kitchen culture holdings ltd.webdocs.kcholdings.com.sg/prospectus.pdfthe sgx-st assumes any...

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KITCHEN CULTURE HOLDINGS LTD.(Incorporated in the Republic of Singapore on 25 March 2011)

(Company Registration No. 201107179D)

This document is important. If you are in any doubt as to the

action you should take, you should consult your legal, financial,

tax, or other professional adviser(s).

Collins Stewart Pte. Limited (the “Sponsor”) has made an applicationto the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for permission to deal in, and for quotation of, all the ordinaryshares (the “Shares”) in the capital of Kitchen Culture HoldingsLtd. (the “Company”) already issued and the new Shares (the“New Shares”) which are the subject of the Placement (as definedherein) on Catalist. The dealing in, and quotation of, our Sharesand the New Shares will be in Singapore dollars.

Companies listed on Catalist may carry higher investment riskwhen compared with larger or more established companies listedon the Main Board of the SGX-ST. In particular, companies maylist on Catalist without a track record of profitability and there isno assurance that there will be a liquid market in the shares orunits of shares traded on Catalist. You should be aware of the risksof investing in such companies and should make the decision toinvest only after careful consideration and, if appropriate, consultationwith your professional adviser(s).

This Placement is made in or accompanied by this Offer Documentthat has been registered by the SGX-ST acting as agent on behalfof the Monetary Authority of Singapore (the “Authority”). We havenot lodged or registered this Offer Document in any other jurisdiction.

Neither the Authority nor the SGX-ST has examined or approvedthe contents of this Offer Document. Neither the Authority northe SGX-ST assumes any responsibility for the contents of thisOffer Document, including the correctness of any of the statementsor opinions made or reports contained in this Offer Document.

The SGX-ST does not normally review the application for admissionbut relies on the Sponsor (as defined herein) confirming that ourCompany is suitable to be listed on Catalist and complies with therules of the Listing Manual (as defined herein). Neither the Authoritynor the SGX-ST has, in any way, considered the merits of theShares or units of Shares being offered for investment.

The registration of this Offer Document by the SGX-ST does notimply that the Securities and Futures Act (Chapter 289) ofSingapore, or any other legal or regulatory requirements, orrequirements under the SGX-ST’s listing rules, have been compliedwith.

Acceptance of applications will be conditional upon the issue ofthe New Shares and the listing and quotation of all our existingissued Shares and the New Shares. Monies paid in respect ofany application accepted will be returned to you at your ownrisk, without interest or any share of revenue or other benefitarising therefrom, if the admission and listing do not proceed,and you will not have any claims against us, the Sponsor andthe Placement Agent (as defined herein).

After the expiration of six months from the date of registrationof this Offer Document, no person shall make an offer ofsecurities, or allot, issue or sell any of our Shares, on the basisof this Offer Document; and no officer or equivalent person orpromoter of our Company will authorise or permit the offer ofany of our Shares or the allotment, issue or sale of any of ourShares, on the basis of this Offer Document.

Investing in our Shares involves risks which are described

in the “Risk Factors” section of this Offer Document.

OFFER DOCUMENT DATED 15 JULY 2011Registered by the Singapore Exchange Securities Trading Limited acting as agent on behalf of theMonetary Authority of Singapore on 15 July 2011

Placement of 17,000,000 New Shares at $0.30 foreach Share, payable in full on application.

Sponsor and Placement Agent

COLLINS STEWART PTE. LIMITED(Incorporated in the Republic of Singapore)(Company Registration No. 200713620D)

KITCHEN CULTURE HOLDINGS LTD.

25 New Industrial Road #02-01 KHL Industrial Building Singapore 536211

Tel: [65] 6471 6776 Fax: [65] 6472 6776

www.khlmktg.com I www.kitchenculture.com

Company Registration No.201107179D

We specialise in the sale and distribution of a wide range of premium imported

kitchen systems, kitchen appliances, wardrobe systems, household furniture and

accessories from Europe and USA, catering to the high end markets under the

“Kitchen Culture” identity. Due to the wide variety of products under different high

end brands that we represent, we have become one of the premier kitchen solutions

providers for the discerning and sophisticated consumer in the premium market

predominantly in Singapore and Malaysia.

Our head office, corporate showroom and warehouse

facility are located in Singapore at 25 New Industrial Road

KHL Industrial Building Singapore 536211. We have two

“Kitchen Culture” retail showrooms located at 2 Leng

Kee Road #01-02/03/04/05/07 Singapore 159086 and 45E

Ground floor and 5th floor Bangunan Bangsaria Jalan

Maarof Taman Bangsar 59100 Kuala Lumpur Malaysia,

and one “Haus” retail showroom located at 390 Orchard

Road #03-04 Palais Renaissance Singapore 238871,

occupying an aggregate built-in area of approximately

32,055 sq ft.

COMPANYPROFILE

COMPETITIVE STRENGTHSWe have established our reputation in the “Kitchen

Culture” brand

• “Kitchen Culture” has established itself as a majorplayer in the residential kitchen industry with morethan two decades of experience in this business.

• We believe that our “Kitchen Culture” brand hasbecome one of the premier kitchen solutions providersfor the discerning and sophisticated consumer in thepremium market predominantly in Singapore andMalaysia.

We are a multi-brand and multi-product player

• We have secured more than ten premium brands inthe residential kitchen industry since our inceptionin this business in 1991.

• Our multi-brand portfolio has also enabled us to bea one-stop solution for our customers for kitchensystems, kitchen appliances, wardrobe systems,household furniture and accessories.

• Our different business segmentation covers the entiremarket chain from the wholesale sector down to theretail consumer market.

We have a strong track record in project execution

when serving customers in our Residential

Projects segment

• We deliver good and reliable services to our customersin the Residential Projects segment, where our abilityto implement and execute projects on a timely basisis crucial to our customers.

• Coupled with our good working relationship withdevelopers and main contractors of private residentialdevelopments, we have been able to garner a numberof projects over the past years.

We have an experienced and committed team of senior

management and key employees

• Our Group is helmed by a senior management teamwhich has extensive experience in the residentialkitchen industry.

• Our Executive Chairman and CEO, Lim Wee Li, hasbeen instrumental in the formulation of our strategicdirections and expansion plans.

• Our Executive Director, Lim Han Li, is responsiblefor the implementation and coordination of strategiesand policies.

We have strong and long-standing relationships with

our suppliers

• We foster close working relationships with our suppliersand our management team regularly visits them in theirhome country to understand their business and productionprocesses.

• Our strong relationship with our suppliers is evidentfrom the number of brands of premium imported

kitchen systems, kitchen appliances, wardrobe systems,household furniture and accessories whom we haverepresented over the past years (as disclosed underthe “Products That We Sell and Distribute” sectionof this Offer Document).

PROSPECTSState of the economies in Singapore and Malaysia

• Singapore economy forecasted to grow by 5.0% to7.0% in 2011; and Malaysian economy projected to growat 5.0% to 6.0% in 2011.

• The growth in the economies of Singapore and Malaysiais likely to translate into higher demand in residentialdevelopments.

Growth of the residential property markets in Singapore

and Malaysia

• Our Directors believe that the higher number of supplyof private residential properties and the improvementin consumer sentiments would translate into betterprospects for the sales of our Group’s products.

Potential of the Hong Kong and Indonesia markets

• The various restrictions imposed by mainland cities suchas Guangzhou and Shanghai on owning second andthird homes have caused mainland investors to focustheir attention on the Hong Kong property market.

• Indonesian government has targeted Gross DomesticProduct growth of approximately 7.0% to 8.0% after2013, which would make Indonesia one of the world’sten largest economies by 2025.

• Our Directors believe that the residential propertymarket in Hong Kong to be relatively healthy in theforeseeable future and believe that the robust growthof Indonesia’s economy is likely to have positiveconsequences for the real estate market. As such,the opportunities available to us to market and sellour products would become greater.

FUTURE PLANSExpanding our geographical coverage

• Our Directors believe that there is potential for ourproducts in new markets such as Hong Kong andIndonesia.

• We plan to embark on expanding our geographicalcoverage by setting up subsidiaries or representativeoffices in new markets (including Hong Kong andIndonesia) or joint ventures with local parties to tap theopportunities in these markets.

• We also intend to set up our “Kitchen Culture”retail showrooms in these markets.

Expanding our product range

• Our Group intends to leverage on the potential increasein demand for lifestyle products and accessories (suchas household furniture, decorative items, bath fixturesand other related products) that complement thehigh end lifestyle of the premium retail market byextending our product offering.

Expansion through acquisitions, joint ventures and/or

strategic alliances

• We may consider expanding our business throughacquisitions, joint ventures or strategic allianceswith parties who create synergistic values with ourexisting business to strengthen our market position,expand our network, as well as expand into newbusinesses complementary to our current business.

CORPORATEPOSITIONING

FINANCIALHIGHLIGHTS

REVENUE BREAKDOWN REVENUE, GROSS PROFIT & PAT

By Geographic Segment

Singapore Malaysia Others

Gross Profit Margin (%)

FY2008

46.1

45.7

56.9

FY2009

44.5

42.9

67.2

FY2010

42.0

29.1

63.0

100%

80%

60%

40%

20%

FY2008 FY2009 FY2010

79.9% 92.7%

15.9%29.1%

By Business Segment

Residential Projects Distribution and Retail

100%

80%

60%

40%

20%

FY2008 FY2009 FY2010

76.2%

Business Segments $’ million

Residential Projects 25.9*

Distribution and Retail 8.7**

ORDER BOOK(from 1 January 2011 to the Latest Practicable Date)

* based on our LOAs** based on confirmation orders (of which approximately

$2.6 million has been fulfilled)

S$35m

S$30m

S$25m

S$20m

S$15m

S$10m

S$5m

FY2008 FY2009 FY2010

1.8

8.6

18.5

1.3

8.8

19.5

4.3

13.0

31.2

PAT Gross Profit Revenue

* refers to customers from Seychelles, Indonesiaand Thailand

5.5%

65.4%

4.2% 1.7%5.6%

23.8%

59.9%

40.1%

47.1%

52.9%

PROPOSED DIVIDEND

We intend to recommend and distribute dividendsof at least 20% of our net profit attributable toShareholders for FY2011 and FY2012, subject tothe factors outlined in the “Dividend Policy” sectionof this Offer Document.

Singapore

Malaysia

Others*

Gross Profit Margin (%)

FY2008

56.4

37.9

46.6

FY2009

50.3

37.5

45.2

FY2010

43.6

35.5

41.7

Residential Projects

Distribution and Retail

Overall

Project Name

Amber Residences

Hamilton Scotts

Leonie Parc View

Paterson Suites

Scotts High Park

Silversea

The Binjai On The Park

The Lumos

The Orange Grove

The Orchard Residences

The Ritz-Carlton Residences,

Singapore, Cairnhill

Name of Developer

Voda Land Pte. Ltd.Sardinia Properties Pte. Ltd.(subsidiary of Hayden Properties)SB (Orchard) Development Pte LtdBukit Sembawang View Pte LtdCapitaLand LimitedFar East OrganisationLayar Intan Sdn BhdKoh Brothers Group Limited & Heeton Holdings LimitedHo Bee Investment LtdCapitaLand Limited & Sun Hung Kai Properties LimitedRoyce Properties Pte. Ltd.(subsidiary of Hayden Properties)

Products Supplied

Kitchen systems & kitchen appliancesKitchen systems

Kitchen systems & wardrobe systemsKitchen systemsKitchen systemsKitchen appliancesKitchen systems & kitchen appliancesKitchen systemsKitchen systemsKitchen systems & kitchen appliancesKitchen systems & kitchen appliances

RECENT NOTABLE RESIDENTIALPROJECTS SECURED

Amber Residences

Scotts High Park

Hamilton ScottsThe Lumos

The Orange Grove

The Ritz-Carlton Residences, Singapore, Cairnhill

The Orchard Residences

BRANDS UNDEROUR DISTRIBUTION

THE HEART OF A GOOD KITCHEN

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . 10

SELLING RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

DETAILS OF THE PLACEMENT

LISTING ON CATALIST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

INDICATIVE TIMETABLE FOR LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

OFFER DOCUMENT SUMMARY

OVERVIEW OF OUR GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

USE OF PROCEEDS FROM THE PLACEMENT AND EXPENSES INCURRED . . . . . . . . . . 23

MANAGEMENT AND PLACEMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ISSUE STATISTICS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SUMMARY OF OUR FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND

FINANCIAL POSITION

OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

SEASONALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

INFLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

REVIEW OF RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

REVIEW OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

CAPITAL EXPENDITURES, DIVESTMENTS, COMMITMENTS AND CONTINGENT

LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

FOREIGN EXCHANGE MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

CONTENTS

1

GENERAL INFORMATION ON OUR GROUP

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

RESTRUCTURING EXERCISE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

GROUP STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

OUR SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

MORATORIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

BUSINESS

BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

PRODUCTS THAT WE SELL AND DISTRIBUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

OUR SALES PROCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

SALES AND MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

QUALITY ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

MAJOR CUSTOMERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

MAJOR SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

CREDIT MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

RESEARCH AND DEVELOPMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

INVENTORY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

PROPERTIES AND FIXED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

STAFF TRAINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

COMPETITIVE STRENGTHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

PROSPECTS, BUSINESS STRATEGIES AND FUTURE PLANS

PROSPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

TREND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

ORDER BOOK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

BUSINESS STRATEGIES AND FUTURE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

GOVERNMENT REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

EXCHANGE CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

CONTENTS

2

DIRECTORS, EXECUTIVE OFFICERS AND STAFF

MANAGEMENT REPORTING STRUCTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

EXECUTIVE OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

STAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

REMUNERATION OF DIRECTORS, EXECUTIVE OFFICERS AND RELATED

EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

SERVICE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

BOARD PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

INTERESTED PERSON TRANSACTIONS

PAST INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

PRESENT AND ON-GOING INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . 111

REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS . . . . . 115

OTHER TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

POTENTIAL CONFLICTS OF INTERESTS

INTERESTS OF DIRECTORS, CONTROLLING SHAREHOLDERS OR THEIR

ASSOCIATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

INTERESTS OF EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

INTERESTS OF SPONSOR OR PLACEMENT AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 122

CLEARANCE AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

GENERAL AND STATUTORY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

APPENDIX A

COMBINED FINANCIAL STATEMENTS FOR FINANCIAL YEARS ENDED 31 DECEMBER

2008, 2009 AND 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

APPENDIX B

SUMMARY OF MEMORANDUM AND ARTICLES OF ASSOCIATION OF OUR COMPANY . . B-1

APPENDIX C

DESCRIPTION OF OUR SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

APPENDIX D

TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

APPENDIX E

TERMS, CONDITIONS AND PROCEDURES FOR APPLICATIONS . . . . . . . . . . . . . . . . . . . E-1

CONTENTS

3

BOARD OF DIRECTORS : Lim Wee Li (Executive Chairman and Chief Executive Officer)

Lim Han Li (Executive Director)

Ong Beng Chye (Lead Independent Director)

Boon Suan Zin Zacchaeus (Independent Director)

Kesavan Nair (Non-Executive Director)

COMPANY SECRETARY : Wee Woon Hong, LLB (Hons)

REGISTERED OFFICE AND

PRINCIPAL PLACE OF

BUSINESS

: 25 New Industrial Road

#02-01 KHL Industrial Building

Singapore 536211

SHARE REGISTRAR AND

SHARE TRANSFER OFFICE

: Boardroom Corporate & Advisory Services Pte. Ltd.

50 Raffles Place

#32-01 Singapore Land Tower

Singapore 048623

SPONSOR AND

PLACEMENT AGENT

: Collins Stewart Pte. Limited

77 Robinson Road

#21-02

Singapore 068896

AUDITORS AND

REPORTING ACCOUNTANTS

: Baker Tilly TFW LLP

15 Beach Road

#03-10 Beach Centre

Singapore 189677

Partner-in-charge: Ong Kian Guan

(A member of the Institute of Certified Public Accountants of

Singapore)

SOLICITORS TO THE

PLACEMENT AND LEGAL

ADVISER TO THE COMPANY

ON SINGAPORE LAW

: Opal Lawyers LLC

30 Raffles Place

#19-04 Chevron House

Singapore 048622

LEGAL ADVISER TO THE

COMPANY ON MALAYSIAN

LAW

: Wong Beh & Toh

Peti #30 Level 19

West Block, Wisma Selangor Dredging

142-C Jalan Ampang

50450 Kuala Lumpur

Malaysia

RECEIVING BANKER : Oversea-Chinese Banking Corporation Limited

65 Chulia Street

OCBC Centre

Singapore 049513

PRINCIPAL BANKERS : DBS Bank Ltd.

6 Shenton Way

DBS Building Tower One

Singapore 068809

Oversea-Chinese Banking Corporation Limited

65 Chulia Street

OCBC Centre

Singapore 049513

CORPORATE INFORMATION

4

In this Offer Document and the accompanying Application Form, unless the context otherwise requires,

the following definitions apply throughout where the context so admits:–

Companies within our Group

“Company” : Kitchen Culture Holdings Ltd.

“Group” : Our Company and our subsidiaries

“Haus” : Haus Furnishings and Interiors Pte. Ltd.

“KHL Marketing” : KHL Marketing Asia-Pacific Pte Ltd

“Kitchen Culture Malaysia” : Kitchen Culture Sdn. Bhd.

“Kitchen Culture Singapore” : Kitchen Culture Pte. Ltd.

Other Corporations and Agencies

“Authority” : The Monetary Authority of Singapore

“CDP” : The Central Depository (Pte) Limited

“Collins Stewart”, “Sponsor”

or “Placement Agent”

: Collins Stewart Pte. Limited

“CPF” : The Central Provident Fund

“EPF” : The Employees Provident Fund

“ISO” : International Organisation for Standardisation

“KHL Home Appliances” : KHL Home Appliances Sdn. Bhd.

“Kim Hup Lee” : Kim Hup Lee & Co. (Private) Limited

“SCCS” : Securities Clearing and Computer Services (Pte) Limited

“SGX-ST” : Singapore Exchange Securities Trading Limited

General

“Application Form” : The printed application form to be used for the purpose of the

Placement and which forms part of this Offer Document

“Application List” : The list of applications for the subscription of the New Shares

“Articles of Association” : The articles of association of our Company

“Associate” : (a) in relation to any director, chief executive officer,

substantial shareholder or controlling shareholder (being

an individual) means:–

(i) his immediate family;

DEFINITIONS

5

(ii) the trustees of any trust of which he or his

immediate family is a beneficiary or, in the case of

a discretionary trust, is a discretionary object; or

(iii) any company in which he and his immediate family

together (directly or indirectly) have an interest of

30% or more of the aggregate of the nominal

amount of all the voting shares;

(b) in relation to a substantial shareholder or a controlling

shareholder (being a company) means any other

company which is its subsidiary or holding company or is

a fellow subsidiary of any such holding company or one

in the equity of which it and/or such other company or

companies taken together (directly or indirectly) have an

interest of 30% or more

“associated company” : In relation to a corporation, means:–

(a) any corporation in which the corporation or its subsidiary

has, or the corporation and its subsidiary together have,

a direct interest of not less than 20% but not more than

50% of the aggregate of the nominal amount of all the

voting shares; or

(b) any corporation, other than a subsidiary of the

corporation or a corporation which is an associated

company by virtue of paragraph (a), the policies of which

the corporation or its subsidiary, or the corporation

together with its subsidiary, is able to control or influence

materially

“Audit Committee” : The audit committee of our Company as at the date of this

Offer Document, unless otherwise stated

“Board” or “Board of

Directors”

: The board of Directors of our Company as at the date of this


“business trust” : Has the same meaning as in Section 2 of the Business Trusts

Act (Chapter 31A) of Singapore

“Catalist” : The sponsor-supervised listing platform of the SGX-ST

“CEO” : Chief Executive Officer

“CFO” : Chief Financial Officer

“Companies Act” : The Companies Act (Chapter 50) of Singapore as amended,

supplemented or modified from time to time

“Controlling Shareholder” : A person who has an interest in our Shares of an aggregate of

not less than 15% of the total votes attached to all our Shares,

or in fact exercises control over our Company

DEFINITIONS

6

“Directors” : The directors of our Company as at the date of this Offer

Document, unless otherwise stated

“entity” : Includes a corporation, an unincorporated association, a

partnership and the government of any state, but does not

include a trust

“EPS” : Earnings per Share

“Executive Directors” : The executive Directors of our Company as at the date of this


“Executive Officers” : The executive officers of our Group as at the date of this Offer

Document, unless otherwise stated

“FY” : Financial year ended or ending 31 December, as the case may

be

“GST” : Goods and Services Tax

“Independent Directors” : The non-executive independent Directors of our Company as

at the date of this Offer Document, unless otherwise stated

“Issue Price” : $0.30 for each New Share

“Latest Practicable Date” : 19 June 2011, being the latest practicable date prior to the

lodgement of this Offer Document with the SGX-ST acting as

agent on behalf of the Authority

“Lead Independent Director” : The lead Independent Director of our Company as at the date

of this Offer Document, unless otherwise stated

“Listing Manual” : The SGX-ST Listing Manual Section B: Rules of Catalist, as

amended, varied or supplemented from time to time

“LOA” : Letter of award

“LOI” : Letter of intent

“Market Day” : A day on which the SGX-ST is open for trading in securities

“New Shares” or “Placement

Shares”

: The 17,000,000 new Shares for which our Company invites

applications to subscribe, pursuant to the Placement, subject

to and on the terms and conditions of this Offer Document

“Nominating Committee” : The nominating committee of our Company as at the date of

this Offer Document, unless otherwise stated

“Non-Executive Director” : The non-executive Director of our Company (including

Independent Directors) as at the date of this Offer Document,

unless otherwise stated

“NTA” : Net tangible assets (after non-controlling interests)

“Offer Document” : This offer document dated 15 July 2011 issued by our

Company in respect of the Placement

DEFINITIONS

7

“PAT” : Profit attributable to equity holders of the Company

“PBT” : Profit before tax

“PER” : Price earnings ratio

“periods under review” : The period which comprises FY2008, FY2009 and FY2010

“Placement” : The placement by the Placement Agent of the New Shares on

behalf of our Company for subscription at the Issue Price,

subject to and on the terms and conditions of this Offer

Document

“Remuneration Committee” : The remuneration committee of our Company as at the date of

this Offer Document, unless otherwise stated

“Restructuring Exercise” : The corporate restructuring exercise undertaken in connection

with the Placement, as described in the “Restructuring

Exercise” section of this Offer Document

“Securities Account” : The securities account maintained by a Depositor with CDP,

but does not include a securities sub-account

“Service Agreements” : The service agreements entered into between our Company

and our Executive Directors, Lim Wee Li and Lim Han Li

respectively, as described in the “Service Agreements” section

of this Offer Document

“SFA” : The Securities and Futures Act (Chapter 289) of Singapore as

amended, modified or supplemented from time to time

“SGXNET” : The corporate announcement system maintained by the

SGX-ST for the submission of announcements by listed

companies

“Shareholders” : Registered holders of Shares, except where the registered

holder is CDP, the term “Shareholders” shall, in relation to

such Shares, mean the Depositors whose Securities Accounts

are credited with Shares

“Shares” : Ordinary shares in the capital of our Company

“Sub-Division” : The sub-division of 1,500,013 Shares in the capital of our

Company into 83,000,000 Shares as described in the “Share

Capital” section of this Offer Document

“subsidiary” : Has the same meaning as in Section 5 of the Companies Act

“Substantial Shareholder” : A person who has an interest in the Shares the total votes

attached to which is not less than 5% of the total votes

attached to all the voting shares in our Company

“USA” : United States of America

DEFINITIONS

8

Currencies, Units and Others

“CHF” : Swiss Franc

“EUR” : The official currency of the European Union

“GBP” : British Pound Sterling

“RM” : Malaysian Ringgit

“RMB” : Chinese Renminbi

“S$” or “$” and “cents” : Singapore dollar and cent, respectively

“sq ft” : Square feet

“US$” : United States dollar

“%” : Percentage

The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings ascribed

to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa and words

importing the masculine gender shall, where applicable, include the feminine and neuter genders and

vice versa. References to persons shall include corporations.

Any reference in this Offer Document and/or the Application Form to any statute or enactment is a

reference to that statute or enactment as for the time being amended or re-enacted. Any word defined

under the Companies Act, the SFA or any statutory modification thereof and used in this Offer

Document and the Application Form shall, where applicable, have the meaning ascribed to it under the

Companies Act, the SFA or any statutory modification thereof, as the case may be.

Any reference in this Offer Document and/or the Application Form to Shares being allotted to an

applicant includes allotment to CDP for the account of that applicant.

Any reference to a time of day in this Offer Document and/or the Application Form shall be a reference

to Singapore time, unless otherwise stated.

Any reference to “we”, “us”, “our”, “ourselves” or their other grammatical variations thereof in this Offer

Document is a reference to our Company, our Group or any member of our Group as the context

requires.

Any discrepancies in the tables included herein between the listed amounts and the total thereof are

due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic

aggregation of the figures which precede them.

DEFINITIONS

9

All statements contained in this Offer Document, statements made in press releases and oral

statements that may be made by us or our Directors, Executive Officers or employees acting on our

behalf that are not statements of historical fact, constitute “forward-looking statements”. You can

identify some of these forward-looking statements by terms such as “expects”, “believes”, “plans”,

“intends”, “estimates”, “anticipates”, “may”, “will”, “would” and “could” or similar words. However, you

should note that these words are not the exclusive means of identifying forward-looking statements. All

statements regarding our expected financial position, business strategies, plans and prospects are

forward-looking statements. These forward-looking statements, including statements as to:–

(a) our revenue and profitability;

(b) expected growth in demand;

(c) expected industry trends;

(d) anticipated expansion plans; and

(e) other matters discussed in this Offer Document regarding matters that are not historical fact,

are only predictions. These forward-looking statements involve known and unknown risks, uncertainties

and other factors that may cause our actual results, performance or achievements to be materially

different from any future results, performance or achievements expected, expressed or implied by

these forward-looking statements. These risks, uncertainties and other factors include, among others:–

(a) changes in political, social, economic and stock or securities market conditions and the regulatory

environment in the countries in which we conduct business;

(b) changes in currency exchange or interest rates;

(c) our anticipated growth strategies and expected growth;

(d) changes in the availability and prices of products we sell;

(e) changes in customer preference;

(f) changes in competitive conditions and our ability to compete under these conditions;

(g) changes in our future capital needs and the availability of financing and capital to fund these

needs;

(h) the factors described in the “Risk Factors” section of this Offer Document; and

(i) other factors beyond our control.

All forward-looking statements made by or attributable to us, or persons acting on our behalf, contained

in this Offer Document are expressly qualified in their entirety by such factors.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

10

Given the risks and uncertainties that may cause our actual future results, performance or

achievements to be materially different from those expected, expressed or implied by the forward-

looking statements in this Offer Document, we advise you not to place undue reliance on those

statements which apply only as at the date of this Offer Document. Neither our Company, the Sponsor,

the Placement Agent nor any other person represents or warrants to you that our actual future results,

performance or achievements will be as discussed in those statements. Further, our Company, the

Sponsor and the Placement Agent disclaim any responsibility to update any of those forward-looking

statements to reflect future developments, events or circumstances for any reason, even if new

information becomes available or other events occur in the future.

We are, however, subject to the provisions of the SFA and the Listing Manual regarding corporate

disclosure. In particular, pursuant to Section 241 of the SFA, if after this Offer Document is registered

but before the close of the Placement, we become aware of (a) a false or misleading statement in this

Offer Document; (b) an omission from this Offer Document of any information that should have been

included in it under Section 243 of the SFA; or (c) a new circumstance which has arisen since the Offer

Document was lodged with the SGX-ST acting as agent on behalf of the Authority and would have been

required by Section 243 of the SFA to be included in this Offer Document, if it had arisen before this

Offer Document was lodged, and that is materially adverse from the point of view of an investor, we

may, in consultation with the Sponsor and the Placement Agent, lodge a supplementary or replacement

offer document with the SGX-ST acting as agent on behalf of the Authority.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

11

This Offer Document does not constitute an offer, solicitation or invitation to subscribe for the New

Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or

to any person to whom it is unlawful to make such offer, solicitation or invitation. No action has been

or will be taken under the requirements of the legislation or regulations of, or of the legal or regulatory

requirements of any jurisdiction, except for the lodgement and/or registration of this Offer Document in

Singapore in order to permit a public offering of the New Shares and the public distribution of this Offer

Document in Singapore. The distribution of this Offer Document and the offering of the New Shares in

certain jurisdictions may be restricted by the relevant laws in such jurisdictions. Persons who may come

into possession of this Offer Document are required by us, the Sponsor and the Placement Agent to

inform themselves about, and to observe and comply with, any such restrictions at their own expense

and without liability to us, the Sponsor and the Placement Agent.

Persons to whom a copy of this Offer Document has been issued shall not circulate to any other person,

reproduce or otherwise distribute this Offer Document or any information herein for any purpose

whatsoever nor permit or cause the same to occur.

SELLING RESTRICTIONS

12

LISTING ON CATALIST

The Sponsor has made an application to the SGX-ST for permission to deal in, and for quotation of, all

our Shares already issued and the New Shares which are the subject of the Placement on Catalist. The

dealing in, and quotation of our Shares and the New Shares will be in Singapore dollars.

Companies listed on Catalist may carry higher investment risk when compared with larger or more

established companies listed on the Main Board of the SGX-ST. In particular, companies may list on

Catalist without a track record of profitability and there is no assurance that there will be a liquid market

in the shares or units of shares traded on Catalist. Applicants should be aware of the risks of investing

in such companies and should make the decision to invest only after careful consideration and, if

appropriate, consultation with their professional adviser(s).

The Placement is made in or accompanied by this Offer Document that has been registered by the

SGX-ST acting as agent on behalf of the Authority. We have not lodged or registered this Offer

Document in any other jurisdiction.

Neither the Authority nor the SGX-ST has examined or approved the contents of this Offer Document.

Neither the Authority nor the SGX-ST assumes any responsibility for the contents of this Offer

Document, including the correctness of any of the statements or opinions made or reports contained

in this Offer Document. The SGX-ST does not normally review the application for admission but relies

on the Sponsor confirming that our Company is suitable to be listed on Catalist and complies with the

rules of the Listing Manual. Neither the Authority nor the SGX-ST has in any way considered the merits

of the Shares being offered for investment.

The registration of this Offer Document by the SGX-ST acting as agent on behalf of the Authority does

not imply that the SFA, or any other legal or regulatory requirements, or requirements under the

SGX-ST’s listing rules, has been complied with.

Acceptance of applications will be conditional upon the issue of New Shares and the listing and

quotation of all our Shares already issued and the New Shares. Monies paid in respect of any

application accepted will be returned to you at your own risk, without interest or any share of revenue

or other benefit arising therefrom, if the admission and listing do not proceed, and you will not have any

claims against us, the Sponsor or the Placement Agent.

After the expiration of six months from the date of registration of this Offer Document, no person shall

make an offer of securities, or allot, issue or sell any of our Shares, on the basis of this Offer Document;

and no officer or equivalent person or promoter of our Company will authorise or permit the offer of any

of our Shares or the allotment, issue or sale of our Shares, on the basis of this Offer Document.

We are subject to the provisions of the SFA and the Listing Manual regarding corporate disclosure. In

particular, pursuant to Section 241 of the SFA, if after this Offer Document is registered but before the

close of the Placement, we become aware of:–

(a) a false or misleading statement in this Offer Document;

(b) an omission from this Offer Document of any information that should have been included in it

under Section 243 of the SFA; or

(c) a new circumstance that has arisen since this Offer Document was lodged which would have been

required by Section 243 of the SFA to be included in this Offer Document, if it had arisen before

this Offer Document was lodged,


13

and that is materially adverse from the point of view of an investor, we may lodge a supplementary or

replacement offer document pursuant to Section 241 of the SFA.

Where prior to the lodgement of the supplementary or replacement offer document, applications have

been made under this Offer Document to subscribe for the New Shares and:–

(a) where the New Shares have not been issued to the applicants, we shall either:–

(i) within two days (excluding any Saturday, Sunday or public holiday) from the date of

lodgement of the supplementary or replacement offer document, give the applicants notice

in writing of how to obtain, or arrange to receive, a copy of the same and provide the

applicants with an option to withdraw their applications, and take all reasonable steps to

make available within a reasonable period the supplementary or replacement offer

document to the applicants who have indicated they wish to obtain, or who have arranged

to receive, a copy of the supplementary or replacement offer document;

(ii) within seven days from the date of lodgement of the supplementary or replacement offer

document, give the applicants the supplementary or replacement offer document, as the

case may be, and provide the applicants with an option to withdraw their applications; or

(iii) treat the applications as withdrawn and cancelled, in which case the applications shall be

deemed to have been withdrawn and cancelled, and we shall, within seven days from the

date of lodgement of the supplementary or replacement offer document, return the

applicants all monies the applicants have paid on account of their applications for the New

Shares; or

(b) where the New Shares have been issued to the applicants, we shall either:–

(i) within two days (excluding any Saturday, Sunday or public holiday) from the date of

lodgement of the supplementary or replacement offer document, give the applicants notice

in writing of how to obtain, or arrange to receive, a copy of the same and provide the

applicants with an option to return to us the New Shares which they do not wish to retain title

in, and take all reasonable steps to make available within a reasonable period the

supplementary or replacement offer document to the applicants who have indicated they

wish to obtain, or who have arranged to receive, a copy of the supplementary or replacement

offer document;

(ii) within seven days from the date of lodgement of the supplementary or replacement offer

document, give the applicants the supplementary or replacement offer document, as the

case may be, and provide the applicants with an option to return to us the New Shares which

they do not wish to retain title in; or

(iii) treat the issue of the New Shares as void, in which case the issue shall be deemed void and

we shall within seven days from the date of lodgement of the supplementary or replacement

offer document, return the applicants all monies the applicants have paid on account of their

applications for the New Shares.

An applicant who wishes to exercise his option under paragraph (a)(i) or (ii) to withdraw his application

shall, within 14 days from the date of lodgement of the supplementary or replacement offer document,

notify us of this, whereupon we shall, within seven days from the receipt of such notification, return to

him all monies paid by him on account of his application for those Shares.


14

An applicant who wishes to exercise his option under paragraph (b)(i) or (ii) to return the New Shares

issued to him shall, within 14 days from the date of lodgement of the supplementary or replacement

offer document, notify us of this and return all documents, if any, purporting to be evidence of title to

those New Shares, to us, whereupon we shall, within seven days from the receipt of such notification

and documents, if any, return to him all monies paid by him for those New Shares, and the issue of

those New Shares shall be deemed to be void.

Where monies are to be returned to applicants for the New Shares, it shall be paid to the applicants

without any interest or share of revenue or benefit arising therefrom at the applicants’ own risk, and the

applicants will not have any claim against our Company, the Sponsor or the Placement Agent.

This Offer Document has been seen and approved by our Directors, and they individually and

collectively accept full responsibility for the accuracy of the information given in this Offer Document

and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, (i) the

facts stated and the opinions, intentions and expectations expressed in this Offer Document are true,

fair and accurate and not misleading in all material respects as at the date of this Offer Document, (ii)

there are no material facts the omission of which would make any statement in this Offer Document

misleading, and (iii) this Offer Document constitutes a full and true disclosure of all material facts about

the Placement, our Group and our Shares.

Neither our Company, the Sponsor, the Placement Agent nor any other parties involved in the

Placement is making any representation to any person regarding the legality of an investment in our

Shares by such person under any investment or other laws or regulations. No information in this Offer

Document should be considered as being business, legal or tax advice regarding an investment in our

Shares. Each prospective investor should consult his own legal, financial, tax or other professional

adviser regarding an investment in our Shares.

The New Shares are offered for subscription solely on the basis of the information contained and the

representations made in this Offer Document.

No person has been or is authorised to give any information or to make any representation not

contained in this Offer Document in connection with the Placement and, if given or made, such

information or representation must not be relied upon as having been authorised by us, the Sponsor or

the Placement Agent. Neither the delivery of this Offer Document and the Application Form nor any

document relating to the Placement shall, under any circumstances, constitute a continuing

representation or create any suggestion or implication that there has been no change in the affairs of

our Company or our subsidiaries or in any statements of fact or information contained in this Offer

Document since the date of this Offer Document. Where such changes occur and are material or are

required to be disclosed by law, we will promptly make an announcement of the same to the SGX-ST

and if required under the SFA, a supplementary or replacement offer document will be issued and made

available to the public after a copy thereof has been lodged with the SGX-ST acting as agent on behalf

of the Authority. All applicants should take note of any such announcement, and/or supplementary or

replacement offer document and, upon the release of such an announcement, and/or supplementary

or replacement offer document, shall be deemed to have notice of such changes.


15

Save as expressly stated in this Offer Document, nothing herein is, or may be relied upon as, a promise

or representation as to the future performance or policies of our Company, or our subsidiaries.

This Offer Document has been prepared solely for the purpose of the Placement and may not be relied

upon by any persons other than the applicants in connection with their applications for the New Shares

or for any other purpose.

This Offer Document does not constitute an offer, solicitation or invitation to subscribe for the

New Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not

authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation.

Copies of this Offer Document may be obtained on request, subject to availability, during office hours

from:–

Collins Stewart Pte. Limited

77 Robinson Road

#21-02

Singapore 068896

An electronic copy of this Offer Document is also available on the SGX-ST website

at http://www.sgxcatalist.com.

The Application List will open at 10.00 a.m. on 20 July 2011 and will remain open until 12.00 noon

on the same day or for such further period or periods as our Directors may, in consultation with

the Sponsor and the Placement Agent, in their absolute discretion decide, subject to any

limitation under all applicable laws. In the event a supplementary or replacement offer

document is lodged with the SGX-ST acting as agent on behalf of the Authority, the Application

List will remain open for at least 14 days after the lodgement of the supplementary or

replacement offer document.

Details of the procedures for applications to subscribe for the New Shares are set out in Appendix E of

this Offer Document.


16

INDICATIVE TIMETABLE FOR LISTING

An indicative timetable is set out below for your reference:–

Indicative Date and Time Event

20 July 2011, 12.00 noon Close of Application List

22 July 2011, 9.00 a.m. Commence trading on a “ready” basis

27 July 2011 Settlement date for all trades done on a “ready” basis

The above timetable is only indicative as it assumes that the date of closing of the Application List is

20 July 2011, the date of admission of our Company to Catalist is 22 July 2011, the SGX-ST’s

shareholding spread requirement will be complied with and the New Shares will be issued and fully

paid-up prior to 22 July 2011.

The above timetable and procedures may be subject to such modification as the SGX-ST may in its

discretion decide, including the commencement date of trading on a “ready” basis.

In the event of any changes in the closure of the Application List or the time period during which the

Placement is open, we will publicly announce the same:–

(i) through a SGXNET announcement to be posted on the internet at the SGX-ST website

http://www.sgx.com; and

(ii) in a major English newspaper in Singapore.

We will provide details of the results of the Placement (including the level of subscription for the New

Shares), as soon as practicable after the closure of the Application List through the channels described

in (i) and (ii) above.

Investors should consult the SGX-ST announcement of the “ready” trading date on the internet

(at the SGX-ST website http://www.sgx.com) or newspapers, or check with their brokers on the

date on which trading on a “ready” basis will commence.


17

The information contained in this summary is derived from and should be read in conjunction with the

full text of this Offer Document. As it is a summary, it does not contain all the information that potential

investors should consider before investing in the Shares of our Company. Potential investors should

read this entire Offer Document carefully, especially the matters set out in the “Risk Factors” section of

this Offer Document, before deciding to invest in our Shares.

OVERVIEW OF OUR GROUP

Our Company was incorporated in Singapore on 25 March 2011 under the Companies Act as a private

company limited by shares under the name of Kitchen Culture Holdings Pte. Ltd.. On 6 July 2011, our

Company was converted into a public company limited by shares and our name was changed to

Kitchen Culture Holdings Ltd..

Pursuant to the Restructuring Exercise, our Company became the holding company of our subsidiaries,

KHL Marketing, Kitchen Culture Singapore, Kitchen Culture Malaysia and Haus.

Our Business

We specialise in the sale and distribution of a wide range of premium imported kitchen systems, kitchen

appliances, wardrobe systems, household furniture and accessories from Europe and USA, catering to

the high end markets under the “Kitchen Culture” identity. Due to the wide variety of products under

different high end brands that we represent, we have become one of the premier kitchen solutions

providers for the discerning and sophisticated consumer in the premium market predominantly in

Singapore and Malaysia.

The products that we sell and distribute are mainly kitchen systems comprising kitchen cabinets, sinks,

mixers, kitchen tops, as well as kitchen appliances which include built-in microwave ovens, built-in

ovens, built-in coffee machine, built-in dishwashers, cook-tops, cooker hoods, refrigerators, freezers,

wine storage units, and other kitchen furniture. These products are manufactured overseas under

different international brands by our suppliers and are imported for sale and distribution by us in

Singapore and Malaysia. We generally enter into long-term or exclusive arrangements with our

suppliers as this would provide us the assurance that we are the exclusive and sole distributors of these

premium products.

Our head office, corporate showroom and warehouse facility are located in Singapore at 25 New

Industrial Road KHL Industrial Building Singapore 536211. We have two “Kitchen Culture” retail

showrooms located at 2 Leng Kee Road #01-02/03/04/05/07 Singapore 159086 and 45E Ground floor

and 5th floor Bangunan Bangsaria Jalan Maarof Taman Bangsar 59100 Kuala Lumpur Malaysia, and

one “Haus” retail showroom located at 390 Orchard Road #03-04 Palais Renaissance Singapore

238871, occupying an aggregate built-in area of approximately 32,055 sq ft.

Further details are set out in the “Business” section of this Offer Document.

Our Competitive Strengths

Our Directors believe our competitive strengths are as follows:–

• We have established our reputation in the “Kitchen Culture” brand

• We are a multi-brand and multi-product player


18

• We have a strong track record in project execution when serving customers in our Residential

Projects segment

• We have an experienced and committed team of senior management and key employees

• We have strong and long-standing relationships with our suppliers

Further details are set out in the “Competitive Strengths” section of this Offer Document.

Our Business Strategies and Future Plans

Our business strategies and future plans are as follows:–

• Expanding our geographical coverage

• Expanding our product range

• Expansion through acquisitions, joint ventures and/or strategic alliances

Further details are set out in the “Business Strategies and Future Plans” section of this Offer Document.

Where you can find us

Both our principal place of business and registered office are located at 25 New Industrial Road #02-01

KHL Industrial Building Singapore 536211. Our telephone and facsimile numbers are (65) 6471 6776

and (65) 6472 6776 respectively. Our Company Registration Number is 201107179D. Our internet

addresses are www.khlmktg.com and www.kitchenculture.com. Information contained in our

websites do not constitute part of this Offer Document.


19

FINANCIAL HIGHLIGHTS

You should read the following summary financial information in conjunction with the full text of this Offer

Document, including the “Combined Financial Statements for Financial Years Ended 31 December

2008, 2009 and 2010” set out in Appendix A of this Offer Document and the “Management’s Discussion

and Analysis of Results of Operations and Financial Position” section of this Offer Document.

Selected items from the Combined Statements of Comprehensive Income(1)

Audited

($’000) FY2008 FY2009 FY2010

Revenue 18,524 19,484 31,221

Gross profit 8,634 8,801 13,010

PBT 2,153 1,804 5,020

PAT 1,817 1,256 4,344

EPS (cents)(2) 2.2 1.5 5.2

EPS (fully diluted) (cents)(3) 1.8 1.3 4.3

Selected items from the Combined Statement of Financial Position(4)

Audited

($’000)

As at

31 December 2010

Non-current assets 1,051

Current assets 20,275

Non-current liabilities 2,650

Current liabilities 11,543

NTA 7,133

Shareholders’ equity 7,133

NTA per Share (cents)(5) 8.6

Notes:–

(1) Our combined statements of comprehensive income for the periods under review have been prepared on the basis that our

Group had been in existence throughout the periods under review.

(2) For comparative purposes, EPS for the periods under review have been computed based on the PAT and our pre-Placement

share capital of 83,000,000 Shares.

(3) For comparative purposes, EPS for the periods under review have been computed based on the PAT and our

post-Placement share capital of 100,000,000 Shares.

(4) Our combined statement of financial position as at 31 December 2010 has been prepared on the basis that our Group has

been in existence on this date.

(5) The NTA per Share as at 31 December 2010 has been computed based on our pre-Placement share capital of 83,000,000

Shares.


20

Issue size : 17,000,000 New Shares. The New Shares will, upon issue

and allotment, rank pari passu in all respects with the

existing issued Shares.

Issue Price : $0.30 for each New Share.

The Placement : The Placement comprises an offering by the Placement

Agent on behalf of our Company of 17,000,000 New Shares

at the Issue Price by way of placement, subject to and on the

terms and conditions of this Offer Document.

Purpose of the Placement : Our Directors believe that the listing of our Company and the

quotation of our Shares on Catalist will enhance our public

image locally and internationally and enable us to tap the

capital markets to fund our business growth. The Placement

will also provide members of the public, our employees, our

business associates and others who have contributed to the

success of our Group with an opportunity to participate in the

equity of our Company.

Listing status : Our Shares will be quoted on Catalist in Singapore dollars,

subject to admission of our Company to Catalist and

permission for dealing in, and for quotation of, our Shares

being granted by the SGX-ST.

Risk factors : Investing in our Shares involves risks which are described in

the “Risk Factors” section of this Offer Document.

THE PLACEMENT

21

The Issue Price is determined by us in consultation with the Sponsor and the Placement Agent after

taking into consideration, inter alia, prevailing market conditions and estimated market demand for the

New Shares determined through a book-building process. The Issue Price is the same for all New

Shares and is payable in full on application.

Placement Shares

Application for the Placement Shares may only be made by way of Placement Shares Application Form.

The terms, conditions and procedures for applications are described in Appendix E of this Offer

Document.

Subscribers of Placement Shares may be required to pay a brokerage of up to 1.0% of the Issue Price

(plus GST thereon, if applicable) to the Placement Agent or any sub-placement agent that may be

appointed by the Placement Agent.

None of our Directors or Substantial Shareholders intends to subscribe for the New Shares in the

Placement. None of our management staff or employees intends to subscribe for more than 5% of the

New Shares in the Placement.

To the best of our knowledge and belief, we are not aware of any person who intends to subscribe for

more than 5% of the New Shares. However, through a book-building process to assess market demand

for our Shares, there may be person(s) who may indicate his interest to subscribe for more than 5% of

the New Shares. If such person(s) were to make an application for more than 5% of the New Shares

pursuant to the Placement and are subsequently allotted such number of Shares, we will make the

necessary announcements at the appropriate time. The final allotment of Shares will be in accordance

with the shareholding spread and distribution guidelines as set out in the Listing Manual.

No Shares shall be allotted on the basis of this Offer Document later than six months after the date of

registration of this Offer Document by the SGX-ST acting as agent on behalf of the Authority.

PLAN OF DISTRIBUTION

22

The net proceeds to be raised by our Company from the issue of the New Shares (after deducting the

estimated expenses to be borne by our Company of approximately $1.4 million) are approximately $3.7

million.

The allocation of each principal intended use of proceeds and the estimated listing expenses is set out

below:–

$’000

As a Percentage

of Gross

Proceeds from

the Placement

(%)

Use of proceeds

To fund possible acquisitions, joint ventures and/or

strategic alliances when opportunities arise, and

for general working capital purposes of our Group 3,720 72.9

Net proceeds from the Placement 3,720 72.9

Estimated listing expenses(1)

Listing and processing fees 43 0.8

Professional fees and expenses 855 16.8

Placement commission 191 3.8

Miscellaneous expenses 291 5.7

Gross proceeds from the Placement 5,100 100.0

Note:–

(1) Of the total estimated listing expenses to be borne by our Company of approximately $1,380,000, $343,631 will be

capitalised against share capital and the balance of the estimated listing expenses will be charged to profit or loss.

In the reasonable opinion of our Directors, there is no minimum amount which must be raised from the

Placement.

Please refer to the “Business Strategies and Future Plans” section of this Offer Document for further

details on our future plans. In particular, our future plans may be funded apart from the proceeds from

the Placement, either through internally generated funds and/or external borrowings.

Pending the deployment of the net proceeds as aforesaid, the funds will be placed in short-term

deposits with financial institutions, used to invest in short-term money market instruments and/or used

for working capital requirements as our Directors may deem appropriate.

We will make periodic announcements on the use of the net proceeds from the issue of the New Shares

as and when the funds are materially disbursed, and provide a status report on the use of the proceeds

in our annual report.

In the event that any part of our proposed uses of the net proceeds from the issue of the New Shares

does not materialise or proceed as planned, our Directors will carefully evaluate the situation and may

reallocate the intended funding to other purposes and/or hold such funds on short-term deposits for so

long as our Directors deem it to be in the interest of our Company and our Shareholders, taken as a

whole. Any change in the use of the net proceeds will be subject to the Listing Manual and appropriate

announcements will be made by our Company on SGXNET.

USE OF PROCEEDS FROM THE PLACEMENT AND EXPENSES INCURRED

23

Pursuant to a management agreement dated 15 July 2011 (the “Management Agreement”) entered into

between our Company and Collins Stewart, our Company appointed Collins Stewart to manage the

Placement. Collins Stewart will receive a fee from our Company for its services rendered in connection

with the Placement.

Pursuant to the placement agreement dated 15 July 2011 (the “Placement Agreement”) entered into

between our Company and Collins Stewart as the Placement Agent, Collins Stewart agreed to

subscribe and/or procure subscribers for the Placement Shares at the Issue Price for a placement

commission of 3.5% of the aggregate Issue Price for the total number of Placement Shares, payable

by our Company. Collins Stewart may, at its absolute discretion, appoint one or more sub-placement

agents for the Placement Shares.

Subscribers of Placement Shares may be required to pay a brokerage of up to 1.0% of the Issue Price

(plus GST thereon, if applicable) to the Placement Agent or any sub-placement agent that may be

appointed by the Placement Agent.

Save as aforesaid, no commission, discount or brokerage, has been paid or other special terms granted

by our Company within the two years preceding the date of this Offer Document or is payable to any

Director, promoter, expert, proposed Director or any other person for subscribing or agreeing to

subscribe or procuring or agreeing to procure subscriptions for any shares in, or debentures of, our

Company and our subsidiaries.

If there shall have been, since the date of the Management Agreement and prior to the close of the

Application List:–

(a) any breach of the warranties or undertakings by our Company in the Management Agreement

which comes to the knowledge of Collins Stewart; or

(b) any occurrence of certain specified events which comes to the knowledge of Collins Stewart; or

(c) any adverse change, or any development involving a prospective adverse change, in the

condition (financial or otherwise) of our Company or of our Group as a whole; or

(d) any introduction or prospective introduction of or any change or prospective change in any

legislation, regulation, order, policy, rule, guideline or directive in Singapore or elsewhere

(whether or not having the force of law) and including, without limitation, any directive or request

issued by the Authority, the Securities Industry Council of Singapore or the SGX-ST or relevant

authorities elsewhere, in the interpretation or application thereof by any court, government body,

regulatory authority or other competent authority in Singapore or elsewhere; or

(e) any change, or any development involving a prospective change, in local, national or international

financial (including stock market, foreign exchange market, inter-bank market or interest rates or

money market), political, industrial, economic, legal or monetary conditions, taxation or exchange

controls (including without limitation, the imposition of any moratorium, suspension or restriction

on trading in securities generally on the SGX-ST due to exceptional financial circumstances or

otherwise, adverse changes in foreign exchange controls in Singapore and overseas or any

combination of any such changes or developments or crisis, or any deterioration of any such

conditions); or

(f) any imminent threat or occurrence of any local, national or international outbreak or escalation of

hostilities, insurrection, terrorist attacks or armed conflict (whether or not involving financial

markets) in any jurisdiction; or

MANAGEMENT AND PLACEMENT ARRANGEMENTS

24

(g) any regional or local outbreak of disease that may have an adverse effect on the financial

markets; or

(h) any other occurrence of any nature whatsoever,

which has resulted or is in the reasonable opinion of the Sponsor likely to result in a material adverse

fluctuation or material adverse conditions in the stock market in Singapore or overseas; or is likely to

materially prejudice the success of the Placement; or it becoming impracticable, inadvisable,

inexpedient or uncommercial to proceed with any of the transactions contemplated under the

Management Agreement or the Placement; or the business, trading position, operations or prospects

of our Group being materially and adversely effected; results or is likely to result in the issue of a notice

of refusal to an admission of our Company to the Official List of Catalist by the SGX-ST to the Sponsor

at any point prior to listing of our Shares; or makes it uncommercial or otherwise contrary to or outside

the usual commercial practices in Singapore for the Sponsor to observe or perform or be obliged to

observe or perform the terms of the Management Agreement, the Sponsor may at any time prior to the

close of the Application List rescind or terminate the Management Agreement.

The Sponsor may terminate the Management Agreement if:–

(a) at any time up to the close of the Application List, a notice of refusal to an admission to the Official

List of Catalist is issued by the SGX-ST to the Sponsor; or

(b) at any time after the registration of this Offer Document with the SGX-ST but before the close of

the Application List, our Company fails and/or neglects to lodge a supplementary or replacement

offer document (as the case may be) if we become aware of:–

(i) a false or misleading statement in this Offer Document;

(ii) an omission from this Offer Document of any information that should have been included in

it under the SFA; or

(iii) a new circumstance that has arisen since this Offer Document was lodged with the SGX-ST

acting as agent on behalf of the Authority and would have been required by the SFA to be

included in this Offer Document if it had arisen before this Offer Document was lodged,

that is materially adverse from the point of view of an investor; or

(c) the Shares have not been admitted to Catalist on or before 22 July 2011 (or such other date as

our Company and the Sponsor may agree).

The obligations under the Placement Agreement are conditional upon the Management Agreement not

being terminated or rescinded pursuant to the provisions of the Management Agreement. In the case

of the non-fulfilment of any of the conditions in the Management Agreement or the release or discharge

of the Sponsor from its obligations under or pursuant to the Management Agreement, the Placement

Agreement shall be terminated and the parties shall be released from their respective obligations under

the Placement Agreement.

In the event that the Management Agreement and/or the Placement Agreement is terminated, our

Directors reserve the right, at their absolute discretion, to cancel the Placement.

Save as disclosed above, we do not have any material relationship with the Sponsor and the Placement

Agent.

MANAGEMENT AND PLACEMENT ARRANGEMENTS

25

Prospective investors should carefully consider and evaluate each of the following risk factors and all

other information contained in this Offer Document before deciding to invest in our Shares. To the best

of our Directors’ knowledge and belief, all risk factors which are material to investors in making an

informed judgement of our Group have been set out below. If any of the following considerations,

uncertainties or material risks develop into actual events, our business, financial position and/or results

of operations could be materially and adversely affected. In such cases, the trading price of our Shares

could decline due to any of these considerations, uncertainties or material risks, and investors may lose

all or part of their investment in our Shares.

This Offer Document also contains forward-looking statements having direct and/or indirect

implications on our future performance. Our actual results may differ materially from those anticipated

by these forward-looking statements due to certain factors, including the risks and uncertainties faced

by us, as described below and elsewhere in this Offer Document.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Our business is subject to the risks of changes in the sentiments of the industry, consumer

preferences and spending trends

We are dependent on consumer preferences and spending trends for premium imported kitchen

systems and kitchen appliances which we sell and distribute. A weak Singapore economy generally

leads to poor market sentiment and results in lower consumer spending. This may in turn lead to a

lower demand for our products, which would adversely affect our profitability. In the event of a

slowdown in the economy, our business and financial performance will be adversely affected.

In addition, in the event we are unable to secure the distribution rights of new products in a timely

manner in response to changing market conditions or customer requirements, or if new products that

we distribute do not achieve market acceptance, or if we are unable to respond promptly to the

changing requirements of our customers or if we fail to adapt to changing consumer preferences, our

business and financial performance will be adversely affected.

We are dependent on residential property development to secure new contracts

A substantial portion of our revenue is derived from our Residential Projects business with contribution

predominantly from both our Singapore and Malaysia markets. It contributed 47.1%, 59.9% and 76.2%

of our revenue in FY2008, FY2009 and FY2010 respectively. Please refer to the “Business Overview

— Residential Projects” section of this Offer Document for further details. Our residential projects are

project-based and non-recurring in nature and therefore, we have to continuously and consistently

secure new projects to generate revenue. To this end, the level of activity in the residential property

development markets in Singapore and Malaysia will have a direct impact on our business in the

Residential Projects segment, as a decrease in residential property development projects would, in

turn, have a negative impact on our business. In this regard, an economic downturn, introduction of

unfavourable policies to regulate the property markets by the Singapore or Malaysian government, or

decrease in the demand for property in Singapore and Malaysia, will have an adverse impact on the

residential property development markets in Singapore and Malaysia. In the event we are unable to

secure new projects that are profitable on a regular basis, our profitability and financial performance will

be adversely and materially affected.

RISK FACTORS

26

We are dependent on distributorships granted by third party principals for the sale and

distribution of products

Our principal products are imported kitchen systems and kitchen appliances which are sold mainly

under different third party brands predominantly in Singapore and Malaysia. Our revenue from the sale

of products under third party brands accounted for 100.0%, 98.7% and 94.5% of our revenue for

FY2008, FY2009 and FY2010, respectively. Our gross profit from the sale of products under third party

brands accounted for 100.0%, 99.7% and 94.5% of our gross profit for FY2008, FY2009 and FY2010,

respectively. The balance of our revenue and gross profit over the periods under review were derived

from the sale of products under our proprietary house brand, “Pureform”. Our rights to sell products

under these third party brands are granted by third party principals under the respective distributorship

agreements which are subject to review and renewal on a periodic basis. In the event that the

distributorship agreements for any of the third party brands are terminated prematurely, or not renewed

upon their expiry date, and we are not able to find suitable or timely replacement, our business and

financial performance will be adversely affected.

We face risk of incorrect estimation of our project costs, cost overruns and delays in project

implementation

As a substantial portion of our revenue is derived from the Residential Projects segment, we are

therefore susceptible to cost overruns and incorrect estimations of costs made during the tender stage

(that is, failure to factor all the relevant costs in the contract value), which will affect our profit margin

and profitability for the relevant project. In addition, unforeseen circumstances such as a delay in the

delivery of products by our suppliers will affect our ability to implement the project on a timely basis,

which will in turn affect our reputation and standing with developers of residential projects and our

customers. Our customers may also claim against us for compensation should there be a delay in

delivery from our principals. If this develops into actual events, there will be a material adverse effect

on our business and financial performance.

Our business is dependent on the goodwill in our “Kitchen Culture” brand

Our Distribution and Retail business is dependent on the goodwill of our “Kitchen Culture” brand.

Establishing and maintaining our reputation and brand name for distributing quality products is

important for us to maintain our existing customer base and increase our new customer base. Any

negative publicity and/or any failure to develop and maintain our reputation and the goodwill associated

with our brand name may tarnish the goodwill and the commercial value of our “Kitchen Culture” brand

name which we have established with our customers. This may materially and adversely affect our

business and our financial performance. In addition, it is possible that our competitors may distribute

products or adopt trade names that are similar to ours notwithstanding that our trade marks have been

registered in several countries including Singapore and Malaysia. Please refer to the “Intellectual

Property” section of this Offer Document for further details of our trade marks. It is also possible that

we may not be able to completely prevent an infringement of our intellectual property rights. In any of

such event, the goodwill generated by our brand name may be eroded and our business will be

adversely affected.

Our continued success is dependent on our key management personnel

We are dependent on the continued services of our management team, in particular, our Executive

Chairman and CEO, Lim Wee Li and Executive Director, Lim Han Li, who have been instrumental in the

development and execution of our corporate strategy and the establishment of business relationships

with our principals and customers. There is no assurance that we will be able to retain the aforesaid key

RISK FACTORS

27

management personnel. The loss of any key management personnel without suitable or timely

replacement may have an adverse impact on our operations and financial performance.

We are exposed to claims by our customers for defective products

Our customers may claim against us for any defects found in the products that are sold by us. There

can be no assurance that we will be able to claim from our principals any indemnification or

compensation for the aforementioned claims against us. If such events were to occur, our reputation

will be adversely affected and we may lose our existing or potential customers and incur additional

expenses and resources to rectify the defects. This will have a material adverse effect on our business

and financial performance.

We are exposed to credit risk and defaults in payments by our customers

Our financial position and profitability are dependent, to a certain extent, on the creditworthiness of our

customers. Any material default by our customers will affect our financial position, profitability and cash

flow. In FY2009 and FY2010, the aggregate of allowance for doubtful receivables and bad debts written

off amounted to approximately $0.2 million and $0.6 million respectively. There was no allowance for

doubtful receivables nor bad debts written off in FY2008. In aggregate, allowance for doubtful

receivables and bad debts written off constituted approximately 8.8% and 12.6% of our PBT for FY2009

and FY2010 respectively. As at 31 December 2010, our trade receivables (net of allowance for doubtful

receivables) amounted to $4.5 million and average trade receivables’ turnover in FY2010 was 58 days.

Please refer to the “Credit Management” section of this Offer Document for further details of our credit

policy. There is no assurance that our customers will not default in their payments. In the event that our

customers default in their payments, bad debts written off will increase, and this will in turn have an

adverse impact on our financial performance and position.

There is no assurance that our expansion plans will be successful

In order to grow our business, we intend to expand our existing operations in Singapore and Malaysia

and penetrate markets in the nearby regions, including Hong Kong and Indonesia. We may also expand

our business through acquisitions, joint ventures and strategic alliances or investment opportunities in

businesses that are complementary to our business. The expansion of our existing business into

overseas markets involves numerous risks, such as political, economic, regulatory and social

conditions as well as the costs of setting up overseas operations. There can be no assurance that our

overseas operations will achieve a sufficient level of revenue which will cover our operational costs.

Participation in strategic alliances, acquisitions, or investments similarly involves risks, including but not

limited to difficulties in integrating management, operations, services, products and personnel. The

successful integration of such growth strategies depends on our ability to identify suitable partners and

the successful integration of operations. There can be no assurance that we will be able to execute

such growth strategies successfully. Should any of the aforesaid events occur, our profitability may be

adversely affected.

We may require additional funding for our future growth

Although we have identified our future growth plans as set out in the “Business Strategies and Future

Plans” section of this Offer Document, the proceeds from the Placement may not be sufficient to cover

the estimated costs to implement all these plans. Under such circumstance, we may need to obtain

debt or equity financing to pursue these growth opportunities.

RISK FACTORS

28

Additional debt and/or equity financing may result in dilution to our Shareholders. If such financing does

not generate a commensurate increase in earnings, our EPS will be diluted, and this could lead to a

decline in our Share price.

Additional debt financing may, apart from increasing interest expense and gearing, result in all or any

of the following:–

• limit our ability to pay dividends;

• increase our vulnerability to general adverse economic and industry conditions;

• require us to dedicate a substantial portion of our cash flows from operations to payments on our

debt, thereby reducing the availability of our cash flows to fund capital expenditure, working

capital and other requirements; and/or

• limit our flexibility in planning for, or reacting to, changes in our business and our industry.

There is no assurance that we will be able to obtain additional debt and/or equity financing on terms that

are acceptable to us or at all. Any inability to secure additional debt and/or equity financing may

materially and adversely affect our business, implementation of our business strategies and future

plans and results of operations.

We are exposed to foreign exchange transaction risks

Our revenue is predominantly denominated in S$ which constituted approximately 84.3% of our

revenue over the periods under review. Our purchases are predominantly denominated in EUR and

US$ which constituted approximately 66.0% and 16.3% respectively of our purchases over the periods

under review. Our expenses are mainly denominated in S$ which constituted 89.8% of our expenses

over the periods under review. Foreign exchange risks arise mainly from a mismatch between the

currency of our sales and the currency of our purchases. We may suffer foreign currency losses if there

are significant adverse fluctuations in currency exchange rates between the time of our purchases and

payments in foreign currencies and the time of our sales and receipts. This may adversely affect our

financial results.

In addition, as our reporting currency is in S$, the financial statements of our subsidiary in Malaysia will

need to be translated to S$ for consolidation purposes. As such, any material fluctuations in foreign

exchange rates will result in translation gains or losses on consolidation. Any such translation gains or

losses will be recorded as translation reserves or deficits as part of our Shareholders’ equity.

We do not currently have any formal policy for hedging against foreign exchange exposure. We will

continue to monitor our foreign exchange exposure and may employ forward currency contracts to

manage our foreign exchange exposure should the need arise. Prior to implementing any formal

hedging policies, we will seek the approval of our Board on the policy and put in place adequate

procedures which shall be reviewed and approved by our Audit Committee. Thereafter, all hedging

transactions entered into by our Group will be in accordance with set policies and procedures. Please

refer to the “Foreign Exchange Management” section of this Offer Document for further details.

We are dependent on obtaining adequate financing to fund our operations

The contract sums for our Residential Projects business are payable by our customers to us

progressively, according to the stage of construction carried out on the relevant project. To perform a

contract on our Residential Projects business, we will require adequate funding either from internal

RISK FACTORS

29

resources or borrowings to fund the working capital of the project. In addition, we may be required to

secure the requisite performance bonds or bankers’ guarantees from insurance companies or financial

institutions respectively to secure our performance under the relevant contract. There can be no

assurance that we will be able to secure adequate financing. In the event that we are unable to secure

adequate financing, our business and growth will be adversely affected.

Our business may be affected by competition from existing industry players and new entrants

We operate in a competitive industry. There is no assurance that we will not face competition from our

existing industry peers or new entrants. Some of our competitors from the international arena are well

established and may have greater financial, marketing or other resources than we do. Any increase in

competition could result in a negative impact on our pricing (thus eroding our profit margins), erode our

market share or make it more difficult for us to achieve any significant market penetration. In the event

we are unable to compete effectively with our existing and future competitors and adapt quickly to

changing market conditions and trends, our business and financial performance will be adversely

affected. Please refer to the “Competition” section of this Offer Document for further details of the

competition we may face.

An outbreak of communicable diseases, severe weather conditions, natural disasters or other

incidents may affect our suppliers and their supplies of products, which if uncontrolled, could

affect our business

In recent years, the outbreaks of various communicable diseases such as severe acute respiratory

syndrome and the avian influenza have resulted in global economic and social uncertainties. Severe

weather conditions, natural disasters such as earthquakes and other incidents such as outbreak of fire,

could cause damage to or a temporary shutdown of our suppliers’ manufacturing facilities. As we obtain

most of our products from overseas suppliers, if the manufacturing facilities or employees of our

suppliers are affected by any of the aforesaid events, it will interrupt the supply of our products, thereby

causing our business and financial performance to be adversely affected.

Our insurance coverage may not be adequate

We have insured against claims arising from fire, burglary and public liability as well as workman injury

compensation and group personal assurance that occur in connection with our business and

operations. However, in the event that the amount of such claims exceed the coverage of the insurance

policies which we have taken up, we may be liable for shortfalls of the amounts claimed. We are not

insured against loss of key personnel and business interruption. If such events were to occur, our

business, financial performance and financial position may be materially and adversely affected.

Please refer to the “Insurance” section of this Offer Document for further details.

RISKS RELATING TO MALAYSIA

We are subject to the foreign exchange legislation and regulations in Malaysia

Local and foreign investors are subject to Foreign Exchange Administration Rules in Malaysia. The

legislation in Malaysia governing exchange control is the Exchange Control Act 1953, pursuant to which

Bank Negara Malaysia, which is the central bank of Malaysia (“Bank Negara”) has issued Exchange

Control Notices (“EC Notices”) which embody its general permissions and directions. The EC Notices

(together with the clarifications) set out the circumstances in which the specific approval of the

Controller of Foreign Exchange within Bank Negara, must be obtained by residents and non-residents

RISK FACTORS

30

to remit funds to and from Malaysia. These EC Notices are reviewed regularly by Bank Negara in line

with the changing environment. As at the Latest Practicable Date, foreign investors are free to

repatriate capital, divestment proceeds, profits, dividends, rental, fees and interests arising from

investments in Malaysia. Any future restriction by the EC Notices on repatriation of funds may limit our

ability on dividends distribution to our Shareholders from business operations in Malaysia.

RISKS RELATING TO INVESTMENT IN OUR SHARES

Investments in securities quoted on Catalist involve a higher degree of risk and can be less

liquid than shares quoted on the Main Board of the SGX-ST

We have made an application for our Shares to be admitted to Catalist, a listing platform primarily

designed for fast growing and emerging or smaller companies (to which a higher investment risk tends

to be attached as compared to larger or more established companies). Catalist was formed in February

2008 and its future success and liquidity in the market for our Shares cannot be guaranteed. An

investment in shares quoted on Catalist may carry a higher risk than an investment in shares quoted

on the Main Board of the SGX-ST. Pursuant to the Listing Manual, we are required to, among other

things, retain a sponsor at all times after our admission to Catalist. In particular, unless approved by the

SGX-ST, the Sponsor must act as our continuing sponsor for at least three years after the admission

of our Company to Catalist. In addition, we may be delisted in the event that we do not have a sponsor

for more than three continuous months. There is no guarantee that following the expiration of the

three-year period, the Sponsor will continue to act as our sponsor or that we are able to find a

replacement sponsor within the three-month period. Should such risks materialise, we may be delisted.

Future sales or issuance of our Shares could materially and adversely affect our Share price

Any future sale of our Shares can have a downward pressure on our Share price. The sale of a

significant amount of Shares in the public market after the Placement, or the perception that such sales

may occur, could adversely affect the market price of our Shares. These factors also affect our ability

to sell additional equity securities. Except as otherwise described in the “Moratorium” section of this

Offer Document, there are no restrictions imposed on our Substantial Shareholders in relation to

disposal of their shareholdings.

Our Controlling Shareholder and his Associate will retain significant control over our Group

after the Placement which will allow them to influence the outcome of matters submitted to

Shareholders for approval

Upon the completion of the Placement, our Executive Directors, Lim Wee Li and Lim Han Li, will

collectively own approximately 83.0% of our Company’s post-Placement share capital. As a result, they

will be able to exercise significant influence over matters requiring Shareholders’ approval, including

the election of directors and the approval of significant corporate transactions. Lim Wee Li and Lim Han

Li will also effectively have veto power with respect to any Shareholders’ action or approval requiring

a majority vote except where they are required by rules of the Listing Manual or other applicable

regulations to abstain from voting. Such concentration of ownership may also have the effect of

delaying, preventing or deterring a change in control of our Group which may benefit the Shareholders.

RISK FACTORS

31

Our Share price may fluctuate following the Placement

The market price of our Shares may fluctuate significantly and rapidly in response to, inter alia, the

following factors, some of which are beyond our control:–

(a) variations in our operating results;

(b) changes in securities analysts’ recommendations, perceptions or estimates of our financial

performance;

(c) changes in market valuations and share prices of companies with business similar to that of our

Company that may be listed in Singapore;

(d) announcements by us of significant acquisitions, joint ventures or strategic alliances;

(e) fluctuations in stock market prices and volume;

(f) our involvement in material litigation;

(g) additions or departures of key personnel;

(h) success or failure of our management in implementing business and growth strategies; and

(i) changes in conditions affecting the industry, the general economic conditions or stock market

sentiments or other events or factors.

New investors will incur immediate dilution and may experience further dilution

Our Issue Price of 30.0 cents per Share is substantially higher than our NTA per Share of 10.9 cents

(based on the NTA as referred to in the “Dilution” section of this Offer Document and as adjusted for

the net proceeds from the issue of New Shares). If we were liquidated immediately following the

Placement, each investor subscribing for the New Shares would receive less than the price he paid for

the Shares. Please refer to the “Dilution” section of this Offer Document for further details.

RISK FACTORS

32

ISSUE PRICE 30 cents

NTA

NTA per Share based on the audited combined statement of financial position of

our Group as at 31 December 2010:–

(a) before adjusting for the estimated net proceeds from the Placement and

based on our Company’s pre-Placement share capital of 83,000,000

Shares

8.6 cents

(b) after adjusting for the estimated net proceeds from the Placement and

based on our Company’s post-Placement share capital of 100,000,000

Shares

10.9 cents

Premium of Issue Price over the NTA per Share based on the audited combined

statement of financial position of our Group as at 31 December 2010:–

(a) before adjusting for the estimated net proceeds from the Placement and

based on our Company’s pre-Placement share capital of 83,000,000

Shares

248.8%

(b) after adjusting for the estimated net proceeds from the Placement and

based on our Company’s post-Placement share capital of 100,000,000

Shares

175.2%

EPS

Historical EPS based on the adjusted PAT for FY2010(1) and our Company’s

pre-Placement share capital of 83,000,000 Shares

4.8 cents

Historical EPS based on the adjusted PAT for FY2010(1) and our Company’s

pre-Placement share capital of 83,000,000 Shares, assuming that the Service

Agreements had been in place from the beginning of FY2010

4.7 cents

PER

Historical PER based on the historical EPS for FY2010 6.3 times

Historical PER based on the historical EPS for FY2010, assuming that the

Service Agreements had been in place from the beginning of FY2010

6.4 times

Net Cash Flow from Operations(2)

Historical net cash flow from operations per Share for FY2010 based on our

Company’s pre-Placement share capital of 83,000,000 Shares

5.2 cents

Historical net cash flow from operations per Share for FY2010 based on our

Company’s pre-Placement share capital of 83,000,000 Shares, assuming that the

Service Agreements had been in place from the beginning of FY2010

5.1 cents

ISSUE STATISTICS

33

Price to Net Cash Flow from Operations Ratio

Issue Price to historical net cash flow from operations per Share for FY2010 5.8 times

Issue Price to historical net cash flow from operations per Share for FY2010,

assuming that the Service Agreements had been in place from the beginning of

FY2010

5.9 times

Market Capitalisation

Our market capitalisation based on the Issue Price and our Company’s post-

Placement share capital of 100,000,000 Shares

$30.0 million

Notes:–

(1) Based on the audited combined statement of comprehensive income of our Group for FY2010, the PAT was approximately

$4,344,000. After adjusting for the one-off waiver of debt from a related party, namely Kim Hup Lee, for non-trade debts

incurred in the previous business of KHL Marketing prior to the commencement of our current business in 1991 of

approximately $388,000, the adjusted PAT would be approximately $3,956,000. The waiver of debt from Kim Hup Lee was

carried out in connection with the Restructuring Exercise.

(2) Net cash flow from operations is defined as the PAT with depreciation expenses added back.

ISSUE STATISTICS

34

Dilution is the amount by which the Issue Price to be paid by investors for our New Shares (“New

Investors”) exceeds the NTA per Share immediately after the Placement. Our audited NTA per Share

as at 31 December 2010 before adjusting for the estimated net proceeds from the Placement and

based on our Company’s pre-Placement share capital of 83,000,000 Shares, was 8.6 cents.

Pursuant to the Placement in respect of 17,000,000 New Shares at the Issue Price, our NTA per Share

after adjusting for the estimated net proceeds from the Placement and based on our Company’s

post-Placement share capital of 100,000,000 Shares, would be 10.9 cents. This represents an

immediate increase in NTA per Share of 2.3 cents to our existing Shareholders and an immediate

dilution in NTA per Share of 19.1 cents to our New Investors.

The following table illustrates such dilution on a per Share basis as at 31 December 2010:–

Cents

Issue Price 30.0

NTA per Share as at 31 December 2010 8.6

Increase in NTA per Share attributable to existing Shareholders 2.3

NTA per Share after the Placement(1) 10.9

Dilution in NTA per Share to New Investors 19.1

Note:–

(1) The computed NTA per Share after the Placement does not take into account our actual financial performance from 1

January 2011. Depending on our actual financial results, our NTA per Share may be higher or lower than the above

computed NTA.

The following table shows the average effective cost per Share paid by our existing Shareholders for

Shares acquired by them during the period of three years prior to the date of lodgement of this Offer

Document and the price per Share to be paid by our New Investors pursuant to the Placement:–

Number of

Shares

Acquired

Total

Consideration

Average

Effective Cost

per Share

($) (cents)

Existing Shareholders

Lim Wee Li 74,700,000 1,350,012 1.8

Lim Han Li 8,300,000 150,001 1.8

New Investors 17,000,000 5,100,000 30.0

Save as disclosed above and in the “Restructuring Exercise” and “Share Capital” sections of this Offer

Document, none of our Directors, Substantial Shareholders or their Associates have acquired any

Shares during the period of three years prior to the date of lodgement of this Offer Document.

DILUTION

35

The following table shows the cash and cash equivalents as well as capitalisation and indebtedness of

our Group as at 31 May 2011:–

(a) based on our management accounts as at 31 May 2011; and

(b) as adjusted for the net proceeds from the Placement.

You should read this in conjunction with the “Combined Financial Statements for Financial Years Ended

31 December 2008, 2009 and 2010” set out in Appendix A of this Offer Document and the

“Management’s Discussion and Analysis of Results of Operations and Financial Position” section of this

Offer Document.

($’000)

As at

31 May 2011

As Adjusted for

the Net Proceeds

from the

Placement

Cash and cash equivalents 3,662 7,382

Indebtedness

Current

— secured and guaranteed 36 36

— secured and non-guaranteed 56 56

— unsecured and guaranteed 2,720 2,720

— unsecured and non-guaranteed — —

2,812 2,812

Non-current

— secured and guaranteed 196 196

— secured and non-guaranteed 84 84

— unsecured and guaranteed 1,767 1,767

— unsecured and non-guaranteed — —

2,047 2,047

Total indebtedness 4,859 4,859

Total shareholders’ equity 7,794 11,514

Total capitalisation and indebtedness 12,653 16,373

There were no material changes in our total capitalisation and indebtedness from 1 June 2011 to the

Latest Practicable Date, save for the scheduled monthly repayments on our bank borrowings and

changes in our retained earnings arising from the day-to-day operations in the ordinary course of

business.

CAPITALISATION AND INDEBTEDNESS

36

Borrowings

Details of our borrowings and indebtedness as at 31 December 2010 are as follows:–

Financial Institution/

Lender Type of Facilities

Amount of

Facilities

Granted

Amount

Utilised

Amount

Owing Securities(1)

($) ($) ($)

DBS Bank Ltd Bridging loan (Local

Enterprise Finance

Scheme)

2,000,000 2,000,000 1,580,610 Joint and several

personal guarantees

from Lim Geok

Khoon, Lim Wee Li

and Lim Han Li

Foreign exchange

spot and forward

and foreign

exchange options

2,500,000 — — Joint and several

personal guarantees

from Lim Geok

Khoon, Lim Wee Li

and Lim Han Li

Overdraft facility,

letter of credit, trust

receipts, bills

receivable

purchase, shipping

guarantee and

airway guarantee

1,500,000 713,297 713,297 Joint and several

personal guarantees

from Lim Geok

Khoon, Lim Wee Li

and Lim Han Li

Oversea-Chinese

Banking Corporation

Limited

Overdraft facility 300,000 — — Deed of guarantee

and indemnity for

all monies from

Lim Geok Khoon,

Lim Wee Li and

Lim Han Li

Letter of credit, trust

receipts, shipping

guarantee and

airway bill

2,000,000 310,022 231,930 Deed of guarantee

and indemnity for

all monies from

Lim Geok Khoon,

Lim Wee Li and

Lim Han Li

Banker’s guarantee 500,000 472,005 — Deed of guarantee

and indemnity for

all monies from

Lim Geok Khoon,

Lim Wee Li and

Lim Han Li

Foreign exchange 2,000,000 — — Deed of guarantee

and indemnity for

all monies from

Lim Geok Khoon,

Lim Wee Li and

Lim Han Li


37



Amount of

Facilities

Granted

Amount

Utilised

Amount

Owing Securities(1)

($) ($) ($)

Bridging loan (Local

Enterprise Finance

Scheme)

1,500,000 1,500,000 1,070,749 Deed of guarantee

and indemnity for

$1,500,000 from

Lim Geok Khoon,

Lim Wee Li and

Lim Han Li

Standard Chartered

Bank


receipts, import

loans, financing

invoices and

shipping guarantee

1,000,000 370,253 370,253 All monies

guarantee provided

by Lim Wee Li and

Lim Han Li

Bridging loan (Local

Enterprise Finance

Scheme)

1,500,000 1,500,000 881,185 All monies

guarantee provided

by Lim Wee Li and

Lim Han Li

Malayan Banking

Berhad


receipts, shipping

guarantee and

banker’s guarantee

2,500,000 785,152 406,542 Personal joint and

several guarantee

for $2,500,000 from

Lim Geok Khoon,

Lim Wee Li and

Lim Han Li

Sing Investments &

Finance Limited

Finance lease/

84 months

commencing on

7 December 2010

250,000 250,000 247,024 Personal guarantee

from Lim Wee Li

Motor-Way Credit

Pte Ltd

Finance lease/

60 months

commencing on

16 October 2007

144,000 144,000 50,384 —

Citibank Singapore Ltd Finance lease/

84 months

commencing on

27 February 2009

118,197 118,197 73,714 —

Hong Leong Finance

Limited

Finance lease/

84 months

commencing on

20 May 2004

39,420 39,420 1,853 —

Finance lease/

60 months

commencing on

8 May 2007

41,000 41,000 10,930 —


38



Amount of

Facilities

Granted

Amount

Utilised

Amount

Owing Securities(1)

($) ($) ($)

RHB Bank Berhad Finance lease/

60 months

commencing on

12 September 2008

41,740 41,740 22,253 —

Malayan Banking

Berhad

Finance lease/

84 months

commencing on

21 March 2006

31,800 31,800 9,824 —

Total 17,966,157 8,316,886 5,670,548

Note:–

(1) Lim Wee Li is our Executive Chairman and CEO while Lim Han Li is our Executive Director. Lim Geok Khoon was a director

of our subsidiary, namely KHL Marketing and the uncle of our Executive Directors, Lim Wee Li and Lim Han Li.

The effective interest rates charged by the relevant financial institutions for the above banking facilities

ranged from 1.7% to 5.3% per annum or such other rates as the respective financial institutions may

from time to time determine. The effective interest rates charged by the relevant lenders for the above

finance lease liabilities ranged from 3.6% to 6.4% per annum.

To the best of our Directors’ knowledge, as at the Latest Practicable Date, we are not in breach of any

of the terms and conditions or covenants associated with any credit arrangement or bank loan which

could materially affect our financial position and results or business operations, or the investments by

our Shareholders.

Save as aforesaid and as disclosed under the “Liquidity and Capital Resources” section of this Offer

Document, our Group does not have any material unused sources of liquidity.

Please refer to the “Interested Person Transactions — Present and On-going Interested Person

Transactions” section of this Offer Document for further details of the guarantees provided by our

Executive Directors and Lim Geok Khoon.


39

KHL Marketing had declared and paid a one-tier tax-exempt interim dividend amounting to $1.5 million

and $4.6 million in respect of FY2008 and FY2010 respectively, to its then shareholders, namely Lim

Wee Li, Lim Han Li and Kim Hup Lee.

Save as disclosed above, no dividends have been declared or paid by our Company or our subsidiaries

during the periods under review.

We currently do not have a formal dividend policy. However, we intend to recommend and distribute

dividends of at least 20% of our net profits attributable to Shareholders for FY2011 and FY2012

(“Proposed Dividends”), subject to the factors outlined below. Investors should note that the foregoing

statement on the Proposed Dividends is merely a statement of our present intention and shall not

constitute a legal binding obligation on our Company or legally binding statement in respect of our

future dividends which may be subject to modification (including reduction or non-declaration thereof)

in our Directors’ sole and absolute discretion. Investors should not treat the Proposed Dividends as an

indication of our Group’s future dividend policy. No inference should or can be made from any of the

foregoing statements as to our actual future profitability or ability to pay dividends.

We may by ordinary resolutions of our Shareholders, declare dividends at a general meeting, but we

may not pay dividends in excess of the amount recommended by our Directors. The declaration and

payment of dividends will be determined at the sole discretion of our Directors subject to the approval

of our Shareholders. There can be no assurance that dividends will be paid in the future or of the

amount or timing of any dividends that will be paid in the future.

Our Directors may also declare an interim dividend without the approval of our Shareholders. In making

their recommendations, our Directors will consider, inter alia, our retained earnings and expected future

earnings, operations, cash flows, capital requirements and general financing condition, as well as

general business conditions and other factors which our Directors may deem appropriate. Future

dividends will be paid by us as and when approved by our Shareholders (if necessary) and Directors.

Information relating to taxes payable on dividends is set out in the “Taxation” section in Appendix D of

this Offer Document.

DIVIDEND POLICY

40

The following selected financial information should be read in conjunction with the full text of this Offer


2008, 2009 and 2010” set out in Appendix A of this Offer Document.

Combined Statements of Comprehensive Income(1)

Audited

($’000) FY2008 FY2009 FY2010

Revenue 18,524 19,484 31,221

Cost of sales (9,890) (10,683) (18,211)

Gross profit 8,634 8,801 13,010

Other income 72 276 561(5)

Selling and distribution expenses (4,638) (4,271) (5,306)

General and administrative expenses (1,608) (2,058) (2,249)

Finance costs (168) (299) (241)

Other expenses (139) (645) (755)

Profit before tax 2,153 1,804 5,020

Tax expense (336) (447) (861)

Net profit for the year 1,817 1,357 4,159

Other comprehensive income:–

Currency translation differences arising from consolidation 22 (1) (22)

Total comprehensive income for the year 1,839 1,356 4,137

Profit attributable to:–

Equity holders of the Company 1,817 1,256 4,344(4)(5)

Non-controlling interests — 101 (185)

1,817 1,357 4,159

Total comprehensive income attributable to:–

Equity holders of the Company 1,839 1,241 4,318


1,839 1,356 4,137

EPS (cents)(2) 2.2 1.5 5.2(4)

EPS (fully diluted) (cents)(3) 1.8 1.3 4.3(4)

Notes:–

(1) Our combined statements of comprehensive income for the periods under review have been prepared on the basis that our

Group had been in existence throughout the periods under review.

(2) For comparative purposes, EPS for the periods under review have been computed based on the PAT and our pre-Placement

share capital of 83,000,000 Shares.

(3) For comparative purposes, EPS for the periods under review have been computed based on the PAT and our

post-Placement share capital of 100,000,000 Shares.

(4) Had the Service Agreements been in place with effect from 1 January 2010, the PAT for FY2010 would have been

approximately $4,259,000, and the EPS and EPS (fully diluted) would be 5.1 cents and 4.3 cents, respectively.

(5) In FY2010, other income included a one-off waiver of debt from a related party, namely Kim Hup Lee, for non-trade debts

incurred in the previous business of KHL Marketing prior to the commencement of our current business in 1991 amounting

to approximately $388,000. Such waiver of debt was carried out in connection with the Restructuring Exercise. Hence, after

adjusting for this one-off income, the adjusted PAT would have been approximately $3,956,000 and the adjusted EPS and

adjusted EPS (fully diluted) would be 4.8 cents and 4.0 cents, respectively.

SUMMARY OF OUR FINANCIAL INFORMATION

41

Combined Statement of Financial Position(1)

($’000)

Audited

As at

31 December 2010

Non-current assets

Property, plant and equipment 855

Long-term prepayment 196

Total non-current assets 1,051

Current assets

Inventories 7,303

Investment property under construction 317

Project work-in-progress 644

Trade and other receivables 6,976

Cash and cash equivalents 5,035

Total current assets 20,275

Total assets 21,326

Non-current liabilities

Bank borrowings 2,299

Finance lease liabilities 314

Deferred tax liability 37

Total non-current liabilities 2,650

Current liabilities

Project work-in-progress 224

Bank borrowings 1,233

Trade and other payables 4,962

Bills payable to banks 1,722

Finance lease liabilities 102

Amounts due to Directors 2,457

Tax payable 843

Total current liabilities 11,543

Total liabilities 14,193

Net assets 7,133

Share capital and reserves

Share capital 1,500

Accumulated profits 5,615

Currency translation reserve 18

Equity attributable to equity holders of the Company 7,133

Non-controlling interests —

Total equity 7,133

NTA per Share (cents)(2) 8.6

Notes:–

(1) Our combined statement of financial position as at 31 December 2010 has been prepared on the basis that our Group has

been in existence on this date.

(2) The NTA per Share as at 31 December 2010 has been computed based on our pre-Placement share capital of 83,000,000

Shares.

SUMMARY OF OUR FINANCIAL INFORMATION

42

The following discussion of our results of operations and financial position has been prepared by our

management and should be read in conjunction with the “Combined Financial Statements for Financial

Years Ended 31 December 2008, 2009 and 2010” set out in Appendix A of this Offer Document. This

discussion contains forward-looking statements that involve risks and uncertainties. Our actual results

may differ significantly from those projected in the forward-looking statements. Factors that might

cause future results to differ significantly from those projected in the forward-looking statements

include, but are not limited to, those discussed below and elsewhere in this Offer Document, particularly

in the “Risk Factors” section of this Offer Document. Under no circumstances should the inclusion of

such forward-looking statements herein be regarded as a representation, warranty or prediction with

respect to the accuracy of the underlying assumptions by our Company, the Sponsor, the Placement

Agent or any other person. Investors are cautioned not to place undue reliance on these forward-

looking statements that speak only as at the date hereof. Please refer to the “Cautionary Note

Regarding Forward-Looking Statements” section of this Offer Document.

OVERVIEW














premium products.







Revenue

Revenue is largely derived from the sale of imported kitchen systems, kitchen appliances, wardrobe

systems, household furniture and accessories to our (i) Residential Projects and (ii) Distribution and

Retail customers.

Revenue from our Residential Projects business accounted for 47.1%, 59.9% and 76.2% of our

revenue in FY2008, FY2009 and FY2010 respectively. The balance of our revenue is derived from

Distribution and Retail business.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OFOPERATIONS AND FINANCIAL POSITION

43

Revenue from our Residential Projects business is recognised using the percentage of completion

method. The amount recognised in the financial statements is only to the extent that it relates to the

value of work done as certified by quantity surveyors and approved by architects. Provision for any

anticipated losses on projects is recognised as soon as the possibility of loss is ascertained. Claims for

additional projects compensation are not recognised until resolved. Generally, our residential projects

are awarded either directly by developers or through invitation to tender from developers, architects

and quantity surveyors. Our Residential Projects customers enter into contracts (which specifically

indicate delivery schedule, quantity and pricing) with us for the supply and delivery of our products for

specific projects, which project life may typically extend up to two years. Our products are then

delivered and installed in stages based on the state of completion of the projects. Typically, the

installation of our products in Residential Projects, and hence revenue recognition, would happen near

the end of the construction phase.

Revenue from our Distribution and Retail business is recognised upon delivery of our products and

when significant risks, rewards of ownership and control have been transferred to customers. Our

Distribution and Retail customers’ orders are based on confirmed orders and we do not typically enter

into long-term contracts with them. Hence, the lead-time to fulfil an order is generally three to six

months for kitchen systems and wardrobe systems, upon final confirmation from our customers. As for

kitchen appliances, household furniture and accessories, we typically deliver within three working days

subject to stock availability.

Geographically, our customers are predominantly located in Singapore, accounting for 65.4%, 79.9%

and 92.7% of our revenue in FY2008, FY2009 and FY2010 respectively, with the balance contribution

from our customers located in Malaysia, Seychelles, Indonesia and Thailand.

84.3% of our total revenue over the periods under review was denominated in S$, with the balance

denominated in EUR, RM and US$.

The major factors that affect our revenue include:–

(a) Our ability to expand our existing range of products for our consumers and adapt to their changing

requirements;

(b) Our ability to compete effectively in the markets we operate. We currently operate in Singapore

and Malaysia;

(c) Our ability to continually attract and secure customers. The demand for our products is mainly

influenced by price, quality and timely completion of installation of our products;

(d) The state of the economy and the growth and development of the property market and

construction industry in Singapore and Malaysia, where we operate and where our products are

sold predominantly; and

(e) Changes in Singapore and Malaysian government policies which could affect the property market

and construction industry such as specific government action or financing restrictions for property

purchases.

Cost of Sales

Cost of sales comprises mainly cost of products, subcontract costs, and freight and transport charges.


44

The main component of our cost of sales is the cost of products, which we purchase directly from our

suppliers mainly in Europe and USA, comprising imported kitchen systems, kitchen appliances,

wardrobe systems, household furniture and accessories. Our suppliers are established manufacturers

for the supply of reliable and quality kitchen systems, kitchen appliances, wardrobe systems,

household furniture and accessories. We generally enter into long-term or exclusive arrangements with

our suppliers as this would provide us the assurance that we are the exclusive and sole distributors of

these premium products. Cost of products accounted for 84.3%, 69.5% and 78.1% of our cost of sales

for FY2008, FY2009 and FY2010 respectively.

To improve our operating flexibility, we utilise subcontract labour for the provision of installation services

of our products at our customers’ sites. Subcontract costs accounted for 10.7%, 22.8% and 16.1% of

our cost of sales in FY2008, FY2009 and FY2010 respectively.

The major factors that affect our cost of sales include:–

(a) Our ability to source for and purchase products at competitive prices that meets our customers’

requirements and specifications;

(b) Our ability to purchase in bulk and negotiate for rebates and discounts from our suppliers; and

(c) The fluctuation in exchange rates between S$ vis-a-vis EUR and US$ as purchases denominated

in foreign currencies accounted for 66.0% and 16.3% of our total purchases over the periods

under review, respectively.

Other Income

Other income include government grants arising from the Jobs Credit Scheme, gain on disposal of

property, plant and equipment, interest income, dividend income from quoted investments and waiver

of debt from a related party, namely Kim Hup Lee, for non-trade debts incurred in the previous business

of KHL Marketing prior to the commencement of our current business in 1991. Such debts were

eventually waived by Kim Hup Lee in FY2010 in connection with the Restructuring Exercise. The Jobs

Credit Scheme was introduced by the government in the Singapore Budget 2009 to encourage

businesses to preserve jobs in the economic downturn in 2009.

Selling and Distribution Expenses

Selling and distribution expenses include advertising costs, entertainment costs, salary-related

expenses of sales, marketing and operations staff, sales commission paid to sales and marketing staff,

third parties and a related party, namely KHL Home Appliances, for referrals, depreciation charges on

motor vehicles, upkeep of motor vehicles, rental expenses of warehousing and showrooms, showroom

expenses, travelling and transportation expenses, and insurance costs (relating mainly to projects and

motor vehicles).

General and Administrative Expenses

General and administrative expenses include Directors’ remuneration, premises-related expenses

(such as office rental and utilities), depreciation charges on office equipment, air conditioners, furniture

and fittings, electrical fittings, computers and renovations, salary-related expenses of general and

administrative staff, and other miscellaneous costs (such as legal and professional fees, general

repairs and maintenance, general expenses and telecommunication expenses).


45

Finance Costs

Finance costs relate mainly to bank charges and interests incurred on borrowings and finance leases.

Other Expenses

Other expenses include allowance for doubtful receivables, bad debts written off, inventories written

down, property, plant and equipment written off, write-back of allowance for slow-moving inventories,

impairment loss on goodwill arising on consolidation, fair value gain or loss on financial assets (being

quoted investments) and foreign exchange gain or loss.

Goodwill is allocated to our cash-generating units identified according to business result and country

of operation. The goodwill on consolidation arose from a subsidiary, namely Kitchen Culture Malaysia,

and full impairment of the goodwill of approximately $166,000 and $87,000 were made in FY2009 and

FY2010 respectively.

Tax Expense

Our Company and subsidiaries are subject to income tax at the applicable statutory tax rates in


FY2008 FY2009 FY2010

Tax expense ($’000) 336 447 861

PBT ($’000) 2,153 1,804 5,020

Effective tax rate (tax expense as a percentage of PBT) (%) 15.6 24.8 17.2

During the periods under review, provisions for income tax were made on income derived from our

operations in Singapore and Malaysia. The prevailing statutory tax rates in Singapore were 18.0% in

FY2008, and 17.0% in FY2009 and FY2010. The prevailing statutory tax rate in Malaysia was 20.0%

over the periods under review.

In FY2008, our effective tax rate of 15.6% was lower than the prevailing statutory tax rates in Singapore

and Malaysia due mainly to the utilisation of previously unrecognised tax losses and unabsorbed

capital allowances in our Malaysian subsidiary, partly offset by certain items which were not deductible

for tax purposes.

In FY2009, our effective tax rate of 24.8% was higher than the prevailing statutory tax rates in

Singapore and Malaysia due mainly to certain items which were not deductible for tax purposes.

In FY2010, our effective tax rate of 17.2% was marginally higher than the prevailing statutory tax rate

in Singapore due mainly to certain items which were not deductible for tax purposes and deferred tax

assets not recognised for the year, partly offset by certain income in Singapore which were not

subjected to tax and Singapore statutory stepped income exemption. There was no tax expense for our

Malaysian subsidiary in FY2010 as it reported a loss in that year.

SEASONALITY

We generally do not experience any seasonality in our (i) Residential Projects and (ii) Distribution and

Retail businesses.


46

INFLATION

Over the periods under review, inflation did not have a material impact on our performance.

REVIEW OF RESULTS OF OPERATIONS

For the purpose of discussion, we have segmented our revenue and gross profit by business segments

as well as geographical locations of our customers for the periods under review. The analysis provided

below should be read in conjunction with the “Combined Financial Statements for Financial Years

Ended 31 December 2008, 2009 and 2010” set out in Appendix A of this Offer Document.

Review of Past Performance by Business Segments

Revenue

FY2008 FY2009 FY2010

$’000 % $’000 % $’000 %

Residential Projects 8,718 47.1 11,674 59.9 23,775 76.2

Distribution and Retail 9,806 52.9 7,810 40.1 7,446 23.8

Total 18,524 100.0 19,484 100.0 31,221 100.0

Gross Profit

FY2008 FY2009 FY2010

$’000 % $’000 % $’000 %

Residential Projects 4,914 56.9 5,871 66.7 10,364 79.7

Distribution and Retail 3,720 43.1 2,930 33.3 2,646 20.3

Total 8,634 100.0 8,801 100.0 13,010 100.0

Gross Profit Margin

FY2008 FY2009 FY2010

% % %

Residential Projects 56.4 50.3 43.6

Distribution and Retail 37.9 37.5 35.5

Overall 46.6 45.2 41.7


47

Review of Past Performance by Geographical Locations(1) of our Customers

Revenue

FY2008 FY2009 FY2010

$’000 % $’000 % $’000 %

Singapore 12,123 65.4 15,568 79.9 28,950 92.7

Malaysia 5,388 29.1 3,090 15.9 1,746 5.6

Others(2) 1,013 5.5 826 4.2 525 1.7

Total 18,524 100.0 19,484 100.0 31,221 100.0

Gross Profit

FY2008 FY2009 FY2010

$’000 % $’000 % $’000 %

Singapore 5,593 64.8 6,920 78.6 12,171 93.6

Malaysia 2,465 28.5 1,326 15.1 508 3.9

Others(2) 576 6.7 555 6.3 331 2.5

Total 8,634 100.0 8,801 100.0 13,010 100.0

Gross Profit Margin

FY2008 FY2009 FY2010

% % %

Singapore 46.1 44.5 42.0

Malaysia 45.7 42.9 29.1

Others(2) 56.9 67.2 63.0

Overall 46.6 45.2 41.7

Notes:–

(1) Based on our customers’ invoice billing address.

(2) Others refer to customers from Seychelles, Indonesia and Thailand.

FY2009 vs FY2008

Revenue

Revenue increased by $1.0 million or 5.2%, from $18.5 million in FY2008 to $19.5 million in FY2009

due to an increase in revenue contribution of $3.0 million from our Residential Projects business, partly

offset by a decrease in revenue contribution of $2.0 million from our Distribution and Retail business.

In FY2009, $5.7 million of our revenue was attributable to revenue recognised from 13 new projects

(which were mainly secured in FY2007 and FY2008) while $6.0 million was attributable to revenue

recognised from then 17 existing projects. The increase in revenue from our Residential Projects

business in FY2009 was due mainly to revenue recognised from three new projects in Singapore


48

(namely, “Waterfall Gardens”, “Leonie Parc View” and “Hillcrest Villas”) amounting to an aggregate of

$4.4 million and one existing project in Singapore (namely, “Paradise Island”) amounting to $1.5 million.

In FY2008, $3.8 million of our revenue was attributable to revenue recognised from 12 new projects

(which were mainly secured in FY2007) while $4.9 million was attributable to revenue recognised from

then 12 existing projects. In FY2008, revenue contribution was mainly from our existing projects at

“Rivergate” in Singapore and “The Binjai On The Park” in Malaysia amounting to an aggregate of $5.6

million. Please refer to the “Business — Business Overview” section of this Offer Document for further

details of our projects.

The decrease in revenue contribution from our Distribution and Retail business was mainly attributable

to the global economic slowdown in late 2008 and early 2009 which affected Singapore’s economy,

leading to a decrease in the number of renovation projects which translated into lower demand for our

products. Notwithstanding the weak economic condition, Residential Projects business grew in

revenue largely as a result of the lag-effect, as revenue was recognised from projects secured

pre-global financial crisis.

Geographically, the increase in revenue was primarily attributable to the revenue contribution from our

customers in Singapore of $3.5 million, partly offset by a decrease in revenue contribution from our

customers in Malaysia of $2.3 million and other markets of $0.2 million. The increase in revenue

contribution from our customers in Singapore was due mainly to our Residential Projects business for

the “Waterfall Gardens”, “Leonie Parc View”, “Hillcrest Villas” and “Paradise Island” projects, amounting

to an aggregate of $5.9 million, partly offset by the decrease in demand from our Distribution and Retail

business in Singapore of $2.0 million. The decrease in revenue contribution from our customers in

Malaysia was due mainly to our Residential Projects business as a result of the significant completion

of the “The Binjai On The Park” project, amounting to $4.1 million in FY2008 as compared to $1.9

million in FY2009.

Gross Profit

Gross profit increased by $0.2 million or 1.9%, from $8.6 million in FY2008 to $8.8 million in FY2009.

The increase was due mainly to higher revenue, partly offset by a 1.4 percentage point decline in our

gross profit margin from 46.6% in FY2008 to 45.2% in FY2009, contributed by both business segments.

Gross profit margin from our Residential Projects segment decreased mainly due to contracts

completed which yielded lower margins as a result of competitive pricing.

Gross profit margin from our Distribution and Retail segment decreased mainly due to a fall in demand

from this segment of customers, largely in line with the prevailing economic conditions in FY2009.

Other Income

Other income increased by $0.2 million or 283.3%, from $0.1 million in FY2008 to $0.3 million in

FY2009 due mainly to the government grants of $0.1 million arising from the Jobs Credit Scheme and

an increase in interest income of $0.1 million arising from interest charged on loans and advances

made to our Executive Director. Please refer to the “Interested Person Transactions — Past Interested

Person Transactions” section of this Offer Document for further details on the loans and advances

made to our Executive Director.


49


Selling and distribution expenses decreased by $0.3 million or 7.9%, from $4.6 million in FY2008 to

$4.3 million in FY2009 due mainly to lower sales commission paid to third parties and a related party,

namely KHL Home Appliances, by $0.5 million as a result of a lower sales contracts secured by them

during the year. This was partly offset by an increase in rental expenses by $0.2 million for the

additional warehouse and storage capacity required, at 25 New Industrial Road KHL Industrial Building

Singapore 536211, to support the growth of our Residential Projects business in order to meet

timeliness of delivery according to the project scheduling. Please refer to the “Interested Person

Transactions — Past Interested Person Transactions” section of this Offer Document for further details

on the sales commission paid to KHL Home Appliances.


General and administrative expenses increased by $0.4 million or 28.0%, from $1.6 million in FY2008

to $2.0 million in FY2009 due mainly to higher salary-related expenses of general and administrative

staff, general expenses and depreciation charges on computers and renovations. The increase in

salary-related expenses of general and administrative staff by $0.1 million was as a result of a

headcount increase of three staff to support the increase in our business activities. General expenses

increased by $0.2 million as a result of renovation works and warehouse expenses which were carried

out at our retail showroom at 2 Leng Kee Road #01-07 Singapore 159086 and our head office,

corporate showroom and warehouse at 25 New Industrial Road KHL Industrial Building Singapore

536211. Depreciation charges on computers and renovations increased by $0.1 million as a result of

a revision in estimated useful lives for computers from ten years to five years and for renovations from

ten years to over the lease term of the properties. The revision in estimates was accounted for on a

prospective basis from 1 January 2009.

Finance Costs

Finance costs increased by $0.1 million or 78.0%, from $0.2 million in FY2008 to $0.3 million in FY2009

due mainly to an increase in bank charges.

Other Expenses

Other expenses increased by $0.5 million or 364.0%, from $0.1 million in FY2008 to $0.6 million in

FY2009 due mainly to an increase in allowance for doubtful receivables by $0.1 million, impairment loss

on goodwill arising on consolidation by $0.2 million, inventories written down by $0.1 million for

showroom display kitchen system sets, property, plant and equipment written off by $0.2 million and a

write-back of allowance for slow-moving inventories of $0.1 million which was recorded in FY2008. The

increase was partly offset by a decrease in foreign exchange loss by $0.1 million and a fair value loss

on financial assets of $0.1 million which was recorded in FY2008.

Profit Before Tax

Our profit before tax decreased by $0.4 million or 16.2%, from $2.2 million in FY2008 to $1.8 million in

FY2009 due mainly to lower gross margin and higher operating expenses, partly offset by higher

revenue and other income.


50

FY2010 vs FY2009

Revenue

Revenue increased by $11.7 million or 60.2%, from $19.5 million in FY2009 to $31.2 million in FY2010

due to an increase in revenue contribution of $12.1 million from our Residential Projects business,

partly offset by a decrease in revenue contribution of $0.4 million from our Distribution and Retail

business.

In FY2010, $20.8 million of our revenue was attributable to revenue recognised from nine new projects

(which were mainly secured in FY2008) while $3.0 million was attributable to revenue recognised from

then 16 existing projects. The increase in revenue from our Residential Projects business in FY2010

was due mainly to revenue recognised from five new projects (namely, “The Orchard Residences”,

“Amber Residences”, “Grange Infinite”, “The Orange Grove” and “Sui Generis”) amounting to an

aggregate of $19.1 million. Please refer to the “Business — Business Overview” section of this Offer

Document for further details of our projects.

The decrease in revenue contribution from our Distribution and Retail business was mainly attributable

to the shift in our marketing efforts to develop further our Residential Projects business, which generally

command higher margins.

Geographically, the increase in revenue was primarily attributable to the revenue contribution from our

customers in Singapore of $13.4 million, partly offset by a decrease in revenue contribution from our

customers in Malaysia of $1.4 million and other markets of $0.3 million. The increase in revenue

contribution from our customers in Singapore was due mainly to our Residential Projects business for

the “The Orchard Residences” and “Amber Residences” projects, amounting to an aggregate of $12.9

million. The decrease in revenue contribution from our customers in Malaysia was due mainly to our

Residential Projects business as a result of the completion of the “The Binjai On The Park” project,

amounting to $1.9 million in FY2009 as compared to $0.1 million in FY2010.

Gross Profit

Gross profit increased by $4.2 million or 47.8%, from $8.8 million in FY2009 to $13.0 million in FY2010.

The increase was due mainly to higher revenue, partly offset by a 3.5 percentage point decline in our

gross profit margin from 45.2% in FY2009 to 41.7% in FY2010, contributed by both business segments.

Gross profit margins from both our Residential Projects segment and Distribution and Retail segment

decreased mainly due to our strategy and efforts to secure a greater market share, particularly, the

Residential Projects segment, by offering competitive pricing to our customers.

Other Income

Other income increased by $0.3 million or 103.3%, from $0.3 million in FY2009 to $0.6 million in

FY2010 due mainly to a waiver of debt from a related party, namely Kim Hup Lee, for non-trade debts

incurred in the previous business of KHL Marketing prior to the commencement of our current business

in 1991 of $0.4 million which were eventually waived by Kim Hup Lee in FY2010 in connection with the

Restructuring Exercise, partly offset by a decrease in the government grants from the Jobs Credit

Scheme by $0.1 million.


51


Selling and distribution expenses increased by $1.0 million or 24.2%, from $4.3 million in FY2009 to

$5.3 million in FY2010 due mainly to higher salary-related expenses of sales, marketing and operations

staff, advertising costs and rental expenses. The increase in salary-related expenses of sales,

marketing and operations staff by $0.7 million was as a result of a headcount increase of seven staff

to support our increased marketing efforts to penetrate further into securing residential projects. This

also led to the additional advertising costs of $0.1 million. Rental expenses increased by $0.2 million

for the additional warehouse and storage capacity required, at 25 New Industrial Road KHL Industrial

Building Singapore 536211, to support the growth of our Residential Projects business in order to meet

timeliness of delivery according to the project scheduling.


Our general and administrative expenses increased by $0.2 million or 9.3%, from $2.0 million in

FY2009 to $2.2 million in FY2010 due mainly to an increase in Directors’ remuneration.

Finance Costs

Finance costs decreased by $0.1 million or 19.4%, from $0.3 million in FY2009 to $0.2 million in

FY2010 due mainly to a decrease in utilisation of working capital facilities.

Other Expenses

Other expenses increased by $0.1 million or 17.1%, from $0.6 million in FY2009 to $0.7 million in

FY2010 due mainly to an increase in allowance for doubtful receivables by $0.5 million, partly offset by

a decrease in property, plant and equipment written off by $0.2 million and inventories written down by

approximately $24,000 as well as an increase in foreign exchange gain by $0.1 million.

Towards the end of FY2009, our Group implemented a tighter credit management policy and made

specific allowances on receivables from customers who have exceeded their credit terms and where

collections are doubtful. Hence, allowance for doubtful receivables was $0.1 million (contributed by 21

customers) and $0.6 million (contributed by 99 customers) in FY2009 and FY2010 respectively

attributable to our Distribution and Retail customers.

Profit Before Tax

Our profit before tax increased by $3.2 million or 178.3%, from $1.8 million in FY2009 to $5.0 million

in FY2010 due mainly to higher revenue and other income, partly offset by lower gross margin and

higher operating expenses.


52

REVIEW OF FINANCIAL POSITION

Non-Current Assets

Non-current assets comprise property, plant and equipment and long-term prepayment for the initial

payment of a leasehold property, being a villa in Batam, Indonesia, which is currently under

construction for the purpose of holding events for our customers and staff. This leasehold property was

purchased by our Group in FY2010, for a purchase consideration of $0.3 million.

As at 31 December 2010, the net carrying value of our property, plant and equipment comprising office

equipment, air conditioners, furniture and fittings, electrical fittings, computers, renovations and motor

vehicles amounted to $0.9 million or 4.0% of our total assets. Long-term prepayment amounted to $0.2

million.

Current Assets

Current assets comprise inventories, investment property under construction, project work-in-progress,

trade and other receivables, and cash and cash equivalents.

As at 31 December 2010, current assets amounted to $20.3 million or 95.1% of our total assets.

Inventories were the largest component of our current assets, accounting for 36.0%. Trade and other

receivables accounted for 34.4% of our current assets. Trade receivables of $6.4 million comprised

mainly amounts due from third parties. Other receivables of $0.6 million comprised mainly deposits for

rental of office, showrooms and warehouse and prepayments for advance payments to suppliers and

deferred expenses incurred in relation to the Placement. Cash and cash equivalents amounted to $5.0

million or 24.8% of our current assets. The remaining balance of current assets comprises project

work-in-progress of $0.6 million and investment property under construction of $0.3 million. Investment

property under construction relates to the deposit for a freehold property which is under construction

in Singapore at a consideration of $1.6 million. Subsequent to the financial year ended 31 December

2010, we disposed off this freehold property at 50 Amber Road #11-02 Singapore 439888 and

accordingly, the carrying amount of $0.3 million was reclassified to current assets as at 31 December

2010.

Non-Current Liabilities

Non-current liabilities comprise bank borrowings, finance lease liabilities and deferred tax liability.

As at 31 December 2010, our non-current liabilities amounted to $2.7 million or 18.7% of our total

liabilities. Bank borrowings of $2.3 million relates to the bridging loans from SPRING Singapore under

the Local Enterprise Finance Scheme. Finance lease liabilities of $0.3 million were for motor vehicles

purchased since FY2007. Deferred tax liability amounted to approximately $37,000.

Current Liabilities

Current liabilities comprise project work-in-progress, bank borrowings, trade and other payables, bills

payable to banks, finance lease liabilities, amounts due to Directors and tax payable.

As at 31 December 2010, our current liabilities amounted to $11.5 million or 81.3% of our total liabilities.

Trade and other payables accounted for 43.0% of our current liabilities. Trade payables of $1.7 million

related to purchases of imported kitchen systems, kitchen appliances, wardrobe systems, household


53

furniture and accessories from third parties. Other payables of $3.3 million comprised mainly $2.5

million of sales deposits received, $0.5 million of accrued operating expenses and $0.3 million related

to the services provided by third parties. Bills payable to banks accounted for $1.7 million or 14.9% of

our current liabilities. Bank borrowings accounted for $1.2 million or 10.7% of our current liabilities,

which comprised bridging loans. Amounts due to Directors accounted for $2.5 million or 21.3% of our

current liabilities. Please refer to the “Interested Person Transactions — Present and On-going

Interested Person Transactions” section of this Offer Document for further details of the amounts due

to Directors. The remaining balance of current liabilities comprises project work-in-progress of $0.2

million, current portion of finance lease liabilities of $0.1 million and tax payable of $0.8 million.

Equity Attributable to Equity Holders of the Company

As at 31 December 2010, equity attributable to equity holders of the Company amounted to $7.1 million.

LIQUIDITY AND CAPITAL RESOURCES

We financed our growth and operations through a combination of Shareholders’ equity (including

retained profits), net cash generated from operating activities, advances from Directors, and

borrowings from financial institutions. Our principal uses of cash have been for working capital

requirements and capital expenditures.

Based on the audited combined statement of financial position as at 31 December 2010, our

Shareholders’ equity amounted to $7.1 million and indebtedness amounted to $5.6 million (comprising

bank borrowings, finance lease liabilities and bills payable to banks). Our gearing ratio (defined as the

sum of indebtedness divided by Shareholders’ equity) was 0.8 times. Our net current assets amounted

to $8.7 million and our working capital ratio (defined by current assets divided by current liabilities) was

1.8 times.

As at 31 December 2010, we had an aggregate net cash surplus position of $5.0 million and available

credit facilities granted of $18.0 million, of which $8.3 million were utilised and $9.7 million were

unutilised. These available credit facilities comprise bridging loans of $5.0 million, banking facilities of

$12.3 million and finance lease liabilities of $0.7 million. For the bridging loans, banking facilities and

finance lease liabilities, $3.5 million, $1.7 million and $0.4 million respectively remained outstanding.

The bridging loans were used for working capital purposes. The interest rate for the bridging loans was

fixed at 5.0% per annum.

As at the Latest Practicable Date, we had an aggregate net cash surplus position of $3.2 million and

available credit facilities granted of $18.0 million, of which $9.8 million were utilised and $8.2 million

were unutilised. These available credit facilities comprise bridging loans of $5.0 million, banking

facilities of $12.3 million and finance lease liabilities of $0.7 million. For the bridging loans, banking

facilities and finance lease liabilities, $2.9 million, $2.0 million and $0.4 million respectively remained

outstanding. The bridging loans were used for working capital purposes. The interest rate for the

bridging loans was fixed at 5.0% per annum.

Our Directors are of the reasonable opinion that, after taking into account the cash flows generated

from our operations, our banking facilities and our existing cash and cash equivalents, the working

capital available to us as at the date of lodgement of this Offer Document is sufficient for present

requirements and for at least 12 months after the listing of our Company on Catalist.


54

The Sponsor is of the reasonable opinion that, after having made due and careful enquiry and after

taking into account the cash flows generated from the Group’s operations, the Group’s banking facilities

and the Group’s existing cash and cash equivalents, the working capital available to the Group as at

the date of lodgement of this Offer Document is sufficient for present requirements and for at least 12

months after the listing of the Company on Catalist.

We set out below a summary of our combined statements of cash flows for the periods under review.

The following net cash flow summary should be read in conjunction with the full text of this Offer


2008, 2009 and 2010” set out in Appendix A of this Offer Document.

Audited

($’000) FY2008 FY2009 FY2010

Net cash generated from/(used in) operating activities 1,846 (2,042) 7,331

Net cash used in investing activities (518) (401) (48)

Net cash (used in)/generated from financing activities (285) 2,470 (3,853)

Net increase in cash and cash equivalents 1,043 27 3,430

Cash and cash equivalents at beginning of financial year 538 1,575 1,600

Effect of exchange rate changes on cash and cash

equivalents (6) (2) 5

Cash and cash equivalents at end of financial year(1) 1,575 1,600 5,035

Note:–

(1) Cash and cash equivalents comprise cash in hand and at bank and fixed deposits.

Our inventories increased by $3.5 million or 64.4%, from $5.5 million as at the end of FY2008 to

$9.0 million as at the end of FY2009, which resulted in negative operating cash flow for FY2009. This

was because we increased the quantity of our products towards the end of FY2009 in view of confirmed

contracts for our Residential Projects business which were due for delivery in early FY2010. This is to

ensure that we deliver and complete the installation of our products in a timely manner. As a result, in

FY2009, we had negative operating cash flows of $2.0 million.

FY2008

In FY2008, we generated net cash from operating activities before changes in working capital of $2.6

million. Net cash used in working capital amounted to $0.2 million. This was due mainly to an increase

in receivables and inventories by $2.8 million and $2.1 million respectively, partly offset by a decrease

in project work-in-progress by $2.8 million, an increase in payables by $1.8 million and translation

differences of approximately $30,000. In FY2008, we paid income tax of $0.4 million and interest of

$0.2 million. The net cash generated from operating activities amounted to $1.8 million.

Net cash used in investing activities of $0.5 million was due mainly to the purchase of an investment

property under construction of $0.3 million and purchase of office equipment, furniture and fittings,

electrical fittings, computers, renovations and motor vehicles of $0.2 million.

Net cash used in financing activities of $0.3 million was due mainly to the dividend paid to Shareholders

of $1.5 million and repayment of finance lease liabilities of $0.1 million, partly offset by the proceeds

from issuance of ordinary shares of $1.3 million.


55

As a result of the above, there was a net increase of $1.0 million in our cash and cash equivalents, from

$0.5 million as at 1 January 2008 to $1.5 million as at 31 December 2008.

FY2009


million. Net cash used in working capital amounted to $3.0 million. This was due mainly to an increase

in inventories, receivables and project work-in-progress by $3.5 million, $0.6 million and $0.2 million

respectively, partly offset by an increase in payables by $1.3 million. In FY2009, we paid income tax of

$1.5 million and interest of $0.3 million, while interest received amounted to $0.1 million. The net cash

used in operating activities amounted to $2.0 million.

Net cash used in investing activities of $0.4 million was due mainly to the purchase of office equipment,

furniture and fittings, electrical fittings, computers, renovations and motor vehicles of $0.5 million, partly

offset by the proceeds from the disposal of motor vehicles of $0.1 million.

Net cash generated from financing activities of $2.5 million was due mainly to the proceeds from

bridging loans of $3.0 million, partly offset by the repayment of bank borrowings and finance lease

liabilities of $0.3 million and $0.2 million respectively.



FY2010


million. Net cash generated from working capital amounted to $2.0 million. This was due mainly to a

decrease in receivables, inventories and project work-in-progress by $2.2 million, $1.7 million and $1.6

million respectively, partly offset by a decrease in payables by $3.5 million. In FY2010, we paid income

tax of $0.1 million and interest of $0.3 million, while interest received amounted to $0.1 million. The net

cash generated from operating activities amounted to $7.3 million.

Net cash used in investing activities of $0.1 million was due mainly to the purchase of office equipment,

furniture and fittings, electrical fittings, computers, renovations and motor vehicles of $0.3 million, partly

offset by the proceeds from the disposal of motor vehicles of $0.2 million.

Net cash used in financing activities of $3.8 million was due mainly to the dividend paid to Shareholders

of $4.6 million and repayment of bank borrowings and finance lease liabilities of $1.1 million and $0.1

million respectively, partly offset by the proceeds from a bridging loan of $2.0 million.




56

CAPITAL EXPENDITURES, DIVESTMENTS, COMMITMENTS AND CONTINGENT LIABILITIES

Capital Expenditures and Divestments

Capital expenditures and divestments made by us during the periods under review and for the period

from 1 January 2011 to the Latest Practicable Date are as follows:–

($’000) FY2008 FY2009 FY2010

1 January 2011

to the Latest

Practicable Date

Expenditures

Office equipment 12 5 31 3

Furniture and fittings 34 106 18 1

Electrical fittings 13 5 16 —

Computers 27 19 34 3

Renovations 62 93 58 32

Motor vehicles 96 408 343 —

Total expenditures 244 636 500 39

Divestments

Computers — — — 7

Motor vehicles — 165 290 —

Total divestments — 165 290 7

The above capital expenditures were financed by finance leases and internally generated funds.

Commitments

Capital Commitments

As at the Latest Practicable Date, we have material capital commitments contracted for but not

provided for in the financial statements as follows:–

($’000)

Commitment to purchase leasehold property(1) 44

Note:–

(1) This relates to the leasehold property, being a villa in Batam, Indonesia, which is currently under construction for the purpose

of holding events for our customers and staff which was purchased by our Group in FY2010.


57

Operating Lease Commitments

As at the Latest Practicable Date, we have non-cancellable operating lease commitments as follows:–

($’000)

Due within one financial year 1,670

Due between two and five financial years 2,213

3,883

Our operating lease commitments comprise rent payable by us for the leased properties as disclosed

in the “Properties and Fixed Assets” section of this Offer Document.

We intend to finance the above operating lease commitments by internally generated funds.

Contingent Liabilities

As at the Latest Practicable Date, we obtained banker’s letter of guarantee and project performance

bonds of $2.7 million to secure the performance under the relevant contracts. The expiring dates of the

banker’s letter of guarantee and project performance bonds ranged from one to 44 months from the

Latest Practicable Date.

FOREIGN EXCHANGE MANAGEMENT

Accounting Treatment of Foreign Currencies

The accounting records for the companies in our Group are maintained in their respective functional

currencies.

Transactions in foreign currencies during the year are recorded in their respective functional currencies

using exchange rates approximating those ruling at the transaction dates. Foreign currency monetary

assets and liabilities at the end of the reporting period are translated into their respective functional

currencies at exchange rates approximating those prevailing at that date. All resultant exchange

differences are dealt with through profit or loss.

In the preparation of the combined financial statements of our Group, the financial statements of our

foreign subsidiary have been translated at the rates of exchange prevailing at the end of the reporting

period except share capital and reserves which are translated at historical exchange rates and income

and expense items which are translated at the average exchange rates for the year. Exchange

differences arising from the above translation are taken directly to other comprehensive income and

accumulated in a separate component of equity.


58

Foreign Exchange Exposure

Our reporting currency is in S$ and our operations are primarily carried out in Singapore and Malaysia.

Other than the respective functional currencies of our subsidiaries (being S$ and RM), we also transact

in CHF, EUR, GBP, RMB and US$. The percentage of our revenue, purchases and expenses

denominated in different currencies for the periods under review are as follows:–

FY2008 FY2009 FY2010

Percentage of revenue denominated in

S$ 68.9 84.0 93.7

RM 21.0 12.4 5.6

US$ 1.8 1.0 0.7

EUR 8.3 2.6 0.0

100.0 100.0 100.0

Percentage of purchases denominated in

EUR 44.7 73.3 78.3

US$ 17.9 18.5 12.5

S$ 26.0 5.3 2.2

Others(1) 11.4 2.9 7.0

100.0 100.0 100.0

Percentage of expenses denominated in

S$ 85.3 92.9 90.7

RM 14.7 7.1 9.3

100.0 100.0 100.0

Note:–

(1) Others comprise CHF, GBP, RM and RMB.

To the extent that (i) our revenue, purchases and expenses are not naturally matched in the same

currency; and (ii) there are timing differences between invoicing and collection/payment, we will be

exposed to adverse fluctuations of the various currencies against the Singapore dollar, which would

adversely affect our earnings.

At present, we do not have any formal policy for hedging against foreign exchange exposure. We will

continue to monitor our foreign exchange exposure and may employ forward currency contracts to

manage our foreign exchange exposure should the need arise. Prior to implementing any formal

hedging policies, we will seek the approval of our Board on the policy and put in place adequate

procedures which shall be reviewed and approved by our Audit Committee. Thereafter, all hedging

transactions entered into by our Group will be in accordance with set policies and procedures.

Our net foreign exchange gain/(loss) for the periods under review are as follows:–

FY2008 FY2009 FY2010

Net foreign exchange gain/(loss) ($’000) (140) (4) 110

As a percentage of revenue (%) (0.8) –(1) 0.4

As a percentage of PBT (%) (6.5) (0.2) 2.2

Note:–

(1) Less than 0.1%


59

SHARE CAPITAL


company limited by shares under the name of “Kitchen Culture Holdings Pte. Ltd.”. On 6 July 2011, our

Company was converted into a public company limited by shares and our name was changed to

“Kitchen Culture Holdings Ltd.”.

As at the date of incorporation, the issued and paid-up share capital of our Company was $2 comprising

two Shares held equally by Lim Wee Li and Lim Han Li.

On 6 June 2011, the issued and paid-up share capital of our Company was increased to $10 by the

allotment and issue of six shares and two shares to Kim Hup Lee and Lim Wee Li respectively.

Pursuant to the Restructuring Exercise, the issued and paid-up share capital of our Company was

increased to $1,500,013 comprising 1,500,013 Shares. Please refer to the “Restructuring Exercise”

section of this Offer Document for further details.

Pursuant to the written resolutions passed on 1 July 2011, our then Shareholders approved, inter alia,

the following:–

(a) the Sub-Division;

(b) the conversion of our Company into a public company limited by shares and the consequential

change of our name to “Kitchen Culture Holdings Ltd.”;

(c) the adoption of a new set of Articles of Association;

(d) the issue of the New Shares pursuant to the Placement, which when allotted, issued and fully

paid, will rank pari passu in all respects with the existing issued Shares; and

(e) the authorisation for our Directors, pursuant to Section 161 of the Companies Act and the Listing

Manual to:– (a) (i) issue (in addition to the New Shares) Shares whether by way of rights, bonus

or otherwise; and/or (ii) make or grant offers, agreements or options (collectively, “Instruments”)

that might or would require Shares to be issued, including but not limited to the creation and issue

of (as well as adjustments to) options, warrants, debentures or other instruments convertible into

Shares, at any time and upon such terms and conditions and for such purposes and to such

persons as our Directors may in their absolute discretion deem fit; and (b) (notwithstanding this

authorisation conferred may have ceased to be in force) issue Shares in pursuance of any

Instruments made or granted by our Directors while this authorisation was in force, provided that:–

(1) the aggregate number of Shares (including Shares to be issued in pursuance of the

Instruments, made or granted pursuant to this authorisation) and Instruments to be issued

pursuant to this authorisation shall not exceed 100% of the total number of issued Shares

(excluding treasury shares) in the capital of our Company (as calculated in accordance with

sub-paragraph (2) below), of which the aggregate number of Shares to be issued (including

Shares to be issued pursuant to the Instruments) other than on a pro rata basis to existing

Shareholders shall not exceed 50% of the total number of issued Shares (excluding treasury

shares) in the capital of our Company (as calculated in accordance with sub-paragraph (2)

below);


60

(2) (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of

determining the aggregate number of Shares (including Shares to be issued pursuant to the

Instruments) that may be issued under sub-paragraph (1) above, the percentage of Shares

that may be issued shall be based on the post-Placement issued share capital of our

Company (excluding treasury shares), after adjusting for:– (a) new Shares arising from the

conversion or exercise of the Instruments or any convertible securities; (b) new Shares

arising from exercising share options or vesting of share awards outstanding and subsisting

at the time of the passing of this authority; and (c) any subsequent bonus issue,

consolidation or sub-division of Shares; and

(3) unless revoked or varied by our Company in a general meeting, such authority shall continue

in force until (i) the conclusion of the next annual general meeting of our Company or (ii) the

date by which the next annual general meeting of our Company is required by law to be held,

whichever is earlier.

As at the date of this Offer Document, our Company has only one class of shares, being ordinary

shares. The rights and privileges of our Shares are stated in our Articles of Association. There is no

founder, management or deferred shares. No person has been, or is entitled to be, given an option to

subscribe for or purchase any securities of our Company or our subsidiaries.

As at the date of this Offer Document, the issued and paid-up share capital of our Company is

$1,500,013 comprising 83,000,000 Shares. Upon the allotment and issue of the New Shares which are

the subject of the Placement, the resultant issued and paid-up share capital of our Company will be

$6,600,013 comprising 100,000,000 Shares.

Details of the changes in the issued and paid-up share capital of our Company since incorporation and

immediately after the Placement are as follows:–

Number of Shares

Resultant Issued

and Paid-up Share

Capital

($)

Issued and paid-up Shares as at our incorporation 2 2

Issue of Shares on 6 June 2011 8 10

Issue of Shares pursuant to the Restructuring Exercise 1,500,003 1,500,013

Sub-Division 83,000,000 1,500,013

Pre-Placement issued and paid-up share capital 83,000,000 1,500,013

Issue of New Shares pursuant to the Placement 17,000,000 5,100,000(1)

Post-Placement issued and paid-up share capital 100,000,000 6,600,013(2)

Notes:–

(1) Based on the gross proceeds from the issue of the New Shares pursuant to the Placement.

(2) Before taking into account capitalisation of approximately $343,631 being a portion of the expenses incurred in relation to

the Placement.


61

The Shareholders’ equity of our Company as at the date of incorporation (being 25 March 2011), as

adjusted for the Restructuring Exercise and after the Placement is set out below:–

As at the Date of

Incorporation

After Adjusting for

the Restructuring

Exercise

After the

Placement

($) ($) ($)

Shareholders’ equity

Share capital 2 1,500,013 6,600,013

Capitalisation of expenses in relation to the

Placement — — (343,631)

Accumulated profits — — —

Total Shareholders’ equity 2 1,500,013 6,256,382

RESTRUCTURING EXERCISE

We undertook the following Restructuring Exercise to streamline and rationalise our Group structure in

connection with the Placement:–

(a) Incorporation of our Company

Our Company was incorporated on 25 March 2011 in Singapore in accordance with the

Companies Act as a private company limited by shares with an issued and paid-up share capital

of $2 comprising two Shares held equally by Lim Wee Li and Lim Han Li. Subsequent to

incorporation, six and two new Shares were allotted and issued to Kim Hup Lee and Lim Wee Li

respectively such that Kim Hup Lee held six Shares, Lim Wee Li held three Shares and Lim Han

Li held one Share in our Company.

(b) Acquisition of Kitchen Culture Singapore

On 16 June 2011, the shareholders of KHL Marketing, namely Kim Hup Lee (60%), Lim Wee Li

(30%) and Lim Han Li (10%), entered into a restructuring agreement (the “Restructuring

Agreement”) with the shareholders of Kitchen Culture Singapore, namely Lim Wee Li (50%) and

Lim Sok Khim (wife of Lim Wee Li) (50%), pursuant to which KHL Marketing acquired the entire

issued and paid-up share capital of Kitchen Culture Singapore for a consideration of $2 based on

the amount of issued and paid-up share capital of Kitchen Culture Singapore as at 31 December

2010. The consideration was satisfied by the allotment and issue of two new ordinary shares in

KHL Marketing to Lim Wee Li and Lim Sok Khim.

Lim Sok Khim nominated Lim Wee Li to receive one ordinary share in KHL Marketing and the

acquisition was completed on 16 June 2011 where Lim Wee Li was issued two ordinary shares

in KHL Marketing.


62

(c) Acquisition of Haus

On 16 June 2011, the shareholders of KHL Marketing entered into the Restructuring Agreement

with the sole shareholder of Haus, namely Lim Wee Li, pursuant to which KHL Marketing acquired

the entire issued and paid-up share capital of Haus for a consideration of $1 based on the amount

of issued and paid-up share capital of Haus as at 31 December 2010. The consideration was

satisfied by the allotment and issue of one new ordinary share in KHL Marketing to Lim Wee Li.

The acquisition was completed on 16 June 2011 where Lim Wee Li was issued one ordinary share

in KHL Marketing.

(d) Acquisition of KHL Marketing

On 16 June 2011, our Company entered into the Restructuring Agreement with the shareholders

of KHL Marketing, namely Kim Hup Lee (60%), Lim Wee Li (30%) and Lim Han Li (10%), pursuant

to which our Company acquired the entire issued and paid-up share capital of KHL Marketing for

a consideration of $1,500,003 based on the amount of issued and paid-up share capital of KHL

Marketing as at 16 June 2011. Pursuant to the acquisition, KHL Marketing became our

wholly-owned subsidiary. The consideration was satisfied by the allotment and issue of 1,500,003

new Shares in our Company to the then shareholders of KHL Marketing as follows:–

Name Number of Shares % Shareholding

Kim Hup Lee 900,000 60.0

Lim Wee Li 450,003 30.0

Lim Han Li 150,000 10.0

Total 1,500,003 100.0

The acquisition was completed on 16 June 2011.

(e) Share Exchange

Pursuant to a conditional share exchange agreement dated 1 June 2011, our Executive Chairman

and CEO, Lim Wee Li, acquired the 60% stake in our Company held by Kim Hup Lee. The

consideration was satisfied by the transfer to such persons and companies nominated by Kim Hup

Lee, of ordinary shares held by Lim Wee Li in Lim Ee Pan & Sons (Private) Limited (1,476 shares)

and Kinly Investment Private Limited (1,606 shares). As one of the conditions precedent for the

share exchange arrangement, Lim Wee Li has distributed and transferred 4,263 ordinary shares

in Kim Hup Lee held by him to such persons and companies nominated by Kim Hup Lee at a

nominal consideration.

On completion of the share exchange, Lim Wee Li held 90% of the entire issued and paid-up

share capital of our Company with the balance 10% being held by Lim Han Li.


63

Resultant Shareholding in our Company before Sub-Division

Number of Shares % Shareholding

Lim Wee Li 1,350,012 90.0

Lim Han Li 150,001 10.0

Total 1,500,013 100.0

Please refer to the “Other Transactions” section of this Offer Document for details of Lim Han Li’s

shareholdings in Kim Hup Lee, Lim Ee Pan & Sons (Private) Limited and Kinly Investment Private

Limited.

(f) Sub-Division of Shares

On 1 July 2011, our Shareholders approved the Sub-Division.

GROUP STRUCTURE

Our Group structure as at the date of this Offer Document is as follows:–

100% 100%

Company

Kitchen Culture

Malaysia Haus Kitchen Culture

Singapore

KHL Marketing

100%

100%


64

OUR SUBSIDIARIES

The details of our subsidiaries as at the date of this Offer Document are as follows:–

Name of Subsidiary

Date and Place of

Incorporation

Principal Place

of Business

Issued and

Paid-up Share

Capital

Equity Interest

Held by Our

Group

KHL Marketing

25 February 1981

Singapore Singapore $1,500,003 100%

Kitchen Culture Malaysia

6 July 2000

Malaysia Malaysia RM100,000 100%

Kitchen Culture Singapore

10 September 2003

Singapore Singapore $2 100%

Haus

1 March 2007

Singapore Singapore $1 100%

None of our subsidiaries is listed on any stock exchange. We do not have any associated companies.

SHAREHOLDERS

Our Shareholders and their respective shareholdings immediately before and after the Placement are

set out below:–

Before the Placement After the Placement

Direct Interest Deemed Interest Direct Interest Deemed Interest

Number of

Shares %

Number of

Shares %

Number of

Shares %

Number of

Shares %

Directors

Lim Wee Li(1) 74,700,000 90.0 — — 74,700,000 74.7 — —

Lim Han Li(1) 8,300,000 10.0 — — 8,300,000 8.3 — —

Ong Beng Chye — — — — — — — —

Boon Suan Zin

Zacchaeus — — — — — — — —

Kesavan Nair — — — — — — — —

Public — — — — 17,000,000 17.0 — —

Total 83,000,000 100.0 100,000,000 100.0

Note:–

(1) Lim Wee Li and Lim Han Li are brothers.

Save as disclosed above, there are no other relationships among our Directors and Substantial

Shareholders.

The Shares held by our Directors and Substantial Shareholders do not carry different voting rights from

the New Shares which are the subject of the Placement.

Save as disclosed above, our Company is not directly or indirectly owned or controlled, whether

severally or jointly, by any person or government.


65

There is no known arrangement, the operation of which may, at a subsequent date, result in a change

in the control of our Company.

There has not been any public take-over offer by a third party in respect of our Shares or by our

Company in respect of shares of another corporation or units of a business trust which has occurred

between 1 January 2010 and the Latest Practicable Date.

Significant Changes in the Percentage of Ownership

Save as disclosed in the “Restructuring Exercise” section of this Offer Document, there were no

significant changes in the percentage of ownership of Shares in our Company during the last three

financial years ended 31 December 2010 and the period from 1 January 2011 up to the Latest

Practicable Date.

MORATORIUM

Our Substantial Shareholders, namely Lim Wee Li and Lim Han Li, who hold an aggregate of

83,000,000 Shares (representing 83.0% of our Company’s issued share capital after the Placement),

have each undertaken not to, directly or indirectly, sell, contract to sell, offer, realise, transfer, assign,

pledge, grant any option to purchase, grant any security over, encumber or otherwise dispose of, any

part of their respective shareholdings in the share capital of our Company immediately after the

Placement (adjusted for any bonus issue or sub-division of Shares) for a period of six months

commencing from the date of admission of our Company to Catalist, and for a period of six months

thereafter, not to, directly or indirectly, sell, contract to sell, offer, realise, transfer, assign, pledge, grant

any option to purchase, grant any security over, encumber or otherwise dispose of, more than 50% of

their respective original shareholdings in our Company.


66

Our principal subsidiary, KHL Marketing, was incorporated in Singapore as a private limited company

under the Companies Act on 25 February 1981 under the name “Kim Hup Lee Ceramic Tiles Pte Ltd”,

which was then owned by Kim Hup Lee, and was trading mainly in ceramic tiles and related products.

On 22 April 1991, its name was changed to “KHL Marketing Asia-Pacific Pte Ltd”. Kim Hup Lee, a

family-run business, is owned and controlled by parties related to our Executive Directors, Lim Wee Li

and Lim Han Li, as at the Latest Practicable Date. Please refer to the “Other Transactions” section of

this Offer Document for further details of Kim Hup Lee.

Our history dates back to 1991, when our Executive Chairman and CEO, Lim Wee Li, spearheaded the

business of distributing premium imported kitchen systems and kitchen appliances under KHL

Marketing when it first secured the agency rights for a high end range of kitchen appliances. In 1991,

we secured our first contract to supply kitchen appliances for a luxury residential project, namely “Four

Seasons Park”, located at Cuscaden Walk in Singapore. Since then, we have forged strong working

relationships with major property developers operating in Singapore and in the region. Some notable

developments that we have been involved in include “Coral Island” by Ho Bee (Sentosa) Pte Ltd at

Sentosa Cove, MCL Land Limited’s “Waterfall Gardens” along Farrer Road and CapitaLand Limited and

Sun Hung Kai Properties Limited’s “The Orchard Residences” atop ION Orchard.

In 1993, we opened our first retail showroom in Singapore with a built-in area of approximately 2,000

sq ft in Ngee Ann City along Orchard Road. In 1997, we relocated and opened a new retail showroom

in Park Mall, Dhoby Ghaut District, with a built-in area of approximately 2,400 sq ft. To cater to the

growing business, Kitchen Culture Malaysia was set up in Kuala Lumpur, Malaysia in July 2000, and

in the same year, we opened a retail showroom with a built-in area of approximately 2,200 sq ft in City

Square Complex, Jalan Ampang, Kuala Lumpur, Malaysia. In 2004, we moved our retail showroom to

the upmarket area of Bangsaria in Bangsar, Kuala Lumpur, Malaysia, with a built-in area of

approximately 12,470 sq ft. In or around 2002, we opened a retail showroom with a built-in area of

approximately 1,800 sq ft in Stamford Court, City Hall District, Singapore.

In June 1997, Kitchen Culture was registered as a sole proprietorship but was terminated in September

2003. This was followed by the incorporation of our subsidiary, Kitchen Culture Singapore in September

2003 to take over the business of Kitchen Culture. Around the same time, we registered “Kitchen

Culture” as a trade mark in August 2003. We started with a portfolio of a single brand of premium

kitchen appliances and in 2003, we introduced two premium kitchen appliance brands from USA,

namely “Sub-Zero” and “Wolf”. In the same year, we secured the distributorship of “Hacker”, a German

brand of kitchen systems. In 2004, we secured the distributorship of “Poggenpohl”, a German brand of

kitchen systems, as well as the distributorship of “Liebherr”, a German brand of kitchen appliances.

In 2004, both the Park Mall and Stamford Court showrooms were relocated to form the current 11,808

sq ft “Kitchen Culture” flagship retail showroom at 2 Leng Kee Road #01-02/03/04/05/07 Singapore

159086. In the same year, Kitchen Culture Singapore won the Award of “Best Retail Concept of the

Year” awarded by the Singapore Retail Association and in 2005, Kitchen Culture Singapore was

awarded ISO 9001:2000 certification in recognition for quality management systems.

In March 2007, we incorporated our subsidiary, Haus, to operate a retail boutique in Singapore under

the style of “Haus”, a German concept furniture store offering predominantly premium German home

furnishings, at Palais Renaissance along Orchard Road, with a built-in area of approximately 2,777 sq

ft. In the same year, Kitchen Culture Singapore was awarded the Singapore Prestige Brand Award

(“SPBA”) — Promising Brands. SPBA is a branding accolade that recognises and honours Singapore

brands that are developed and managed effectively through effective branding initiatives. The award is

today accepted as “the” brand award to attain for local brands and is a joint initiative between the

Singapore’s Association of Small and Medium Enterprises and Lianhe ZaoBao.

HISTORY

67

In 2008, we moved into our current head office with a corporate showroom and warehouse facility

located at 25 New Industrial Road KHL Industrial Building Singapore 536211, with a built-in area of

approximately 41,937 sq ft.

In 2008, KHL Marketing was ranked twelfth in the Enterprise 50 (E50) Award, which recognises the

achievements and contributions of Singapore’s high performing small and medium enterprises. In

2009, KHL Marketing was awarded ISO 9001:2008 certification in recognition for quality management

systems. In 2010, Kitchen Culture Singapore was awarded the Singapore Service Star by the

Singapore Tourism Board for achieving the mark of quality service.

In 2009, we started to supply kitchen systems and wardrobe systems under our proprietary house

brand known as “Pureform”. Products sold under our proprietary house brand are largely to cater to the

demand of developers for quality and well-designed products to meet the specifications of their

property development projects. This is to meet the needs of these developers with a shorter lead time

for us to deliver our products.

As opposed to manufacturing our own products which entails high fixed overheads and the prospects

of rising costs in raw materials and labour, we have made a strategic decision to focus on a “distribution

model” to sell and distribute third party products since inception. Furthermore, some of the agency and

licensed dealerships give us exclusive rights to sell renowned premium imported kitchen systems,

kitchen appliances, wardrobe systems, household furniture and accessories. This allows our Group to

expand our offerings to our customers by adding on to our existing range of products and brands when

the opportunity arises and is in tandem with our vision to provide a one-stop lifestyle solution for our

customers.

Throughout the years, our portfolio of premium brands has grown from one in 1991 to more than ten

international premium brands for imported kitchen systems, kitchen appliances, wardrobe systems,

household furniture and accessories from Europe and USA as at the Latest Practicable Date.


company limited by shares. On 16 June 2011, we completed the Restructuring Exercise whereby KHL

Marketing, Kitchen Culture Singapore, Kitchen Culture Malaysia and Haus became our wholly-owned

subsidiaries. Please refer to the “Restructuring Exercise” section of this Offer Document for further

details. On 6 July 2011, our Company was converted into a public company limited by shares and our

name was changed to “Kitchen Culture Holdings Ltd.”.

As at the Latest Practicable Date, our staff strength was 79 employees.

HISTORY

68

BUSINESS OVERVIEW






Singapore and Malaysia. Please refer to the “Products That We Sell and Distribute” section of this Offer

Document for further details of the portfolio of brands represented by our Group.








premium products.







Our customer base is broadly categorised as follows:–

(a) Residential Projects

Residential Projects customers are usually customers who are involved in residential property

development projects and make bulk purchases from us, usually for specific residential property

development projects. Residential Projects customers are predominantly construction companies

who are the main contractors of the property developers. Our residential projects are awarded

either directly by developers or through invitation to tender from developers, architects and

quantity surveyors. Please refer to the “Our Sales Process” section of this Offer Document for

further details.

Since starting our business in importing kitchen appliances in 1991, our first project was to supply

kitchen appliances for a luxury residential project, namely “Four Seasons Park”, located at

Cuscaden Walk in Singapore. Since then, we have forged close working relationships with major

property developers operating in Singapore and in the region and continued to secure luxury

residential projects.

BUSINESS

69

Some of the notable projects that we have been involved in the last three financial years ended

31 December 2010 and the period from 1 January 2011 up to the Latest Practicable Date are set

out below:–

Project Name Location Name of Developer Main Products Supplied

Amber Residences Amber Road

Singapore

Voda Land Pte. Ltd. Kitchen systems and

kitchen appliances

Coral Island Sentosa Cove

Singapore

Ho Bee (Sentosa) Pte Ltd Kitchen systems and

kitchen appliances

Grange Infinite Grange Road

Singapore

Grange Properties Pte Ltd Kitchen systems

Hillcrest Villas Hillcrest Road

Singapore

MCL Land Limited Kitchen systems

Lakeshore Drive Lakeshore Avenue,

Sentosa

Singapore

Elevation Developments

Pte Ltd

Kitchen systems and

kitchen appliances

Leonie Parc View Leonie Hill Road

Singapore

SB (Orchard)

Development Pte Ltd

Kitchen systems and

wardrobe systems

Paradise Island Paradise Island,

Sentosa

Singapore

Ho Bee Investment Ltd Kitchen systems and

kitchen appliances (mainly

refrigerators)

Paterson Suites Paterson

Singapore

Bukit Sembawang View

Pte Ltd

Kitchen systems

Rivergate Robertson Quay

Singapore

Riverwalk Promenade Pte

Ltd

Kitchen systems

Scotts High Park Scotts Road

Singapore

CapitaLand Limited Kitchen systems

Sui Generis Balmoral Crescent

Singapore

Kajima Overseas Asia Pte

Ltd

Kitchen systems

The Binjai On

The Park

Kuala Lumpur

Convention Centre

Malaysia

Layar Intan Sdn Bhd Kitchen systems and

kitchen appliances

The Lumos Leonie Hill

Singapore

Koh Brothers Group

Limited and Heeton

Holdings Limited

Kitchen systems

The Orange Grove Orange Grove Road

Singapore

Ho Bee Investment Ltd Kitchen systems

The Orchard

Residences

Orchard Boulevard

Singapore

CapitaLand Limited and

Sun Hung Kai Properties

Limited

Kitchen systems and


refrigerators)

The Ritz-Carlton

Residences,


Cairnhill Road

Singapore

Royce Properties Pte. Ltd.

(subsidiary of Hayden

Properties Pte. Ltd.)

Kitchen systems and


refrigerators)

Waterfall Gardens Farrer Road

Singapore

MCL Land Limited Kitchen systems

Revenue from our Residential Projects segment accounted for 47.1%, 59.9% and 76.2% of our

revenue in FY2008, FY2009 and FY2010 respectively.

BUSINESS

70

(b) Distribution and Retail

We sell and distribute our imported kitchen systems, kitchen appliances, wardrobe systems,

household furniture and accessories through a network of dealers and retailers, who are our

Distribution customers, operating mainly in Singapore, Malaysia, Indonesia and Thailand.

Retail customers may purchase our products directly through our two “Kitchen Culture” retail

showrooms located at 2 Leng Kee Road #01-02/03/04/05/07 Singapore 159086 and 45E Ground

floor and 5th floor Bangunan Bangsaria Jalan Maarof Taman Bangsar 59100 Kuala Lumpur

Malaysia, and one “Haus” retail showroom located at 390 Orchard Road #03-04 Palais

Renaissance Singapore 238871, where we display a variety of our kitchen systems, kitchen

appliances, wardrobe systems, household furniture and accessories.

Revenue from our Distribution and Retail segment accounted for 52.9%, 40.1% and 23.8% of our

revenue in FY2008, FY2009 and FY2010 respectively.

We provide value-added services to both our (i) Residential Projects and (ii) Distribution and Retail

customers such as installation services for our kitchen systems and wardrobe systems as well as

additional carpentry works (where required). Generally, we subcontract these installation services to

third party contractors who are pre-qualified by us. The installation works will be carried out at our

customers’ designated premises. We also provide our customers with maintenance services in

connection with the products we supply. Such services are provided to our customers during the

warranty period for the products, which generally ranges from 12 to 18 months, from the date of

completion of the projects for Residential Projects and upon delivery/installation for Distribution and

Retail. During the warranty period, we rectify warrantable defects subject to terms and conditions

provided in the warranty.

PRODUCTS THAT WE SELL AND DISTRIBUTE

Third Party Brands

We are a distributor for a wide range of imported kitchen systems, kitchen appliances, wardrobe

systems, household furniture and accessories under third party brands which are manufactured by

manufacturers in different jurisdictions, some of which are as follows:–

Brands

Country of

Manufacturer

Key Products We

Supply

Commencement

of Relationship Territories

Exclusive/

Non-exclusive

Distributorship

Germany Kitchen systems 2004 Singapore

Malaysia

Exclusive


Malaysia

(1)


Malaysia

Indonesia

(1)

BUSINESS

71

Brands

Country of

Manufacturer

Key Products We

Supply

Commencement


Exclusive/

Non-exclusive

Distributorship

Germany Kitchen appliances

(mainly refrigerators,

freezers and wine

storage units)

2004 Singapore (1)

Germany Wardrobe systems

and household

furniture

2011 Singapore

Malaysia

(1)

Germany Household furniture 2007 Singapore Exclusive

Germany Household furniture 2008 Singapore Exclusive

Germany Kitchen appliances

(mainly built-in

microwave ovens,

built-in ovens,

built-in coffee

machine, built-in

dishwashers, cook-

tops and cooker

hoods)

2006 Singapore Exclusive

Italy Kitchen appliances

(mainly cooker

hoods)

2010 Singapore

Malaysia

(1)

Italy Wardrobe systems

and household

furniture

2010 Singapore Exclusive

BUSINESS

72

Brands

Country of

Manufacturer

Key Products We

Supply

Commencement


Exclusive/

Non-exclusive

Distributorship

Italy Kitchen appliances

(mainly built-in

microwave ovens,

built-in ovens,

built-in coffee

machine, built-in

dishwashers, cook-

tops and cooker

hoods) and kitchen

sinks and mixers

2010 Singapore (1)

Switzerland Faucets and mixers 2010 Singapore (1)

Switzerland Kitchen appliances

(mainly built-in

microwave ovens,

built-in ovens,

built-in coffee

machine, built-in

dishwashers, cook-

tops and cooker

hoods), washing

machines and

dryers

2010 Singapore

Malaysia

Exclusive

USA Kitchen appliances

(mainly refrigerators,

freezers and wine

storage units)

2003 Singapore

Malaysia

Brunei

Exclusive

USA Kitchen appliances

(mainly built-in

microwave ovens,

built-in ovens, cook-

tops and cooker

hoods)

2003 Singapore

Malaysia

Brunei

Exclusive

Note:–

(1) Although the relevant contract does not state that the distributorship is of an exclusive nature, based on the working

relationship between the relevant supplier and our Group, our Directors believe that our Group is the sole distributor for the

manufacturer’s products in the stated territories.

BUSINESS

73

Over the years, we have been able to clinch distributorships from various established international third

party brands of kitchen systems, kitchen appliances, wardrobe systems, household furniture and

accessories catering to the premium market. Whilst the respective distributorship agreements with our

suppliers do not specifically provide for long-term contract duration, some of these agreements have

been automatically renewed upon their expiry since commencement. This reflects the long-term

arrangement that we have developed with some of our suppliers over the years. We continue to source

for new international brands to increase our product offering in order to keep abreast of the market

trends and consumer demands. Our revenue from the sale of products under third party brands

accounted for 100.0%, 98.7% and 94.5% of our revenue in FY2008, FY2009 and FY2010 respectively.

Proprietary House Brand

In addition to distributing the products of third party brands, we also supply kitchen and wardrobe

systems under our proprietary house brand known as “Pureform”. Products sold under our proprietary

house brand are largely to cater to the demand of developers for quality and well-designed products to

meet the specifications of their property development projects. This is to meet the needs of these

developers with a shorter lead time for us to deliver our products. We obtain the products sold under

our house brand, “Pureform”, from third party manufacturers located in Malaysia. We commenced

selling products under our proprietary house brand in 2009 and such sales constituted approximately

1.3% and 5.5% of our revenue in FY2009 and FY2010 respectively.

OUR SALES PROCESS

Residential Projects

Generally, our residential projects are awarded either:– (a) directly by developers; or (b) through

invitation to tender from developers, architects and quantity surveyors as described below.

(a) Awarded directly by developers

We are invited to submit our quotation based on the designs and specifications requested by the

developer. Upon approval of the quotation by the developer, we will proceed to sign the LOI, which

will be issued by the developer or the architect (on behalf of the developer), or the LOA, which will

be issued by the main contractor. The acceptance of the LOI or LOA (as the case may be) is an

indication of the acceptance of the quotation by the developer or main contractor (as the case may

be).

Contractually, after our acceptance of the LOA, we will usually be responsible for the installation

of kitchen systems and/or wardrobe systems and/or kitchen appliances in the show flats, if any,

erected by the developers. Under the industry norm, prior to the commencement of construction,

a main contractor is usually selected and appointed by the developer. The appointed main

contractor will enter into a contract and sign a LOA with us (as the nominated subcontractor of the

kitchen systems and/or kitchen appliances and/or wardrobe systems). Typically, we do not enter

into a contract directly with the developer because the developer usually enters into the

construction contract with the main contractor. The main contractor will subsequently enter into

contracts with different subcontractors (including the nominated subcontractors). In addition, for

kitchen appliances, the developer may award us the contract to supply, with or without the

requirement for installation, directly, where no main contractor will be involved.

The main contractor will require a performance bond to be provided by us. Normally, a

performance bond of between 5% and 10% of the contract value will be provided by us. After

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signing of the LOA, we will commence installation works approximately one to two years later

depending on the progress of the construction phase. Once the installation works have

commenced, we will submit progress claims to the main contractor in accordance to the stage of

completion. Progress claims will be certified by quantity surveyors and approved by architects.

The certification process will take two to four weeks. Upon certification of the progress claims, we

will raise billings to the main contractor. We typically grant credit terms ranging from 30 to 60 days

from the relevant invoice date.

(b) Invitation to tender from developers, architects and quantity surveyors

We are invited by developers, architects or quantity surveyors to tender for residential projects

through a bidding exercise together with other competitors. Before the submission of our tender

bid, it will be reviewed and approved by our Executive Chairman and CEO. The bidding process

will take approximately one to two months.

Upon the successful bidding of a project, the developer or the architect (on behalf of the

developer) will issue a LOI to us, or the main contractor will issue a LOA to us. The issue and

acceptance of the LOI or the LOA is an indication of the acceptance of the tender by the

developer. We will be responsible for the installation of kitchen systems and/or wardrobe systems

and/or kitchen appliances in the show flats erected by the developers.

Prior to the commencement of construction, a main contractor will be selected and appointed by

the developer. Similar to being awarded directly by developers as described above, the appointed

main contractor will enter into a contract and sign a LOA with us and will require a performance

bond of between 5% and 10% of the contract value from us. The rest of the sales process is

similar to being awarded directly by developers as described above.

Distribution and Retail

Generally, we do not require our Distribution customers to make any deposits. Upon delivery or

installation of our imported kitchen appliances, we will invoice our Distribution customers and grant

them a credit term of 30 days from the date of invoice. Our Retail customers are typically required to

make full payment upon confirmation of their orders. However, when an order is significantly large and

requires a few months for us to meet delivery, a deposit of between 30% and 50% is usually required

upon confirmation of their orders with the balance payable on a cash-on-delivery basis.

SALES AND MARKETING

Our sales and marketing activities are spearheaded by our Executive Chairman and CEO, Lim Wee Li,

who is assisted by our marketing team with 30 personnel as at 31 December 2010. Together with the

senior managers, they formulate marketing strategies, secure new customers and maintain customer

relationship.

We market our products and services to our customers through direct marketing, advertisements,

publications and our corporate website. With our presence in the residential kitchen industry for more

than two decades since 1991, our Directors believe that we have established ourselves in the

residential kitchen industry as a supplier of quality and reliable products. We maintain regular contact

with our customers to better understand their requirements and attend to their enquiries promptly.

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To enhance public awareness of our products, we advertise in magazines with circulation in Singapore

and Malaysia mainly catering to the high society lifestyle, interior design, food and wine. We advertise

in television commercials, newspapers, trade publications and directories to further extend our reach

to potential new customers in both the local and overseas markets. We also participate in the promotion

of our products through television media by allowing free usage of our retail showrooms in certain

television programmes. In addition, we organise launches for new international brands that we secured,

as well as partner with reputable chefs to conduct demonstrations and cooking courses at our retail

showrooms where our customers and business partners will be invited to attend.

In addition, we attend international trade fairs held mainly in Italy, Germany, France, USA and the

People’s Republic of China, to source for new brands and products, understand changes in trends and

foster relationships with existing and potential principals.

We believe that our sales and marketing activities have heightened our profile among the industry

players and provided us with an effective tool for marketing our products directly to our customers.

Our sales and marketing network covers mainly South East Asia (including Singapore) and East Asia.

QUALITY ASSURANCE

We believe that the quality of our products and services are vital to our success and we place great

emphasis on having stringent quality control measures at different stages of our business process.

These quality control measures (i) adhere closely to the ISO guidelines (from sourcing and

procurement to the delivery of our products), and (ii) ensure the quality of our products and services

meet our customers’ expectations.

Our commitment to quality is evidenced by the following certifications which we have obtained:–

Name of Subsidiary Certification Scope Issuer Expiry Date

KHL Marketing ISO 9001:2008 Design, sales and

installation of

kitchen systems

SGS United

Kingdom Ltd

Systems & Service

Certification

4 August 2011

Kitchen Culture

Singapore

Singapore Service

Star

For achieving the

mark of quality

service

Singapore Tourism

Board

30 September 2011

We source and procure our products from suppliers of international brands who have a set of stringent

in-house checks in place to ensure their products are manufactured in accordance to their standards

and guidelines. Prior to signing the distributorship or agency agreements with any of our principals, our

management team will visit their factories in their home country to understand their business and

production processes. Upon the signing of the distributorship or agency agreement, our management

team will continue to make such visits regularly to ensure that our suppliers conform to their production

processes. Please refer to the “Products that We Sell and Distribute” section of this Offer Document for

further details. As at the Latest Practicable Date, we have appointed three senior managers and

assigned each of them to handle the management of a specific portfolio of brands with the assistance

of other brand managers, who are familiar with the brands and our principals’ products distributed by

us. They collectively report to our Executive Chairman and CEO, Lim Wee Li, who oversees the

management of this team.

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When we receive the products from our principals, our warehouse supervisor will conduct review and

inspection of the incoming products for quantity, specifications and defects in accordance to the

requirements stated in the purchase contracts. Any product that fails our incoming inspection will be

rejected and returned to our principals for replacement or rectification. Prior to delivery of the products

to our customers, our warehouse supervisor performs outgoing inspection to ensure that products with

the required specifications and quantities are packed and delivered to our customers.

MAJOR CUSTOMERS

Our major customers are main contractors who operate primarily in the property development industry.

The customers accounting for 5% or more of our revenue during the periods under review were as

follows:–

As a Percentage of Revenue (%)

Customer FY2008 FY2009 FY2010

Penta-Ocean Construction Co Ltd — — 27.9

Lian Beng/L.S. J.V. — — 13.4

CES Engineering & Construction Pte Ltd — — 10.0

Kim Seng Heng Engineering Construction (Pte) Ltd — — 6.1

China Construction (South Pacific) Development Co. Ltd. 1.7 14.7 1.5

Soil Build (Pte) Ltd — 8.2 0.6

Hexacon Construction Pte Ltd 2.7 8.4 0.1

Shimizu Corporation 7.7 0.6 0.1

Dragages Singapore Pte Ltd 1.6 6.0 —

Revenue generated by each major customer is subject to the value of projects which we secure from

them and time to completion. We may not secure similar projects in terms of size and scope with the

same customer in subsequent years.

To the best of their knowledge, our Directors are not aware of any information or arrangement which

would lead to a cessation or termination of our current relationship with any of our major customers.

As at the date of this Offer Document, none of our Directors, Substantial Shareholders or their

respective Associates has any interest, direct or indirect, in any of the above major customers.

MAJOR SUPPLIERS

Our purchases comprise mainly kitchen systems, kitchen appliances, wardrobe systems, household

furniture and accessories from established manufacturers mainly in Europe and USA. We generally

enter into long-term or exclusive arrangements with our suppliers as this would provide us the

assurance that we are the exclusive and sole distributors of these premium products. We select our

suppliers based on their reputation, reliability, pricing, purchase terms, timelines of delivery and quality

and specifications of their products and services.

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The suppliers accounting for 5% or more of our purchases during the periods under review were as

follows:–

Supplier Products As a Percentage of Purchases (%)

FY2008 FY2009 FY2010

Poggenpohl Mobelwerke GmbH Kitchen systems 11.4 37.2 49.0

Sub-Zero Inc Kitchen appliances (such as

refrigerators, freezers and wine

storage units)

15.3 17.6 12.1

Kuppersbusch Hausgerate AG Kitchen appliances (such as

built-in microwave ovens, built-in

ovens, built-in coffee machine,

built-in dishwashers, cook-tops

and cooker hoods)

3.6 3.2 7.4

Liebherr-Singapore Pte Ltd Kitchen appliances (such as

refrigerators, freezers and wine

storage units)

7.3 6.9 7.0

Hacker Kuchen GmbH & Co. KG Kitchen systems 17.0 11.7 3.7

Signature Manufacturing Sdn Bhd Kitchen systems 9.2 — —

The fluctuations in our purchases from our major suppliers were a result of our varying requirements

for different projects. We may not generate similar purchases in terms of size and scope with the same

supplier in subsequent years.

To the best of their knowledge, our Directors are not aware of any information or arrangement which

would lead to a cessation or termination of our current relationship with any of our major suppliers.

As at the date of this Offer Document, none of our Directors, Substantial Shareholders or their

respective Associates has any interest, direct or indirect, in any of the above major suppliers.

CREDIT MANAGEMENT

Credit Terms to Our Customers

Our Executive Directors and CFO manage and administer our credit policies as well as monitor

payments made to our Group on a regular basis.

For our customers in the Residential Projects segment, credit terms are given based on contractual

terms of the individual projects which are typically in line with the industry standards. We will usually

invoice our customers based on the progress of the projects and grant them credit terms ranging from

30 to 60 days from the date of our invoice. Generally, the contract value is payable to us on a

progressive basis depending on the stage of completion of the project. The balance 5% of the contract

value known as retention sum is usually payable at the end of our product warranty period ranging from

12 to 18 months.

For our customers in the Distribution and Retail segment, we typically grant credit terms of 30 days from

the date of our invoice to our customers in the Distribution segment (who are distributors and retailers).

Typically, for our Retail customers where sales are conducted at our retail showrooms, they will be

required to make full payment upon confirmation of their orders. However, when an order is significantly

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large and requires a few months for us to meet delivery, a deposit of between 30% and 50% is usually

required upon confirmation of their orders with the balance payable on a cash-on-delivery basis. We

accept various modes of payment, namely cash (including electronic payments), cheques and credit

cards for retail sales.

Outstanding payments are closely monitored by our Executive Directors and CFO. Specific provision

or write-off would be made when we are of the view that the collectability of an outstanding debt is

impaired or the debt is uncollectible. The amount of bad debts written off and allowance for doubtful

receivables during the periods under review were as follows:–

($’000) FY2008 FY2009 FY2010

Bad debts written off (trade) — 25 2

Allowance for doubtful receivables (trade) — 133 619

Allowance for doubtful receivables (non-trade) — — 10

Total — 158 631

As a percentage of revenue (%) — 0.8 2.0

As a percentage of PBT (%) — 8.8 12.6

Our average trade receivables’ turnover days during the periods under review were as follows:–

FY2008 FY2009 FY2010

Average trade receivables’ turnover days(1) 78 95 58

Note:–

(1) The average trade receivables’ turnover days is calculated based on the average trade receivables (net of allowance for

doubtful receivables) divided by average daily revenue for the year.

Towards the end of FY2009, our Group implemented a tighter credit management policy and made

specific allowances on receivables from customers who have exceeded their credit terms and where

collections are doubtful. Hence, allowance for doubtful receivables was $0.1 million (contributed by 21

customers) and $0.6 million (contributed by 99 customers) in FY2009 and FY2010 respectively

attributable to our Distribution and Retail customers, and our average trade receivables improved to 58

days in FY2010 (from 78 days in FY2008 and 95 days in FY2009).

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Our trade receivables (net of allowance for doubtful receivables) as at 31 December 2010 amounted

to $4.5 million (of which approximately $3.5 million has been collected as at the Latest Practicable

Date) and its ageing schedule was as follows:–

Age of Trade Receivables

Percentage of Total

Trade Receivables

(%)

0 − 30 days 58.2

31 − 60 days 3.3

61 − 90 days 2.8

91 − 120 days 3.1

More than 120 days 32.6

100.0

Credit Terms from Our Suppliers

The payment terms granted by our suppliers vary from supplier to supplier and are also dependent on,

inter alia, the size of the transaction and our relationship with the suppliers. Generally, our local

suppliers grant us credit terms ranging from 40 to 60 days upon delivery of products. For our foreign

suppliers, we are required to make full payment of the contract value by way of letter of credit or

telegraphic transfer before the shipment date once such information is made available to us. The credit

terms granted by the banks for the letter of credit facility ranged from 120 to 180 days. Hence, this

explains the trade payables’ turnover for FY2008, FY2009 and FY2010 of 98, 141 and 114 days

respectively.

Our average trade payables’ turnover days during the periods under review were as follows:–

FY2008 FY2009 FY2010

Average trade payables’ turnover days(1) 98 141 114

Note:–

(1) The average trade payables’ turnover days is calculated based on the average trade payables divided by average daily

purchases, subcontract costs, and freight and transport charges for the year.

RESEARCH AND DEVELOPMENT

The nature of our business does not require us to carry out any research and development activities.

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INTELLECTUAL PROPERTY

Save as disclosed below, we do not own nor are we dependent on any registered trade mark, patent

or other intellectual property rights.

Registration Number/

Trade Mark Class(1)

Country of

Registration

Registration/

Application Date Expiry Date

T03/12584D

T03/12585B

T03/12586J

20

35

42

Singapore 18 August 2003 17 August 2013

03010550

03010555

03010554

20

35

42

Malaysia 19 August 2003 18 August 2013

01169000 20 Taiwan 16 August 2005 15 August 2015

01182152

01182494

35

42

Taiwan 16 November 2005 15 November 2015

1032430 35 Australia 30 November 2004 29 November 2014

T03/12595Z

T03/12597F

T03/12600Z

20

35

42

Singapore 18 August 2003 18 August 2013

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Registration Number/

Trade Mark Class(1)

Country of

Registration

Registration/

Application Date Expiry Date

03010553

03010551

03010552

20

35

42

Malaysia 19 August 2003 19 August 2013

01169001 20 Taiwan 16 August 2005 15 August 2015

01182153

01182495

35

42

Taiwan 16 November 2005 15 November 2015

T07/13075C

T07/13076A

35

42

Singapore 13 June 2007 13 June 2017

T09/08292F 6

7

9

11

20

Singapore 27 July 2009 27 July 2019

2010001466

2010001467

2010001468

2010001469

2010001470

6

7

9

11

20

Malaysia 26 January 2010 Pending registration

status

Note:–

(1) The classes of Specification of Goods and Services in Singapore, Malaysia, Taiwan and Australia are described as follows:–

(a) Class 6: Common metals and their alloys; metal building materials; transportable buildings of metal; materials of

metal for railway tracks; non-electric cables and wires of common metal; ironmongery, small items of metal

hardware; pipes and tubes of metal; safes; goods of common metal not included in other classes; ores

(b) Class 7: Machines and machine tools; motors and engines (except for land vehicles); machine coupling and

transmission components (except for land vehicles); agricultural implements other than hand-operated;

incubators for eggs

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(c) Class 9: Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring, signalling,

checking (supervision), life-saving and teaching apparatus and instruments; apparatus and instruments for

conducting, switching, transforming, accumulating, regulating or controlling electricity; apparatus for

recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs;

automatic vending machines and mechanisms for coin-operated apparatus; cash registers, calculating

machines, data processing equipment and computers; fire-extinguishing apparatus

(d) Class 11: Apparatus for lighting, heating, steam generating, cooking, refrigerating, drying, ventilating, water supply

and sanitary purposes

(e) Class 20: Furniture, mirrors, picture frames; goods (not included in other classes) of wood, cork, reed, cane, wicker,

horn, bone, ivory, whalebone, shell, amber, mother-of-pearl, meerschaum and substitutes for all these

materials, or of plastics

(f) Class 35: Advertising; business management; business administration; office functions

(g) Class 42: Scientific and technological services and research and design relating thereto; industrial analysis and

research services; design and development of computer hardware and software

As at the Latest Practicable Date, our business or profitability is not materially dependent on any

registered trade mark, patent or other intellectual property rights. We have not paid or received any

royalties for any license or use of any intellectual property.

INVENTORY MANAGEMENT

Our inventories comprise mainly imported kitchen systems, kitchen appliances, wardrobe systems,

household furniture and accessories.

As a policy, we maintain products in our inventory based on the recent sales trends and project

requirements and make purchases in anticipation of orders for our Residential Projects business. We

monitor closely the developments in our main markets especially the construction industry and property

markets in Singapore and Malaysia. Regular interaction with our sales and marketing staff to

understand our customers’ requirements and preferences allows us to make better procurement

decisions and hence, improves our inventory management. The ability to provide our products as and

when they are required by our customers is a competitive advantage which differentiates us from our

competitors.

All orders with suppliers are subject to approval from our senior managers. We adopt the weighted

average basis of inventory management and costing. Our finance department performs sample

inventory counts on a quarterly basis, while a full inventory count is carried out on an annual basis. The

senior managers and their team members conduct monthly inventory checks to assess the status of

various inventory levels and to identify slow moving inventories in order to better plan for inventory

replenishment and manage product obsolescence.

Our average inventory turnover days during the periods under review were as follows:–

FY2008 FY2009 FY2010

Average inventory turnover days(1) 163 237 280

Note:–

(1) The average inventory turnover days is calculated based on the average inventory balance divided by average daily

purchases for the year.

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To the best of our Directors’ knowledge, our average inventory turnover is in line with the industry norm

for businesses serving the construction industry and property markets. Our average inventory turnover

days increased in FY2009 as we increased the quantity of our products towards the end of FY2009 in

view of confirmed contracts for our Residential Projects business which were due for delivery in early

FY2010. This is to ensure that we deliver and complete the installation of our products on a timely

manner. Our average inventory turnover days increased in FY2010 due to the higher closing inventory

balance in FY2009 and generally to support the higher business activity during FY2010.

Our inventories as at 31 December 2010 amounted to $7.3 million. As at the Latest Practicable Date,

32.6% of these inventories had been sold.

Our Directors are of the view that the risk of inventory obsolescence is low as our inventories are

durable and not perishable. We assess the saleability of each product and allowances/write-downs are

made for those items identified by our Executive Directors as obsolete based on their experience and

knowledge of the market demand trends. In addition, our Executive Directors review the inventory

ageing reports and make allowances/write-downs for slow moving inventories which our Group expects

to recover only a portion of our purchase cost.

Our allowances/write-downs for slow moving inventories during the periods under review were as

follows:–

($’000) FY2008 FY2009 FY2010

Inventories written down — 121 98

Write-back of allowance for slow moving inventories (117) — —

As a percentage of revenue (%) (0.6) 0.6 0.3

As a percentage of PBT (%) (5.4) 6.7 2.0

In FY2008, we wrote back an allowance for slow moving inventories of approximately $117,000 when

the related inventories were sold above the carrying amounts.

PROPERTIES AND FIXED ASSETS

In April 2011, KHL Marketing entered into an option to purchase with an unrelated party to sell its

freehold property at 50 Amber Road #11-02 Singapore 439888 at a consideration of $1,650,000. The

sale was completed on 17 June 2011.

We currently lease the following properties for our operations in Singapore and Malaysia:–

Location Tenure

Approximate

Built-in

Area

(sq ft) Usage

Approximate

Monthly Rental

(excluding GST) Lessor

Singapore

390 Orchard Road

#03-04 Palais

Renaissance

Singapore 238871

1 June 2010 to

31 May 2013,

with an option to

renew for

another three

years

2,777 Retail

showroom

S$18,051 Citydev Real

Estate

(Singapore)

Pte Ltd

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Location Tenure

Approximate

Built-in

Area

(sq ft) Usage

Approximate

Monthly Rental

(excluding GST) Lessor

Singapore

2 Leng Kee Road

#01-07

Singapore 159086

1 November

2009 to 31

October 2012,

with an option to

renew for

another three

years

2,788 Retail

showroom

S$8,225 Thye Hong

Properties

Pte Ltd

2 Leng Kee Road

#01-02/03/04/05

Singapore 159086

1 November

2009 to 31

October 2012,

with an option to

renew for

another three

years

9,020 Retail

showroom

S$32,472 Thye Hong

Properties

Pte Ltd

25 New Industrial

Road KHL

Industrial Building

Singapore 536211

1 April 2011 to

31 March 2014,

with an option to

renew for

another three

years

13,339 Office S$59,880 Kim Hup Lee(1)

5,000 Corporate

showroom

23,598 Warehouse

Malaysia

45E Ground floor

and 5th floor

Bangunan

Bangsaria Jalan

Maarof Taman

Bangsar 59100

Kuala Lumpur

Malaysia

7 July 2011 to 6

July 2014, with

an option to

renew for

another three

years

12,470 Retail

showroom

RM47,250

(and monthly

maintenance

charges of

RM3,741)

Leo Myer Sdn

Bhd

Total 68,992

Note:–

(1) Please refer to the “Other Transactions” section of this Offer Document for further details of Kim Hup Lee’s shareholders.

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We do not have production facilities and we obtain our products sold under our proprietary house brand

from third party manufacturers in Malaysia. Hence, information indicating the production capacity and

extent of utilisation of production facilities would not be applicable.

As at 31 December 2010, the net carrying value of our fixed assets comprising office equipment, air

conditioners, furniture and fittings, electrical fittings, computers, renovations and motor vehicles was

$0.9 million.

To the best of our Directors’ knowledge, there are no regulatory requirements or environmental issues

that may materially affect our utilisation of the above properties and fixed assets, save as disclosed in

the “Government Regulations” section of this Offer Document.

STAFF TRAINING

We believe that our employees are important to our success. To realise this, we provide on-the-job

training for newly recruited staff and carry out periodic in-house training for existing staff. We enrol our

employees in external training courses on a need basis.

We send our sales, marketing and operations staff to our principals’ plant in Europe or USA to attend

trainings conducted by our principals and the sales, marketing and operations staff will in turn share

such knowledge with their team members via our in-house training programme. From time to time, our

sales, marketing and operations staff undergo product training conducted by our principals in

Singapore and overseas.

We have a standard policy and procedure for proposing training needs for all our permanent

employees, and we sponsor them for external training in relevant functional areas.

During the periods under review, our expenses incurred in relation to staff training were not significant.

INSURANCE

As at the Latest Practicable Date, we have taken out insurance policies in respect of the following:–

(a) loss or damage to our properties by fire and/or lightning and/or extra perils;

(b) loss due to burglary;

(c) public liability within our premises;

(d) workmen injury compensation for our employees;

(e) group insurance for accidental death and dismemberment of our employees; and

(f) business travel insurance for our employees.

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Our Directors are of the view that the above insurance policies are adequate for our existing operations.

However, significant damage to our operations, whether as a result of fire or other causes, may still

have a material adverse effect on our results of operations or financial position. We are not insured

against loss of key personnel and business interruption. If such events were to occur, our business may

be materially or adversely affected. Our Directors will review our insurance coverage annually to ensure

that our Group has sufficient insurance coverage.

COMPETITION

We operate in a competitive environment. To the best of our Directors’ knowledge, there are numerous

competitors who supply kitchen systems, kitchen appliances, wardrobe systems, household furniture

and accessories in Singapore and Malaysia. Our competitors comprise mainly domestic distributors

and suppliers. We sell our products to a wide and diversified range of customers. Based on our

customers’ profile and to the best of our Directors’ knowledge, some of our main competitors are in the

following territories:–

Company Products that we compete in

Singapore

Design Studio Furniture Manufacturer Ltd Kitchen systems and wardrobe systems

Space Furniture Pte Ltd Kitchen systems, wardrobe systems and household

furniture

BSH Home Appliances Pte Ltd Kitchen appliances

De Dietrich Singapore Pte. Ltd. Kitchen appliances

Miele Pte Ltd Kitchen appliances

Malaysia

Signature International Berhad Kitchen systems and kitchen appliances

Space Furniture Collection Sdn Bhd Kitchen systems, wardrobe systems and household

furniture

BSH Home Appliances Sdn Bhd Kitchen appliances

To the best of our knowledge, there are no published statistics or official sources of information with

respect to industry statistics and the market share of our Group and our competitors.

None of our Directors, Controlling Shareholders or Substantial Shareholders has any interest, direct or

indirect, in any of the above competitors.

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COMPETITIVE STRENGTHS

We believe our competitive strengths are as follows:–

We have established our reputation in the “Kitchen Culture” brand

With more than two decades of experience in this business, “Kitchen Culture” has established itself as

a major player in the residential kitchen industry. It has also gained enough traction to warrant a

stand-alone flagship store at 2 Leng Kee Road #01-02/03/04/05/07 Singapore 159086 of approximately

11,808 sq ft for more than ten premium brands in kitchen systems, kitchen appliances, wardrobe

systems, household furniture and accessories. We believe that we have built a strong brand identity

through our “Kitchen Culture” brand which has come to be associated with premium and luxury quality

products. We believe that our “Kitchen Culture” brand has become one of the premier kitchen solutions



We are a multi-brand and multi-product player

Since our inception in this business in 1991, we have secured more than ten premium brands in the

residential kitchen industry. This has placed our Group in a unique position as a local player with a

multi-brand and multi-product portfolio serving the Singapore and Malaysia markets. We have

leveraged on this positioning to sell and distribute our products across three different distribution

channels, namely residential projects, distribution and retail. Our different business segmentation

covers the entire market chain from the wholesale sector down to the retail consumer market. The

multi-brand portfolio has also enabled us to be a one-stop solution for our customers for kitchen

systems, kitchen appliances, wardrobe systems, household furniture and accessories. Please refer to

the “Products That We Sell and Distribute” section of this Offer Document for further details of the

portfolio of brands distributed by us.

We believe that we have been able to accumulate such a wide range of product representation due to

the experience of our people who are equipped with the technical and business knowledge of market

trends prevailing in our industry. In addition, our people are able to make informed and discerning

choices in the area of product selection from the different brands in the market. This has enabled us

and will continue to enable us to identify and secure prospective brands that may emerge over time. We

believe that careful and astute brand and product selection for our portfolio is consistent with our vision

to remain a premier kitchen solutions provider for the discerning and sophisticated consumer in the

premium market.

We have a strong track record in project execution when serving customers in our Residential

Projects segment

We believe that we have been able to deliver good and reliable services to our customers in the

Residential Projects segment, where our ability to implement and execute projects on a timely basis is

crucial to our customers. Coupled with our good working relationship with developers and main

contractors of private residential developments, we have been able to garner a number of projects over

the past years as reflected in the “Business — Business Overview” section of this Offer Document.

These factors have enabled us to build a strong track record in supplying kitchen systems, kitchen

appliances, wardrobe systems, household furniture and accessories to private residential

developments, which serves as a competitive advantage for us to secure new projects.

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We have an experienced and committed team of senior management and key employees

Our Group is helmed by a senior management team which has extensive experience in the residential

kitchen industry. Our Executive Chairman and CEO, Lim Wee Li, has been instrumental in the

formulation of our strategic directions and expansion plans. Our Executive Director, Lim Han Li, is

responsible for the implementation and coordination of strategies and policies. Together with the

support from a team of managers, they have successfully and progressively expanded our portfolio of

brands and projects over the years. We believe that the knowledge and experience of our people has

helped our Group to successfully position itself as one of the leading specialists in premium imported

kitchen systems and kitchen appliances. Please refer to the “Directors, Executive Officers and Staff”

section of this Offer Document for further details of our Directors and management team.

We have strong and long-standing relationships with our suppliers

We believe in nurturing long-term business relationships with our suppliers. We foster close working

relationships with our suppliers and our management team regularly visits them in their home country

to understand their business and production processes. Our strong relationship with our suppliers is

evident from the number of brands of premium imported kitchen systems, kitchen appliances, wardrobe

systems, household furniture and accessories whom we have represented over the past years. Please

refer to the “Products That We Sell and Distribute” section of this Offer Document for further details.

BUSINESS

89

PROSPECTS

Our business is dependent on the general economic outlook and property market in the countries which

we operate in, particularly Singapore and Malaysia. Our Directors believe the following to be factors

affecting the growth of our business:–

State of the economies in Singapore and Malaysia

On 19 May 2011, the Ministry of Trade and Industry announced that it expects the Singapore economy

to grow by 5.0% to 7.0% in 2011. The Singapore economy grew by 8.3% on a year-on-year basis in the

first quarter of 2011, compared to the growth of 12.0% in the preceding quarter. On a seasonally-

adjusted quarter-on-quarter annualised basis, the economy expanded by 22.5%, a strong improvement

from the growth of 3.9% in the preceding quarter(1).

In addition, after the downturn in 2009, the Malaysian economy experienced a strong resumption of

growth in 2010 with an expansion of 7.2%. Following the strong performance in 2010, the Malaysian

economy is projected to grow at 5.0% to 6.0% in 2011, supported mainly by continued expansion in

domestic demand(2).

The growth in the economies of Singapore and Malaysia is likely to translate into higher demand in

residential developments.

Growth of the residential property markets in Singapore and Malaysia

Based on the pipeline supply of private residential units, the number of supply of private residential

properties in Singapore increased from 79,477 units in the fourth quarter of 2010 to 80,172 units in the

first quarter of 2011(3).

In addition, the residential property market in Malaysia has experienced an upturn since the fourth

quarter of 2009 as demand rebounded by 7.1% in 2010 as compared to a contraction of 2.3% in 2009,

attributed to improved consumer sentiments(4).

As such, our Directors believe that the higher number of supply of private residential properties and the

improvement in consumer sentiments would translate into better prospects for the sales of our Group’s

products.

Potential of the Hong Kong and Indonesia markets

Apart from the Singapore and Malaysia markets, we view Hong Kong and Indonesia as important

potential markets for our Group. The various restrictions imposed by mainland cities such as

Guangzhou and Shanghai on owning second and third homes have caused mainland investors to focus

their attention on the Hong Kong property market. It is expected that the influx of mainland buyers will

continue in the next few years(5). Our Directors believe that the residential property market in Hong

Kong to be relatively healthy in the foreseeable future.

In addition, the Indonesian government has targeted Gross Domestic Product growth of approximately

7.0% to 8.0% after 2013, which would make Indonesia one of the world’s ten largest economies by

2025(6).

Our Directors believe that the robust growth of Indonesia’s economy is likely to have positive

consequences for the real estate market, as rising incomes increase purchasing power for middle and


90

upper-income groups in particular, allowing them to invest in new residential properties. As such, the

opportunities available to us to market and sell our products would become greater.

Barring unforeseen circumstances, these would enhance our prospects. We have plans to penetrate

into the Hong Kong and Indonesia markets. Further details can be found in the “Business Strategies

and Future Plans” section of this Offer Document.

Notes:–

(1) Statistics obtained from the internet website of the Ministry of Trade and Industry announcement dated 19 May 2011

entitled “MTI Revises 2011 Growth Forecast to 5.0 to 7.0 per cent” at (http://app.mti.gov.sg/data/article/24881/doc/

ESS1Q2011__PR.pdf)

(2) The information was extracted from Bank Negara Malaysia Annual Report 2010 dated 23 March 2011 at (http://

www.bnm.gov.my/files/publication/ar/en/2010/ar2010_book.pdf)

(3) Statistics obtained from the Monthly Digest of Statistics Singapore for June 2011 from the Singapore Department of

Statistics at (http://www.singstat.gov.sg/pubn/reference/mdsjun11.pdf)

(4) The information was extracted from an article on The Star Online dated 24 March 2011 entitled “Demand Rebound Lifts

Residential Property Market” published on the website of The Star Online at (http://biz.thestar.com.my/news/story.asp?file=/

2011/3/24/business/8329275&sec=business)

(5) The information was extracted from an article on the South China Morning Post dated 2 March 2011, entitled “Mid-levels site

could hit record HK$10.9 billion” published on the website of South China Morning Post at (http://topics.scmp.com/news/

hk-news-watch/article/Mid-Levels-site-could-hit-record-HK109b)

(6) The information was extracted from an article on The Jakarta Post dated 2 May 2011, entitled “Indonesia: Resilient Growth

to Continue” published on the website of The Jakarta Post at (http://www.thejakartapost.com/news/2011/05/02/indonesia-

resilient-growth-continue.html)

(7) Each of the Ministry of Trade and Industry, Bank Negara Malaysia, the Singapore Department of Statistics, The Star Online,

the South China Morning Post and The Jakarta Post has not consented to the inclusion of the above information in this Offer

Document for the purposes of Sections 249 and 254 of the SFA. While our Directors have taken reasonable action to ensure

that the information is extracted accurately and fairly and has been included in this Offer Document in its proper form and

content, they have not independently verified the accuracy of the relevant information

TREND INFORMATION

For the current financial year ending 31 December 2011, our Directors observed the following trends

based on the operations of our Group as at the Latest Practicable Date:–

(1) We expect to maintain the selling prices of our products, subject to the competitive conditions in

the residential kitchen industry. Barring unforeseen circumstances and as disclosed in the

“Prospects” section of this Offer Document, we expect demand for our products to increase due

to the growth in the construction industry and improvement in the property markets in Singapore

and Malaysia in the middle of 2011.

(2) Fluctuations in the exchange rates between the S$ and CHF, the S$ and EUR, and the S$ and

US$ will also affect the cost of our products. Depending on the extent of the fluctuation in

exchange rates and purchase costs, our gross margin may vary significantly from past trends.

(3) We expect our operating expenses to increase significantly in FY2011 due mainly to (i) the

increase in staff costs as a result of higher headcounts and increments in salaries as we expand

our business and increase our marketing efforts to be in line with the expansion of our operations,

(ii) professional fees and expenses incurred in relation to the Placement, and (iii) the Service

Agreements with our Executive Directors (further details are set out in the “Service Agreements”

section of this Offer Document).


91

In view of the increase in operating expenses mentioned in paragraph 3 above, our Directors are of the

view that our Group may not be able to sustain the same growth patterns or profit growth as reflected

in the periods under review. As such, our net profit attributable to Shareholders in FY2011 may be

affected accordingly.

Save for the above, as at the Latest Practicable Date, our Directors do not expect any significant recent

trends or any other known trends, uncertainties, demands, commitments or events to have a material

effect on us in the current financial year.

ORDER BOOK

Our Residential Projects customers enter into contracts (which specifically indicate delivery schedule,

quantity and pricing) with us for the supply and delivery of our products for specific projects, which

project life may typically extend up to two years. Our products are then delivered and installed in stages

based on the state of completion of the projects nearly towards the end of the construction phase. From

1 January 2011 to the Latest Practicable Date, our Group has secured Residential Projects contracts

amounting to approximately $25.9 million, based on our LOAs. These mainly include notable

developments such as “The Ritz-Carlton Residences, Singapore, Cairnhill” by Royce Properties Pte.

Ltd. (subsidiary of Hayden Properties Pte. Ltd.), “Sandy Island, Sentosa” by YTL Singapore Pte Ltd,

“Elmira Heights” by Ho Bee Development Pte Ltd, “Floridian” and “Silversea” by Far East Organisation,

“Volari” by City Developments Limited, “Hamilton Scotts” by Sardinia Properties Pte. Ltd. (subsidiary of

Hayden Properties Pte. Ltd.) and “The Boutiq” by Unique Development Pte Ltd. For LOIs entered into

by our Group which are subject to definitive contracts, we have obtained projects amounting to

approximately $13.4 million from 1 January 2011 to the Latest Practicable Date.

In addition, our Distribution and Retail customers’ orders are based on confirmed orders and we do not

typically enter into long-term contracts with them. Hence, our lead-time to fulfil an order is generally

three to six months for kitchen systems and wardrobe systems, upon final confirmation from our

customers. As for kitchen appliances, household furniture and accessories, we will typically deliver

within three working days subject to stock availability. From 1 January 2011 to the Latest Practicable

Date, our order book based on confirmed orders was approximately $8.7 million, of which

approximately $2.6 million had been fulfilled.

Due to the aforesaid, the state of our order book at any point in time is not reflective or indicative of our

Group’s overall financial results and performance at the relevant point in time and may be subject to

variation, modification and cancellation by customers. Please refer to the “Risk Factors” section of this

Offer Document for further details.

BUSINESS STRATEGIES AND FUTURE PLANS

Our business strategies and future plans are as follows:–

Expanding our geographical coverage

Currently, our market is predominantly in Singapore and Malaysia. Our Directors believe that there is

potential for our products in new markets such as Hong Kong and Indonesia. We believe that our long

history and established track record will enable us to develop and expand our business in new markets

such as Hong Kong and Indonesia. Subject to market conditions, we plan to embark on expanding our

geographical coverage by setting up subsidiaries or representative offices in new markets (including

Hong Kong and Indonesia) or joint ventures with local parties to tap the opportunities in these markets.

We also intend to set up our “Kitchen Culture” retail showrooms in these markets. Our Singapore


92

operations will continue to be the central procurement hub in order to maintain consistency of our

product quality and price competitiveness.

Expanding our product range

We believe that there will be an increase in demand for lifestyle products and accessories (such as

household furniture, decorative items, bath fixtures and other related products) that complement the

high end lifestyle of the premium retail market. As such, our Group intends to leverage on such potential

demand by extending our product offering to items other than kitchen systems, kitchen appliances,

wardrobe systems, household furniture and accessories. This will serve to create an additional revenue

stream whilst leveraging on our existing sales and distribution networks. We aim to achieve greater

success through the introduction of new products or brands to stay ahead of the competition.

Expansion through acquisitions, joint ventures and/or strategic alliances

In addition to growing organically, we may consider expanding our business through acquisitions, joint

ventures or strategic alliances with parties who create synergistic values with our existing business.

Through such acquisitions, joint ventures or strategic alliances, we will look to strengthen our market

position, expand our network, as well as expand into new businesses complementary to our current

business. We believe that our status as a listed company will allow us to be better placed for expansion.

Should such opportunities arise, we will seek approval, where necessary, from our Shareholders,

Sponsor and/or the relevant authorities in accordance with the requirements of the applicable laws and

regulations.

Our Directors believe that for our overseas ventures, forming joint ventures with business partners with

local knowledge or local contacts is a prudent and cost-effective strategy of penetrating the overseas

markets.


93

We have identified the main laws and regulations (apart from those pertaining to general business

requirements) that materially affect our operations and the relevant bodies in the following countries.

Details of these laws and regulations are set out below.

SINGAPORE

Employment of Foreign Workers

The availability and the employment cost of skilled and unskilled foreign workers are affected by the

Government’s policies and regulations on the immigration and employment of foreign workers in

Singapore. The policies and regulations are set out in, inter alia, the Employment of Foreign Manpower

Act, Chapter 91A, of Singapore and the relevant Government Gazettes.

The employment of foreign workers is also subject to the payment of levies. The amount of foreign

worker levy payable on each foreign worker depends on whether he is skilled or unskilled. Under the

work permit conditions, employers are required to provide acceptable accommodation for their foreign

workers. Such accommodation must meet the statutory requirements set by various government

agencies, including the National Environment Agency, the Public Utilities Board, the Singapore Civil

Defence Force and the Building and Construction Authority. A list of approved off-site housing is

provided by the relevant approving agencies, namely the Urban Redevelopment Authority, Singapore

Land Authority, Jurong Town Corporation and the Housing Development Board.

An employer of foreign workers is also subject to, inter alia, the provisions set out in the Employment

Act (Chapter 91), the Employment of Foreign Workers Act (Chapter 91A), the Immigration Act (Chapter

133) and the Immigration Regulations.

Workmen’s Compensation

The Work Injury Compensation Act (Chapter 354) (“WICA”), which is regulated by the Ministry of

Manpower, applies to workmen in all industries in respect of injury suffered by them in the course of

their employment and sets out, inter alia, the amount of compensation they are entitled to and the

method(s) of calculating such compensation. The WICA provides that if in any employment, personal

injury by accident arising out of and in the course of the employment is caused to a workman, the

employer shall be liable to pay compensation in accordance with the provisions of the WICA.

The WICA provides, inter alia, that, where any person (referred to as the principal) in the course of its

business or for the purpose of his trade or business contracts with any other person (referred to as the

contractor) for the execution by the contractor of the whole or any part of any work undertaken by the

principal, the principal shall be liable to pay to any workman employed in the execution of the work any

compensation which he would have been liable to pay if that workman had been immediately employed

by the principal.

MALAYSIA

Business Licence

In order to carry out business in Malaysia, we are required to apply for and obtain certain licences such

as business premises licence and advertising licence for its showroom, from the local government of

the district or municipality in which our business is carried out. Licences for our showroom in Bangsar,

are issued by Dewan Bandaraya Kuala Lumpur and are subject to terms and conditions which must be

complied with, failing which the licence may be cancelled.

GOVERNMENT REGULATIONS

94

Customs

As our principal activity is trading in kitchen systems, kitchen appliances, wardrobe systems, household

furniture and accessories which are imported from overseas, we are required to comply with the

Customs Act 1967 especially with regards to import duty, deposit of dutiable goods in a customs or

licensed warehouse and declaration of dutiable goods imported.

Employment

The employment of our Malaysian employees is generally governed by the Employment Act 1955

whereas the employment of non-Malaysian employees comes within the Malaysian Employment

(Restriction) Act 1968. The employment of a non-Malaysian employee is prohibited unless there has

been issued in respect of that person a valid employment permit.

Our Directors confirm that as at the date of this Offer Document, our Group has obtained all necessary

approvals and complied with the relevant laws and regulations that would materially affect its business

operations.

GOVERNMENT REGULATIONS

95

SINGAPORE

Currently there are no Singapore governmental laws, decrees, regulations and other legislation that

may affect the following:–

(a) the import or export of capital, including the availability of cash and cash equivalents for use by

our Group; and

(b) the remittance of dividends, interest or other payments to non-resident holders of our Company’s

securities.

MALAYSIA

The administration of exchange control matter is governed by Exchange Control Act 1953 (“ECA”).

Pursuant to Section 3 of the ECA, Bank Negara Malaysia (“BNM”) is responsible for administering,

enforcing, carrying out, and giving effect to the provisions of ECA and the Governor of BNM shall be

Controller of Foreign Exchange. The ECA prohibits all dealings and transactions falling within the

purview unless the permission of the Controller of Foreign Exchange is obtained.

As part of the effort to enhance the Malaysian liberalization policy, BNM has from time to time

announced further relaxations to the foreign exchange administration rules as part of its proposals to

promote the development of the domestic foreign exchange market and to promote stability in the

financial system and economy of Malaysia. Some of the areas which have been relaxed affecting a

non-resident includes as follows:

(a) non-residents are free to invest in Malaysia in any form. Non-residents are free to exchange their

foreign currency into Ringgit and vice versa of any amount as well as repatriate their capital,

profits and income from Malaysia in foreign currency, this includes no restriction on non-resident

to purchase any Ringgit securities, including debt securities (including Ringgit bonds issued by

non-resident) in Malaysia;

(b) a non-resident may open and maintain any number of Ringgit-denominated accounts with any

licensed onshore banks, licensed finance companies or licensed investment banks in Malaysia.

Such account shall be known as an External Account (being a Ringgit Account belonging to a

non-resident or where the beneficiary of the funds is a non-resident). There is no restriction on the

amount of Ringgit funds that can be placed in the External Account. The Ringgit funds in an

External Account can be used for payments for residents for purchase of Ringgit assets or

services provided in Malaysia. Funds in the External Account can be converted into foreign

currency with a licensed onshore bank and repatriated at any time;

(c) a non-resident may pay for the investment in Malaysia in Ringgit from the External Account or in

foreign currency. However, Ringgit assets purchased by residents from non-residents may be

settled in ringgit or foreign currency other than currency of Israel (“Restricted Currency”).

However, all remittances abroad must be made in foreign currency other than Restricted

Currency;

(d) a non-resident is free to repatriate capital, divestment proceeds, profits, dividends, rental, fees

and interest arising from investment in Malaysia; and

(e) a non-resident may sell any of his investments in Malaysia including securities not listed on Bursa

Securities to a resident or another non-resident. A resident may pay or settle the purchase from

the non-resident seller in Ringgit or foreign currency. A non-resident may also pay or settle the

purchase from the non-resident seller in foreign currency or Ringgit in External Account.

EXCHANGE CONTROLS

96

MANAGEMENT REPORTING STRUCTURE

Our management reporting structure as at the Latest Practicable Date is set out below:–

CFO

Seah Geok Ling

General Manager

(Appliances Division)

Terrence Liew Fook Siong

Board of Directors

Executive Chairman and CEO

Lim Wee Li

Executive Director

Lim Han Li

DIRECTORS

Our Directors are entrusted with the responsibility for the overall management of our Group. The

particulars of our Directors as at the date of this Offer Document are set out below:–

Name Age Residential Address Current Occupation

Lim Wee Li(1) 44 9 Riviera Drive

#06-06

Singapore 467202

Executive Chairman and CEO

Lim Han Li(1) 42 3 Jalan Lana

Singapore 419036

Executive Director

Ong Beng Chye 43 853 Mountbatten Road

#05-03

Singapore 437838

Director of Appleton Global

Private Limited and Group

financial controller of Higson

International Pte Ltd

Boon Suan Zin

Zacchaeus

47 Blk 1 Tanjong Pagar Plaza

#06-47

Singapore 082001

Deputy chairman of Time Voyager

Pte. Ltd.

Kesavan Nair 47 93 Holland Road

#03-03

Singapore 278537

Director of Genesis Law

Corporation

Note:–



97

Information on the business and working experience, education and professional qualifications, if any,

and areas of responsibilities of our Directors is set out below:–

Lim Wee Li is our Executive Chairman and CEO and is currently responsible for the formulation of our

Group’s strategic directions and expansion plans and managing our Group’s overall business

development. In addition, he oversees sales, marketing and business development of our Group and

liaises with brand principals for securing distribution rights for our Group. He has been working in our

Group since 1991 and spearheaded the growth of our business and operations to the present size and

scale. Lim Wee Li graduated with a Bachelor of Business Administration, majoring in Corporate Finance

from University of North Texas, USA in 1988. He was awarded Top Entrepreneur of the Year 2008 by

the Association of Small and Medium Enterprise and Rotary Club of Singapore. He is a member of the

Singapore Chinese Chamber of Commerce.

Lim Han Li is our Executive Director and has been our Director since 2005. He is presently responsible

for the implementation and coordination of strategies and policies. From 2001 to 2005, he was an

executive director of Hanz Global Pte Ltd where he managed all aspects of financial matters. From

1996 to 2001, he was a manager with Victory Investment Pte Ltd where he was responsible for projects

implementation and coordination, maintaining banker’s relations and sales and marketing strategies.

From 1994 to 1996, he was a senior officer with United Overseas Bank Ltd, in charge of retail corporate

accounts. Lim Han Li graduated with a Bachelor of Business Administration, majoring in Finance,

Investment and Banking from University of Wisconsin-Madison, USA in 1993. He also holds a

Certificate of Successful Completion in Real Estate Agency Course awarded by the Singapore Institute

of Surveyors and Valuers in 1996.

Ong Beng Chye is our Lead Independent Director and was appointed to our Board on 27 June 2011.

He is currently and has since 2007 been the group financial controller of Higson International Pte Ltd,

a retailer and manufacturer of sportswear, and director of Appleton Global Private Limited, a business

management and consultancy services firm. He is also presently the lead independent director and

chairman of the audit committee of Hafary Holdings Limited, and a non-executive director of Heatec

Jietong Holdings Ltd, both listed on Catalist. He has more than 20 years of experience in the financial

sector. From 2005 to 2006, he was an executive director and CEO of Time Watch Investments Limited,

a watch manufacturer and retailer. In 2004, he was an executive director and vice-president of SAC

Capital Private Limited, a merger and acquisition advisory and corporate advisory firm. From 1998 to

2004, he was a senior manager in Deloitte and Touche LLP in Singapore. Prior to this, he was with

Jupiter Asset Management in Malaysia from 1997 to 1998, Seacorp-Schroders in Malaysia from 1995

to 1997 and Deloitte and Touche in London from 1990 to 1995. Ong Beng Chye obtained a Bachelor

of Science with Honours degree from The City University, London in 1990. He is a fellow of The Institute

of Chartered Accountants in England and Wales, a Chartered Financial Analyst conferred by The

Institute of Chartered Financial Analysts and a non-practising member of the Institute of Certified Public

Accountants of Singapore.

Boon Suan Zin Zacchaeus is our Independent Director and was appointed to our Board on 27 June

2011. He is presently the deputy chairman of Time Voyager Pte. Ltd. where he oversees corporate

development work. He is also presently a director of several companies, namely, Majuven Pte. Ltd.

where he is responsible for fund management activities since 2011, Dragon Capital Pte. Ltd. where he

is currently non-executive deputy chairman and was previously managing director responsible for fund

management activities from 2008 to 2011, McLean Watson Capital (Asia) Private Limited where he is

responsible for private equity fund management since 2002, and a partner with Thymos Capital LLP

where he is responsible for mentoring seed stage technology start-ups. In addition, Boon Suan Zin

Zacchaeus is currently an alternate director (non-executive) of Ntegrator International Ltd., which is

listed on Catalist. From 2000 to 2001, he was a director for investments in Venture TDF Pte. Ltd. where

he was responsible for venture capital fund management. From 1991 to 1999, he was with IBM/Lotus


98

Development where his last appointment was director (Asia Pacific) with responsibilities for the small

and medium business sector of Lotus software products. From 1989 to 1991, he was a computer

network engineer with the Singapore Ministry of Defence working on military projects. He graduated

with a Bachelor of Computer Science from The University of Newcastle, Australia in 1989.

Kesavan Nair is our Non-Executive Director and was appointed to our Board on 27 June 2011. He is

an Advocate and Solicitor of Singapore and has been a director of Genesis Law Corporation since

2008, practises in the area of civil and criminal litigation. He was a partner in David Lim & Partners from

2003 to 2008, a partner in Harry Elias Partnership from 2000 to 2003 and a partner in M.P.D. Nair &

Co. from 1992 to 2000. Kesavan Nair graduated with a Bachelor of Laws (Honours) from The University

College of Wales, Aberystwyth in 1988. He was admitted as a Barrister-at Law, Middle Temple in 1990,

a Barrister and Solicitor of the Supreme Court of the Australian Capital Territory in 1991 and an

Advocate & Solicitor of the Supreme Court of Singapore in 1992.

Ong Beng Chye and Boon Suan Zin Zacchaeus have prior experience as directors of public listed

companies in Singapore. Lim Wee Li, Lim Han Li and Kesavan Nair do not have prior experience as

directors of public listed companies in Singapore but have received relevant training to familiarise

themselves with the roles and responsibilities of a director of a company listed on the SGX-ST.

Save for Lim Wee Li and Lim Han Li who are brothers, none of our Directors has any family relationship

with another Director or with any Executive Officer or Substantial Shareholder of our Company.

There was no agreement or arrangement with our Substantial Shareholders, customers or suppliers

pursuant to which we will appoint any of them or any person nominated by any of them as our Director.

The list of present and past directorships of each Director over the last five years preceding the date

of this Offer Document excluding those held in our Company, is set out below:–

Name Present Directorships Past Directorships

Lim Wee Li Group corporations Group corporations

Haus

KHL Marketing

Kitchen Culture Malaysia


Nil

Other corporations Other corporations

KHL Home Appliances

Kim Sing Industries Sdn Bhd

Voda Development Pte. Ltd.

Voda Land Pte. Ltd.

Kim Hup Lee

Kinly Investment Private Limited

Lim Ee Pan & Sons (Private) Limited

Lim Giok Hong Investment Pte Ltd

Poggenpohl Singapore (2005) Pte. Ltd.

Victory Investment Pte. Ltd.

Werke Technologies Pte. Ltd.

Lim Han Li Group corporations Group corporations

KHL Marketing Nil


99



Nil Hanz Global Pte Ltd

Kim Hup Lee

Kinly Investment Private Limited

Lim Ee Pan & Sons (Private) Limited

Lim Giok Hong Investment Pte Ltd

Poggenpohl Singapore (2005) Pte. Ltd.

Ong Beng Chye Group corporations Group corporations

Nil Nil


Appleton Global Private Limited

Hafary Holdings Limited

Heatec Jietong Holdings Ltd.

ES Shipping Pte. Ltd.

Time Watch Investments Limited

Boon Suan Zin

Zacchaeus

Group corporations Group corporations

Nil Nil


Amplus Communication Pte. Ltd.

Cammeray Pte. Ltd.

Dragon Capital Partners Group

Limited

Dragon Capital Pte. Ltd.

Majuven Pte. Ltd.

McLean Watson Capital (Asia)

Private Limited

Nexus Ventures Private Limited

Ntegrator International Ltd.

Time Voyager Pte. Ltd.

Nil

Kesavan Nair Group corporations Group corporations

Nil Nil


Genesis Law Corporation Nil


100

EXECUTIVE OFFICERS

Our day-to-day operations are entrusted to our Executive Directors who are assisted by an experienced

and qualified team of Executive Officers. The particulars of our Executive Officers are set out below:–

Name Age Residential Address Current Occupation

Seah Geok Ling 41 25 Elias Road #10-10

Singapore 519931

CFO

Terrence Liew Fook Siong 42 42 Gardenia Road

Singapore 578837

General Manager

(Appliances Division)

Information on the business and working experience, education and professional qualifications, if any,

and areas of responsibilities of our Executive Officers is set out below:–

Seah Geok Ling joined our Group as CFO on 1 December 2010 where she is responsible for the

overall financial accounting and financial reporting of our Group. Prior to joining our Group, she was an

audit senior manager with Baker Tilly TFW LLP where she served for more than 15 years from April

1993 to May 1999 and from June 2001 to November 2010. She was responsible for managing and

providing external audit services to a portfolio of clients ranging from companies listed on the SGX-ST

to multi-national corporations and small and medium enterprises. She left the firm briefly to join

Informatics Holdings Limited as its group finance manager from 1999 to 2001 where she handled

quarterly group consolidation ensuring statutory compliance and oversaw the annual audit. From

February to June 2001, she was with Pico Art International Pte Ltd as an accounts manager where her

duties included handling of group consolidation, overseeing group reporting requirements and

managing corporate secretarial matters. From 1993 to 1999, she was with Teo Foong + Wong (now

known as Baker Tilly TFW LLP) as an audit supervisor. Seah Geok Ling graduated with a Bachelor of

Commerce (Accounting) from Murdoch University, Australia in 1992. She is a Certified Practicing

Accountant of the Australian Society of Certified Practising Accountants since 1997 and a non-

practicing member of the Institute of Certified Public Accountants of Singapore since 1998.

Terrence Liew Fook Siong joined our Group in 1994 and is presently our General Manager

(Appliances Division). He is responsible for product management (including all sales, marketing,

after-sales, logistics and procurement activities) in our Appliances Division. He leads a team of sales

and after-sales staff for retail and project-based sales, as well as local and overseas distribution sales.

He also liaises with overseas appliances factories, customers and suppliers. Prior to joining our Group,

he was with Singapore Technologies Automotive Ltd as a technical specialist from 1989 to 1994.

Terrence Liew Fook Siong graduated with a Diploma in Mechatronic Engineering from Ngee Ann

Polytechnic in 1998.

None of our Executive Officers has any family relationship with another Executive Officer or with any

Director or Substantial Shareholder of our Company.

There was no agreement or arrangement with our Substantial Shareholders, customers or suppliers

pursuant to which we will appoint any of them or any person nominated by any of them as our Executive

Officer.


101

The list of present and past directorships of each Executive Officers over the last five years preceding

the date of this Offer Document excluding those held in our Company, is set out below:–


Seah Geok Ling Group corporations Group corporations

Nil Nil


Nil Nil

Terrence Liew Fook Siong Group corporations Group corporations

Nil Nil


Nil Nil

STAFF

As at 31 December 2010, we have a workforce of 77 full-time employees. We do not experience any

significant seasonal fluctuations in our number of employees. We do not employ a significant number

of temporary employees.

None of our employees are unionised. There has not been any incidence of work stoppages or labour

disputes that affected our operations. Accordingly, we consider our relationship with our employees to

be good.

The number of employees of our Group as at the end of each of the last three financial years ended

31 December 2010, segmented by function and geographical areas are as follows:–

Number of Employees

As at

31 December 2008

As at

31 December 2009

As at

31 December 2010

Function

Management(1) 3 3 4

Finance and administration 8 10 10

Sales and marketing 29 26 30

Operations 23 31 33

Total 63 70 77

Geographical

Singapore 58 62 69

Malaysia 5 8 8

Total 63 70 77

Note:–

(1) Executive Directors and Executive Officers are classified under management.


102

Save for CPF and EPF contributions, we have not set aside or accrued any amounts to provide for

pension, retirement or similar benefits for any of our employees.

REMUNERATION OF DIRECTORS, EXECUTIVE OFFICERS AND RELATED EMPLOYEES

Directors and Executive Officers

The remuneration paid to our Directors and Executive Officers (which includes benefits-in-kind and

bonuses) for services rendered to us on an aggregate basis and in remuneration bands of $250,000(1)

during FY2009 and FY2010 (being the two most recent completed financial years) and as estimated for

FY2011, excluding bonuses under any profit-sharing plan or any other profit-linked agreement(s), is as

follows:–

FY2009 FY2010

FY2011

(estimated)

Directors

Lim Wee Li(3) Band A Band B Band B

Lim Han Li(3) Band A Band A Band A

Ong Beng Chye (2) (2) Band A

Boon Suan Zin Zacchaeus (2) (2) Band A

Kesavan Nair (2) (2) Band A

Executive Officers

Seah Geok Ling (2) Band A Band A

Terrence Liew Fook Siong Band A Band A Band A

Notes:–

(1) Band A: Compensation from $0 to $250,000 per annum.

Band B: Compensation from $250,001 to $500,000 per annum.

(2) Not under our appointment as at the relevant period.


Related Employees

As at the Latest Practicable Date, we did not have employees who were related to our Directors or

Substantial Shareholders.

The remuneration of employees who are related to our Directors or Substantial Shareholders will be

reviewed annually by our Remuneration Committee to ensure that their remuneration packages are in

line with our staff remuneration guidelines and commensurate with their respective job scopes and level

of responsibilities. Any bonuses, pay increases and/or promotions for these related employees will also

be subject to the review and approval of our Remuneration Committee. In addition, any new

employment of related employees and the proposed terms of their employment will be subject to the

review and approval of our Remuneration Committee. In the event that a member of our Remuneration

Committee is related to the employee under review, he will abstain from the review.


103

SERVICE AGREEMENTS

Our Company has entered into separate service agreements (the “Service Agreements”) with our

Executive Directors, namely, Lim Wee Li and Lim Han Li. The Service Agreements are valid for an initial

period of three years upon admission of our Company to Catalist. Upon the expiry of the initial period

of three years, the employment of the Executive Directors shall be automatically renewed on a year on

year basis on such terms and conditions as the parties may agree. During the initial period of three

years, either party may terminate the Service Agreement at any time by giving to the other party not less

than six months’ notice in writing, or in lieu of notice, payment of an amount equivalent to six months’

salary based on the Executive Director’s last drawn monthly salary. Our Group may also terminate the

employment of any of the Executive Directors at any time without notice or payment in lieu of notice

under the following circumstances:–

(i) if the Executive Director is guilty of any gross default or grave misconduct in connection with or

affecting the business of our Group;

(ii) in the event of any serious or repeated breach or non-observance by the Executive Director of any

of the stipulations contained in the Service Agreements;

(iii) if the Executive Director becomes bankrupt or makes any composition or enters into any deed of

arrangement with his creditors;

(iv) if the Executive Director shall become of unsound mind; or

(v) If the Executive Director commits any act of criminal breach of trust or dishonesty.

Pursuant to the terms of the Service Agreements, Lim Wee Li and Lim Han Li are entitled to a monthly

salary of $25,000 and $13,500, respectively. All reasonable travelling, hotel and other expenses

incurred by the Executive Directors in connection with our business will also be borne by us. In addition,

all reasonable medical expenses of our Executive Directors in accordance with our personnel policy

shall be reimbursed by us. Each of Lim Wee Li and Lim Han Li is entitled to the ownership of a country

club membership of his choice and our Company shall pay the acquisition cost, subscription fees and

expenses incurred in respect of the said club membership.

Our Executive Directors are entitled to an annual fixed bonus of one month of their respective last

drawn salary. They are also entitled to receive an annual performance bonus based on the audited PBT

of our Group, provided that the Executive Directors are under the employment of our Group on the last

day of the relevant financial year. The amount of performance bonus will be determined as follows:–

Performance Bonus

Lim Wee Li Lim Han Li

Where PBT does not exceed $4.0 million Nil Nil

Where PBT exceeds $4.0 million but

does not exceed $6.0 million

3.0% of the PBT in

excess of $4.0 million

2.0% of the PBT in


Where PBT exceeds $6.0 million 3.0% of $2.0 million plus

5.0% of the PBT in


2.0% of $2.0 million plus

3.5% of the PBT in



104

Under the Service Agreements, the salary of the Executive Directors is subject to review by the

Remuneration Committee after the accounts of our Group for the immediate preceding financial year

have been audited. The Executive Directors shall abstain from voting in respect of any resolution or

decision to be made by our Board in relation to the terms and renewal of their Service Agreements.

Under the Service Agreements, each Executive Director has covenanted not to do business with any

person who has done business with us or entice away any of our employees in connection with the

carrying on of any business similar to or in competition with our business for 12 months after ceasing

to be employed by our Group. Each Executive Director has also covenanted not to carry on any activity

or business in competition with us within Singapore or any country in which we have operations or

carried on business, for 12 months after ceasing to be employed under his Service Agreement.

Directors’ fees do not form part of the terms of the Service Agreements as these will only be paid out

to Directors after the approval of Shareholders at our Company’s annual general meeting.

Had the Service Agreements been in existence since the beginning of FY2010, the aggregate

remuneration paid to the Executive Directors would have been approximately $573,000 instead of

$470,000 and our PBT would have been $4.9 million (instead of $5.0 million) and our PAT would remain

largely unchanged at $4.3 million.

Save as disclosed, there are no existing or proposed service agreements between our Group and any

of our Directors. There are no existing or proposed service agreements entered or to be entered into

by our Directors with our Company or our subsidiaries which provide for benefits upon termination of

employment.

CORPORATE GOVERNANCE

Our Directors recognise the importance of corporate governance and the offering of high standards of

accountability to our Shareholders. Our Board of Directors has formed three committees: (i) the Audit

Committee, (ii) the Remuneration Committee and (iii) the Nominating Committee.

In addition, in view of Lim Wee Li’s concurrent appointment as our Executive Chairman and CEO, we

have appointed Ong Beng Chye as our Lead Independent Director. The Lead Independent Director will

be available to Shareholders where they have concerns which contact through the normal channels of

our Executive Chairman and CEO, Executive Director and/or CFO has failed to resolve or for which

such contact is inappropriate.

Nominating Committee

Our Nominating Committee comprises Boon Suan Zin Zacchaeus, Ong Beng Chye and Kesavan Nair.

The chairman of the Nominating Committee is Boon Suan Zin Zacchaeus.

Our Nominating Committee will be responsible for:–

(a) re-nomination of our Directors having regard to each Director’s contribution and performance;

(b) determining annually whether or not a Director is independent;

(c) deciding whether or not a director is able to and has been adequately carrying out his duties as

a director; and


105

(d) assessing the effectiveness of the Board as a whole and the contribution of each Director to the

effectiveness of the Board.

Each member of the Nominating Committee shall abstain from voting on any resolutions in respect of

the assessment of his performance or re-nomination as Director.

Generally, the Nominating Committee does not appoint new directors, but nominates them to the Board

which retains the final discretion in appointing such new directors.

Remuneration Committee

Our Remuneration Committee comprises Boon Suan Zin Zacchaeus, Ong Beng Chye and Kesavan

Nair. The chairman of the Remuneration Committee is Boon Suan Zin Zacchaeus.

Our Remuneration Committee will recommend to our Board a framework of remuneration for our

Directors and Executive Officers, and determine specific remuneration packages for each Executive

Director.

The recommendations of our Remuneration Committee should be submitted for endorsement by the

entire Board. All aspects of remuneration, including but not limited to Directors’ fees, salaries,

allowances, bonuses, options and benefits-in-kind shall be covered by our Remuneration Committee.

Each member of the Remuneration Committee shall abstain from voting on any resolutions in respect

of his remuneration package. The remuneration of employees who are related to our Directors or

Substantial Shareholders will also be reviewed annually by our Remuneration Committee to ensure that

their remuneration package are in line with our staff remuneration guideline and to commensurate with

their respective job scopes and level of responsibilities.

Audit Committee

Our Audit Committee comprises Ong Beng Chye, Kesavan Nair and Boon Suan Zin Zacchaeus. The

chairman of the Audit Committee is Ong Beng Chye.

Our Independent Directors and Non-Executive Director do not have any existing business or

professional relationship of a material nature with our Group, our Directors or Substantial Shareholders,

save for our Non-Executive Director, Kesavan Nair, who has provided legal services to our Group

through the law firm, Genesis Law Corporation, and the details of which are found in the “Interested

Person Transactions — Present and On-going Interested Person Transactions” section of this Offer

Document.

Our Audit Committee will assist our Board in discharging their responsibility to safeguard our assets,

maintain adequate accounting records and develop and maintain effective systems of internal control,

with the overall objective of ensuring that our management creates and maintains an effective control

environment in our Group.

Our Audit Committee will provide a channel of communication between our Board, our management

and our external auditors on matters relating to audit.

Our Audit Committee shall meet periodically to perform the following functions:–

(a) review the audit plans of our external auditors and internal auditors, including the results of our

external and internal auditors’ review and evaluation of our system of internal controls;


106

(b) review the annual consolidated financial statements and our external auditor’s report on those

financial statements, and discuss any significant adjustments, major risk areas, changes in

accounting policies, compliance with Singapore Financial Reporting Standards, concerns and

issues arising from their audits including any matters which the auditors may wish to discuss in

the absence of management, where necessary, before submission to our Board for approval;

(c) review the periodic consolidated financial statements comprising the profit and loss statements

and the balance sheets and such other information required by the Listing Manual, before

submission to our Board for approval;

(d) review and discuss with our external and internal auditors (if any), any suspected fraud,

irregularity or infringement of any relevant laws, rules and regulations, which has or is likely to

have a material impact on our Group’s operating results or financial position and our

management’s response;

(e) review the co-operation given by our management to our external auditors;

(f) consider the appointment or re-appointment of the external auditors;

(g) review and ratify any interested person transactions falling within the scope of Chapter 9 of the

Listing Manual;

(h) review potential conflicts of interests (if any);

(i) review the procedures by which employees of our Group may, in confidence, report to the

chairman of the Audit Committee, possible improprieties in matters of financial reporting or other

matters and ensure that there are arrangements in place for independent investigation and

follow-up actions thereto;

(j) undertake such other reviews and projects as may be requested by our Board, and report to our

Board its findings from time to time on matters arising and requiring the attention of our Audit

Committee; and

(k) undertake generally such other functions and duties as may be required by law or the Listing

Manual, and by such amendments made thereto from time to time.

Apart from the duties listed above, our Audit Committee shall commission and review the findings of

internal investigations into matters where there is any suspected fraud or irregularity, or failure of

internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have

a material impact on our Group’s operating results and/or financial position. Each member of the Audit

Committee shall abstain from voting on any resolutions in respect of matters in which he is interested.

Our Audit Committee shall also commission an annual internal control audit until such time as our Audit

Committee is satisfied that our Group’s internal controls are robust and effective enough to mitigate our

Group’s internal control weakness (if any). Prior to decommission of such annual audit, our Board is

required to report to the SGX-ST and the Sponsor on how the key internal control weaknesses have

been rectified, and the basis for the decision to decommission the annual internal control audit.

Thereafter, such audits may be initiated by our Audit Committee as and when it deems fit to satisfy itself

that our Group’s internal controls remain robust and effective. Upon completion of the internal control

audit, appropriate disclosure will be made via SGXNET of any material, price-sensitive internal control

weaknesses and any follow-up actions to be taken by our Board.


107

Our Audit Committee, after having:–

(a) conducted interviews with Seah Geok Ling;

(b) considered the qualifications and past working experience of Seah Geok Ling (as described in the

“Directors, Executive Officers and Staff” section of this Offer Document);

(c) observed Seah Geok Ling’s abilities, familiarity and diligence in relation to the financial matters

and information of our Group; and

(d) noted the absence of negative feedback on Seah Geok Ling from Baker Tilly TFW LLP, our

Group’s Auditors and Reporting Accountants,

is of the view that Seah Geok Ling is suitable for the position of CFO of our Group.

BOARD PRACTICES

Our Articles of Association provide that our Board will consist of not less than two Directors. None of

our Directors are appointed for any fixed terms.

Our Directors are appointed by our Shareholders at a general meeting, and an election of Directors

takes place annually. One-third (or the number nearest one-third) of our Directors, are required to retire

from office at each annual general meeting. Every Director must retire from office at least once in every

three years. However, a retiring Director is eligible for re-election at the meeting at which he retires.


108

In general, transactions between our Group and any of its interested persons (namely, our Directors or

Controlling Shareholders or their respective Associates) are known as interested person transactions.

Save as disclosed below and in the “Restructuring Exercise” section of this Offer Document, none of

our Directors, Controlling Shareholders or their respective Associates (each, an interested person) was

or is interested in any material transaction undertaken by our Group for the past three financial years

ended 31 December 2010 and the period from 1 January 2011 up to the Latest Practicable Date (the

“Relevant Period”).

The following persons or companies are considered “interested persons” for the purposes of this

section of the Offer Document:–

Interested Persons Relationship with our Group

Kesavan Nair Our Non-Executive Director.

KHL Home Appliances A company incorporated in Malaysia. Its shareholders are our

Executive Chairman and CEO, Lim Wee Li (50%) and an

unrelated party, Chan Keng Chum (50%). Its directors are Lim

Wee Li and Chan Keng Chum.

Lim Han Li Our Executive Director.

Lim Wee Li Our Executive Chairman and CEO.

Singapore Spa Institute Pte. Ltd. A company incorporated in Singapore. Its shareholders are our

Executive Chairman and CEO, Lim Wee Li (5%), his wife, Lim

Sok Khim (80%) and two sisters-in-law, Lim Sock Koon (10%)

and Lim Sok Kheng Shirley (5%). Its directors are Lim Sok Khim,

Lim Sock Koon and Lim Sok Kheng Shirley.

PAST INTERESTED PERSON TRANSACTIONS

Loans and advances from our Group to Interested Person

Our Group had in the past granted loans and advances to Lim Wee Li, our Executive Chairman and

CEO for investment purposes. The amounts due from Lim Wee Li were made at an interest rate of

5.25% per annum, unsecured and had no fixed terms of repayment. The amounts of loans and

advances owing by Lim Wee Li to our Group (comprising the loans and interest thereon) as at the end

of each of the last three financial years ended 31 December 2010 and the Latest Practicable Date were

as follows:–

Amounts owing by interested person

to our Group ($’000)

As at

31 December

2008

As at

31 December

2009

As at

31 December

2010

As at the

Latest

Practicable

Date

Lim Wee Li 1,553 1,723 — —

During the Relevant Period, the largest amount owed by Lim Wee Li to our Group, based on month-end

balances owing by Lim Wee Li, was approximately $2,184,000. As at the Latest Practicable Date, all


109

the aforesaid amounts owing have been repaid to our Group from the above interested person. After

our admission to Catalist, we have no intention to grant such loans or advances to any interested

persons.

Transactions with KHL Home Appliances

KHL Home Appliances was principally engaged in the business of trading in furniture and fittings,

kitchen equipment and related products. Prior to the Relevant Period, our Group had carried out trade

transactions with KHL Home Appliances in relation to products sold and distributed by us.

In FY2008, our Group had paid sales commission amounting to approximately $589,000 to KHL Home

Appliances for contracts secured through the referral of KHL Home Appliances. The rate of sales

commission was agreed upon having regard to the then prevailing market rates and the transactions

with KHL Home Appliances were conducted on an arm’s length basis and on normal commercial terms.

There were no further transactions between our Group and KHL Home Appliances after FY2008. KHL

Home Appliances has ceased its operations in March 2009 and is in the process of de-registration.

Transactions with Singapore Spa Institute Pte. Ltd.

Singapore Spa Institute Pte. Ltd. (“SSI”) is principally engaged in the provision of spa, beauty and

massage services. In FY2009, our Group sold household furniture amounted to approximately $15,000

to SSI. The above sales to SSI were conducted on an arm’s length basis and on normal commercial

terms. The sale price was fully paid by SSI in March 2011. After our admission to Catalist, any such

sales will be entered into in accordance with such guidelines as described in the “Review Procedures

for Future Interested Person Transactions” section of this Offer Document and Chapter 9 of the Listing

Manual.

Sale of motor vehicle to our Executive Director, Lim Han Li

In FY2010, our Group sold a motor vehicle to Lim Han Li for approximately $39,000. The sale price,

which was higher than the net carrying value of the motor vehicle as at the point of sale, was agreed

upon between our Group and Lim Han Li on a willing-buyer willing-seller basis. The sale price was fully

paid by Lim Han Li in December 2010.

Provision of counter indemnity by Interested Persons

Our Executive Directors, Lim Wee Li and Lim Han Li, and their uncle, Lim Geok Khoon (formerly a

director of our subsidiary, namely KHL Marketing), have in the past provided the following counter

indemnity to an insurance company for an insurance performance bond guarantee to secure our

Group’s performance of its obligations under a contract made with one of our customers in FY2009 and

FY2010:–

Project Name Amount Insured under

Performance Bond

($)

Counter Indemnity

Provided by

Lakeshore Drive 16,721 Lim Wee Li

Lim Han Li

Lim Geok Khoon


110

Sale of an imported kitchen system and kitchen appliances to our Non-Executive Director,

Kesavan Nair

In FY2010 and from 1 January 2011 to the Latest Practicable Date, our Group sold an imported kitchen

system and kitchen appliances to Kesavan Nair, our Non-Executive Director, for approximately $30,000

and $21,000, respectively. The sales transactions were conducted on an arm’s length basis and on

normal commercial terms. The sale price was fully paid by Kesavan Nair in May 2011. After our

admission to Catalist, any such sales will be entered into in accordance with such guidelines as

described in the “Review Procedures for Future Interested Person Transactions” section of this Offer

Document and Chapter 9 of the Listing Manual.

PRESENT AND ON-GOING INTERESTED PERSON TRANSACTIONS

Loans and advances from Interested Persons to our Group

Our Group had in the past obtained loans and advances from our Directors, namely Lim Wee Li and

Lim Han Li to fund the working capital needs of our Group. These loans and advances granted by Lim

Wee Li and Lim Han Li are interest-free and unsecured and hence were not transacted on an arm’s

length basis. The amounts owing from our Group to Lim Wee Li and Lim Han Li during the Relevant

Period were as follows:–

($’000) FY2008 FY2009 FY2010

1 January 2011

to the Latest

Practicable Date

Amounts owing to interested persons

by our Group

Lim Wee Li — — 2,037 1,437

Lim Han Li — — 420 280

Total — — 2,457 1,717

Such amounts owing to Lim Wee Li and Lim Han Li will be settled by six installments, payable quarterly

in arrears from September 2011. During the Relevant Period, the largest amounts owed by our Group

to Lim Wee Li and Lim Han Li, based on month-end balances of such amounts owing to them, were

approximately $2,037,000 and $420,000 respectively. We do not intend to procure such amounts from

any of the above interested persons following our listing on Catalist.

Legal services provided by Genesis Law Corporation

Our Non-Executive Director, Kesavan Nair, is a director of the law firm, Genesis Law Corporation, which

had from time to time provided legal representation, services and advice to our Group. Sharmila Nair,

the sister of Kesavan Nair, owns 33.3% of the issued share capital of Genesis Law Corporation.

The total amount of fees incurred by our Group for the provision of the aforesaid legal services from 1

January 2011 to the Latest Practicable Date was approximately $45,000. Such engagement was made

on terms determined on an arm’s length basis and on normal commercial terms. After our admission

to Catalist, all future transactions with Genesis Law Corporation will be conducted in accordance with

such guidelines as described in the “Review Procedures for Future Interested Person Transactions”

section of this Offer Document and Chapter 9 of the Listing Manual.


111

Provision of guarantees by Interested Persons

As at the Latest Practicable Date, our Executive Directors, Lim Wee Li and Lim Han Li, and their uncle,

Lim Geok Khoon (formerly a director of our subsidiary, namely KHL Marketing), provided the following

personal guarantees to secure banking and trade facilities granted to our Group:–

Financial Institution/Lender Type of Facilities

Amount of

Facilities

Guaranteed

($)

Personal

Guarantee(s)

Provided by

DBS Bank Ltd. Bridging loan (Local Enterprise

Finance Scheme)

2,000,000 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Foreign exchange spot and

forward and foreign exchange

options


Lim Han Li

Lim Geok Khoon

Overdraft facility, letter of credit,

trust receipts, bills receivable

purchase, shipping guarantee and

airway guarantee


Lim Han Li

Lim Geok Khoon

Oversea-Chinese Banking

Corporation Limited

Overdraft facility 300,000 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Letter of credit, trust receipts,

shipping guarantee and airway bill


Lim Han Li

Lim Geok Khoon

Banker’s guarantee 500,000 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Foreign exchange 2,000,000 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Bridging loan (Local Enterprise

Finance Scheme)


Lim Han Li

Lim Geok Khoon

Standard Chartered Bank Letter of credit, trust receipts,

import loans, financing invoices

and shipping guarantee


Lim Han Li

Bridging loan (Local Enterprise

Finance Scheme)


Lim Han Li

Malayan Banking Berhad Letter of credit, trust receipts,

shipping guarantee and banker’s

guarantee


Lim Han Li

Lim Geok Khoon

Sing Investments & Finance

Limited

Finance lease 250,000 Lim Wee Li

Total 17,550,000

No consideration was paid to Lim Wee Li, Lim Han Li and Lim Geok Khoon for the provision of the

aforesaid personal guarantees and the largest aggregated amount guaranteed was $17.6 million during

the Relevant Period.


112

Subsequent to the Placement, the above-named guarantors intend to obtain a release and discharge

of the above guarantees from the respective financial institutions or lender by substituting the same

with other securities to be furnished by our Group that are acceptable to them, if required. Should any

of the financial institutions or lender be unwilling to release and discharge the above guarantees, the

guarantors will continue to provide the guarantees.

Provision of counter indemnities by Interested Persons

As at the Latest Practicable Date, our Executive Directors, Lim Wee Li and Lim Han Li, and their uncle,

Lim Geok Khoon, have provided the following counter indemnities to an insurance company for

insurance performance bond guarantees to secure our Group’s performance of its obligations under

contracts made with our customers:–


Performance Bond

($)

Counter Indemnities

Provided by

Amber Residences

(kitchen appliances)

84,500 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Amber Residences

(kitchen systems)

350,000 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Volari 262,061 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Hamilton Scotts 198,334 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Jardin 55,371 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Elmira Heights 250,000 Lim Wee Li

Lim Han Li

Lim Geok Khoon

The Greenwood 20,000 Lim Wee Li

Lim Han Li

Lim Geok Khoon

The Orange Grove

(kitchen systems — dry)

162,703 Lim Wee Li

Lim Han Li

Lim Geok Khoon

The Orange Grove

(kitchen systems — wet)

62,939 Lim Wee Li

Lim Han Li

Lim Geok Khoon

D’ Pavilion 32,500 Lim Wee Li

Lim Han Li

Lim Geok Khoon

The Lumos 154,500 Lim Wee Li

Lim Han Li

Lim Geok Khoon


113


Performance Bond

($)

Counter Indemnities

Provided by

The Promont 43,862 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Hillcrest Villa 179,300 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Waterfall Gardens 72,158 Lim Wee Li

Lim Han Li

Lim Geok Khoon

The Ritz-Carlton Residences,


114,965 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Floridian 29,604 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Miro 26,481 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Cable Road Lot 02057L & 02056X

(kitchen systems)

16,428 Lim Wee Li

Lim Han Li

Lim Geok Khoon

Cable Road Lot 02057L & 02056X

(kitchen appliances)

4,053 Lim Wee Li

Lim Han Li

Lim Geok Khoon

No consideration was paid to Lim Wee Li, Lim Han Li and Lim Geok Khoon for the provision of the

aforesaid counter indemnities.

Chapter 9 of the Listing Manual

Under Chapter 9 of the Listing Manual, where a listed company or any of its subsidiaries or associated

companies over which the listed company has control (other than a subsidiary or associated company

that is listed on a foreign stock exchange) proposes to enter into a transaction with the listed company’s

interested persons, shareholders’ approval and/or an immediate announcement is required in respect

of the transaction if the value of the transaction is equal to or exceeds certain financial threshold. In

particular, shareholders’ approval is required where the value of such transaction is not below $100,000

and is:–

(i) equal to or more than 5% of the latest audited NTA of the listed company; or

(ii) equal to or more than 5% of the latest audited NTA, when aggregated with other transactions

entered into with the same interested person during the same financial year.


114

Definitions under the Listing Manual

Under the Listing Manual:–

(a) the term “interested person” is defined to mean a director, chief executive officer, or controlling

shareholder of the listed company or an associate of any such director, chief executive officer or

controlling shareholder; and

(b) the term “associate” is defined to mean:–

(i) in relation to any director, chief executive officer, substantial shareholder or controlling

shareholder (being an individual):–

• his immediate family;

• the trustee of any trust of which he and his immediate family is a beneficiary or, in the

case of a discretionary trust, is a discretionary object; and

• any company in which he and his immediate family (that is, the spouse, child, adopted

child, step child, sibling or parent) together (directly or indirectly) have an interest of

30% or more;

(ii) in relation to a substantial shareholder or a controlling shareholder (being a company)

means any other company which is its subsidiary or holding company or is a subsidiary of

such holding company or one in the equity of which it and/or such other company or

companies taken together (directly or indirectly) have an interest of 30% or more.

REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS

To ensure that future transactions with interested persons are undertaken on normal commercial terms

and are consistent with our Group’s usual business practices and policies, which are generally no more

favourable than those extended to unrelated third parties, the following procedures will be implemented

by our Group.

In relation to any purchase of products or procurement of services from interested persons, quotes from

at least two unrelated third parties in respect of the same or substantially the same type of transactions

will be used as comparison wherever possible. The purchase price, procurement price or fee for

services shall not be higher than the most competitive price of the two comparative prices from the two

unrelated third parties. The Audit Committee will review the comparables, taking into account, the

suitability, quality and cost of the product or service, and the experience and expertise of the supplier.

In relation to any sale of products or provision of services to interested persons, the price and terms of

two other completed transactions of the same or substantially the same type of transactions to

unrelated third parties are to be used as comparison wherever possible. The interested persons shall

not be charged at rates lower than that charged to the unrelated third parties.

All interested persons transactions above $100,000 are to be approved by a Director who shall not be

an interested person in respect of the particular transaction. Any contracts to be made with an

interested person shall not be approved unless the pricing is determined in accordance with our usual

business practices and policies, consistent with the usual margin given or price received by us for the

same or substantially similar type of transactions between us and unrelated third parties and the terms

are no more favourable than those extended to or received from unrelated third parties.


115

For the purposes above, where applicable, contracts for the same or substantially similar type of

transactions entered into between us and unrelated third parties will be used as a basis for comparison

to determine whether the price and terms offered to or received from the interested person are no more

favourable than those extended to unrelated third parties.

In addition, we shall monitor all interested person transactions entered into by us categorising the

transactions as follows:–

(i) a “category one” interested person transaction is one where the value thereof is in excess of 5%

of the NTA of our Group; and

(ii) a “category two” interested person transaction is one where the value thereof is below or equal

to 5% of the NTA of our Group.

“Category one” interested person transactions must be approved by our Audit Committee prior to entry.

“Category two” interested person transactions need not be approved by our Audit Committee prior to

entry but shall be reviewed on a half-yearly basis by our Audit Committee.

In addition, after the Company’s admission to Catalist, our Executive Directors, Lim Wee Li and Lim

Han Li will update the Board of their personal investments, direct or indirect, in property development

projects.

When renting properties from or to an interested person, our Directors shall take appropriate steps to

ensure that such rent is commensurate with the prevailing market rates, including adopting measures

such as making relevant enquiries with landlords of similar properties and obtaining suitable reports or

reviews published by property agents (as necessary), including independent valuation report by

property valuer, where appropriate. The rent payable shall be based on the most competitive market

rental rate of similar property in terms of size and location, based on the results of the relevant

enquiries. Such transactions shall be subject to review by our Audit Committee on a half-yearly basis.

We will prepare relevant information to assist our Audit Committee in its review.

Before any agreement or arrangement with an interested person that is not in the ordinary course of

business of our Group is transacted, prior approval must be obtained from our Audit Committee. In the

event that a member of our Audit Committee is interested in any interested person transactions, he will

abstain from reviewing that particular transaction. Any decision to proceed with such an agreement or

arrangement would be recorded for review by our Audit Committee.

We will also comply with the provisions in Chapter 9 of the Listing Manual in respect of all future

interested person transactions, and if required under the Listing Manual, the Companies Act or the SFA,

we will seek independent Shareholders’ approval for such transactions.


116

This section sets out transactions which were conducted between (i) our Group and Kim Hup Lee

(which was previously a majority shareholder of KHL Marketing) (please refer to the “Restructuring

Exercise” section of this Offer Document for further details) and its Associates, and (ii) our Group and

companies connected to our Executive Directors, Lim Wee Li and Lim Han Li, which do not fall within

the definition of interested persons under Chapter 9 of the Listing Manual.

Transactions with Kim Hup Lee and its Associates

Prior to the completion of the Restructuring Exercise, Kim Hup Lee, a company incorporated in

Singapore, was a 60.0% shareholder of our principal subsidiary, KHL Marketing. Kim Hup Lee owns a

diversified group of companies with interests in building materials supply, manufacturing, printing

services, paper trading, property development and contract furnishing. On completion of the share

exchange referred to in the “Restructuring Exercise” section of this Offer Document, the directors and

shareholders of Kim Hup Lee and its Associates, KHL Printing Co. Pte Ltd (“KHL Printing”) and Lim

Geok Khoon, are set out below:–

Name of Entity Relationship with our Group

Kim Hup Lee Kim Hup Lee, a family-run business, is owned and controlled by parties

related to our Executive Directors, Lim Wee Li and Lim Han Li.

The shareholders of Kim Hup Lee are Lim Han Li (1.15%), Adrienne

Lim Ai Bee (sister of Lim Wee Li and Lim Han Li) (1.15%), Foo Min Yin

(mother of Lim Wee Li and Lim Han Li) (0.39%), the relatives(1) of Lim

Wee Li and Lim Han Li (12.06%) and Lim Ee Pan & Sons (Private)

Limited (85.25%). Its directors are Lim Geok Khoon, Lim Geok Chong

and Lim Geok Lin Andy (uncles of Lim Wee Li and Lim Han Li).

The shareholders of Lim Ee Pan & Sons (Private) Limited are Lim Han

Li (10.34%), Adrienne Lim Ai Bee (sister of Lim Wee Li and Lim Han Li)

(7.31%), Foo Min Yin (mother of Lim Wee Li and Lim Han Li) (4.19%),

the relatives(1) of Lim Wee Li and Lim Han Li (66.89%) and Kinly

Investment Private Limited (11.27%). Its directors are Lim Geok

Khoon, Lim Geok Chong and Lim Geok Lin Andy (uncles of Lim Wee

Li and Lim Han Li).

The shareholders of Kinly Investment Private Limited are Lim Han Li

(16.0%), Adrienne Lim Ai Bee (sister of Lim Wee Li and Lim Han Li)

(6.0%), Foo Min Yin (mother of Lim Wee Li and Lim Han Li) (2.0%), the

relatives(1) of Lim Wee Li and Lim Han Li (60.0%) and Kim Hup Lee

(16.0%). Its directors are Lim Geok Khoon and Lim Geok Lin Andy

(uncles of Lim Wee Li and Lim Han Li).

KHL Printing A company incorporated in Singapore. Its shareholders are Kim Hup

Lee (75.25%), Kinly Investment Private Limited (11.25%) and the

relatives(1) of Lim Wee Li and Lim Han Li as well as companies owned

by these relatives (13.50%). Its directors are Foo Ton Yong, Lim Geok

Khoon and Lim Geok Chong (uncles of Lim Wee Li and Lim Han Li).

Lim Geok Khoon The uncle of our Executive Directors, Lim Wee Li and Lim Han Li.

Note:–

(1) These relatives do not fall within the definition of “Associates” under the Listing Manual.

OTHER TRANSACTIONS

117

The transactions between our Group and Kim Hup Lee and its Associate during the Relevant Period are

set out below:–

(a) Leasing of premises from Kim Hup Lee

Since FY2008, our Group has leased from Kim Hup Lee office cum warehouse premises with a

built-in area of approximately 25,425 sq ft located at 25 New Industrial Road KHL Industrial

Building Singapore 536211. Since FY2009, Kim Hup Lee leased an additional built-in area of

approximately 16,512 sq ft of showroom cum warehouse space at the same premises to our

Group. The monthly rental and air conditioning and service charges paid by our Group to Kim Hup

Lee during the Relevant Period were as follows:–

($’000) FY2008 FY2009 FY2010

1 January 2011

to the Latest

Practicable Date

Rental, air conditioning and

service charges paid by our Group

421 553 639 349

The rental rates for FY2008, FY2009, FY2010 and for the period from 1 January 2011 up to 31

March 2011 were mutually agreed between the parties based on preferential rates, as such the

transaction was not conducted on an arm’s length basis.

Subsequent to 31 March 2011, our Company has entered into a lease agreement for a lease

period of 36 months for a built-in area of approximately 41,937 sq ft, commencing 1 April 2011,

with an option of a further term of 36 months from 31 March 2014, at a monthly rental, air

conditioning and service charges of $59,880, excluding air conditioning charges for the 1st floor,

which will be charged according to usage. The rental rates for the current lease agreement were

mutually agreed between the parties based on preferential rates, as such the transaction was not

conducted on an arm’s length basis.

(b) Purchase of building materials from Kim Hup Lee

Our Group purchased building materials, including cement, tiles, plywood and adhesive glue for

the purpose of our installation works in connection with our business, amounting to $172, $963

and $18,323 in FY2008, FY2009 and FY2010 respectively, from Kim Hup Lee. The purchase price

was determined according to market value and the transaction was conducted on an arm’s length

basis and on normal commercial terms.

(c) Printing services provided by KHL Printing

KHL Printing is a company principally engaged in the business of publishing and printing of books

and magazines. KHL Printing provided printing services to our Group and the contract amounted

to approximately $15,000 in FY2010 and $7,800 for the period from 1 January 2011 up to the

Latest Practicable Date. The contract price was determined according to market value and the

transaction was conducted on an arm’s length basis and on normal commercial terms. The

contract price was fully paid by our Group as at the Latest Practicable Date.

OTHER TRANSACTIONS

118

(d) Advances to our Group from Kim Hup Lee and its Associate

Our Group had in the past obtained advances from Kim Hup Lee and KHL Printing to fund the

working capital needs of our Group. These advances were made on a preferential basis as they

were interest-free, unsecured and repayable on demand.

The amounts of advances owing to Kim Hup Lee and KHL Printing by our Group as at the end of

each of the last three financial years ended 31 December 2010 and the Latest Practicable Date

were as follows:–

Amounts owing to Kim Hup Lee

and KHL Printing by our Group

($’000)

As at

31 December

2008

As at

31 December

2009

As at

31 December

2010

As at

the Latest

Practicable Date

Kim Hup Lee 801 801 — —

KHL Printing 34 34 34 —

Total 835 835 34 —

During the Relevant Period, the largest amounts owed to Kim Hup Lee and KHL Printing by our

Group, based on month-end balances of such amounts owing to them, were:–

Amount owing to:– ($’000)

Kim Hup Lee 3,483

KHL Printing 1,551

Total 5,034

As at the Latest Practicable Date, all the aforesaid amounts owing have been repaid by our

Group. Our Group has no intention to procure such loans or advances from any of the above

parties in the future.

(e) Waiver of debt by Kim Hup Lee

There had been non-trade debts of approximately $388,000 due to Kim Hup Lee which were

incurred in the previous business of KHL Marketing prior to the commencement of our current

business in 1991. Such debts were eventually waived by Kim Hup Lee in FY2010 in connection

with the Restructuring Exercise.

(f) Sale of kitchen appliances to Lim Geok Khoon

Lim Geok Khoon is the uncle of our Executive Directors, Lim Wee Li and Lim Han Li, and a former

director of our subsidiary, namely KHL Marketing. In FY2009 and FY2010, our Group sold kitchen

appliances to Lim Geok Khoon for approximately $2,400 and $2,600 respectively. The sales

transactions were conducted on an arm’s length basis and on normal commercial terms. The sale

price was fully paid by Lim Geok Khoon in February 2011.

OTHER TRANSACTIONS

119

Transactions with Voda Land Pte. Ltd. (“Voda Land”)

Voda Land, a company incorporated in Singapore, is a property developer. Our Executive Chairman

and CEO, Lim Wee Li is a director and owns 10.0% of the issued share capital of Voda Land. The

shareholders holding the remaining 90.0% interests in Voda Land are parties not related to our

Directors or Controlling Shareholders or their respective Associates. Accordingly, Voda Land does not

fall within the definition of interested persons under Chapter 9 of the Listing Manual.

In FY2008, our Group purchased a freehold property at 50 Amber Road #11-02 Singapore 439888 from

Voda Land at a purchase consideration of $1,583,341 as an investment property for our Group. The

purchase consideration was based on market rates and conducted on an arm’s length basis. In April

2011, our Group entered into an option to purchase with an unrelated party to sell such property at a

sale price of $1,650,000. The sale was completed on 17 June 2011.

In December 2008, our Group was appointed by Voda Land, the developer for the Amber Residences

development at 50 Amber Road Singapore 439888, as the subcontractor for the supply of kitchen

systems and kitchen appliances for the development. Pursuant to this, our Group entered into the

contract to supply kitchen systems and kitchen appliances for the Amber Residences development with

the main contractor, namely Lian Beng/ L.S. J.V. (as disclosed in the “Business — Business Overview”

section of this Offer Document). The contract sum of $4,344,990 was awarded to our Group directly by

the developer and not by invitation to tender, for which our Group has completed delivery and

installation in FY2010. The contract sum was determined on an arm’s length basis and on normal

commercial terms. The temporary occupation permit for the development was obtained in March 2011.

Transactions with Royce Properties Pte. Ltd. (subsidiary of Hayden Properties Pte. Ltd.)

(“Royce Properties”)

Royce Properties, a company incorporated in Singapore, is a property developer. Its directors are

unrelated parties. Lim Yee Ling Elaine (wife of our Executive Director, Lim Han Li) holds 0.0003% of the

issued share capital of Royce Properties. The shareholders holding the remaining interests in Royce

Properties are parties not related to our Directors or Controlling Shareholders or their respective

Associates. Accordingly, Royce Properties does not fall within the definition of interested persons under

Chapter 9 of the Listing Manual.

In September 2008, our Group was appointed by Royce Properties, the developer for The Ritz-Carlton

Residences, Singapore, Cairnhill development at Cairnhill Road Singapore, as the subcontractor for the

supply of kitchen systems, as well as the supplier for kitchen appliances for the development. Pursuant to

this, our Group entered into the contract to supply kitchen systems for The Ritz-Carlton Residences,

Singapore, Cairnhill development with the main contractor, namely Millennium International Builders Pte.

Ltd. (a member of Lian Beng Group) in November 2008 for a contract sum of $2,299,294, and entered into

the contract to supply kitchen appliances for the same development with the developer, Royce Properties

in September 2008 for a contract sum of $806,200. The aggregate contract sum of $3,105,494 was

awarded to our Group directly by the developer and not by invitation to tender. From 1 January 2011 to the

Latest Practicable Date, our Group has made sales amounting to $1,926,116 to Millennium International

Builders Pte. Ltd.. The contract sum was determined on an arm’s length basis and on normal commercial

terms. We expect to complete delivery and installation by end of FY2011.

OTHER TRANSACTIONS

120

Transactions with Sardinia Properties Pte. Ltd. (subsidiary of Hayden Properties Pte. Ltd.)

(“Sardinia Properties”)

Sardinia Properties, a company incorporated in Singapore, is a property developer. Its directors are

unrelated parties. Our Executive Director, Lim Han Li, owns 0.0001% of the issued share capital of

Sardinia Properties. The shareholders holding the remaining 99.9999% interests in Sardinia Properties

are parties not related to our Directors or Controlling Shareholders or their respective Associates.

Accordingly, Sardinia Properties does not fall within the definition of interested persons under Chapter

9 of the Listing Manual.

In July 2010, our Group was appointed by Sardinia Properties, the developer for the Hamilton Scotts

development at 37 Scotts Road Singapore 228229, as the subcontractor for the supply of kitchen

systems for the development. Pursuant to this, our Group entered into the contract to supply kitchen

systems for the Hamilton Scotts development with the main contractor, namely A.M. Associates

(Singapore) Pte Ltd (a member of the AMA Group). The contract sum of $1,983,343 was awarded to

our Group directly by the developer and not by invitation to tender. As at the Latest Practicable Date,

our Group has not made any sale to A.M. Associates (Singapore) Pte Ltd. The contract sum was

determined on an arm’s length basis and on normal commercial terms. Our Group expects to complete

delivery and installation by end of FY2011.

After our Company’s admission to Catalist, our Executive Directors, namely Lim Wee Li and Lim Han

Li, will update the Board on their personal investments, direct or indirect, in property development

projects.

OTHER TRANSACTIONS

121

INTERESTS OF DIRECTORS, CONTROLLING SHAREHOLDERS OR THEIR ASSOCIATES

Save as disclosed in the “Interested Person Transactions” section of this Offer Document, during the

past three financial years ended 31 December 2010 and the period from 1 January 2011 up to the

Latest Practicable Date:–

(a) none of our Directors, Controlling Shareholders or any of their respective Associates has any

interest, direct or indirect, in any material transactions to which our Company or any of our

subsidiaries was or is a party;

(b) none of our Directors, Controlling Shareholders or any of their respective Associates has any

interest, direct or indirect, in any entity carrying on the same business or dealing in similar

products which competes materially and directly with the existing business of our Group; and

(c) none of our Directors, Controlling Shareholders or any of their respective Associates has any

interest, direct or indirect, in any enterprise or company that is our customer or supplier of goods

and services.

INTERESTS OF EXPERTS

None of the experts named in this Offer Document:–

(i) is employed on a contingent basis by our Company or our subsidiaries;

(ii) has a material interest, whether direct or indirect, in our Shares or in the shares of our

subsidiaries; or

(iii) has a material economic interest, whether direct or indirect, in our Company, including having an

interest in the success of the Placement.

INTERESTS OF SPONSOR OR PLACEMENT AGENT

In the reasonable opinion of our Directors, the Sponsor and the Placement Agent do not have a material

relationship with our Company save that the Placement is managed by the Sponsor and the Placement

is undertaken by the Placement Agent. Please refer to the “Management and Placement

Arrangements” section of this Offer Document for further details on our management and placement

arrangements.

POTENTIAL CONFLICTS OF INTERESTS

122

Upon listing and quotation on Catalist, our Shares will be traded under the book-entry settlement

system of the CDP, and all dealings in and transactions of our Shares through Catalist will be effected

in accordance with the terms and conditions for the operation of Securities Accounts with the CDP, as

amended form time to time.

Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf

of persons who maintain, either directly or through Depository Agents, Securities Accounts with CDP.

Persons named as direct Securities Account holders and Depository Agents in the Depository Register

maintained by the CDP, rather than CDP itself, will be treated, under our Articles of Association and the

Companies Act, as members of our Company in respect of the number of Shares credited to their

respective Securities Accounts.

Persons holding the Shares in Securities Accounts with CDP may withdraw the number of Shares they

own from the book-entry settlement system in the form of physical share certificates. Such share

certificates will, however, not be valid for delivery pursuant to trades transacted on Catalist, although

they will be prima facie evidence of title and may be transferred in accordance with our Articles of

Association. A fee of $10.00 for each withdrawal of 1,000 Shares or less and a fee of $25.00 for each

withdrawal of more than 1,000 Shares is payable upon withdrawing our Shares from the book entry

settlement system and obtaining physical share certificates. In addition, a fee of $2.00 or such other

amount as our Directors may decide, is payable to the share registrar for each share certificate issued

and a stamp duty of $10.00 is also payable where our Shares are withdrawn in the name of the person

withdrawing our Shares or $0.20 per $100.00 or part thereof of the last transacted price where it is

withdrawn in the name of a third party. Persons holding physical share certificates who wish to trade

on Catalist must deposit with CDP their share certificates together with the duly executed and stamped

instruments of transfer in favour of CDP, and have their respective Securities Accounts credited with the

number of Shares deposited before they can effect the desired trades. A fee of $10.00 is payable upon

the deposit of each instrument of transfer with CDP. The above fees may be subject to such charges

as may be in accordance with CDP’s prevailing policies or the current tax policies that may be in force

in Singapore from time to time.

Transactions in our Shares under the book-entry settlement system will be reflected by the seller’s

Securities Account being debited with the number of Shares sold and the buyer’s Securities Account

being credited with the number of Shares acquired. No transfer of stamp duty is currently payable for

our Shares that are settled on a book-entry basis.

A Singapore clearing fee for trades in our Shares on Catalist is payable at the rate of 0.04% of the

transaction value subject to a maximum of $600.00 per transaction. The clearing fee, instrument of

transfer deposit fee and share withdrawal fee may be subject to GST at the prevailing rate of 7% (or

such other rate prevailing from time to time).

Dealing in our Shares will be carried out in Singapore dollars and will be effected for settlement on CDP

on a scripless basis. Settlement of trades on a normal “ready” basis on Catalist generally takes place

on the third Market Day following the transaction date, and payment for the securities is generally

settled on the following business day. CDP holds securities on behalf of investors in Securities

Accounts. An investor may open a direct account with CDP or a sub-account with a CDP Depository

Agent. The CDP Depository Agent may be a member company of the SGX-ST, bank, merchant bank

or trust company.

CLEARANCE AND SETTLEMENT

123

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

1. Save as disclosed below, none of our Directors, Executive Officers or Controlling Shareholder is

or was involved in any of the following events:–

(a) had at any time during the last ten years, an application or a petition under any bankruptcy

laws of any jurisdiction filed against him or against a partnership of which he was a partner

at the time when he was a partner or at any time within two years from the date he ceased

to be a partner;

(b) had at any time during the last ten years, an application or a petition under any law of any

jurisdiction filed against an entity (not being a partnership) of which he was a director or an

equivalent person or a key executive, at the time when he was a director or an equivalent

person or a key executive of that entity or at any time within two years from the date he

ceased to be a director or an equivalent person or a key executive of that entity, for the

winding up or dissolution of that entity or, where that entity is the trustee of a business trust,

that business trust, on the ground of insolvency;

(c) has any unsatisfied judgment against him;

(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or

dishonesty, which is punishable with imprisonment, or has been the subject of any criminal

proceedings (including any pending criminal proceedings of which he is aware) for such

purpose;

(e) has been convicted of any offence, in Singapore or elsewhere, involving a breach of any law

or regulatory requirement that relates to the securities or futures industry in Singapore or

elsewhere, or has been the subject of any criminal proceedings (including any pending

criminal proceedings of which he is aware) for such breach;

(f) at any time during the last ten years, had judgment entered against him in any civil

proceedings in Singapore or elsewhere involving a breach of any law or regulatory

requirement that relates to the securities or futures industry in Singapore or elsewhere, or a

finding of fraud, misrepresentation or dishonesty on his part, or been the subject of any civil

proceedings (including any pending civil proceedings of which he is aware) involving an

allegation of fraud, misrepresentation or dishonesty on his part;

(g) has been convicted in Singapore or elsewhere of any offence in connection with the

formation or management of any entity or business trust;

(h) has been disqualified from acting as a director or an equivalent person of any entity

(including the trustee of a business trust), or from taking part in any way directly or indirectly

in the management of any entity or business trust;

(i) has been the subject of any order, judgment or ruling of any court, tribunal or governmental

body permanently or temporarily enjoining him from engaging in any type of business

practice or activity;

(j) has ever, to his knowledge, been concerned with the management or conduct, in Singapore

or elsewhere, of the affairs of:–

(i) any corporation which has been investigated for a breach of any law or regulatory

requirement governing corporations in Singapore or elsewhere;

GENERAL AND STATUTORY INFORMATION

124

(ii) any entity (not being a corporation) which has been investigated for a breach of any law

or regulatory requirement governing such entities in Singapore or elsewhere;

(iii) any business trust which has been investigated for a breach of any law or regulatory

requirement governing business trusts in Singapore or elsewhere; or

(iv) any entity or business trust which has been investigated for a breach of any law or

regulatory requirement that relates to the securities or futures industry in Singapore or

elsewhere,

in connection with any matter occurring or arising during the period when he was so

concerned with the entity or business trust; or

(k) has been the subject of any current or past investigation or disciplinary proceedings, or has

been reprimanded or issued any warning, by the Authority or any other regulatory authority,

exchange, professional body or governmental agency, whether in Singapore or elsewhere.

Disclosure Relating to Lim Wee Li (our Executive Chairman and CEO)

Our Executive Chairman and CEO, Lim Wee Li, was fined an aggregate sum of $2,800 for drink

driving and speeding in 2004. The fines have been fully paid.

Disclosure Relating to Terrence Liew Fook Siong (our Executive Officer)

Our Executive Officer, Terrence Liew Fook Siong, was fined $600 for speeding in 2001. The fine

has been fully paid.

SHARE CAPITAL

2. Save as disclosed below, there were no changes in the issued and paid-up share capital of our

Company and our subsidiaries within the three years preceding the date of lodgement of this Offer

Document:–

Our Company

Date of Issue

Number of

Shares Issued Purpose

Consideration

Per Share

Resultant

Issued Share

Capital

25 March 2011 2 Incorporation $1 $2

6 June 2011 8 New allotment $1 $10

21 June 2011 1,500,003 Restructuring

exercise

$1 $1,500,013

KHL Marketing

Date of Issue

Number of

Shares Issued Purpose

Consideration

Per Share

Resultant

Issued Share

Capital

16 June 2011 3 Restructuring

exercise

$1 $1,500,003


125

3. Save as disclosed above and in the “Restructuring Exercise” section of this Offer Document, no

shares in our Company or any of our subsidiaries have been issued for a consideration other than

cash during the three years preceding the date of lodgement of this Offer Document.

MATERIAL CONTRACTS

4. The following contract, not being contract entered into in the ordinary course of business, has

been entered into by our Company and our subsidiaries within the two years preceding the date

of lodgement of this Offer Document and is or may be material:–

(a) Restructuring agreement dated 16 June 2011 entered into between our Company, Lim Wee

Li, Lim Han Li, Lim Sok Khim, Kim Hup Lee and KHL Marketing.

LITIGATION

5. There are no legal or arbitration proceedings, including those which are pending or known to be

contemplated, which may have or have had during the last 12 months before the date of this Offer

Document, a material effect on our Group’s financial position or profitability.

MISCELLANEOUS

6. Save as disclosed in the “Subsequent Events” section in Appendix A of this Offer Document, our

Directors are not aware of any event which has occurred since 31 December 2010, which may

have a material effect on the financial information provided in the “Combined Financial

Statements for Financial Years Ended 31 December 2008, 2009 and 2010” set out in Appendix A

of this Offer Document.

7. We currently have no intention of changing the auditors of our Company and our subsidiaries after

the admission of our Company to Catalist.

CONSENTS

8. Baker Tilly TFW LLP, the Auditors and Reporting Accountants have given and have not withdrawn

their written consent to the issue of this Offer Document with the inclusion herein of the “Combined

Financial Statements for Financial Years Ended 31 December 2008, 2009 and 2010”, in the form

and context in which it is included and references to their name in the form and context in which

it appears in this Offer Document and to act in such capacity in relation to this Offer Document.

9. Collins Stewart has given and has not withdrawn its written consent to the issue of this Offer

Document with the inclusion herein of its name and references thereto in the form and context in

which it appears in this Offer Document and to act as the Sponsor and the Placement Agent in

relation to this Offer Document.

10. Opal Lawyers LLC, the Solicitors to the Placement and Legal Adviser to the Company on

Singapore Law, has given and has not withdrawn its written consent to the issue of this Offer

Document with the inclusion herein of its name and references thereto in the form and context in

which it appears in this Offer Document and to act in such capacity in relation to this Offer

Document.


126

11. Wong Beh & Toh, the Legal Adviser to the Company on Malaysian Law, has given and has not

withdrawn its written consent to the issue of this Offer Document with the inclusion herein of its

name and references thereto in the form and context in which it appears in this Offer Document

and to act in such capacity in relation to this Offer Document.

12. Unless otherwise expressly stated herein, the Solicitors to the Placement and Legal Adviser to the

Company on Singapore Law, the Legal Adviser to the Company on Malaysian Law, the Share

Registrar and Share Transfer Office, the Principal Bankers and the Receiving Banker do not make

or purport to make any statement in this Offer Document or any statement upon which a statement

in this Offer Document is based and each of them makes no representation regarding any

statement in this Offer Document and to the maximum extent permitted by law, expressly disclaim

and takes no responsibility for any liability to any person which is based on, or arises out of, any

statement, information or opinions in, or omission from, this Offer Document.

DOCUMENTS AVAILABLE FOR INSPECTION

13. Copies of the following documents may be inspected at the registered address of our Company

during normal business hours for a period of six months from the date of registration by the

SGX-ST acting as agent on behalf of the Authority, of this Offer Document:–

(a) the Memorandum and Articles of Association of our Company;

(b) the “Combined Financial Statements for Financial Years Ended 31 December 2008, 2009

and 2010” set out in Appendix A of this Offer Document;

(c) the material contracts referred to in paragraph 4 above;

(d) the letters of consent referred to in paragraphs 8 to 11 above; and

(e) the Service Agreements.

RESPONSIBILITY STATEMENT BY OUR DIRECTORS

14. This Offer Document has been seen and approved by our Directors and they collectively and

individually accept the full responsibility for the accuracy of the information given in this Offer

Document and confirm, having made all reasonable enquiries, that to the best of their knowledge

and belief, the facts stated and the opinions expressed herein are fair and accurate in all material

respects as of the date hereof and there are no other facts the omission of which would make any

statements herein misleading, and that this Offer Document constitutes full and true disclosure of

all material facts about the Placement and our Group.


127


STATEMENT BY DIRECTORS

In the opinion of the directors:

(i) the combined financial statements of the Group as set out on pages A-4 to A-47 are drawn up so

as to give a true and fair view of the state of affairs of the Group at 31 December 2008, 2009 and

2010 and of the results, changes in equity and cash flows of the Group for the financial years then

ended; and

(ii) at the date of this statement there are reasonable grounds to believe that the Group will be able

to pay its debts as and when they fall due.

On behalf of the directors

Lim Wee Li

Director

Lim Han Li

Director

15 July 2011

APPENDIX ACOMBINED FINANCIAL STATEMENTS FOR FINANCIAL YEARS

ENDED 31 DECEMBER 2008, 2009 AND 2010

A-1

INDEPENDENT AUDITOR’S REPORT ON THE COMBINED FINANCIAL STATEMENTS

FOR FINANCIAL YEARS ENDED 31 DECEMBER 2008, 2009 AND 2010

15 July 2011

The Board of Directors

Kitchen Culture Holdings Ltd.

25 New Industrial Road

#02-01 KHL Industrial Building

Singapore 536211

Dear Sirs,

We have audited the accompanying combined financial statements of Kitchen Culture Holdings Ltd.

(the “Company”) and its subsidiaries (collectively the “Group”) as set out on pages A-4 to A-47, which

comprise the combined statements of financial position of the Group as at 31 December 2008, 2009

and 2010, and the combined statements of comprehensive income, combined statements of changes

in equity and combined statements of cash flows of the Group for financial years ended 31 December

2008, 2009 and 2010, and a summary of significant accounting policies and other explanatory

information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in

accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore

Financial Reporting Standards, and for devising and maintaining a system of internal accounting

controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from

unauthorised use or disposition; and transactions are properly authorised and that they are recorded

as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and

to maintain accountability of assets.

Independent Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that

we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation of financial statements that give a true and fair view in order to design audit procedures that

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.



A-2

Opinion

In our opinion, the combined financial statements of the Group are properly drawn up in accordance

with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair

view of the state of affairs of the Group as at 31 December 2008, 2009 and 2010 and the results,

changes in equity and cash flows of the Group for the financial years ended on that date.

This report has been prepared solely for inclusion in the Offer Document dated 15 July 2011 of the

Company in connection with the proposed initial public offering of the ordinary shares of the Company

on the Singapore Exchange Securities Trading Limited.

Baker Tilly TFW LLP

Public Accountants and

Certified Public Accountants

Singapore

Partner: Ong Kian Guan



A-3


COMBINED STATEMENTS OF COMPREHENSIVE INCOME

For the financial years ended 31 December 2008, 2009 and 2010

2008 2009 2010

Note $’000 $’000 $’000

Revenue 4 18,524 19,484 31,221

Cost of sales (9,890) (10,683) (18,211)

Gross profit 8,634 8,801 13,010

Other income 5 72 276 561

Selling and distribution expenses (4,638) (4,271) (5,306)

General and administrative expenses (1,608) (2,058) (2,249)

Finance costs 6 (168) (299) (241)

Other expenses (139) (645) (755)

Profit before tax 7 2,153 1,804 5,020

Tax expense 9 (336) (447) (861)


Other comprehensive income

Currency translation differences arising from

consolidation 22 (1) (22)

Total comprehensive income for the year 1,839 1,356 4,137

Profit attributable to:




Total comprehensive income attributable to:



1,839 1,356 4,137

Earnings per share

Basic and diluted (cents) 10 2.2 1.5 5.2

The accompanying notes form an integral part of these financial statements.



A-4


COMBINED STATEMENTS OF FINANCIAL POSITION

At 31 December 2008, 2009 and 2010

2008 2009 2010

Note $’000 $’000 $’000

Non-current assets

Property, plant and equipment 11 908 894 855

Investment property under construction 12 317 317 —

Goodwill on consolidation 13 166 — —

Long-term prepayment 14 — — 196

1,391 1,211 1,051

Current assets

Financial assets at fair value through profit or loss 15 20 — —

Inventories 16 5,474 9,001 7,303

Investment property under construction 12 — — 317

Project work-in-progress 17 2,388 2,045 644

Trade and other receivables 18 6,987 7,650 6,976

Amounts due from directors 19 1,553 1,723 —

Cash and cash equivalents 20 1,575 1,600 5,035

17,997 22,019 20,275

Total assets 19,388 23,230 21,326

Non-current liabilities

Bank borrowings 21 — 1,954 2,299

Finance lease liabilities 22 290 201 314

Deferred tax liability 23 37 37 37

327 2,192 2,650

Current liabilities

Project work-in-progress 17 504 — 224

Bank borrowings 21 — 713 1,233

Trade and other payables 24 8,532 9,448 4,962

Bills payable to banks 25 2,650 3,204 1,722


Amounts due to directors 19 — — 2,457

Tax payable 1,142 89 843

12,918 13,539 11,543

Total liabilities 13,245 15,731 14,193

Net assets 6,143 7,499 7,133

Share capital and reserves

Share capital 26 1,500 1,500 1,500

Accumulated profits 4,615 5,871 5,615

Currency translation reserve 27 28 13 18

Equity attributable to equity holders of the Company 6,143 7,384 7,133

Non-controlling interests — 115 —

Total equity 6,143 7,499 7,133




A-5


COMBINED STATEMENTS OF CHANGES IN EQUITY


Attributable to equity holders of the Company

Share

capital

Accumulated

profits

Currency

translation

reserve Total

Non-

controlling

interests

Total

equity

$’000 $’000 $’000 $’000 $’000 $’000

At 1.1.2008 200 4,298 6 4,504 — 4,504

Profit for the year — 1,817 — 1,817 — 1,817

Other comprehensive income for

the year, net of tax

— currency translation differences

arising from consolidation — — 22 22 — 22

Total comprehensive income

for the year — 1,817 22 1,839 — 1,839

Issuance of shares 1,300 — — 1,300 — 1,300

Dividend (note 28) — (1,500) — (1,500) — (1,500)

At 31.12.2008 1,500 4,615 28 6,143 — 6,143

At 1.1.2009 1,500 4,615 28 6,143 — 6,143

Profit for the year — 1,256 — 1,256 101 1,357

Other comprehensive loss for the

year, net of tax


arising from consolidation — — (15) (15) 14 (1)

Total comprehensive income/(loss)

for the year — 1,256 (15) 1,241 115 1,356

At 31.12.2009 1,500 5,871 13 7,384 115 7,499

At 1.1.2010 1,500 5,871 13 7,384 115 7,499

Profit for the year — 4,344 — 4,344 (185) 4,159

Other comprehensive loss for the

year, net of tax


arising from consolidation — — (26) (26) 4 (22)

Total comprehensive income/(loss)

for the year — 4,344 (26) 4,318 (181) 4,137

Acquisition of non-controlling

interests — — 31 31 66 97

Dividend (note 28) — (4,600) — (4,600) — (4,600)

At 31.12.2010 1,500 5,615 18 7,133 — 7,133




A-6


COMBINED STATEMENTS OF CASH FLOWS


2008 2009 2010

$’000 $’000 $’000

Cash flows from operating activities


Adjustments for:

Depreciation of property, plant and equipment 227 399 372

Gain on disposal of property, plant and equipment — (11) (33)

Fair value loss/(gain) on financial assets at fair value through profit

or loss 79 (17) —

Impairment loss on goodwill on consolidation — 166 87

Interest income (27) (134) (85)

Interest expense 168 299 241

Property, plant and equipment written off — 164 —

Operating profit before working capital changes 2,600 2,670 5,602

Inventories (2,077) (3,527) 1,698

Project work-in-progress 2,819 (161) 1,625

Receivables (2,839) (629) 2,167

Payables 1,829 1,301 (3,532)

Translation differences 30 2 3

Cash generated from/(used in) operations 2,362 (344) 7,563

Interest paid (168) (299) (241)

Interest received 27 134 85

Tax paid (375) (1,533) (76)

Net cash from/(used in) operating activities 1,846 (2,042) 7,331

Cash flows from investing activities

Purchase of investment property under construction (317) — —

Purchases of property, plant and equipment (note A) (201) (534) (250)

Proceeds from disposal of property, plant and equipment — 96 202

Proceeds from disposal of financial assets at fair value through

profit or loss — 37 —

Net cash used in investing activities (518) (401) (48)




A-7

2008 2009 2010

$’000 $’000 $’000

Cash flows from financing activities

Proceeds from issuance of ordinary shares 1,300 — —

Dividend paid to shareholders (1,500) — (4,600)

Drawndown of term loan — 3,000 2,000

Repayment of bank borrowings — (334) (1,133)

Repayment of finance lease (85) (196) (120)

Net cash (used in)/from financing activities (285) 2,470 (3,853)

Net increase in cash and cash equivalents 1,043 27 3,430

Cash and cash equivalents at beginning of financial year 538 1,575 1,600

Effect of exchange rate changes on cash and cash equivalents (6) (2) 5

Cash and cash equivalents at end of financial year (note 20) 1,575 1,600 5,035

Note A

During the year, the Group acquired property, plant and equipment with an aggregate cost of $500,000 (2009: $636,000; 2008:

$244,000) of which $250,000 (2009: $102,000; 2008: $43,000) was financed by means of finance lease. Cash payment of

$250,000 (2009: $534,000; 2008: $201,000) was made to purchase property, plant and equipment.




A-8


NOTES TO THE COMBINED FINANCIAL STATEMENTS


These notes form an integral part of and should be read in conjunction with the accompanying

combined financial statements.

1. Corporate information

Kitchen Culture Holdings Pte. Ltd. (the “Company”) (Co. Reg. No. 201107179D) was incorporated

in Singapore under the Singapore Companies Act, Cap. 50 on 25 March 2011. At the date of

incorporation, the issued and paid-up share capital was $2. On 6 June 2011, the Company issued

8 ordinary shares at $1 each for a total cash consideration of $8. The combined financial

statements are presented in Singapore dollars.

On 6 July 2011, the Company was converted into a public company limited by shares and

changed the name to Kitchen Culture Holdings Ltd..

The registered office and principal place of the Company is at 25 New Industrial Road, #02-01,

KHL Industrial Building, Singapore 536211.

The principal activity of the Company is that of investment holding. The principal activities of the

subsidiaries are disclosed in note 2.

The combined financial statements of the Group have been prepared solely for inclusion in the

Offer Document dated 15 July 2011 in connection with the proposed initial public offering of the

ordinary shares of the Company.

2. The Restructuring Exercise

A restructuring exercise was conducted to streamline and rationalise the Group structure and

business activities (“Restructuring Exercise”). The following steps were carried out in the

Restructuring Exercise:

(a) Incorporation of the Company

The Company was incorporated on 25 March 2011 in Singapore in accordance with the

Companies Act as a private company limited by shares with an issued and paid-up share

capital of $2 comprising 2 shares held equally by Lim Wee Li and Lim Han Li. Subsequent

to incorporation, 6 and 2 new shares were allotted and issued to Kim Hup Lee & Co.

(Private) Limited and Lim Wee Li respectively such that Kim Hup Lee & Co. (Private) Limited

held 6 shares, Lim Wee Li held 3 shares and Lim Han Li held 1 share in the Company.

(b) Acquisition of Kitchen Culture Pte. Ltd. (“Kitchen Culture Singapore”)

On 16 June 2011, the shareholders of KHL Marketing Asia-Pacific Pte Ltd (“KHL Marketing”),

namely Kim Hup Lee & Co. (Private) Limited (60%), Lim Wee Li (30%) and Lim Han Li

(10%), entered into a restructuring agreement (the “Restructuring Agreement”) with the

shareholders of Kitchen Culture Singapore, namely Lim Wee Li (50%) and Lim Sok Khim

(wife of Lim Wee Li) (50%), pursuant to which KHL Marketing acquired the entire issued and

paid-up share capital of Kitchen Culture Singapore for a consideration of $2 based on the

amount of issued and paid-up share capital of Kitchen Culture Singapore as at 31 December

2010. The consideration was satisfied by the allotment and issue of 2 new ordinary shares

in KHL Marketing to Lim Wee Li and Lim Sok Khim.



A-9

2. The Restructuring Exercise (continued)

(b) Acquisition of Kitchen Culture Pte. Ltd. (“Kitchen Culture Singapore”) (continued)

Lim Sok Khim nominated Lim Wee Li to receive 1 ordinary share in KHL Marketing and the

acquisition was completed on 16 June 2011 where Lim Wee Li was issued 2 ordinary shares

in KHL Marketing.

(c) Acquisition of Haus Furnishings and Interiors Pte. Ltd. (“Haus”)

On 16 June 2011, the shareholders of KHL Marketing entered into the Restructuring

Agreement with the sole shareholder of Haus, namely Lim Wee Li, pursuant to which KHL

Marketing acquired the entire issued and paid-up share capital of Haus for a consideration

of $1 based on the amount of issued and paid-up share capital of Haus as at 31 December

2010. The consideration was satisfied by the allotment and issue of 1 new ordinary share in

KHL Marketing to Lim Wee Li.

The acquisition was completed on 16 June 2011 where Lim Wee Li was issued 1 ordinary

share in KHL Marketing.

(d) Acquisition of KHL Marketing

On 16 June 2011, the Company entered into the Restructuring Agreement with the

shareholders of KHL Marketing, namely Kim Hup Lee & Co. (Private) Limited (60%), Lim

Wee Li (30%) and Lim Han Li (10%), pursuant to which the Company acquired the entire

issued and paid-up share capital of KHL Marketing for a consideration of $1,500,003 based

on the amount of issued and paid-up share capital of KHL Marketing as at 16 June 2011.

Pursuant to the acquisition, KHL Marketing became a wholly-owned subsidiary. The

consideration was satisfied by the allotment and issue of 1,500,003 new shares in the

Company to the then shareholders of KHL Marketing as follows:


Kim Hup Lee & Co. (Private) Limited 900,000 60.0

Lim Wee Li 450,003 30.0

Lim Han Li 150,000 10.0

Total 1,500,003 100.0

The acquisition was completed on 16 June 2011.

(e) Share Exchange

Pursuant to a conditional share exchange agreement dated 1 June 2011, the Executive

Chairman and CEO, Lim Wee Li, acquired the 60% stake in the Company held by Kim Hup

Lee & Co. (Private) Limited. The consideration was satisfied by the transfer to such persons

and companies nominated by Kim Hup Lee & Co. (Private) Limited, of ordinary shares held

by Lim Wee Li in Lim Ee Pan & Sons (Private) Limited (1,476 shares) and Kinly Investment

Private Limited (1,606 shares). As one of the conditions precedent for the share exchange

arrangement, Lim Wee Li has distributed and transferred 4,263 ordinary shares in Kim Hup

Lee & Co. (Private) Limited held by him to such persons and companies nominated by Kim

Hup Lee & Co. (Private) Limited at a nominal consideration.



A-10

2. The Restructuring Exercise (continued)

(e) Share Exchange (continued)

On completion of the share exchange, Lim Wee Li held 90% of the entire issued and paid-up

share capital of the Company with the balance 10% being held by Lim Han Li.

Resultant Shareholding in the Company before Sub-Division


Lim Wee Li 1,350,012 90.0

Lim Han Li 150,001 10.0

Total 1,500,013 100.0

(f) Sub-Division of shares

On 1 July 2011, the shareholders approved the Sub-Division.

Upon the completion of the Restructuring Exercise and at the date of this report, the Company has

the following subsidiaries:

Name of subsidiary

(Country of incorporation) Principal activities

Group’s equity

interest held

2008 2009 2010

% % %

Held by the Company

KHL Marketing

(Singapore)

Suppliers of household and

fittings, kitchen equipment and

related products

100 100 100

Held by subsidiary

Kitchen Culture Sdn. Bhd.

(Malaysia)

Trading in furnitures and fittings,

kitchen equipment and related

products

100 100 100


(Singapore)

Dormant 100 100 100

Haus

(Singapore)

Dormant 100 100 100



A-11

3. Significant accounting policies

(a) Basis of preparation

The combined financial statements of the Group, expressed in Singapore dollars and all

values in the tables are rounded to the nearest thousand ($’000) except when otherwise

indicated. The combined financial statements of the Group have been prepared in

accordance with the provisions of the Singapore Companies Act and Singapore Financial

Reporting Standards (“FRS”). The financial statements have been prepared under the

historical cost convention except as disclosed in the accounting policies below.

The preparation of financial statements in conformity with FRS requires the use of estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements and the reported

amounts of revenues and expenses during the financial year. Although these estimates are

based on management’s best knowledge of current events and actions and historical

experiences and various other factors that are believed to be reasonable under the

circumstances, actual results may ultimately differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised if the

revision affects only that period, or in the period of the revision and future periods if the

revision affects both current and future periods. The areas involving a high degree of

judgment or complexity, are disclosed in note 3(y) to the financial statements.

The carrying amounts of cash and cash equivalents, trade and other current receivables and

payables and provisions approximate their respective fair values due to the relatively

short-term maturity of these financial instruments.

At 31 December 2010, the Group has adopted all the new and revised FRS and

Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for the

current financial year.

The adoption of these new/revised FRSs has no material effect on the financial statements

except for the adoption of the following new or revised FRS which are relevant to the Group:

FRS 103 (revised) Business Combinations

(effective for annual periods beginning on or after 1 July 2009)

The Group adopted the revised standard on 1 January 2010 and the revised accounting

policy on business combinations which is disclosed in note 3(b).

Changes in significant accounting policies resulting from the adoption of the revised FRS

103 are summarised as follows:

— Acquisition-related transactions costs would no longer be capitalised as part of the cost

of acquisition but will be expensed in profit or loss when incurred;

— Consideration contingent on future events are recognised at fair value on the

acquisition date and any changes in the amount of consideration to be paid will no

longer be adjusted against goodwill but in profit or loss;



A-12

3. Significant accounting policies (continued)

(a) Basis of preparation (continued)

FRS 103 (revised) Business Combinations (continued)

— The Group elects for each acquisition of a business, to measure non-controlling

interest at fair value or at the non-controlling interest’s proportionate share of the

acquiree’s identifiable net assets, and this impacts the amount of goodwill recognised;

and

— When a business is acquired in stages, the previously held equity interests in the

acquiree is remeasured to fair value at the acquisition date with any corresponding

gain or loss recognised in profit or loss, and this impacts the amount of goodwill

recognised.

FRS 27 (revised) Consolidated and Separate Financial Statements

The Group adopted the revision to FRS 27 on 1 January 2010. Changes in significant

accounting policies resulting from the adoption of the revised FRS 27 include:

— A change in the ownership interest of a subsidiary that does not result in loss of control

is accounted for as equity transactions. Such change will not have any impact on

goodwill, nor will it give rise to a gain or loss recognised in profit or loss;

— Losses incurred by a subsidiary are allocated to the non-controlling interest even if the

losses exceed the non-controlling interest in the subsidiary’s equity; and

— When control over a subsidiary is lost, any interest retained is measured at fair value

with the corresponding gain or loss recognised in profit or loss.

As the changes have been implemented prospectively in accordance with the standard’s

transitional provisions, the adoption of the revised standard did not require any adjustments

to any amounts previously recognised in the financial statements, and there were no impact

on the financial statements for the current financial year.

At 31 December 2010, the following FRSs and INT FRSs were issued, revised or amended

but not effective:

FRS 24 Related Party Disclosures

INT FRS 115 Agreements for the Construction of Real Estate

INT FRS 119 Extinguishing Financial Liabilities with Equity

Instruments

Amendments to FRS 32 Classification of Rights Issues

Amendments to FRS 101 Limited Exemption from Comparative FRS 107

Disclosures For First-time Adopters

Amendments to INT FRS 114

Improvements to FRSs 2010 project

Prepayments of a Minimum Funding Requirement

The Group anticipates that the adoption of these FRSs and INT FRSs (where applicable) in

future periods will have no material impact on the combined financial statements of the

Group.



A-13


(b) Basis of consolidation

The combined financial statements comprise the financial statements of the Company and

its subsidiaries as at the reporting date. The financial statements of the subsidiaries are

prepared for the same reporting date as the parent company. Consistent accounting policies

are applied for like transactions and events in similar circumstances.

The combined financial statements of the Group have been prepared in a manner similar to

the “pooling of interest” method as the Restructuring Exercise involved companies which are

under common control. Such a manner of presentation reflects the economic substance of

the combining enterprise, although the legal parent-subsidiary relationships were not

established until after the reporting date. The Group is regarded as a continuing entity

throughout the financial period. Accordingly, the Group’s combined financial statements for

the financial years ended 31 December 2008, 2009 and 2010 have been prepared as if the

Group had been in existence prior to the Restructuring Exercise.

All intra-group balances, transactions, income and expenses and unrealised gains and

losses resulting from intra-group transactions are eliminated in full.

Business combinations involving entities or businesses under common control are

accounted for by applying the pooling of interest method. The assets and liabilities of the

combining entities or businesses are reflected at their existing carrying amounts in the

combined financial statements. The retained earnings and other reserves recognised in the

combined financial statements are the retained earnings and other reserves of the

combining entities or businesses immediately before the combination.

Any difference between the consideration paid and the share capital of the acquired entity

or the net tangible asset amount of the acquired business is reflected within equity as merger

reserve or deficit. The combined profit and loss account reflects the results of the combining

entities or businesses for the full year, irrespective of when the combination takes place.

Comparatives are presented as if the entities or businesses had always been combined

since the date the entities or businesses had come under common control.

(c) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and

operating policies so as to obtain benefits from its activities. The Group generally has such

power when it directly or indirectly, holds more than 50% of the issued share capital, or

controls more than half of the voting power, or controls the composition of the board of

directors. The existence and effect of potential voting rights that are currently exercisable or

convertible are considered when assessing whether the Group has control over another

entity.



A-14


(d) Goodwill

Goodwill is initially measured at cost and is subsequently measured at cost less any

accumulated impairment losses.

The Group tests goodwill annually for impairment or more frequently if there are indications

that goodwill might be impaired.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s

cash-generating units expected to benefit from the synergies of the combination. Cash-

generating units to which goodwill has been allocated are tested for impairment annually, or

more frequently when there is an indication that the unit may be impaired. If the recoverable

amount of the cash-generating unit is less than the carrying amount of the unit, the

impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to

the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount

of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a

subsequent periods.

On disposal of a subsidiary, the attributable amount of goodwill is included in the

determination of the profit or loss on disposal.

(e) Revenue recognition

Revenue comprises the fair value for the sale of goods and rendering of services, net of

goods and services tax, rebates and discounts, and after eliminating sales within the Group.

Revenue is recognised to the extent that it is probable that the economic benefits associated

with the transaction will flow to the entity, and the amount of revenue and related cost can

be reliably measured.

Revenue from residential project is recognised using the percentage of completion method

by reference to the value of work done certified. Provision for any anticipated losses on

projects is recognised as soon as the possibility of loss is ascertained. Claims for additional

projects compensation are not recognised until resolved.

Revenue from sale of goods on credit is recognised when the goods are delivered and risks

and rewards passed to customers and in respect of cash sales, when goods are taken and

paid for over the counters.

Interest income is recognised on a time proportion basis using the effective interest method.

(f) Property, plant and equipment

Property, plant and equipment are initially recognised at cost and subsequently carried at

cost less accumulated depreciation and accumulated impairment losses.

The cost of property, plant and equipment initially recognised includes its purchase price and

any cost that is directly attributable to bringing the asset to the location and condition

necessary for it to be capable of operating in the manner intended by management.



A-15


(f) Property, plant and equipment (continued)

Fully depreciated assets are retained in the combined financial statements until they are no

longer in use.

Depreciation is calculated on a straight line basis to allocate the depreciable amounts of

property, plant and equipment over their estimated useful lives. The estimated useful lives

are as follows:

Years

Office equipment 5

Air-conditioners 5

Furniture and fittings 5

Electrical fittings over the lease terms

Renovations over the lease terms

Computers 5

Motor vehicles 5

The residual values, estimated useful lives and depreciation method of property, plant and

equipment are reviewed, and adjusted as appropriate, at each reporting date. The effects of

any revision are recognised in profit or loss when the changes arise.

Subsequent expenditure relating to property, plant and equipment that has already been

recognised is added to the carrying amount of the asset when it is probable that future

economic benefits, will flow to the Group and the cost can be reliably measured. Other

subsequent expenditure is recognised as an expense during the financial year in which it is

incurred.

On disposal of a property, plant and equipment, the difference between the net disposal

proceeds and its carrying amount is taken to profit or loss.

(g) Investment property under construction

Investment properties are properties held for long term rental yield and/or capital

appreciation.

Investment property is measured initially at cost and subsequently carried at cost less

accumulated depreciation and accumulated impairment losses.

No depreciation is provided for investment property under construction until the construction

is completed.

For the financial year ended 31 December 2010, investment property is classified as asset

held for sale and is stated at the lower of carrying amount and fair value less costs to sell,

if its carrying amount is recovered principally through a sale transaction rather than through

continuing use. The assets are not depreciated or amortised while they are classified as held

for sale.



A-16


(h) Financial assets

Classification

The Group classifies its financial assets according to the purpose for which the assets were

acquired. Management determines the classification of its financial assets at initial

recognition. The Group’s only financial assets are loans and receivables and financial assets

at fair value through profit or loss.

Financial assets, at fair value through profit or loss

This category has two sub-categories: “financial assets held for trading”, and those

designated at fair value through profit or loss at inception. A financial asset is classified as

held for trading if acquired principally for the purpose of selling in the short term. Financial

assets designated as at fair value through profit or loss at initial recognition are those that

are managed and their performances are evaluated on a fair value basis, in accordance with

a documented Group’s investment strategy. Derivatives are also categorised as “held for

trading” unless they are designated as hedging instruments. Assets in this category are

classified as current assets if they are either held for trading or are expected to be realised

within 12 months after the reporting date.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. They are included in current assets,

except those maturing later than 12 months after the reporting date which are classified as

non-current assets. Loans and receivables are classified within “trade and other

receivables”, “amounts due from directors” and “cash and cash equivalents” on the

combined statements of financial position.

Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date — the date on

which the Group commits to purchase or sell the asset. Financial assets are derecognised

when the rights to receive cash flows from the financial assets have expired or have been

transferred and the Group has transferred substantially all risks and rewards of ownership.

On sale of a financial asset, the difference between the net sale proceeds and its carrying

amount is taken to profit or loss.

Initial measurement

Financial assets are initially recognised at fair value plus transaction costs except for

financial assets at fair value through profit or loss, which are recognised at fair value.

Transaction costs for financial assets at fair value through profit or loss are recognised in

profit or loss.



A-17


(h) Financial assets (continued)

Subsequent measurement

Financial assets, at fair value through profit or loss are subsequently carried at fair value.

Loans and receivables are carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of financial assets, at fair value through

profit or loss, including effects of currency translation, are recognised in profit or loss in the

financial year in which the changes in fair values arise.

Impairment

The Group assesses at each reporting date whether there is objective evidence that a

financial asset or a group of financial assets is impaired.

Loans and receivables

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy

or financial reorganisation, and default or delinquency in payments are considered indicators

that the receivable is impaired.

The carrying amount of these assets is reduced through the use of an impairment allowance

account, and the amount of the loss is recognised in profit or loss. The allowance amount is

the difference between the asset’s carrying amount and the present value of estimated

future cash flows, discounted at the original effective interest rate. When the asset becomes

uncollectible, it is written off against the allowance account. Subsequent recoveries of

amounts previously written off are recognised against the same line item in profit or loss.

Impairment loss is reversed through the profit or loss if the impairment loss decrease can be

related objectively to an event occurring after the impairment loss was recognised. The

carrying amount of the asset previously impaired is increased to the extent that the new

carrying amount does not exceed the amortised cost had no impairment been recognised in

prior periods.

(i) Financial liabilities

Financial liabilities include trade and other payables, bills payable to banks, bank

borrowings, finance lease liabilities and amounts due to directors. Financial liabilities are

recognised on the combined statements of financial position when, and only when, the

Group becomes a party to the contractual provisions of the financial instrument. Financial

liabilities are initially recognised at fair value plus directly attributable transaction costs and

subsequently measured at amortised cost using the effective interest method.

A financial liability is derecognised when the obligation under the liability is extinguished.

Gains and losses are recognised in profit or loss when the liabilities are derecognised and

through the amortisation process.



A-18


(j) Inventories

Inventories, comprising kitchen and wardrobe systems, appliances, furniture, accessories

and related products are stated at the lower of cost and net realisable value. Net realisable

value is the estimated selling price in the ordinary course of business, less the costs of

completion and selling expenses.

Cost was determined on the “first-in, first-out” basis in prior years. Since the beginning of the

year 2010, the Group has changed its cost formula to weighted average basis. The change

in accounting policy does not have any significant impact on the Group’s combined financial

statements.

(k) Cash and cash equivalents

For the purposes of presentation in the combined statements of cash flows, cash and cash

equivalents comprise cash on hand, deposits with financial institutions which are readily

convertible and subject to an insignificant risk of change in value.

(l) Functional and foreign currencies

Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the

currency of the primary economic environment in which that entity operates (the “functional

currency”). The combined financial statements of the Group are presented in Singapore

dollars, which is the Company’s functional and presentation currency.

Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are

translated into the functional currency using the exchange rates prevailing at the dates of the

transactions. Currency translation gains and losses resulting from the settlement of such

transactions and from the translation at year-end exchange rates of monetary assets and

liabilities denominated in foreign currencies are recognised in the profit or loss, except for

currency translation differences on net investment in foreign operations and borrowings and

other currency instruments qualifying as net investment hedges for foreign operations, which

are included in the currency transaction reserve within equity in the financial statements. The

currency translation reserve is reclassified from equity to profit or loss of the Group on

disposal of the foreign operation.

Non-monetary items measured at fair values in foreign currencies are translated using the

exchange rates at the date when the fair values are determined.



A-19


(l) Functional and foreign currencies (continued)

Translation of Group entities’ financial statements

The results and financial position of all the group entities (none of which has the currency of

a hyperinflationary economy) that have a functional currency different from the presentation

currency are translated into the presentation currency as follows:

(i) Assets and liabilities are translated at the closing rates at the date of the combined

statements of financial position;

(ii) Income and expenses are translated at average exchange rates (unless the average

is not a reasonable approximation of the cumulative effect of the rates prevailing on the

transaction dates, in which case income and expenses are translated using the

exchange rates at the dates of the transactions); and

(iii) All resulting exchange differences are recognised in the currency translation reserve

within equity.

On combination, exchange differences arising from the translation of the net investment in

foreign operations (including monetary items that, in substance, form part of the net

investment in foreign entities), and of borrowings and other currency instruments designated

as hedges of such investments, are taken to the currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are

treated as assets and liabilities of the foreign operation and translated at the closing rate.

On disposal of a foreign group entity, the cumulative amount of the currency translation

reserve relating to that particular foreign entity is reclassified from equity and recognised in

profit or loss when the gain or loss on disposal is recognised.

(m) Impairment of non-financial assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of its non-financial assets

(other than goodwill) to determine whether there is any indication that those assets have

suffered an impairment loss. If any such indication exists, the recoverable amount of the

asset is estimated in order to determine the extent of the impairment loss (if any). Where it

is not possible to estimate the recoverable amount of an individual asset, the Group

estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In

assessing value in use, the estimated future cash flows are discounted to their present value

using a pre-tax discount rate that reflects current market assessments of the time value of

money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than

its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its

recoverable amount. An impairment loss is recognised immediately in the profit or loss,

unless the relevant asset is carried at a revalued amount, in which case the impairment loss

is recognised in other comprehensive income up to the amount of any previous revaluation.



A-20


(m) Impairment of non-financial assets excluding goodwill (continued)

Where an impairment loss subsequently reverses, the carrying amount of the asset

(cash-generating unit) is increased to the revised estimate of its recoverable amount, but so

that the increased carrying amount does not exceed the carrying amount that would have

been determined had no impairment loss been recognised for the asset (cash-generating

unit) in prior years. A previously recognised impairment loss for an asset other than goodwill

is only reversed if there has been a change in the estimates used to determine the asset’s

recoverable amount since the last impairment loss was recognised. A reversal of an

impairment loss is recognised immediately in the profit or loss, unless the relevant asset is

carried at a revalued amount, in which case the reversal of the impairment loss is treated as

a revaluation increase.

(n) Leases

Finance leases

Leases of property, plant and equipment in which the Group assumes substantially the risks

and rewards of ownership are classified as finance leases. Finance leases are capitalised

at the inception of the lease at the lower of fair value of the leased property or the present

value of the minimum lease payments. Each lease payment is allocated between the liability

and finance charges so as to achieve a constant rate on the finance balance outstanding.

The corresponding rental obligations, net of finance charges, are included in finance lease

liabilities. The interest element of the finance cost is taken to the profit or loss over the lease

period so as to produce a constant periodic rate of interest on the remaining balance of the

liability for each period. The property, plant and equipment acquired under finance leases

are depreciated over the shorter of the useful life of the asset or the lease term.

Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the

lessor are classified as operating leases. Payments made under operating leases (net of any

incentives received from the lessor) are taken to the profit or loss on a straight-line basis

over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment

required to be made to the lessor by way of penalty is recognised as an expense in the

period in which termination takes place.

(o) Income taxes

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax

is recognised in profit or loss except to the extent that it relates to items recognised directly

to equity, in which case it is recognised in equity.

Current tax is the expected tax payable or recoverable on the taxable income for the current

year, using tax rates enacted or substantially enacted at the reporting date, and any

adjustment to tax payable or recoverable in respect of previous years.



A-21


(o) Income taxes (continued)

Deferred income tax is provided using the liability method, on all temporary differences at the

reporting date arising between the tax bases of assets and liabilities and their carrying

amounts in the financial statements except where the deferred income tax arises from the

initial recognition of goodwill or an asset or liability in a transaction that is not a business

combination, and at the time of the transaction, affects neither the accounting nor taxable

profit or loss.

Deferred income tax is provided on temporary differences arising on investments in

subsidiaries, except where the timing of the reversal of the temporary difference can be

controlled by the Group and it is probable that the temporary difference will not reverse in the

foreseeable future.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit

will be available against which the deductible temporary differences can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply

in the year when the asset is realised or the liability is settled, based on currently enacted

or substantively enacted tax rates at the reporting date.

Deferred income tax are charged or credited to equity if the tax relates to items that are

credited or charged, in the same or a different period, directly to equity.

(p) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as

a result of past event, and it is probable that an outflow of economic resources will be

required to settle that obligation and that the amount can be estimated reliably. Provisions

are measured at management’s best estimate of the expenditure required to settle the

obligation at the reporting date, and are discounted to present value where the effect is

material.

(q) Dividends

Interim dividends are recorded during the financial year in which they are declared payable.

Final dividends are recorded in the combined financial statements in the period in which they

are approved by the Company’s shareholders.

(r) Share capital

Proceeds from issuance of ordinary shares are recognised as share capital in equity.

Incremental costs directly attributable to the issuance of ordinary shares are deducted

against share capital.



A-22


(s) Employee benefits

Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays

fixed contributions into separate entities such as the Central Provident Fund, and will have

no legal or constructive obligation to pay further contributions once the contributions have

been paid. Contributions to defined contribution plans are recognised as an expense in the

period in which the related service is performed.

Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. An

accrual is made for the estimated liability for leave as a result of services rendered by

employees up to the reporting date.

(t) Borrowing costs

Borrowing costs, which comprise interest and other costs incurred in connection with the

borrowing of funds, are capitalised as part of the cost of a qualifying asset if they are directly

attributable to the acquisition, construction or production of that asset. Capitalisation of

borrowing costs commences when the activities to prepare the asset for its intended use or

sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs

are capitalised until the assets are substantially completed for their intended use or sale. All

other borrowing costs are expensed in the period they occur.

(u) Project work-in-progress

Project revenue is recognised to the extent of project costs incurred where it is probable

those costs will be recoverable when the outcome of a project cannot be estimated reliably.

Project costs are recognised when incurred. When outcome of a project can be estimated

reliably, project revenue and project costs are recognised by using the stage of completion

of the project activity at the end of the reporting date. The stage of completion is measured

by reference to the value of work done certified. When it is probable that total project costs

will exceed total project revenue, the expected loss is recognised as an expense

immediately.

Costs incurred in the year in connection with future activity on a project are excluded from

costs incurred to date when determining the stage of completion of a project. Such costs are

shown as project work-in-progress. The aggregate of the costs incurred and the profit/loss

recognised on each project is compared against the progress billings up to the year-end.

Where costs incurred and recognised profits (less recognised losses) exceed progress

billings, the balance is shown as due from customers on projects under current assets.

Where progress billings exceed costs incurred plus recognised profits (less recognised

losses), the balance is shown as due to customers on projects under current liabilities.



A-23


(v) Government grants

Government grants are recognised at their fair value where there is reasonable assurance

that the grant will be received and all attaching conditions will be complied with. Where the

grant relates to an asset, the fair value is recognised as deferred capital grant on the

statement of financial position and is amortised to profit or loss over the expected useful life

of the relevant asset by equal annual instalments.

When the grant relates to an expense item, it is recognised in profit or loss over the period

necessary to match them on a systematic basis to the costs that it is intended to

compensate.

(w) Related party

A related party is a company, not being a subsidiary or an associated company, in which a

director of the Group has an equity interest and can exercise significant influence over its

financial and operating policy decisions.

(x) Segment reporting

An operating segment is a component of the Group that engages in business activities from

which it may earn revenues and incurs expenses, including revenues and expenses that

relate to transactions with other components of the Group. Operating segments are reported

in a manner consistent with the internal reporting provided to the Group’s chief operating

decision maker for making decisions about allocating resources and assessing performance

of the operating segments.

(y) Significant accounting judgments and estimates

In the process of applying the Group’s accounting policies which are disclosed in note 3(a),

management has made the following judgments and estimations which has the most

significant effect on the amounts recognised in the financial statements.

Income taxes

The Group has exposure to income taxes in Singapore and Malaysia. Significant judgment

is involved in determining the Group’s provision for income taxes. There are various

transactions and computations for which the ultimate tax determination is uncertain during

the ordinary course of business. The Group recognises liabilities for expected tax issues

based on estimates of whether additional taxes will be due. Where the final tax outcomes of

these matters is different from the amounts that were initially recognised, such differences

will impact the income tax and deferred tax provisions in the period in which such

determination is made. At 31 December 2010, the carrying amounts of the Group’s tax

payable is $843,000 (2009: $89,000; 2008: $1,142,000). The deferred tax liability at 31

December 2010 is $37,000 (2009: $37,000; 2008: $37,000).



A-24


(y) Significant accounting judgments and estimates (continued)

Impairment of loans and receivables

The Group assesses as at each reporting date whether there is any objective evidence that

a financial asset is impaired. To determine whether there is objective evidence of

impairment, the Group considers factors such as the probability of insolvency or significant

financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows

are estimated based on historical loss experience for assets with similar credit risk

characteristics. The carrying amounts of the Group’s loans and receivables at the reporting

date are disclosed in note 32(b) to the financial statements.

Estimate of total budgeted costs and costs to completion for projects

Total budgeted costs for projects comprise direct costs attributable to the projects. In

estimating the total budgeted costs for projects, management has considered information

such as current offers agreed with suppliers and contractors and professional estimation on

construction and material costs.

The carrying amount of assets and liabilities arising from projects at the reporting date are

disclosed in note 17 to the financial statements.

4. Revenue

2008 2009 2010

$’000 $’000 $’000

Revenue from Residential Projects 8,718 11,674 23,775

Distribution and Retail 9,806 7,810 7,446

18,524 19,484 31,221

5. Other income

2008 2009 2010

$’000 $’000 $’000

Government grant from Jobs Credit Scheme — 114 29

Gain on disposal of property, plant and equipment — 11 33

Interest income 27 134 85

Dividend income 1 — —

Other income 44 17 26

Waiver of debt from a related party — — 388

72 276 561



A-25

6. Finance costs2008 2009 2010

$’000 $’000 $’000

Bank charges and interest 153 273 228

Finance lease interest 15 26 13

168 299 241

7. Profit before tax2008 2009 2010

$’000 $’000 $’000

This is arrived at after charging/(crediting):

Allowance for doubtful receivables (note 18)

— trade (third parties) — 133 619

— non-trade (a related party) — — 10

Bad debts written off — 25 2

Depreciation (note 11) 227 399 372

Fair value loss/(gain) on financial assets at fair value through

profit or loss (note 15) 79 (17) —

Gain on disposal of property, plant and equipment — (11) (33)

Loss/(gain) on foreign exchange difference 140 4 (110)

Impairment loss on goodwill on consolidation (note 13) — 166 87

Inventories recognised as expense in cost of sales (note 16) 9,202 7,558 12,571

Inventories written down — 121 98

Property, plant and equipment written off — 164 —

Rental expense 1,420 1,659 1,945

Write-back of allowance for slow-moving inventories (note 16) (117) — —

Personnel expenses (note 8) 2,553 2,709 3,466

8. Personnel expenses2008 2009 2010

$’000 $’000 $’000

Directors’ remuneration:

— Salaries and bonus 309 317 403

— CPF 22 19 28

— Other benefits 5 7 39

Key management staff (non-director):

— Salaries and bonus 71 90 108

— CPF 8 9 11

Staff costs:

— Salaries and related costs 1,802 1,896 2,494

— CPF 188 187 248

— Staff commissions 148 184 135

2,553 2,709 3,466



A-26

9. Tax expense

2008 2009 2010

$’000 $’000 $’000

Tax expense attributable to profits is made up of:

Income tax:

— Current year 304 416 861

— Under provision in prior year 1,071 31 —

Deferred tax:

— Current year 37 — —

— Over provision in prior year (1,076) — —

336 447 861

The income tax expense on the results of the financial year varies from the amount of income tax

determined by applying the Singapore statutory rate of income tax to profit before tax due to the

following factors:

$’000 $’000 $’000


Tax calculated at a tax rate of 17% (2009: 17%; 2008: 18%) 387 307 853

Singapore statutory stepped income exemption (27) (26) (26)

Effect of different tax rates in other countries 10 13 (11)

Expenses not deductible for tax purposes 61 153 64

Income not subject to tax — (22) (77)

(Over)/under provision in prior year (5) 31 —

Deferred tax assets not recognised for the year — — 64

Utilisation of previously unrecognised tax losses and

unabsorbed capital allowances (106) — —

Others 16 (9) (6)

336 447 861

For the financial year ended 31 December 2010, a subsidiary has unutilised tax losses and

unabsorbed capital allowances of $318,000 and $45,000 (2009: $Nil and $Nil; 2008: $33,000 and

$Nil) respectively available for setting off against future taxable income subject to meeting certain

statutory requirements by the subsidiary in its respective country of incorporation. Deferred tax

benefits arising from tax losses carried forward and unabsorbed capital allowances have not been

recognised in the combined financial statements as there is no reasonable certainty that future

taxable profits will be available to utilise these tax losses and capital allowances.



A-27

10. Earnings per share

Basic earnings per share are calculated by dividing the Group’s net profits attributable to equity

holders of the Company by the aggregate number of pre-invitation ordinary shares of no par

value.

The following reflects the profit attributable to the equity holders of the Company used in the

earnings per share computation:

2008 2009 2010

$’000 $’000 $’000

Profit attributable to equity holders of the Company 1,817 1,256 4,344

’000 ’000 ’000

Aggregate number of pre-invitation ordinary shares 83,000 83,000 83,000

11. Property, plant and equipment

Office

equipment

Air-

conditioners

Furniture

&

fittings

Electrical

fittings Computers Renovations

Motor

vehicles Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2008

Cost

At 1.1.2008 129 52 187 138 234 256 646 1,642

Currency alignment (1) — (2) — — (1) (1) (5)

Additions 12 — 34 13 27 62 96 244

At 31.12.2008 140 52 219 151 261 317 741 1,881

Accumulated depreciation

At 1.1.2008 81 35 126 71 105 91 240 749

Currency alignment — — (2) — — (1) — (3)

Depreciation charge 11 3 17 15 22 33 126 227

At 31.12.2008 92 38 141 86 127 123 366 973

Net carrying value

At 31.12.2008 48 14 78 65 134 194 375 908



A-28

11. Property, plant and equipment (continued)

Office

equipment

Air-

conditioners

Furniture

&

fittings

Electrical

fittings Computers Renovations

Motor

vehicles Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2009

Cost

At 1.1.2009 140 52 219 151 261 317 741 1,881

Currency alignment — — (2) — — (1) (1) (4)

Additions 5 — 106 5 19 93 408 636

Disposals — — — — — — (165) (165)

Written off (104) (40) (93) (112) (103) (143) — (595)

At 31.12.2009 41 12 230 44 177 266 983 1,753


At 1.1.2009 92 38 141 86 127 123 366 973

Currency alignment — — (1) — — (1) — (2)


Disposals — — — — — — (80) (80)

Written off (79) (36) (84) (74) (80) (78) — (431)

At 31.12.2009 17 3 79 22 149 115 474 859

Net carrying value

At 31.12.209 24 9 151 22 28 151 509 894

2010

Cost

At 1.1.2010 41 12 230 44 177 266 983 1,753

Currency alignment — — 2 — — 1 1 4

Additions 31 — 18 16 34 58 343 500

Disposals — — — — — — (290) (290)

At 31.12.2010 72 12 250 60 211 325 1,037 1,967


At 1.1.2010 17 3 79 22 149 115 474 859

Currency alignment — — 1 — — 1 — 2


Disposals — — — — — — (121) (121)

At 31.12.2010 35 7 141 34 167 190 538 1,112

Net carrying value

At 31.12.2010 37 5 109 26 44 135 499 855



A-29

11. Property, plant and equipment (continued)

Motor vehicles of the Group with net carrying value of $428,000 (2009: $283,000; 2008:

$353,000) respectively are under finance leases. Motor vehicles of the Group with net carrying

value of $Nil (2009: $169,000; 2008: $42,000) are held in trust by one of the director.

During the financial year ended 31 December 2010, the Group revised the estimated useful lives

of office equipment, air-conditioners and furniture & fittings from 10 to 5 years. The revision in

estimate has been applied on a prospective basis from 1 January 2010. The effect of the revision

on depreciation charge in current year and future periods are as follows:

2010 2011 Future

$’000 $’000 $’000

Increase/(decrease) in depreciation charge

Office equipment 6 4 (10)

Air-conditioners 3 3 (6)

Furniture & fittings 29 12 (41)

In 2009, the Group revised the estimated useful lives of computer from 10 to 5 years and

renovations and electrical fittings from 10 years to over lease term period respectively. The

revision in estimate has been applied on a prospective basis from 1 January 2009. The effect of

the revision on depreciation charge in 2009 and future periods are as follows:

2009 2010 Future

$’000 $’000 $’000

Increase/(decrease) in depreciation charge

Computer 84 (8) (76)

Renovations 44 40 (84)

Electrical fittings 6 5 (11)

12. Investment property under construction

This pertains to part payment of a freehold property which is under construction in Singapore and

with a purchase consideration of $1,583,000.

Subsequent to the financial year ended 31 December 2010, the Group disposed off the

investment property (note 35). Accordingly, the asset with carrying amount of $317,000 was

reclassified to current asset as at 31 December 2010.



A-30

13. Goodwill on consolidation

2008 2009 2010

$’000 $’000 $’000

At 1 January 166 166 —

Addition — — 87

Impairment loss on goodwill (note 7) — (166) (87)

At 31 December 166 — —

Goodwill is allocated to the Group’s cash-generating units identified according to business result

and country of operation. The goodwill arose from acquisition of the additional shares in Kitchen

Culture Sdn. Bhd., a subsidiary of KHL Marketing Asia-Pacific Pte Ltd.

In 2009 and 2010, the Group recognised the full impairment loss on the goodwill.

14. Long-term prepayment

During the financial year ended 31 December 2010, the Group purchased a leasehold villa which

is under construction in Batam, Indonesia, for a purchase consideration of $319,000. The

payment of $196,000 is recognised as long-term prepayment as at 31 December 2010.

15. Financial assets at fair value through profit or loss

2008 2009 2010

$’000 $’000 $’000

Quoted investments, at fair value 20 — —

Movements in quoted investments are as follows:

At 1 January 99 20 —

Disposal — (37) —

Fair value (loss)/gain (note 7) (79) 17 —

At 31 December 20 — —

Market value of quoted shares 20 — —

In 2009, the Group disposed off the quoted investments which were registered in the name of a

director in trust for a subsidiary.



A-31

16. Inventories

2008 2009 2010

$’000 $’000 $’000

Finished goods 5,476 9,124 7,267

Goods-in-transit — — 257

5,476 9,124 7,524

Less: Inventories written down (2) (123) (221)

5,474 9,001 7,303

The Group wrote back allowance for inventories of $Nil (2009: $Nil; 2008: $117,000) (note 7)

when the related inventories were sold above the carrying amounts.

The costs of inventories recognised as an expense in cost of sales amounted to $12,571,000

(2009: $7,558,000; 2008: $9,202,000) (note 7).

17. Project work-in-progress

2008 2009 2010

$’000 $’000 $’000

Cost of projects 11,625 9,464 19,025

Attributable profits recognised to-date 9,945 4,777 13,493

21,570 14,241 32,518

Progressive billings (19,686) (12,196) (32,098)

1,884 2,045 420

Represent:

Due from customers on projects 2,388 2,045 644

Due to customers on projects (504) — (224)

1,884 2,045 420

18. Trade and other receivables

2008 2009 2010

$’000 $’000 $’000

Trade receivables 3,975 4,781 5,082

Amounts due from related parties (trade) 740 769 160

Retention sum (trade) 1,934 1,500 1,864

Less: Allowance for doubtful receivables (third parties) — (133) (730)

6,649 6,917 6,376



A-32

18. Trade and other receivables (continued)

2008 2009 2010

$’000 $’000 $’000

Amounts due from related parties (non-trade) 10 10 34

Less: Allowance for doubtful receivables (a related party) — — (10)

10 10 24

Advance to suppliers — — 59

Sundry deposits:

— third parties 286 599 273

— related parties 30 30 30

Sundry receivables 8 25 32

Prepayments 4 35 182

Tax recoverable — 34 —

338 733 600

6,987 7,650 6,976

Movements in allowance for doubtful trade receivables are as follows:

$’000 $’000 $’000

At 1 January 146 — 133

Charged to profit or loss (note 7) — 133 619

Allowance written off (146) — (22)

At 31 December — 133 730

Movements in allowance for doubtful non-trade receivables are as follows:

$’000 $’000 $’000

At 1 January — — —

Charged to profit or loss (note 7) — — 10

At 31 December — — 10

The non-trade amounts due from related parties are unsecured, interest-free and repayable on

demand.



A-33

19. Amounts due from/(to) directors

The amount due from a director is interest-free, non-trade in nature, unsecured and repayable on

demand, except for an amount of $Nil (2009: $1,415,000; 2008: $1,245,000) at the reporting date

which bears interest at Nil (2009: 5.25%; 2008: 5.25%) per annum. The amount was fully settled

by offsetting against dividend declared and payable during the financial year (note 28).

The amounts due to directors relate to dividend declared and payable during the financial year

ended 31 December 2010 (note 28).

20. Cash and cash equivalents

2008 2009 2010

$’000 $’000 $’000

Cash in hand and at bank 1,372 1,600 5,035

Fixed deposit 203 — —

1,575 1,600 5,035

In 2008, fixed deposit placed with the bank matured within 5 days from reporting date. The

effective interest rate was 2.95% per annum.

21. Bank borrowings

2008 2009 2010

$’000 $’000 $’000

Term loan I — 1,243 881

Term loan II — 1,424 1,071

Term loan III — — 1,580

— 2,667 3,532

Classified as:

Non-current portion — 1,954 2,299

Current portion — 713 1,233

— 2,667 3,532

Term loan I

Term loan I is at Local Enterprise Finance Scheme (“LEFS”) fixed rate of 5% per annum,

computed on outstanding balances on a monthly rest basis and repayable in 48 monthly

instalments commencing 1 April 2009. The loan is secured by directors’ personal guarantees.

Term loan II

Term loan II is charged at 5% LEFS fixed rate per annum and repayable in 48 monthly instalments

commencing 1 October 2009.

The loans are secured by deed of guarantee and indemnity from all directors of a subsidiary.



A-34

21. Bank borrowings (continued)

Term loan III

Term loan III is charged at 5% LEFS fixed rate per annum and repayable in 48 monthly

instalments commencing 11 January 2010.

The loans are secured by Deed of guarantee and indemnity from all the directors of a subsidiary.

22. Finance lease liabilities

Minimum lease payments Present value of lease payments

2008 2009 2010 2008 2009 2010

$’000 $’000 $’000 $’000 $’000 $’000

Within 1 financial year 106 118 117 90 85 102

Within 2 to 5 financial years 342 219 280 290 201 244

After 5 years — — 79 — — 70

Total minimum lease

payments 448 337 476 380 286 416

Less future finance charges (68) (51) (60) — — —

380 286 416 380 286 416

Representing finance lease

liabilities:

— Current 90 85 102

— Non-current 290 201 314

380 286 416

The finance leases bear an effective rate of interest between 3.6% to 6.4% (2009: 4.4% to 6.4%;

2008: 4.5% to 6.4%) for the Group per annum respectively.

Finance lease liabilities amounted to $247,000 (2009: $Nil; 2008: $Nil) was guaranteed by a

director.

The fair values of the Group’s finance lease obligations approximate their carrying amounts.

23. Deferred tax liability

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off

current tax assets against current tax liabilities. The deferred tax liabilities consist of the excess

of net carrying value of property, plant and equipment over their tax written down values.

2008 2009 2010

$’000 $’000 $’000

Accelerated tax depreciation

At 1 January and 31 December 37 37 37



A-35

24. Trade and other payables

2008 2009 2010

$’000 $’000 $’000

Trade payables 1,281 1,990 1,669

Amounts due to related parties (trade) 617 607 33

Amount due to a related party (non-trade) 806 801 —

Other payables 262 142 260

Sales deposits received 5,492 5,797 2,473

Accrued operating expenses 74 111 527

8,532 9,448 4,962

The non-trade amount due to a related party is unsecured, interest-free and repayable on

demand.

25. Bills payable to banks

Bills payable to banks bear an effective interest rate ranging from 1.7% to 5.3% (2009: 1.9% to

3.1%; 2008: 6.6% to 7.0%) per annum. Bills payable to bank are secured by the personal

guarantees of the directors.

26. Share capital

2008 2009 2010

$’000 $’000 $’000

Issued and fully paid up capital

1,500,003 ordinary shares with no par value 1,500 1,500 1,500

The Company was incorporated on 25 March 2011 with an issued share capital of $2. For the

purpose of the combined financial statements, the share capital and number of shares represent

the aggregate paid up capital and number of shares of its subsidiaries.

The holders of ordinary shares are entitled to receive dividends as and when declared by the

Company. All ordinary shares carry one vote per share without restrictions.

27. Currency translation reserve

2008 2009 2010

$’000 $’000 $’000

At 1 January 6 28 13

Net translation adjustments 22 (15) 5

At 31 December 28 13 18

Currency translation reserve arises from the translation of the financial statements of entities

within the Group whose functional currencies are different from the Group’s presentation

currency.



A-36

28. Dividend

2008 2009 2010

$’000 $’000 $’000

1-tier tax exempt interim dividend of $3.07

(2009: $Nil; 2008: $1.00) per share 1,500 — 4,600

A subsidiary declared tax exempt interim dividends of $1,500,000 and $4,600,000 in financial

years 2008 and 2010 respectively.

29. Contingent liability

As at 31 December 2010, the Group has obtained banker’s Letter of Guarantee and project

performance bonds of $2,894,000 (2009: $2,125,000; 2008: $472,000) to secure the performance

under the relevant contract. The expired dates of Letter of Guarantee and project performance

bonds are ranged from 2 to 50 months (2009: 10 to 42 months; 2008: 2 to 22 months) from the

reporting date.

30. Related parties transactions

Significant transactions with related parties conducted during the year on terms agreed between

the parties concerned are as follows:

2008 2009 2010

$’000 $’000 $’000

Sales to related parties — 17 3

Advances to a director 1,334 — 480

Rental expense paid to a related party 421 553 639

Payment on behalf by related parties 1,967 — —

Waiver of debts from a related party — — 388

Interest income charged to a director — 132 85

Proceeds from disposal of property, plant and equipment to a

director — — 39

Gain arising from disposal of property, plant and equipment to a

director — — 18

Purchase from related parties — 1 33

Purchase of investment property under construction from a

company in which a director of a subsidiary has financial

interest 317 — —

Project sales commission paid to a related party 589 — —



A-37

31. Commitments

Capital commitments

Capital commitments contracted for but not provided for in the financial statements:

2008 2009 2010

$’000 $’000 $’000

Balance payment for properties under construction:

— investment property (note 12) 1,267 1,267 1,267

— leasehold property (note 14) — — 123

— motor vehicle 145 — —

1,412 1,267 1,390

Operating lease commitments

Commitments for minimum lease rental payments under non-cancellable operating leases are as

follows:

2008 2009 2010

$’000 $’000 $’000

Due within 1 financial year 1,176 981 1,035

Due between 2 to 5 financial years 181 989 754

1,357 1,970 1,789

The Group leases various shops and warehouses under non-cancellable operating lease

agreements. The leases have varying terms, escalation clauses and have tenure of more than

one year with renewal options.

Lease terms do not contain restrictions in the Group’s activities concerning dividends, additional

debt or further leasing.

32. Financial instruments

(a) Categories of financial instruments

Financial instruments as at reporting date are as follows:

2008 2009 2010

$’000 $’000 $’000

Financial assets

Trade and other receivables 6,983 7,581 6,735

Amounts due from directors 1,553 1,723 —

Cash and cash equivalents 1,575 1,600 5,035

Loans and receivables 10,111 10,904 11,770

Financial assets at fair value through profit or loss 20 — —

Total financial assets 10,131 10,904 11,770



A-38

32. Financial instruments (continued)

(a) Categories of financial instruments (continued)

2008 2009 2010

$’000 $’000 $’000

Financial liabilities

Trade and other payables 3,040 3,623 2,452

Bills payable to bank 2,650 3,204 1,722

Finance lease liabilities 380 286 416

Amounts due to directors — — 2,457

Bank borrowings — 2,667 3,532

Total financial liabilities 6,070 9,780 10,579

(b) Financial risk management objectives and policies

The Group is exposed to financial risks arising from its operations and the use of financial

instruments. The key financial risks include foreign currency risk, interest rate risk, credit risk

and liquidity risk. The policies for managing each of these risks are summarised below. The

directors review and agree policies and procedures for the management of these risks.

There has been no change to the Group’s exposure to these financial risks or the manner

in which the Group manages and measures financial risk.

Foreign currency risk

Foreign currency risk arises on certain transactions that are denominated in currencies other

than the respective functional currencies of the entities in the Group. The Group’s foreign

currencies risks are mainly United States dollar (“USD”), Malaysian Ringgit (“MYR”) and

Euro (“EUR”).

The Group’s overall risk management strategy seek to minimise adverse effects from these

financial risks on the Group’s financial performance. The Group may use derivatives such as

forward currency contracts to hedge certain financial risk exposures but the Group does not

hold derivative financial instruments for trading purposes.

The Group’s foreign currency exposures based on the information provided by key

management are as follows:

Denominated in

USD MYR EUR

$’000 $’000 $’000

At 31 December 2008

Financial assets

Trade receivables 101 268 —

Cash and cash equivalents 61 — 323

162 268 323



A-39


(b) Financial risk management objectives and policies (continued)

Foreign currency risk (continued)

Denominated in

USD MYR EUR

$’000 $’000 $’000


Trade payables 5 — 552

Bills payable to banks 178 — 860

183 — 1,412

Net financial assets/(liabilities) (21) 268 (1,089)

At 31 December 2009

Financial assets

Trade receivables 72 — 8


235 — 29



Bills payable to banks 80 — 1,203

286 — 1,478

Net financial liabilities (51) — (1,449)

At 31 December 2010

Financial assets

Trade receivables 69 — —


442 — 7



Bills payable to banks 777 — 945

800 — 1,262

Net financial liabilities (358) — (1,255)



A-40



Foreign currency risk (continued)

If the USD, MYR and EUR changes against the respective functional currencies of the

Group’s entities by 5% (2009: 5%; 2008: 5%) with all other variables including tax rate being

held constant, the effects arising from the net financial assets/(liabilities) position will be as

follows:

Increase/(decrease) in Profit after tax

2008 2009 2010

$’000 $’000 $’000

USD

— strengthened (1) (2) (15)

— weakened 1 2 15

MYR

— strengthened 11 — —

— weakened (11) — —

EUR

— strengthened (45) (60) (52)

— weakened 45 60 52

The Group used forward foreign exchange contracts with settlement period within one

month to manage foreign currency exposures arising from normal trading activities. At

reporting date, the total amount of outstanding forward foreign exchange contracts to which

the Group are committed are as follows:

2008 2009 2010

$’000 $’000 $’000

Forward foreign exchange contracts — 844 —

At the reporting date, the fair value of the Group’s currency derivatives is not significant to

the Group.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flow of the Group’s financial

instruments will fluctuate because of changes in market interest rates. The Group’s income

and operating cash flows are substantially independent on changes in market interest rates

as the Group has no significant interest-bearing assets and liabilities except for fixed rates

fixed deposit, amounts due from/(to) directors (note 19), bank borrowings (note 21), finance

lease liabilities (note 22) and variable rates from bills payable to banks (note 25). The

sensitivity analysis for interest rate risk is not disclosed as a reasonably possible fluctuation

in the market interest rates has no significant impact on the Group’s profit or loss.



A-41



Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations

resulting in financial loss to the Group. The Group has credit policies in place and the

exposure to credit risk is monitored on an ongoing basis by the management.

The Group’s trade receivables comprise 1 debtor (2009: 2 debtors; 2008: 2 debtors) that

represented approximately 9% (2009: 21%; 2008: 24%) of the trade receivables.

The carrying amounts of the financial assets represent the Group’s maximum exposure to

credit risk.

Financial assets that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are substantially corporate

customers with good collection track record with the Group. Cash and cash equivalents that

are neither past due nor impaired are placed with reputable financial institutions with high

credit ratings and no history of default.

There is no other class of financial assets that is past due and/or impaired except for trade

receivables.

The table below is an ageing analysis of trade receivables of the Group:

2008 2009 2010

$’000 $’000 $’000

Not past due and not impaired 1,435 2,385 3,053

Past due but not impaired 3,280 3,032 1,459

Past due and impaired — 133 730

4,715 5,550 5,242

Financial assets that are past due and/or impaired

The age analysis of trade receivables of the Group that are past due but not impaired are

as follows:

$’000 $’000 $’000

Past due 0 to 2 months 377 537 541

Past due over 2 months 2,903 2,495 918

3,280 3,032 1,459



A-42



Liquidity risk

The board of directors exercises prudent liquidity and cash flow risk management policies

and aims at maintaining an adequate level of liquidity and cash flow at all times.

The table below summarises the maturity profile of the Group’s financial liabilities at the

reporting date based on contractual undiscounted payments.

Repayable

on demand

or within

1 year

Within 2 to

5 years

Over

5 years Total

$’000 $’000 $’000 $’000

At 31 December 2008

Trade and other payables 3,040 — — 3,040

Bills payable to banks 2,650 — — 2,650

Finance lease liabilities 106 342 — 448

5,796 342 — 6,138

At 31 December 2009



Finance lease liabilities 118 219 — 337

Bank borrowings 830 2,084 — 2,914

7,775 2,303 — 10,078

At 31 December 2010




Amounts due to directors 2,457 — — 2,457

Bank borrowings 1,382 2,395 — 3,777

8,130 2,675 79 10,884

(c) Fair values of financial instruments

The carrying amounts of the financial assets and financial liabilities recorded in the financial

statements of the Group approximate their fair values due to the relatively short-term

maturity of these financial instruments.



A-43

33. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong

credit rating and healthy capital ratios in order to support its business and maximise shareholders’

value.

The Group actively and regularly reviews and manages its capital structure to ensure optimal

capital structure and shareholder returns, taking into consideration the future capital requirements

of the Group, capital efficiency, prevailing and projected profitability, projected operating cash

flows and projected capital expenditures. The Group, in achieving an optimal capital structure may

issue new shares or adjust the amount of its dividend payment.

The capital structure comprises share capital, accumulated profits and reserves.

No changes were made to the objectives, policies or processes during the years ended 31

December 2008, 31 December 2009 and 31 December 2010.



A-44

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A-45

34. Segment information (continued)

Segment results

Performance of each segment is evaluated based on segment profit or loss which is measured

differently from the net profit or loss before tax in the combined financial statements. Interest

income, foreign exchange (loss)/gain, impairment of goodwill on consolidation and finance costs

are not allocated to segments as Group financing is managed on a group basis.

A reconciliation of segment profits to the combined profit before tax is as follows:

2008 2009 2010

$’000 $’000 $’000

Segment profits 2,825 2,861 5,271

Interest income 27 134 85

Foreign exchange (loss)/gain (140) (4) 110

Impairment of goodwill on consolidation — (166) (87)

Unallocated corporate expenses (560) (1,021) (359)

Dividend income 1 — —


Segment assets

The amounts provided to management with respect to total assets are measured in a manner

consistent with that of the combined financial statements. Management monitors the assets

attributable to each segment for the purposes of monitoring segment performance and for

allocating resources between segments. All assets are allocated to reportable segments except

for tax recoverable which is classified as unallocated asset.

Segment liabilities

The amounts provided to management with respect to total liabilities are measured in a manner

consistent with that of the combined financial statements. All liabilities are allocated to the

reportable segments based on the operations of the segments other than deferred tax liability, tax

payable and bank borrowings are classified as unallocated liabilities.



A-46

34. Segment information (continued)

Geographical information

Revenue and non-current assets information based on the geographical location of customers

and assets respectively are as follows:

Sales to external customers Non-current assets

2008 2009 2010 2008 2009 2010

$’000 $’000 $’000 $’000 $’000 $’000

Singapore 12,123 15,568 28,950 1,305 1,072 912

Malaysia 5,388 3,090 1,746 86 139 139

Seychelles 531 611 306 — — —

Indonesia 398 181 194 — — —

Thailand 84 34 25 — — —

18,524 19,484 31,221 1,391 1,211 1,051

Non-current assets information presented above of the Group are non-current assets as

presented on the combined statements of financial position.

Information about major customers

Revenue of approximately $12,891,000 (2009: $2,858,000; 2008: $5,214,000) which amounts to

more than 10% of the Group’s revenue are derived from 2 (2009: 1; 2008: 1) external customers

and are attributable to the residential projects segment.

35. Subsequent events

(a) Subsequent to 31 December 2010, the Group disposed off the investment property under

construction for a consideration of $1.65 million; and

(b) Save as those events disclosed in note 2 and other notes to the combined financial

statements, no other item, transaction, or event of a material or unusual nature has arisen

subsequent to 31 December 2010.

36. Authorisation of combined financial statements

The combined financial statements of the Group for the financial years ended 31 December 2008,

2009 and 2010 were authorised for issue in accordance with a resolution of the directors dated

15 July 2011.



A-47

The discussion below provides a summary of the principal objects of our Company set out in our

Memorandum of Association and certain provisions of our Articles of Association and the laws of

Singapore. This discussion is only a summary and is qualified by reference to Singapore law and our

Memorandum and Articles of Association.

MEMORANDUM OF ASSOCIATION AND REGISTRATION NUMBER

We are registered in Singapore with the Accounting and Corporate Regulatory Authority. Our company

registration number is 201107179D. Our Memorandum of Association sets out the objects for which our

Company was formed, including carrying on business as, inter alia, an investment holding company.

SUMMARY OF OUR ARTICLES OF ASSOCIATION

1. Directors

(a) Ability of interested directors to vote

A director shall not vote in respect of any contract, proposed contract or arrangement or any

other proposal in which he has any personal material interest, and he shall not be counted

in the quorum present at the meeting except under circumstances set out in the Articles of

Association.

(b) Remuneration

Fees payable to Non-Executive Directors shall be a fixed sum (not being a commission on

or a percentage of profits or turnover of the Company) as shall from time to time be

determined by the Company in general meeting. Fees payable to Directors shall not be

increased except at a general meeting convened by a notice specifying the intention to

propose such increase.

Any Director who holds any executive office, or who serves on any committee of the

Directors, or who performs services outside the ordinary duties of a Director, may be paid

extra remuneration by way of salary or otherwise (not being a commission on or a

percentage of profits or turnover of the Company), as the Directors may determine.

The remuneration of a Chief Executive Officer shall be fixed by the Directors and may be by

way of salary or commission or participation in profits or by any or all of these modes but

shall not be by a commission on or a percentage of turnover.

The Directors shall have power 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.

(c) Borrowing

Our Directors may exercise all the powers of our Company to raise or borrow money, to

mortgage or charge its undertaking, property and uncalled capital, and to secure any debt,

liability or obligation of our Company.

APPENDIX BSUMMARY OF MEMORANDUM AND

ARTICLES OF ASSOCIATION OF OUR COMPANY

B-1

(d) Retirement age limit

There is no retirement age limit for Directors under our Articles of Association. Section

153(1) of the Companies Act however, provides that no person of or over the age of 70 years

shall be appointed a director of a public company, unless he is appointed or re-appointed as

a director of the Company or authorised to continue in office as a director of the Company

by way of an ordinary resolution passed at an annual general meeting of the Company.

(e) Shareholding qualification

There is no shareholding qualification for Directors in the Memorandum and Articles of

Association of our Company.

2. Share rights and restrictions

Our Company currently has one class of shares, namely, ordinary shares. Only persons who are

registered on our register of Shareholders and in cases in which the person so registered is CDP,

the persons named as the depositors in the depository register maintained by CDP for the

ordinary shares, are recognised as our Shareholders.

(a) Dividends and distribution

We may, by ordinary resolution of our Shareholders, declare dividends at a general meeting,

but we may not pay dividends in excess of the amount recommended by our Board. We must

pay all dividends out of our profits and we may satisfy dividends by the issue of shares to

our Shareholders. All dividends are paid pro-rata amongst our Shareholders in proportion to

the amount paid-up on each Shareholder’s ordinary shares, unless the rights attaching to an

issue of any ordinary share provide otherwise. Unless otherwise directed, dividends are paid

by cheque, warrant or post office order sent through the post to each Shareholder at his

registered address. Notwithstanding the foregoing, the payment by us to CDP of any

dividend payable to a Shareholder whose name is entered in the depository register shall,

to the extent of payment made to CDP, discharge us from any liability to that shareholder in

respect of that payment.

The payment by the Directors of any unclaimed dividends or other monies payable on or in

respect of a share into a separate account shall not constitute the Company a trustee in

respect thereof. All dividends unclaimed after being declared may be invested or otherwise

made use of by the Directors for the benefit of the Company. Any dividend unclaimed after

a period of six years after having been declared may be forfeited and shall revert to the

Company but the Directors may thereafter at their discretion annul any such forfeiture and

pay the dividend so forfeited to the person entitled thereto prior to the forfeiture.

The Directors may retain any dividends or other monies payable on or in respect of a share

on which our Company has a lien, and may apply the same in or towards satisfaction of the

debts, liabilities or engagements in respect of which the lien exists.

(b) Voting rights

A holder of our ordinary shares is entitled to attend, speak and vote at any general meeting,

in person or by proxy. Proxies need not be a Shareholder. A person who holds ordinary

shares through the SGX-ST book-entry settlement system will only be entitled to vote at a

general meeting as a shareholder if his name appears on the depository register maintained



B-2

by CDP 48 hours before the general meeting. Except as otherwise provided in our Articles

of Association, two or more Shareholders must be present in person or by proxy to constitute

a quorum at any general meeting. Under our Articles of Association, on a show of hands,

every Shareholder present in person and by proxy shall have one vote, and on a poll, every

Shareholder present in person or by proxy shall have one vote for each ordinary share which

he holds or represents. A poll may be demanded in certain circumstances, including by the

Chairman of the meeting or by any Shareholder present in person or by proxy and

representing not less than one-tenth of the total voting rights of all Shareholders having the

right to attend and vote at the meeting or by any five Shareholders present in person or by

proxy and entitled to vote. In the case of a tie vote, whether on a show of hands or a poll,

the Chairman of the meeting shall be entitled to a casting vote.

3. Change in capital

Changes in the capital structure of our Company (for example, consolidation, cancellation,

sub-division or conversion of our share capital) require Shareholders to pass an ordinary

resolution. Ordinary resolutions generally require at least 14 days’ notice in writing. The notice

must be given to each of our Shareholders who have supplied us with an address in Singapore

for the giving of notices and must set forth the place, the day and the hour of the meeting.

However, we are required to obtain our Shareholders’ approval by way of a special resolution for

any reduction of our share capital or other undistributable reserve, subject to the conditions

prescribed by law.

4. Variation of rights of existing shares or classes of shares

Subject to the Companies Act, whenever the share capital of the Company is divided into different

classes of shares, the special rights attached to any class may be varied or abrogated either with

the consent in writing of the holders of three-quarters of the total number 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. To every such separate general meeting the provisions of our

Articles of Association 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 of the total number 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

of the total number 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.

These provisions 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 or abrogated.

The relevant Article does not impose more significant conditions than the Companies Act in this

regard.

5. Limitations on foreign or non-resident Shareholders

There are no limitations imposed by Singapore law or by our Articles of Association on the rights

of our Shareholders who are regarded as non-residents of Singapore, to hold or vote their shares.



B-3

The following statements are brief summaries of the rights and privileges of our Shareholders conferred

by the laws of Singapore, the Listing Manual and our Articles of Association (“Articles”). These

statements summarise the material provisions of our Articles but are qualified in entirety by reference

to our Articles, a copy of which is available for inspection at our registered office during normal business

hours for a period of six months from the date of this Offer Document.

Ordinary Shares

All of our Shares are in registered form. We may, subject to the provisions of the Companies Act and

the rules of the SGX-ST, purchase our Shares. However, we may not, except in circumstances

permitted by the Companies Act, grant any financial assistance for the acquisition or proposed

acquisition of our Shares.

New Shares

New Shares may only be issued with the prior approval of our Shareholders in a general meeting. The

aggregate number of Shares to be issued pursuant to such approval may not exceed the limit as may

be prescribed by the SGX-ST, of which the aggregate number of Shares to be issued other than on a

pro rata basis to our Shareholders may not exceed the limit as may be prescribed by the SGX-ST. The

approval, if granted, will lapse at the conclusion of the annual general meeting following the date on

which the approval was granted or the date by which the annual general meeting is required by law to

be held, whichever is the earlier. Subject to the foregoing, the provisions of the Companies Act and any

special rights attached to any class of shares currently issued, all New Shares are under the control of

our Board of Directors who may allot and issue the same with such rights and restrictions as it may think

fit.

Shareholders

Only persons who are registered in our register of Shareholders and, in cases in which the person so

registered is CDP, the persons named as the Depositors in the Depository Register maintained by CDP

for the Shares, are recognised as our Shareholders. We will not, except as required by law, recognise

any equitable, contingent, future or partial interest in any Share or other rights for any Share other than

the absolute right thereto of the registered holder of that Share or of the person whose name is entered

in the Depository Register for that Share. We may close our register of Shareholders for any time or

times if we provide the SGX-ST at least ten clear Market Days’ notice. However, the register of

Shareholders may not be closed for more than 30 days in aggregate in any calendar year. We typically

close our register of Shareholders to determine Shareholders’ entitlement to receive dividends and

other distributions.

Transfer of Shares

There is no restriction on the transfer of fully paid Shares except where required by law or the Listing

Manual or the rules or by-laws of any stock exchange on which our Company is listed. Our Board of

Directors may decline to register any transfer of Shares which are not fully paid Shares or Shares on

which we have a lien. Our Shares may be transferred by a duly signed instrument of transfer in a form

approved by the SGX-ST or any stock exchange on which our Company is listed. Our Board of

Directors may also decline to register any instrument of transfer unless, among other things, it has been

duly stamped and is presented for registration together with the share certificate and such other

evidence of title as they may require. We will replace lost or destroyed certificates for Shares if it is

APPENDIX CDESCRIPTION OF OUR SHARES

C-1

properly notified and if the applicant pays a fee which will not exceed $2 and furnishes any evidence

and indemnity that our Board of Directors may require.

General Meetings of Shareholders

We are required to hold an annual general meeting every year. Our Board of Directors may convene

an extraordinary general meeting whenever it thinks fit and must do so if Shareholders representing not

less than 10% of the total voting rights of all Shareholders request in writing that such a meeting be

held. In addition, two or more Shareholders holding not less than 10% of our issued share capital may

call a meeting. Unless otherwise required by law or by our Articles, voting at general meetings is by

ordinary resolution, requiring an affirmative vote of a simple majority of the votes cast at the meeting.

An ordinary resolution suffices, for example, for the appointment of directors. A special resolution,

requiring the affirmative vote of at least 75% of the votes cast at the meeting, is necessary for certain

matters under Singapore law, including voluntary winding up, amendments to the Memorandum of

Association and our Articles, a change of our corporate name and a reduction in our share capital. We

must give at least 21 days’ notice in writing for every general meeting convened for the purpose of

passing a special resolution. Ordinary resolutions generally require at least 14 days’ notice in writing.

The notice must be given to each of our Shareholders who have supplied us with an address in

Singapore for the giving of notices and must set forth the place, the day and the hour of the meeting

and, in the case of special business, the general nature of that business.

Voting Rights

A holder of our Shares is entitled to attend, speak and vote at any general meeting, in person or by

proxy. Proxies need not be Shareholders. A person who holds Shares through the SGX-ST book-entry

settlement system will only be entitled to vote at a general meeting as a Shareholder if his name

appears on the Depository Register maintained by CDP 48 hours before the general meeting. Except

as otherwise provided in our Articles, two or more Shareholders must be present in person or by proxy

to constitute a quorum at any general meeting. Under our Articles, on a show of hands, every

Shareholder present in person and by proxy shall have one vote and on a poll, every Shareholder

present in person or by proxy shall have one vote for each Share which he holds or represents. A poll

may be demanded in certain circumstances, including by the chairman of the meeting or by any

Shareholder present in person or by proxy and representing not less than one-tenth of the total voting

rights of all Shareholders having the right to attend and vote at the meeting or by any five Shareholders

present in person or by proxy and entitled to vote. In the case of an equality of votes, whether on a show

of hands or a poll, the chairman of the meeting shall be entitled to a casting vote.

Dividends

We may, by ordinary resolution of our Shareholders, declare dividends at a general meeting, but we

may not pay dividends in excess of the amount recommended by our Board of Directors. We must pay

all dividends out of our profits and we may satisfy dividends by the issue of Shares to our Shareholders.

All dividends are paid pro rata among our Shareholders in proportion to the amount paid-up on each

Shareholder’s Shares, unless the rights attaching to an issue of any Share provides otherwise. Unless

otherwise directed, dividends are paid by cheque or warrant sent through the post to each Shareholder

at his registered address. Notwithstanding the foregoing, the payment by us to CDP of any dividend

payable to a Shareholder whose name is entered in the Depository Register shall, to the extent of

payment made to CDP, discharge us from any liability to that Shareholder in respect of that payment.


C-2

Bonus and Rights Issue

Our Board of Directors may, with approval of our Shareholders at a general meeting, capitalise any

reserves or profits and distribute the same as bonus Shares credited as paid-up to our Shareholders

in proportion to their shareholdings. Our Board of Directors may also issue rights to take up additional

Shares to Shareholders in proportion to their shareholdings. Such rights are subject to any conditions

attached to such issue and the regulations of any stock exchange on which we are listed.

Takeovers

Under the Singapore Code on Take-overs and Mergers (“Singapore Take-over Code”), issued by the

Authority pursuant to Section 321 of the SFA, any person acquiring an interest, either on his own or

together with parties acting in concert with him, in 30% or more of the voting shares must extend a

takeover offer for the remaining voting shares in accordance with the provisions of the Singapore

Take-over Code. In addition, a mandatory takeover offer is required to be made if a person holding,

either on his own or together with parties acting in concert with him, between 30% and 50% of the voting

shares acquires additional voting shares representing more than 1% of the voting shares in any six

month period. Under the Singapore Take-over Code, the following individuals and companies will be

presumed to be persons acting in concert with each other unless the contrary is established:–

(a) the following companies:–

(i) a company;

(ii) the parent company of (i);

(iii) the subsidiaries of (i);

(iv) the fellow subsidiaries of (i);

(v) the associated companies of (i), (ii), (iii) or (iv); and

(vi) companies whose associated companies include any of (i), (ii), (iii), (iv) or (v);

(b) a company with any of its directors (together with their close relatives, related trusts as well as

companies controlled by any of the directors, their close relatives and related trusts);

(c) a company with any of its pension funds and employee share schemes;

(d) a person with any investment company, unit trust or other fund whose investment such person

manages on a discretionary basis, but only in respect of the investment account which such

person manages;

(e) a financial or other professional adviser, including a stockbroker, with its customer in respect of

the shareholdings of:–

(i) the adviser and persons controlling, controlled by or under the same control as the adviser;

and

(ii) all the funds which the adviser manages on a discretionary basis, where the shareholdings

of the adviser and any of those funds in the customer total 10% or more of the customer’s

equity share capital;


C-3

(f) directors of a company (together with their close relatives, related trusts and companies controlled

by any of such directors, their close relatives and related trusts) which is subject to an offer or

where the directors have reason to believe a bona fide offer for their company may be imminent;

(g) partners; and

(h) the following persons and entities:–

(i) an individual;

(ii) the close relatives of (i);

(iii) the related trusts of (i);

(iv) any person who is accustomed to act in accordance with the instructions of (i); and

(v) companies controlled by any of (i), (ii), (iii) or (iv).

Under the Singapore Take-over Code, a mandatory offer made with consideration other than cash must

be accompanied by a cash alternative at not less than the highest price paid by the offeror or any

person acting in concert within the preceding six months.

Liquidation or Other Return of Capital

If we liquidate or in the event of any other return of capital, holders of our Shares will be entitled to

participate in any surplus assets in proportion to their shareholdings, subject to any special rights

attaching to any other class of shares.

Indemnity

As permitted by Singapore law, our Articles provide that, subject to the Companies Act, our Board of

Directors and officers shall be entitled to be indemnified by us against any liability incurred in defending

any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done

as an officer, director or employee and in which judgement is given in their favour or in which they are

acquitted or in connection with any application under any statute for relief from liability in respect thereof

in which relief is granted by the court. We may not indemnify our Directors and officers against any

liability which by law would otherwise attach to them in respect of any negligence, default, breach of

duty or breach of trust of which they may be guilty in relation to us.

Limitations on Rights to Hold or Vote Shares

Except as described in “Voting Rights” and “Takeovers” above, there are no limitations imposed by

Singapore law or by our Articles on the rights of non-resident Shareholders to hold or vote in respect

of our Shares.


C-4

Minority Rights

The rights of minority shareholders of Singapore-incorporated companies are protected under Section

216 of the Companies Act, which gives the Singapore courts a general power to make any order, upon

application by any of our Shareholders, as they think fit to remedy any of the following situations

where:–

(a) our affairs are being conducted or the powers of our Board of Directors are being exercised in a

manner oppressive to, or in disregard of the interests of, one or more of our Shareholders; or

(b) we take an action, or threaten to take an action, or our Shareholders pass a resolution, or propose

to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or

more of our Shareholders, including the applicant.

Singapore courts have a wide discretion as to the reliefs they may grant and those reliefs are in no way

limited to those listed in the Companies Act itself. Without prejudice to the foregoing, the Singapore

courts may:–

(a) direct or prohibit any act or cancel or vary any transaction or resolution;

(b) regulate the conduct of our affairs in the future;

(c) authorise civil proceedings to be brought in our name of, or on behalf of, by a person or persons

and on such terms as the court may direct;

(d) provide for the purchase of a minority Shareholder’s Shares by our other Shareholders or by us

and, in the case of a purchase of Shares by us, a corresponding reduction of our share capital;

or

(e) provide that we be wound up.


C-5

The following is a discussion of certain tax matters relating to Singapore income tax, capital gains tax,

stamp duty and estate duty consequences in relation to the purchase, ownership and disposal of our

Shares. The discussion is limited to a general description of certain tax consequences in Singapore

with respect to the ownership of shares and is based on laws, regulations and interpretations now in

effect and available as of the date of this Offer Document. The laws, regulations and interpretations,

however, may change at any time, and any change could be retroactive to the date of issuance of our

Shares. These laws and regulations are also subject to various interpretations and the relevant tax

authorities or the courts of Singapore could later disagree with the explanations or conclusions set out

below.

Prospective purchasers of our Shares should consult their tax advisers concerning the tax

consequences of owning and disposing of our Shares. Neither our Company, our Directors nor

any other persons involved in this Placement accepts responsibility for any tax effects or

liabilities resulting from the subscription, purchase, holding or disposal of our Shares.

SINGAPORE INCOME TAX

General

Scope of Tax

Corporate taxpayers are generally subject to Singapore income tax on all Singapore source income,

and on foreign source income received or deemed received in Singapore (unless specifically

exempted).

In general, individuals are subject to Singapore income tax only on Singapore source income. However,

foreign source income received through a partnership may be subject to Singapore income tax if it is

received or deemed received in Singapore (unless specifically exempted).

Rates of Tax

The prevailing corporate income tax rate is 17% with partial tax exemption for normal chargeable

income of up to S$300,000 as follows:–

• 75% exemption of up to the first S$10,000 and

• 50% exemption of up to the next S$290,000.

For newly incorporated Singapore tax resident companies, with no more than 20 individual

shareholders at least one of which is an individual holding at least 10% of the total number of issued

ordinary shares throughout the basis period relating to the Year of Assessment of claim, the following

exemptions for normal chargeable income apply for the first three Years of Assessment:–

• 100% exemption of up to the first S$100,000 and

• 50% of exemption of up to the next S$200,000.

An individual is regarded as tax resident in Singapore for a year of assessment if, in the preceding year,

he was physically present or had exercised employment in Singapore (other than as a director of a

company) for 183 or more days, or if he resides in Singapore.

APPENDIX DTAXATION

D-1

Singapore tax-resident individuals are generally subject to tax based on a progressive scale. The top

marginal rate of tax is currently 20%.

Non-Singapore resident individuals are generally subject to tax at a flat rate of 20%, Their Singapore

employment income is however taxed at a flat rate of 15% or at resident tax rates, whichever yields a

higher amount of tax.

Dividend Distributions

The one-tier system of taxation for companies completely replaced Singapore’s full imputation system

on 1 January 2008. Under the one-tier system, dividends paid out by our company are exempt from

income tax in the hands of the shareholders. The dividends will have no tax credit attached.

No withholding tax is imposed on dividend payments made, whether to resident or non-resident

shareholders.

Gains on Disposal of Ordinary Shares

Singapore does not impose tax on capital gains. However, gains arising from the disposal of our

ordinary shares that are construed to be of an income nature will be subject to tax. Hence, any profits

derived from the disposal of ordinary shares are not taxable in Singapore unless the seller is regarded

as having derived gains of an income nature, in which case the gains on disposal of the ordinary shares

will be taxable. Likewise, if the gains are regarded by the Inland Revenue Authority of Singapore as

having arisen from the carrying on of a trade or business in Singapore, such gains may be taxed as

trading income.

STAMP DUTY

No stamp duty is payable on the subscription and issuance of our Shares.

Where existing Shares evidenced in certificated form are acquired in Singapore, stamp duty is payable

on the instrument of transfer of the Shares at the rate of $2 for every $1,000 or any part thereof of the

consideration for or market value of, the Shares, whichever is higher. The purchaser is liable for the

stamp duty charge, unless otherwise agreed by the parties to the transaction.

No stamp duty is payable if no instrument of transfer is executed (such as in the case of scripless

shares, the transfer of which does not require an instrument of transfer to be executed) or if the

instrument of transfer is executed outside of Singapore. However, stamp duty may be payable if the

instrument of transfer which is executed outside Singapore is subsequently brought into Singapore.

ESTATE DUTY

The Singapore estate duty was abolished with effect from 15 February 2008.

GOODS AND SERVICES TAX (“GST”)

GST is a tax on domestic consumption of goods and services and on the importation of goods into

Singapore. The standard rate of GST is currently 7%.

APPENDIX DTAXATION

D-2

The sale of our Company’s ordinary shares by an investor belonging in Singapore through an SGX-ST

member or to another person belonging in Singapore is an exempt supply not subject to GST. Any GST

incurred by a GST registered investor in the making of such an exempt supply is generally not

recoverable from the Comptroller of GST.

Where our Company’s ordinary shares are sold by a GST registered investor to a person belonging

outside Singapore, the sale is a taxable supply subject to GST at 0% if certain conditions are met. Any

GST incurred by a GST registered investor in the making of this supply in the course or furtherance of

a business may be recovered from the Comptroller of GST.

Services such as brokerage, handling and clearing charges rendered by a GST registered person to an

investor belonging in Singapore in connection with the investor’s purchase, sale or holding of shares

will be subject to GST at the standard rate. Similar services rendered to an investor belonging outside

Singapore may be zero-rated if certain conditions are met.

APPENDIX DTAXATION

D-3

You are invited to subscribe for the New Shares at the Issue Price, subject to the following terms and

conditions:–

1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES OR INTEGRAL

MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF NEW SHARES

WILL BE REJECTED.

2. Your application for the New Shares may only be made by way of printed Placement Shares

Application Form.

YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE NEW SHARES.

3. You are allowed to submit only one application in your own name for the New Shares.

If you, not being an approved nominee company, have submitted an application for the

New Shares in your own name, you should not submit any other application for the New

Shares for any other person. Such separate applications shall be deemed to be multiple

applications and will be liable to be rejected at the discretion of our Company.

Joint applications shall be rejected. Multiple applications for the New Shares shall be liable

to be rejected at the discretion of our Company. If you submit or procure submissions of

multiple share applications, you may be deemed to have committed an offence under the

Penal Code, Chapter 224 of Singapore and the SFA, and your applications may be referred

to the relevant authorities for investigation. Multiple applications or those appearing to be

or suspected of being multiple applications will be liable to be rejected at the discretion of

our Company.

4. We will not accept applications from any person under the age of 21 years, undischarged

bankrupts, sole proprietorships, partnerships or non-corporate bodies, joint Securities Account

holders of CDP and from applicants whose addresses (as furnished in their Application Forms)

bear post office box numbers. No person acting or purporting to act on behalf of a deceased

person is allowed to apply under the Securities Account with CDP in the deceased name at the

time of application.

5. We will not recognise the existence of a trust. Any application by a trustee or trustees must be

made in his/her/their own name(s) and without qualification or, where the application is made by

way of an Application Form by a nominee, in the name(s) of an approved nominee company or

approved nominee companies after complying with paragraph 6 below.

6. WE WILL ONLY ACCEPT APPLICATIONS FROM APPROVED NOMINEE COMPANIES.

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. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A

SECURITIES ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR

APPLICATION. If you do not have an existing Securities Account with CDP in your own name at

the time of your application, your application will be rejected. If you have an existing Securities

Account with CDP but fail to provide your Securities Account number or provide an incorrect

Securities Account number in Section B of the Application Form, your application is liable to be

APPENDIX ETERMS, CONDITIONS AND PROCEDURES FOR APPLICATIONS

E-1

rejected. Subject to paragraph 8 below, your application shall be rejected if your particulars such

as name, NRIC/passport number, nationality, permanent residence status and CDP Securities

Account number provided in your Application Form differ from those particulars in your Securities

Account as maintained with CDP. If you have more than one individual direct Securities Account

with CDP, your application shall be rejected.

8. If your address as stated in the Application Form is different from the address registered

with CDP, you must inform CDP of your updated address promptly, failing which the

notification letter on successful allotment and other correspondences from CDP will be

sent to your address last registered with CDP.

9. Our Company reserves the right to reject any application which does not conform strictly

to the instructions set out in the Application Form and in this Offer Document or with the

terms and conditions of this Offer Document 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 up or improper form of remittance. Our Company

further reserves the right to treat as valid any application not completed or submitted or

effected in all respects in accordance with the instructions set out in the Application Form

or the terms and conditions of this Offer Document, 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. Our Company reserves the right to reject or accept, in whole or in part, or to scale down or to ballot

any application, without assigning any reason therefor, and no enquiry and/or correspondence on

our decision of our Company will be entertained. In deciding the basis of allotment which shall be

at the discretion of our Company, due consideration will be given to the desirability of allotting the

New Shares to a reasonable number of applicants with a view to establishing an adequate market

for our Shares.

11. Share certificates will be registered in the name of CDP or its nominee and will be forwarded only

to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days after the

close of the Application List, a statement of account stating that your Securities Account has been

credited with the number of New Shares allotted to you. This will be the only acknowledgement

of application monies received and is not an acknowledgement by our Company. You irrevocably

authorise CDP to complete and sign on your behalf as transferee or renounce any instrument of

transfer and/or other documents required for the issue or transfer of the New Shares allotted

and/or allocated to you.

12. You irrevocably authorise CDP to disclose the outcome of your application, including the number

of New Shares allotted to you pursuant to your application, to us, the Sponsor and the Placement

Agent and, any other parties so authorised by the foregoing persons.

13. Any reference to “you” or the “applicant” in this section shall include an individual, a corporation,

an approved nominee company and trustee applying for the New Shares by way of a Placement

Shares Application Form.

14. By completing and delivering an Application Form in accordance with the provisions of this Offer

Document, you:–

(a) irrevocably offer, agree and undertake to subscribe for the number of New Shares specified

in your application (or such smaller number for which the application is accepted) at the


E-2

Issue Price for each New Share and agree that you will accept such New Shares as may be

allotted to you, in each case on the terms of, and subject to the conditions set out in this Offer

Document and the Memorandum and Articles of Association of our Company;

(b) warrant the truth and accuracy of the information contained, and representations and

declarations made, in your application, and acknowledge and agree that such information,

representations and declarations will be relied on by our Company in determining whether

to accept your application and/or whether to allot any New Shares to you;

(c) agree that the aggregate Issue Price for the New Shares applied for is due and payable to

our Company upon application; and

(d) agree and warrant that, if the laws of any jurisdictions outside Singapore are applicable to

your application, you have complied with all such laws and none of our Company, the

Sponsor and/or the Placement Agent will infringe any such laws as a result of the

acceptance of your application.

15. Our acceptance of applications will be conditional upon, inter alia, our Company being satisfied

that:–

(a) permission has been granted by the SGX-ST to deal in and for quotation of all our existing

Shares and the New Shares on Catalist;

(b) the Management Agreement and Placement Agreement referred to in the “Management and

Placement Arrangements” section of this Offer Document have become unconditional and

have not been terminated or cancelled prior to such date as we may determine; and

(c) the Authority has not issued a stop order under the SFA which directs that no further shares

to which this Offer Document relates be allotted and/or allocated.

16. We will not hold any application in reserve.

17. We will not allot Shares on the basis of this Offer Document later than six months after the date

of registration of this Offer Document by the SGX-ST acting as agent on behalf of the Authority.

18. Additional terms and conditions for applications by way of Application Form are set out in the

“Additional Terms and Conditions for Applications using Application Form” below.


E-3

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORM

You shall make an application by way of an Application Form on and subject to the terms and conditions

of this Offer Document including but not limited to the terms and conditions appearing below and those

set out in the “Terms, Conditions And Procedures For Applications” section as well as the Memorandum

and Articles of Association of our Company.

1. Your application for the New Shares must be made using the BLUE Application Form for

Placement Shares accompanying and forming part of this Offer Document.

We draw your attention to the detailed instructions contained in the Application Form and this

Offer Document for the completion of the Application Form which must be carefully followed. Our

Company reserves the right to reject applications which do not conform strictly to the

instructions set out in the Application Form and this Offer Document or to the terms and

conditions of this Offer Document or which are illegible, incomplete, incorrectly completed

or which are accompanied by improperly drawn remittances or improper form of

remittances.

2. Your Application Form must be completed in English. Please type or write clearly in ink using

BLOCK LETTERS.

3. All spaces in the Application Form, except those under the heading “FOR OFFICIAL USE ONLY”,

must be completed and the words “NOT APPLICABLE” 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. You must make your application, in the case of individuals, in your full names as they appear

in your identity card (if applicants have such identification documents) or in your passport and, in

the case of corporations, in your full names as registered with a competent authority. If you are

not an individual, you must complete the Application Form under the hand of an official who must

state the name and capacity in which he signs the Application Form. If you are a corporation

completing the Application Form, you are required to affix your Common Seal (if any) in

accordance with your Memorandum and Articles of Association or equivalent constitutive

documents. If you are a corporate applicant and your application is successful, a copy of your

Memorandum and Articles of Association or equivalent constitutive documents must be lodged

with our Company’s Share Registrar and Share Transfer Office. Our Company reserves the right

to require you to produce documentary proof of identification for verification purposes.

5. (a) You must complete Sections A and B and sign on page 1 of the Application Form.

(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form.

Where paragraph 7(a) is deleted, you must also complete Section C of the Application Form

with particulars of the beneficial owner(s).

(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be,

on page 1 of the Application Form, your application is liable to be rejected.

6. You, whether an individual or corporate applicant, whether incorporated or unincorporated and

wherever incorporated or constituted, will be required to declare whether you are a citizen or

permanent resident of Singapore or a corporation in which citizens or permanent residents of

Singapore or any body corporate constituted under any statute of Singapore have an interest in


E-4

the aggregate of more than 50% of the issued share capital of or interests in such corporations.

If you are an approved nominee company, you are required to declare whether the beneficial

owner of the New 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% of the issued share capital of or interests in such

corporation.

7. Your application must be accompanied by a remittance in Singapore currency for the full amount

payable, in respect of the number of New Shares applied for, in the form of a BANKER’S DRAFT

or CASHIER’S ORDER drawn on a bank in Singapore, made out in favour of “KITCHEN

CULTURE SHARE ISSUE ACCOUNT” crossed “A/C PAYEE ONLY”, with your name and address

written clearly on the reverse side. We will not accept applications not accompanied by any

payment or accompanied by any other form of payment. We will reject remittances bearing

“NOT TRANSFERABLE” or “NON TRANSFERABLE” crossings. The completed and signed

BLUE Placement Shares Application Form and your remittance in full in respect of the number of

New Shares applied for in accordance with the terms and conditions of this Offer Document, with

your name and address written clearly on the reverse side, must be enclosed and sealed in an

envelope to be provided by you. The sealed envelope must be DESPATCHED BY ORDINARY

POST OR DELIVERED BY HAND, at your own risk, to Boardroom Corporate & Advisory

Services Pte. Ltd., 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623, to

arrive by 12.00 noon on 20 July 2011 or such other time as our Company may, in

consultation with the Sponsor, decide. Local Urgent Mail or Registered Post must NOT be

used. No acknowledgement of receipt will be issued by our Company or the Sponsor for any

applications or application monies received.

8. Monies paid in respect of unsuccessful applications are expected to be returned (without interest

or any share of revenue or other benefit arising therefrom) to you by ordinary post within 24 hours

of balloting of applications at your own risk. Where your application is rejected or accepted in part

only, the full amount or the balance of the application monies, as the case may be, will be refunded

(without interest or any share of revenue or other benefit arising therefrom) to you by ordinary post

at your own risk within 14 Market Days after the close of the Application List, provided that the

remittance accompanying such application which has been presented for payment or other

processes has been honoured and the application monies have been received in the designated

share issue account. In the event that the Placement is cancelled by us following the termination

of the Management Agreement and/or Placement Agreement, the application monies received will

be refunded (without interest or any share of revenue or any other benefit arising therefrom) to you

by ordinary post or telegraphic transfer at your own risk within five Market Days of the termination

of the Placement. In the event that the Placement is cancelled by us following the issuance of the

stop order by the SGX-ST, acting as agent on behalf of the Authority, the application monies

received will be refunded (without interest or any share of revenue or other benefit arising

therefrom) to you by ordinary post at your own risk within 14 days from the date of the stop order.

9. Capitalised terms used in the Application Form and defined in this Offer Document shall bear the

meanings assigned to them in this Offer Document.


E-5

10. By completing and delivering the Application Form, you agree that:–

(a) in consideration of our Company having distributed the Application Form to you and

agreeing to close the Application List at 12.00 noon on 20 July 2011 or such other time or

date as our Directors may, in consultation with the Sponsor, decide:–

(i) your application is irrevocable; and

(ii) your remittance will be honoured on first presentation and that any application monies

returnable may be held pending clearance of your payment without interest or any

share of revenue or other benefit arising therefrom;

(b) all applications, acceptances and contracts resulting therefrom under the Placement shall be

governed by and construed in accordance with the laws of Singapore and that you

irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

(c) in respect of the New Shares for which your application has been received and not rejected,

acceptance of your application shall be constituted by written notification and not otherwise,

notwithstanding any remittance being presented for payment by or on behalf of our

Company;

(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at any

time after acceptance of your application;

(e) in making your application, reliance is placed solely on the information contained in this Offer

Document and none of our Company, the Sponsor, the Placement Agent nor any other

person involved in the Placement shall have any liability for any information not so

contained;

(f) you consent to the disclosure of your name, NRIC/passport number, address, nationality,

permanent resident status, CDP Securities Account number, CPF Investment Account

number (if applicable), and share application amount to our Share Registrar, CDP, SCCS,

SGX-ST, our Company, the Sponsor, the Placement Agent or other authorised operators;

and

(g) you irrevocably agree and undertake to subscribe for and/or purchase the number of New

Shares applied for as stated in the Application Form or any smaller number of such New

Shares that may be allotted and/or allocated to you in respect of your application. In the

event that our Company decides to allot and/or allocate any smaller number of New Shares

or not to allot and/or allocate any New Shares to you, you agree to accept such decision as

final.


E-6

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We specialise in the sale and distribution of a wide range of premium imported

kitchen systems, kitchen appliances, wardrobe systems, household furniture and

accessories from Europe and USA, catering to the high end markets under the

“Kitchen Culture” identity. Due to the wide variety of products under different high

end brands that we represent, we have become one of the premier kitchen solutions

providers for the discerning and sophisticated consumer in the premium market

predominantly in Singapore and Malaysia.

Our head office, corporate showroom and warehouse

facility are located in Singapore at 25 New Industrial Road

KHL Industrial Building Singapore 536211. We have two

“Kitchen Culture” retail showrooms located at 2 Leng

Kee Road #01-02/03/04/05/07 Singapore 159086 and 45E

Ground floor and 5th floor Bangunan Bangsaria Jalan

Maarof Taman Bangsar 59100 Kuala Lumpur Malaysia,

and one “Haus” retail showroom located at 390 Orchard

Road #03-04 Palais Renaissance Singapore 238871,

occupying an aggregate built-in area of approximately

32,055 sq ft.

COMPANYPROFILE

KIT

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EN

CU

LT

UR

E H

OL

DIN

GS

LT

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KITCHEN CULTURE HOLDINGS LTD.(Incorporated in the Republic of Singapore on 25 March 2011)

(Company Registration No. 201107179D)

This document is important. If you are in any doubt as to the

action you should take, you should consult your legal, financial,

tax, or other professional adviser(s).

Collins Stewart Pte. Limited (the “Sponsor”) has made an applicationto the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for permission to deal in, and for quotation of, all the ordinaryshares (the “Shares”) in the capital of Kitchen Culture HoldingsLtd. (the “Company”) already issued and the new Shares (the“New Shares”) which are the subject of the Placement (as definedherein) on Catalist. The dealing in, and quotation of, our Sharesand the New Shares will be in Singapore dollars.

Companies listed on Catalist may carry higher investment riskwhen compared with larger or more established companies listedon the Main Board of the SGX-ST. In particular, companies maylist on Catalist without a track record of profitability and there isno assurance that there will be a liquid market in the shares orunits of shares traded on Catalist. You should be aware of the risksof investing in such companies and should make the decision toinvest only after careful consideration and, if appropriate, consultationwith your professional adviser(s).

This Placement is made in or accompanied by this Offer Documentthat has been registered by the SGX-ST acting as agent on behalfof the Monetary Authority of Singapore (the “Authority”). We havenot lodged or registered this Offer Document in any other jurisdiction.

Neither the Authority nor the SGX-ST has examined or approvedthe contents of this Offer Document. Neither the Authority northe SGX-ST assumes any responsibility for the contents of thisOffer Document, including the correctness of any of the statementsor opinions made or reports contained in this Offer Document.

The SGX-ST does not normally review the application for admissionbut relies on the Sponsor (as defined herein) confirming that ourCompany is suitable to be listed on Catalist and complies with therules of the Listing Manual (as defined herein). Neither the Authoritynor the SGX-ST has, in any way, considered the merits of theShares or units of Shares being offered for investment.

The registration of this Offer Document by the SGX-ST does notimply that the Securities and Futures Act (Chapter 289) ofSingapore, or any other legal or regulatory requirements, orrequirements under the SGX-ST’s listing rules, have been compliedwith.

Acceptance of applications will be conditional upon the issue ofthe New Shares and the listing and quotation of all our existingissued Shares and the New Shares. Monies paid in respect ofany application accepted will be returned to you at your ownrisk, without interest or any share of revenue or other benefitarising therefrom, if the admission and listing do not proceed,and you will not have any claims against us, the Sponsor andthe Placement Agent (as defined herein).

After the expiration of six months from the date of registrationof this Offer Document, no person shall make an offer ofsecurities, or allot, issue or sell any of our Shares, on the basisof this Offer Document; and no officer or equivalent person orpromoter of our Company will authorise or permit the offer ofany of our Shares or the allotment, issue or sale of any of ourShares, on the basis of this Offer Document.

Investing in our Shares involves risks which are described

in the “Risk Factors” section of this Offer Document.

OFFER DOCUMENT DATED 15 JULY 2011Registered by the Singapore Exchange Securities Trading Limited acting as agent on behalf of theMonetary Authority of Singapore on 15 July 2011

Placement of 17,000,000 New Shares at $0.30 foreach Share, payable in full on application.

Sponsor and Placement Agent

COLLINS STEWART PTE. LIMITED(Incorporated in the Republic of Singapore)(Company Registration No. 200713620D)


25 New Industrial Road #02-01 KHL Industrial Building Singapore 536211

Tel: [65] 6471 6776 Fax: [65] 6472 6776

www.khlmktg.com I www.kitchenculture.com

Company Registration No.201107179D

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