be the
only acknowledgement of application moneys received and is not an acknowledgement by the
Company and the Vendor. Each applicant irrevocably authorises CDP to complete and sign on his
behalf as transferee or renouncee any instrument of transfer and/or other documents required for
the issue or transfer of the Invitation Shares allotted and/or allocated to the applicant. This
authorisation applies to applications made by way of Application Forms and by way of Electronic
Applications.
12. By completing and delivering an Application Form and, in the case of an ATM Electronic Application,
by pressing the Enter or OK or Confirm or Yes key on the ATM in accordance with the
provisions herein, each applicant:
(a) irrevocably offers to subscribe for the number of Invitation Shares specified in his application
(or such smaller number for which the application is accepted) at the Offer Price or the
Placement Price (as the case may be) and agrees that he will accept such Shares as may be
allocated to him, in each case on the terms of, and subject to the conditions set out in, the
Prospectus and the Memorandum and Articles of Association of the Company; and
(b) warrants the truth and accuracy of the information provided in his application.
13. In the event of an under-subscription for Offer Shares as at the close of the Application List, the
number of Offer Shares under-subscribed shall be made available to satisfy applications for
Placement Shares to the extent that there is an over-subscription for Placement Shares as at the
close of the Application List. Any Reserved Shares not taken up by the employees and business
associates of the Group will be made available first to satisfy other applications for the Placement
Shares to the extent that there is an over-subscription for the Placement Shares and then to satisfy
applications for Offer Shares to the extent that there is an over-subscription for Offer Shares.
In the event of an under-subscription for Placement Shares (other than Reserved Shares) as at the
close of the Application List, that number of Placement Shares (other than Reserved Shares)
under-subscribed shall be made available to satisfy applications for Offer Shares to the extent that
there is an over-subscription for Offer Shares as at the close of the Application List.
In the event of an over-subscription of the Offer Shares as at the close of the Application List and
the number of Placement Shares are fully subscribed or over-subscribed as at the close of the
Application List, the successful applications for the Offer Shares will be determined by ballot or
otherwise as determined by the Directors and the Vendor, and approved by the SGX-ST.
14. Each applicant irrevocably authorises CDP to disclose the outcome of his application, including the
number of Invitation Shares allotted or allocated to the applicant pursuant to his application, to
authorised operators.
15. Acceptance of applications will be conditional upon, inter alia, the Company and the Vendor being
satisfied that:
(a) permission has been granted by the SGX-ST to deal in and for quotation for all the existing
Shares and the New Shares on the Official List of the SGX-ST; and
(b) the Management and Underwriting Agreement and the Placement Agreement referred to on
page 107 of this Prospectus have become unconditional and have not been terminated.
16. No application will be held in reserve.
17. No Shares will be allotted or allocated on the basis of this Prospectus later than six months after
the date of issue of this Prospectus.
138
18. Additional terms and conditions for applications by way of Application Forms are set out on
pages 139 to 142 of this Prospectus.
19. Additional terms and conditions for applications by way of Electronic Applications are set out on
pages 142 to 146 of this Prospectus.
20. Any reference to the applicant in this section shall include a person applying for the Offer Shares
by way of an Application Form or by way of an Electronic Application , a person applying for the
Placement Shares through the Placement Agent, or a person applying for Reserved Shares by way
of a Reserved Shares Application Form.
ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS
Applications by way of Application Forms shall be made on and subject to the terms and conditions of
this Prospectus including but not limited to the terms and conditions appearing below as well as those
set out under the section on TERMSAND CONDITIONSAND PROCEDURES FORAPPLICATION on
pages 136 to 146 of this Prospectus, as well as the Memorandum and Articles of Association of the
Company.
1. Applications must be made using the WHITE Application Forms and official envelopes A and B
for Offer Shares and the BLUE Application Forms for Placement Shares (other than Reserved
Shares) accompanying and forming part of this Prospectus. Attention is drawn to the detailed
instructions contained in the respective Application Forms and this Prospectus for the completion of
the Application Forms which must be carefully followed. The Company and the Vendor reserve the
right to reject applications which do not conform strictly to the instructions set out in the
Application Forms and this Prospectus or to the terms and conditions of this Prospectus or
which are illegible, incomplete, incorrectly completed or which are accompanied by
improperly drawn remittances.
2. The Application Forms must be completed in English. Please type or write clearly in ink using
BLOCK LETTERS.
3. All spaces in the Application Forms except those under the heading FOR OFFICIAL USE ONLY
must be completed and the words NOTAPPLICABLE or N.A. should be written in any space that
is not applicable.
4. Individuals, corporations, approved nominee companies and trustees must give their names in full.
Applications must be made, in the case of individuals, in their full names appearing in their identity
cards (if applicants have such identification documents) or in their passports and, in the case of
corporations, in their full names as registered with a competent authority. An applicant, other than an
individual, completing the Application Form under the hand of an official must state the name and
capacity in which that official signs. Acorporation completing the Application Form is required to affix
its Common Seal (if any) in accordance with its Memorandum and Articles of Association or
equivalent constitutive documents of the corporation. If an application by a corporate applicant is
successful, a copy of its Memorandum and Articles of Association or equivalent constitutive
documents must be lodged with the Companys Share Registrar and Share Transfer Office. The
Company and the Vendor reserve the right to require any applicant to produce documentary proof
of identification for verification purposes.
5. (a) All applicants must complete page 1 and Sections A and B of the Application Forms.
(b) All applicants are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application
Forms. Where paragraph 7(a) is deleted, the applicants must also complete Section C of the
Application Forms with particulars of the beneficial owner(s).
(c) Applicants who fail to make the required declaration in paragraph 7(a) or 7(b), as the case may
be, on page 1 of the Application Forms are liable to have their applications rejected.
139
6. Individual and corporate applicants, whether incorporated or unincorporated and wherever
incorporated or constituted, will be required to declare whether they are citizens or permanent
residents of Singapore or corporations in which citizens or permanent residents of Singapore or any
body corporate constituted under any statute of Singapore have an interest in the aggregate of
more than 50 per cent. of the issued share capital of or interests in such corporations. Approved
nominee companies are required to declare whether the beneficial owner of the Invitation Shares
is a citizen or permanent resident of Singapore or a corporation, whether incorporated or
unincorporated and wherever incorporated or constituted, in which citizens or permanent residents
of Singapore or any body corporate whether incorporated or unincorporated and wherever
incorporated or constituted under any statute of Singapore have an interest in the aggregate of
more than 50 per cent. of the issued share capital of or interests in such corporation.
7. Each application must be accompanied by a remittance in Singapore currency for the full amount
payable, in respect of the number of Invitation Shares applied for, in the form of a BANKERS
DRAFT or CASHIERS ORDER drawn on a bank in Singapore, made out in favour of OSIM
SHARE ISSUE ACCOUNT crossed A/C PAYEE ONLY, with the name and address of the
applicant written clearly on the reverse side. Applications not accompanied by any payment or
accompanied by ANY OTHER FORM OF PAYMENT WILL NOT BE ACCEPTED. Remittances
bearing NOT TRANSFERABLE or NON TRANSFERABLE crossings shall be rejected. No
acknowledgement of receipt will be issued by the Company, the Vendor or OCBC Bank for
applications and application moneys received.
8. It is expected that unsuccessful applications will be returned to the applicants by ordinary post
(without interest or any share of revenue or other benefit arising therefrom) within three Market
Days after the close of the Application List at the applicants own risk. Where an application is
rejected or accepted in part only, the full amount or the balance of the application moneys, as the
case may be, will be refunded (without interest or any share of revenue or other benefit arising
therefrom) to the applicant by ordinary post at the applicants own risk within 14 days after the close
of the Application List.
9. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the
meanings assigned to them in this Prospectus.
10. In consideration of the Company and the Vendor having distributed the Application Form to the
applicant and agreeing to close the Application List at 12.00 noon on 27 July 2000 or such later time
or date as the Company and the Vendor may, in their absolute discretion, decide and by completing
and delivering the Application Form, the applicant agrees that:
(a) his application is irrevocable;
(b) his remittance will be honoured on first presentation and that any application moneys
returnable may be held pending clearance of his payment without interest or any share of
revenue or other benefit arising therefrom;
(c) all applications, acceptances and contracts resulting therefrom under the Invitation shall be
governed by and construed in accordance with the laws of Singapore and that he irrevocably
submits to the non-exclusive jurisdiction of the Singapore courts;
(d) in respect of the Invitation Shares for which his application has been received and not
rejected, acceptance of his application shall be constituted by written notification by or on
behalf of Company and the Vendor and not otherwise, notwithstanding any remittance being
presented for payment by or on behalf of the Company and the Vendor; and
(e) he will not be entitled to exercise any remedy of rescission for misrepresentation at any time
after acceptance of his application.
140
Applications for Offer Shares
1. Applications for Offer Shares MUST be made using the WHITE Offer Shares Application Forms and
WHITE official envelopes A and B. ONLY ONE APPLICATION should be enclosed in each
envelope.
2. The applicant must:
(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together with
his remittance in the WHITE envelope A provided;
(b) in the appropriate spaces on WHITE envelope A:
(i) write his name and address;
(ii) state the number of Offer Shares applied for; and
(iii) affix adequate Singapore postage;
(c) SEAL WHITE envelope A;
(d) write, in the special box provided on the larger WHITE envelope B addressed to OCBC
BANK, 18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, the
number of Offer Shares for which the application is made; and
(e) insert WHITE envelope A into WHITE envelope B, seal WHITE envelope B and thereafter
DESPATCH BY ORDINARY POST OR DELIVER BY HAND at his own risk to OCBC BANK,
18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, so as to
arrive by 12.00 noon on 27 July 2000 or such later date and time as the Company and the
Vendor may, in their absolute discretion, decide. Local Urgent Mail or Registered Post
must NOT be used.
3. No acknowledgement of receipt will be issued for any application or remittance received.
4. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly
drawn remittances are liable to be rejected.
Applications for Placement Shares (other than Reserved Shares)
1. Applications for Placement Shares must be made using the BLUE Placement Shares Application
Forms. ONLY ONE APPLICATION should be enclosed in each envelope.
2. The completed BLUE Placement Shares Application Form and the applicants remittance with the
name and address of the applicant written clearly on the reverse side, must be enclosed and sealed
in an envelope to be provided by the applicant. The sealed envelope must be DESPATCHED BY
ORDINARY POST OR DELIVERED BY HAND at the applicants own risk to OCBC BANK,
18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, to arrive by
12.00 noon on 27 July 2000 or such later date and time as the Company and the Vendor may,
in their absolute discretion, decide. Local Urgent Mail or Registered Post must NOT be used.
141
Applications for Reserved Shares
1. Applications for Reserved Shares must be made using the PINK Reserved Shares Application
Forms. ONLY ONE APPLICATION should be enclosed in each envelope.
2. The completed PINK Reserved Shares Application Form and the applicants remittance with the
name and address of the applicant written clearly on the reverse side, in accordance with the terms
of this Prospectus, must be enclosed and sealed in an envelope to be provided by the applicant. The
sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at the
applicants own risk to the Company at 57 Genting Lane, Osim Industrial Building, Singapore
349564, to arrive by 12.00 noon on 27 July 2000 or such later date and time as the Company
and the Vendor may, in their absolute discretion, decide. Local Urgent Mail or Registered Post
must NOT be used.
ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS
The procedures for Electronic Applications at ATMs of the Participating Banks are set out on the ATM
screens (in the case of ATMElectronic Applications) of the relevant Participating Banks (the Steps). For
illustration purposes, the procedures for Electronic Applications at ATMs of the OCBC Bank group are set
out in the STEPS FORATM ELECTRONICAPPLICATIONS appearing on page 146 of this Prospectus.
Please read carefully the terms of this Prospectus, the Steps and the terms and conditions for Electronic
Applications set out below before making an Electronic Application. Any reference to the applicant in
the terms and conditions for Electronic Applications and the Steps shall mean the applicant who applies
for Offer Shares through an ATM of a Participating Bank.
An applicant must have an existing bank account with and be an ATM cardholder of one of the
Participating Banks before he can make an Electronic Application at the ATMs of that Participating Bank.
An ATM card issued by one Participating Bank cannot be used to apply for Offer Shares at an ATM
belonging to other Participating Banks. The Steps set out the actions that the Applicant must take at
ATMs of the OCBC Bank group to complete an Electronic Application. The actions that an applicant must
take at ATMs of other Participating Banks are set out on the ATM screens of the relevant Participating
Banks. Upon the completion of his Electronic Application transaction, the applicant will receive an ATM
transaction slip (Transaction Record), confirming the details of his Electronic Application. The
Transaction Record is for retention by the applicant and should not be submitted with any printed
Application Form.
An applicant, including one who has a joint bank account with any of the Participating Banks,
must ensure that he enters his own Securities Account number when using the ATM card issued
to him in his own name. Using his own Securities Account number with an ATM card which is not
issued to him in his own name will render his Electronic Application liable to be rejected.
An Electronic Application shall be made on and subject to the terms and conditions of this Prospectus
including but not limited to the terms and conditions appearing below and those set out under the section
on TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION on page 146 of this
Prospectus as well as the Memorandum and Articles of Association of the Company.
1. In connection with his Electronic Application for Offer Shares, the applicant is required to confirm
statements to the following effect in the course of activating his Electronic Application:
(a) that he has received a copy of this Prospectus and has read, understood and agreed to
all the terms and conditions of application for Offer Shares in this Prospectus prior to
effecting the Electronic Application and agrees to be bound by the same;
(b) that he consents to the disclosure of his name, NRIC/passport number, address,
nationality, permanent resident status, CDP Securities Account number, CPF investment
account number (if applicable) and share application amount (the Relevant
Particulars) from his account with that Participating Bank to the Share Registrar, CDP,
CPF, SCCS, the Company, the Vendor and the Manager (the Relevant Parties); and
142
(c) that the Electronic Application made is his only application for Offer Shares and it is
made in his own name and at his own risk.
His application will not be successfully completed and cannot be recorded as a completed
transaction unless he presses the Enter or OK or Confirm or Yes key in the ATM. By doing
so, the applicant shall be treated as signifying his confirmation of each of the three statements. In
respect of statement 1(b) above, his confirmation, by pressing the Enter or OK or Confirm or
Yes key, shall signify and shall be treated as his written permission, given in accordance with the
relevant laws of Singapore including Section 47(4) of the Banking Act, Chapter 19 of Singapore to
the disclosure by that Participating Bank of the Relevant Particulars to the Relevant Parties.
2. By making an Electronic Application, the applicant confirms that he is not applying for Offer
Shares as nominee of any other person and that any Electronic Application that he makes is
the only application made by him as beneficial owner. The applicant shall make only one
Electronic Application for Offer Shares and shall not make any other application for Invitation
Shares (other than Reserved Shares), whether at the ATMs of any participating bank or on the
application forms. Where a person has made an application for Offer Shares or Placement
Shares (other than Reserved Shares) on an application form, he shall not make an Electronic
Application for Offer Shares.
3. The applicant must have sufficient funds in his bank account with his Participating Bank at the time
he makes his Electronic Application, failing which his Electronic Application will not be completed.
Any Electronic Application which does not conform strictly to the instructions set out on the
screens of the ATM through which the Electronic Application is being made shall be rejected.
4. The applicant irrevocably agrees and undertakes to subscribe for and to accept the number of Offer
Shares applied for as stated on the Transaction Record or any lesser number of Offer Shares that
may be allotted or allocated to him in respect of his Electronic Application. In the event that the
Company and the Vendor decide to allot any lesser number of such Offer Shares or not to allot any
Offer Shares to the applicant, the applicant agrees to accept such decision as final. If the applicants
Electronic Application is successful, his confirmation (by his action of pressing the Enter or OK
or Confirm or Yes key on the ATM) of the number of Offer Shares applied for shall signify and
shall be treated as his acceptance of the number of Offer Shares that may be allotted or allocated
to him and his agreement to be bound by the Memorandum and Articles of Association of the
Company.
5. No applications will be kept in reserve. Where an Electronic Application is unsuccessful, the full
amount of the application moneys will be refunded in Singapore dollars (without interest or any share
of revenue or other benefit arising therefrom) to the applicant by being automatically credited to the
applicants account with his Participating Bank within three Market Days after the close of the
Application List. Trading on a WHEN ISSUED basis, if applicable, is expected to commence
after such refund has been made.
Where an Electronic Application is rejected or accepted in part only, the full amount or the balance
of the application moneys, as the case may be, will be refunded (without interest or any share of
revenue or other benefit arising therefrom) to the applicant by being automatically credited to the
applicants account with his Participating Bank within 14 days after the close of the Application List.
Responsibility for timely refund of application moneys from Electronic Applications lies solely with the
respective Participating Banks. Therefore, you are strongly advised to consult your Participating
Bank as to the status of your Electronic Application and/or the refund of any moneys to you from an
unsuccessful or partially successful Electronic Application, to determine the exact number of Offer
Shares allotted to you before trading the Offer Shares on SGX-ST. Neither SGX-ST, the CDP, the
SCCS, the Participating Banks, our Company, the Vendor or the Manager assume any responsibility
for any loss that may be incurred as a result of you having to cover any net sell positions or from
buy-in procedures activated by the SGX-ST.
143
6. If the applicants Electronic Application is made through theATMs of Keppel TatLee Bank Limited and
is unsuccessful, it is expected that a computer generated notice will be sent to the applicant by his
Participating Bank (at the address of the applicant stated in the records of such Participating Bank
as at the date of his Electronic Application) by ordinary post at the applicants own risk within three
Market Days after the close of the Application List.
If the applicants Electronic Application is made through the ATMs of the OCBC Bank group
(comprising, OCBC Bank and Bank of Singapore Limited), Overseas Union Bank Limited (OUB),
The Development Bank of Singapore Ltd (DBS Bank) (including those of its POSBank Services
division) or the United Overseas Bank Limited group (comprising United Overseas Bank Limited, Far
Eastern Bank Ltd and Industrial & Commercial Bank Limited), and is unsuccessful, no notification will
be sent by such Participating Bank.
Applicants who make Electronic Applications through the ATMs of the following banks may check the
provisional results of their Electronic Applications as follows:
Bank Telephone/Web-site Available at ATM Operating Hours Service expected from
OCBC 1 800 363 3333 ATM Phone Banking/ATM:
24 hours a day
Evening of the balloting day
DBS
Bank
1 800 222 2222
327 4767
www.dbs.com.sg
Internet Banking
or Internet
Kiosk
24 hours a day 7.00 p.m. on the balloting day
KTB 222 8228 ATM ATM: 24 hours a day
Phone Banking:
MonFri: 08002200
Sat: 08001500
ATM: Evening of the balloting
day
Phone Banking: 8.00 a.m. on
the day after the balloting day
OUB 1 800 224 2000
www.oub2000.com.sg
Not Available Internet Banking/Phone
Banking:
24 hours a day
OUB Mobile Buzz:
24 hours a day
Evening of the balloting day
UOB 1 800 533 5533
1 800 222 2121
www.uobcyberbank.com.sg
ATM (Other
Transactions
IPO Enquiry)
Phone Banking/ATM:
24 hours a day
6.00 p.m. on the balloting day
*Applicants who make Electronic Applications through the ATMs of OUB and who have activated their OUB Mobile Buzz
services will be notified of the results of their Electronic Application, via their mobile phones.
7. Electronic Applications shall close at 12.00 noon on 27 July 2000 or such later date and time as the
8. The applicant is deemed to have requested and authorised the Company and the Vendor to:
(a) register the Offer Shares allotted or allocated to the applicant in the name of CDP for deposit
into his Securities Account;
(b) send the relevant Share certificate(s) to CDP;
(c) return or refund (without interest or any share of revenue or other benefit arising therefrom) the
application moneys, should his Electronic Application be rejected, by automatically crediting the
applicants bank account with his Participating Bank with the relevant amount within three
Market Days after the close of the Application List; and
144
(d) return or refund (without interest or any share of revenue or other benefit arising therefrom) the
balance of the application moneys, should his Electronic Application be accepted in part only,
by automatically crediting the applicants bank account with his Participating Bank with the
relevant amount within 14 days after the close of the Application List.
9. The applicant irrevocably agrees and acknowledges that his Electronic Application is subject to
risks of electrical, electronic, technical and computer-related faults and breakdowns, fires, acts of
God and other events beyond the control of the Participating Banks, the Company, the Vendor and
the Manager and if, in any such event, the Company, the Vendor, the Manager and/or the relevant
Participating Bank do not record or receive the applicants Electronic Application, or data relating
to the applicants Electronic Application or the tape containing such data is lost, corrupted,
destroyed or not otherwise accessible, whether wholly or partially for whatever reason, the
applicant shall be deemed not to have made an Electronic Application and the applicant shall have
no claim whatsoever against the Company, the Vendor, the Manager and/or the relevant
Participating Bank for the Offer Shares applied for or for any compensation, loss or damage.
10. The existence of a trust will not be recognised. Any Electronic Application by an applicant must be
made in his own name and without qualification. The Company and the Vendor will reject any
Electronic Application by any person acting as nominee.
11. All particulars of the applicant in the records of his Participating Bank at the time he makes his
Electronic Application shall be deemed to be true and correct and his Participating Bank and the
Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any change in
the particulars of the applicant after the time of the making of his Electronic Application, the
applicant shall promptly notify his Participating Bank.
12. The applicant should ensure that his personal particulars as recorded by both CDP and the
relevant Participating Bank are correct and identical, otherwise, his Electronic Application
is liable to be rejected. The applicant should promptly inform CDP of any change in address,
failing which the notification letter on successful allotment and other correspondence from the CDP
will be sent to his address last registered with CDP.
13. In consideration of the Company and the Vendor arranging for the Electronic Application facility
through the ATMs of the Participating Banks and agreeing to close the Application List at 12.00
noon on 27 July 2000 or such later time or date as the Directors and the Vendor, may in their
absolute discretion decide, by making and completing an Electronic Application, the applicant
agrees that:
(a) his Electronic Application is irrevocable;
(b) his Electronic Application, the acceptance by the Company and the Vendor and the contract
resulting therefrom under the Invitation shall be governed by and construed in accordance with
the laws of Singapore and he irrevocably submits to the non-exclusive jurisdiction of the
Singapore courts;
(c) none of the Company, the Vendor, the Manager and the Participating Banks shall be liable for
any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery
of data relating to his Electronic Application to the Company, the Vendor or CDP due to a
breakdown or failure of transmission, delivery or communication facilities or any risks referred
to in paragraph 9 above or to any cause beyond their respective controls;
(d) in respect of Offer Shares for which his Electronic Application has been successfully completed
and not rejected, acceptance of the applicants Electronic Application shall be constituted by
written notification by or on behalf of the Company and the Vendor and not otherwise,
notwithstanding any payment received by or on behalf of the Company and the Vendor; and
(e) he will not be entitled to exercise any remedy of rescission or misrepresentation at any time
after acceptance of his application.
145
Steps for ATM Electronic Applications through ATMs of the OCBC Bank group
An applicant making an Electronic Application through the ATMs of the OCBC Bank group shall be
viewing the following instructions on the ATM screens of the OCBC Bank group. Certain words appearing
on the screen are in abbreviated form (a/c, appln, ESA, no. and & refer to account,
application, electronic share application, number and and respectively). Instructions for
Electronic Applications appearing on the ATM screens of the Participating Banks (other than the OCBC
Bank group) may differ from those represented below.
Step 1 : Insert your personal OCBC ATM card
2 : Enter your Personal Identification Number
3 : Select Other Services
4 : Select Electronic Share Appln
5 : Select OSIM
6 : For an applicant making an Electronic Application at the ATM for the first time
(a) For non-Singaporean
Press the Yes key if you are a permanent resident of Singapore, otherwise, press
the No key.
(b) Enter your own Securities Account number (12 digits) eg. 168101234567 and press
Yes key to confirm that the Securities Account number you have entered is correct.
7 : Check your particulars appearing on the screen and press the Correct key to confirm that
your particulars are correct.
8 : Press the Confirm key to confirm that you have read the following messages:
You have read, understood and agreed to all terms of appln & Prospectus/
Document
You consent to disclose your NRIC/Passport No., address, nationality, securities
a/c no., qty. of securities applied for and CPF investment a/c no. to share
registrar, CDP, CPF, SCCS, Issuer & Vendor(s)
This appln is made in your own name & at your own risk
9 : Press the Confirm key again to confirm that you have read the following messages:
Where applicable, a copy of the Prospectus/Document has been lodged with and
registered by the Registrar of Companies & Businesses in Singapore who take
no responsibility for its contents
The Prospectus/Document are available at various Participating Banks
10 : Select the number of Shares you wish to apply for:
For fixed price ESA, this is the only application submitted
Fixed Price: $0.52
11 : Select the type of bank account to debit your application moneys
12 : Check the details of your application appearing on the screen and press the Confirm key
to confirm your application
13 : For customers with multiple bank accounts, select the bank account from which to debit
your application moneys
14 : Remove Transaction Record for your reference only
146
the world .
for its contents.
AND
Singapore
S in g a p o re 3 4 9 5 6 4
Te l: (6 5 ) 7 4 7 - 6 8 6 6
Fa x : (6 5 ) 8 4 6 - 4 9 1 9
OSIM Global Network
H o n g K o n g
Ta iw a n
PRC
In d o n e s ia
M a la y s ia
Th a ila n d
U S A
U AE
10.8
3.2
4.4
3.7
1.6
103.1
69.7
60.8
42.9
31.4
1999
1998
1997
1996
1995
1 , 0 0 0 b y 2 0 0 8 .
Singapore: 37
Malaysia: 21
Thailand: 5
Indonesia: 14
Taiwan: 30
Hong Kong: 40
PRC: 44
UAE: 1
USA: 11
1000
500
300
2008E
2003E
2001E
No. of outlets
(S$ million)

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