Apps

INTERNATIONAL HEALTHWAY CORPORATION LIMITED An Integrated Healthcare Services and Facilities Provider
(Company Registration No.: 201304341E) (Incorporated in the Republic of Singapore on 18 February 2013)
Placement of 104,350,000 Placement Shares comprising 58,517,000 New Shares and 45,833,000 Vendor Shares at S$0.48 for each Placement Share, payable in full on application
OFFER DOCUMENT DATED 1 JULY 2013 (Registered by the Singapore Exchange Securities Trading Limited (the SGX-ST), acting as agent on behalf of the Monetary Authority of Singapore (the Authority) on 1 July 2013) THIS OFFER IS MADE IN OR ACCOMPANIED BY AN OFFER DOCUMENT (THE OFFER DOCUMENT) THAT HAS BEEN REGISTERED BY THE SGX-ST, ACTING AS AGENT ON BEHALF OF THE AUTHORITY ON 1 JULY 2013. THE REGISTRATION OF THIS OFFER DOCUMENT BY THE SGX-ST, ACTING AS AGENT ON BEHALF OF THE AUTHORITY DOES NOT IMPLY THAT THE SECURITIES AND FUTURES ACT (CHAPTER 289) OF SINGAPORE, OR ANY OTHER LEGAL OR REGULATORY REQUIREMENTS, OR REQUIREMENTS UNDER THE SGX-STS LISTING RULES, HAVE BEEN COMPLIED WITH. This document is important. If you are in any doubt as to the action you should take, you should consult your legal, nancial, tax or other professional adviser(s). PrimePartners Corporate Finance Pte. Ltd. (the Sponsor) has made an application to the SGX-ST for permission to deal in, and for quotation of, all the ordinary shares (the Shares) in the capital of International Healthway Corporation Limited (the Company) already issued (including the Vendor Shares (as defined herein)), the New Shares (as defined herein) (which together with the Vendor Shares, are the subject of this Placement) as well as the SPA Shares (as defined herein) on Catalist. Acceptance of applications will be conditional upon, inter alia, issue of the New Shares and permission being granted by the SGX-ST for the listing and quotation of all our existing issued Shares (including the Vendor Shares), the New Shares and the SPA Shares on Catalist. Monies paid in respect of any application accepted will be returned if the admission and listing do not proceed. The dealing in and quotation of the 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 SGX-ST Main Board. 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. You 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 your professional adviser(s). 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 to Catalist but relies on the Sponsor to confirm that the Company is suitable to be listed and complies with the Catalist Rules (as defined herein). Neither the Authority nor the SGX-ST has in any way considered the merits of the Shares or units of Shares being offered for investment. We have not lodged this Offer Document in any other jurisdiction. Investing in our Shares involves risks which are described in the section entitled RISK FACTORS of this Offer Document. After the expiration of six (6) months from the date of registration of this Offer Document, no person shall make an offer of securities, or allot, issue or sell any securities, on the basis of this Offer Document; and no ofcer or equivalent person or promoter of the Company will authorise or permit the offer of any securities or the allotment, issue or sale of any securities, on the basis of this Offer Document.
Manager, Sponsor and Joint Placement Agent
PRIMEPARTNERS CORPORATE FINANCE PTE. LTD. (Company Registration No.: 200207389D) (Incorporated in the Republic of Singapore)
Joint Placement Agents
DMG & PARTNERS SECURITIES PTE LTD (Company Registration No.: 198701140E) (Incorporated in the Republic of Singapore)
SAC CAPITAL PRIVATE LIMITED (Company Registration No.: 200401542N) (Incorporated in the Republic of Singapore)
AN INTEGRATED HEALTHCARE SERVICES AND FACILITIES PROVIDER

Providing healthcare services through the management and operation of hospital and investment in healthcare-related assets Developing medical real estate, healthcarerelated assets and integrated mixed-use developments
OUR BUSINESS SEGMENTS

HEALTHCARE SERVICES
HEALTHCARE SERVICES: Own, manage and operate Hospital with a range of medical specialisations HEALTHCARE-RELATED: Own Nursing Facilities
INTEGRATED MEDICAL REAL ESTATE

MEDICAL REAL ESTATE: Own, manage and develop hospitals and large-format medical centres MIXED-USE DEVELOPMENTS: Own, manage and develop integrated mixed-use development that has medical facilities integrated with other commercial retail centres and service residences
STRATEGIC PORTFOLIO OF 22 ASSETS ACROSS THE PRC, JAPAN AND MALAYSIA

THE PRC
1 Hospital in Wuxi 1 Medical & Commercial Centre in Chengdu 1 Maternity Home & Commercial Centre in Shanghai 1 Medical & Wellness Resort in Chengdu
OUR INVESTMENT MERITS

GOOD FUNDAMENTALS
Platform for growth through investing in healthcare services and facilities in strategic locations Strategic portfolio of medical real estate, healthcare-related assets and integrated mixed-use developments Broad-based integrated exposure, through services our and healthcare
facilities, to highly attractive and rapid
JAPAN
12 Nursing Facilities 2 Senior Residences
growth economies in the Asian region (excluding Japan) and the stable economy of Japan Focused approach targeting middleincome and high-income markets, including expatriates Committed, qualied and experienced management team
MALAYSIA
1 Medical & Commercial Centre in Kuala Lumpur 1 Commercial Centre & Service Residences in Iskandar, Johor 1 Retirement Village in Seri Alam, Johor 1 Aesthetic & Wellness Centre in Seri Alam, Johor
INITIAL PORTFOLIO 15 PENDING PROJECTS 4 PIPELINE PROJECTS 3
CLEAR GROWTH STRATEGIES

Strong growth momentum Grow and strengthen presence in Primary Geographical Markets, capitalising on rise of afuent class in the PRC, the
KEY FIGURES
elderly healthcare market in Japan and medical tourism in Malaysia* Expand into Asia-Pacic region: Eye on opportunities in Singapore, Indonesia, the Philippines, Australia and India Develop, redevelop and expand our existing projects Implement proactive measures on operational performance May eventually establish listing vehicles, such as REITS, to enhance shareholder value
Total Gross Floor Area 1
Total Number of Nursing & Maternity Rooms 2
Total Number of Hospital Beds 3
386,996
sqm
1 2
1,454
rooms
950
beds
Figure is approximate. Includes proposed GFA for the following: (i) IHC Medical and Commercial Centre in Kuala Lumpur; (ii) IHC Medical and Commercial Centre in Chengdu; (iii) IHC Wuxi Hospital and (iv) IHC Commercial Centre and Service Residences in Puteri Harbour; and excludes Senior Residences and Pipeline Projects Includes the rooms in the Nursing Facilities and the proposed number of rooms in the IHC Maternity Home and Commercial Centre in Shanghai Includes the proposed number of hospital beds upon the completion of the IHC Wuxi Project and IHC Chengdu Project
INDICATIVE TIMETABLE
EVENT Opening Date & Time for Placement Closing Date & Time for Placement Commence trading on a ready basis DATE & TIME 1 July 2013, 12:00 noon 4 July 2013, 12:00 noon 8 July 2013, 9:00 a.m.
ASSET VALUE BY GEOGRAPHY^
REVENUE BY GEOGRAPHY
JAPAN 54.1% THE PRC 45.9%
POSITIVE INDUSTRY OUTLOOK*

Strong demand for healthcare services and healthcare facilities Private healthcare is likely to grow its market share All Asia-Pacic countries are expected to nearly double their 2012 healthcare expenditure by 2018
JAPAN 40.24%
MALAYSIA 38.58%
FY2012
FY2012
THE PRC: Rising income and expanding middle class

drive consumption of healthcare services The Chinese Ministry of Health has set a goal for the increase of in- and out-patient visits at private hospitals from 8% in 2012 to 20% by 2015 Reducing the burden on public healthcare
THE PRC 21.18%
FINANCIAL HIGHLIGHTS
S$mil (Unaudited Pro Forma) Revenue Gross Profit Gross Profit Margin (%) Other Operating Income# Net Profit
^
FY2011 35.3 23.8 67.3 9.1 13.8
FY2012 37.8 23.9 63.0 53.2 53.3
VARIANCE 7.1% 0.4% (4.3)ppt 484.6% 286.2%
JAPAN: The rapidly ageing population demands specic

and upmarket healthcare services 26% of population above 65 years expected Tripled public spending on long-term care expected 40% of healthcare cost goes to elderly healthcare
MALAYSIA: Thriving medical tourism market

#
Includes the estimated values for Initial Portfolio on an as if complete and fully leased basis, except for the Wuxi Hospital and the Nursing Facilities, which are on an as-is basis as at February 28, 2013. (For reference only) Based on the unaudited pro forma nancial statements of the Group for FY2012 Comprises net fair value gains
Expected to triple its 2011 revenues from medical travel to RM1.57 billion in 2016 Healthcare sector as a focus area for development under the Economic Transformation Programme Iskandar Malaysia potential to be the next medical travel hub in Malaysia
Source: Frost & Sullivan Market Research Report on the Healthcare Services Industry in China, Japan and Malaysia, February 25, 2013
TABLE OF CONTENTS
CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GLOSSARY OF TECHNICAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CAUTIONARY NOTE ON FORWARD LOOKING STATEMENT . . . . . . . . . . . . . . . . . . . . SELLING RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DETAILS OF THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LISTING ON THE CATALIST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INDICATIVE TIMETABLE FOR LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DETAILS OF THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RATIONALE FOR THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLAN OF PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INTERESTS OF MANAGER, SPONSOR AND JOINT PLACEMENT AGENT . . . . . . . INTERESTS OF JOINT PLACEMENT AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OFFER DOCUMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUR COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUR COMPETITIVE STRENGTHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUR BUSINESS STRATEGIES AND FUTURE PLANS . . . . . . . . . . . . . . . . . . . . . . . OUR CONTACT DETAILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXCHANGE RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUMMARY FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RISKS RELATING TO OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RISKS RELATING TO OUR PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RISKS RELATING TO OUR COUNTRIES OF OPERATION . . . . . . . . . . . . . . . . . . . . RISKS RELATING TO AN INVESTMENT IN OUR SHARES . . . . . . . . . . . . . . . . . . . . ISSUE STATISTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . USE OF PROCEEDS AND LISTING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8 23 24 26 27 27 32 33 33 33 33 35 36 36 37 37 37 38 38 38 39 40 43 44 44 56 63 67 71 73 75 76
TABLE OF CONTENTS
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SHAREHOLDING AND OWNERSHIP STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . SIGNIFICANT CHANGES IN PERCENTAGE OF OWNERSHIP . . . . . . . . . . . . . . . . . VENDORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MORATORIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RESTRUCTURING EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GROUP STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SELECTED PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BASIS OF PREPARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . REVIEW OF PAST PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . REVIEW OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CAPITAL EXPENDITURE AND DIVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FOREIGN EXCHANGE MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INFLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SIGNIFICANT ACCOUNTING POLICY CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP . . . . . . . . . . . . . . . . HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INDUSTRY OVERVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QUALITY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CREDIT POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INVENTORY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SALES AND MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LICENCES, PERMITS, APPROVALS, CERTIFICATIONS AND GOVERNMENT REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUR MAJOR CUSTOMERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUR MAJOR SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SEASONALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 82 87 88 89 92 96 97 99 105 110
112 112 114 116 117 119 120 121 122 123 123 124 124 125 126 137 138 140 141 141 141 142 145 145 146 146
TABLE OF CONTENTS
STAFF TRAINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPETITIVE STRENGTHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROPERTIES AND FIXED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AWARDS AND ACCOLADES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROSPECTS AND TREND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ORDER BOOK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BUSINESS STRATEGIES AND FUTURE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAST INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . ON-GOING INTERESTED PERSON TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . GUIDELINES AND REVIEW PROCEDURES FOR ON-GOING AND FUTURE INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . POTENTIAL CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DIRECTORS, MANAGEMENT AND STAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MANAGEMENT REPORTING STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DIRECTORS AND EXECUTIVE OFFICERS REMUNERATION . . . . . . . . . . . . . . . . . SERVICE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DESCRIPTION OF ORDINARY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXCHANGE CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CLEARANCE AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GENERAL AND STATUTORY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MEMORANDUM AND ARTICLES OF ASSOCIATION . . . . . . . . . . . . . . . . . . . . . . . . . MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MANAGEMENT AND PLACEMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RESPONSIBILITY STATEMENT BY OUR DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . RESPONSIBILITY STATEMENT BY THE VENDORS . . . . . . . . . . . . . . . . . . . . . . . . . DOCUMENTS FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 146 147 150 161 161 162 162 168 168 171 174 176 181 181 188 191 192 193 194 197 202 207 209 223 224 224 227 227 228 229 229 232 233 234 234 235
TABLE OF CONTENTS
APPENDIX A INDEPENDENT AND REPORTING AUDITORS REPORT ON THE COMBINED FINANCIAL STATEMENTS OF INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 AND THE FINANCIAL PERIOD FROM 3 FEBRUARY 2011 TO 31 DECEMBER 2011 . . . . . . . . . . . . . . . . . . . . . . . APPENDIX B INDEPENDENT AND REPORTING AUDITORS REPORT ON THE EXAMINATION OF THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2012 AND 31 DECEMBER 2011 . . . . . . . . . . . APPENDIX C INDEPENDENT VALUATION REPORT ON THE PROPERTIES IN THE PRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX D INDEPENDENT VALUATION REPORT ON THE PROPERTIES IN MALAYSIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX E INDEPENDENT VALUATION REPORT ON THE PROPERTIES IN JAPAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX F MARKET RESEARCH REPORT ON THE HEALTHCARE SERVICES INDUSTRY IN CHINA, JAPAN AND MALAYSIA . . . . . . . . . . . . . . . . . . . APPENDIX G SELECTED EXTRACTS OF OUR ARTICLES OF ASSOCIATION . . . . . APPENDIX H DESCRIPTION OF RELEVANT LAWS AND REGULATIONS . . . . . . . . . APPENDIX I TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A-1
B-1
C-1
D-1
E-1
F-1 G-1 H-1
I-1
CORPORATE INFORMATION
BOARD OF DIRECTORS : Dr. Jong Hee Sen (Executive Chairman and Group President) Yip Yuen Leong (Executive Director and President, Integrated Medical Real Estate) Wong Ong Ming Eric (Non-executive Director) Siew Teng Kean (Lead Independent Director) Ong Lay Khiam (Independent Director) Teo Cheng Hiang Richard (Independent Director) Wee Woon Hong, LLB (Hons) Lee Hock Heng 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 PrimePartners Corporate Finance Pte. Ltd. 20 Cecil Street #21-02 Equity Plaza Singapore 049705 DMG & Partners Securities Pte Ltd 10 Collyer Quay #09-08 Ocean Financial Centre Singapore 049315 SAC Capital Private Limited 1 Robinson Road #21-02 AIA Tower Singapore 048542 INDEPENDENT AND REPORTING AUDITOR : PricewaterhouseCoopers LLP 8 Cross Street #17-00 PWC Building Singapore 048424 Partner-in-charge: Tham Tuck Seng (a member of the Institute of Certified Public Accountants of Singapore) SOLICITORS TO THE PLACEMENT AND LEGAL ADVISER TO OUR COMPANY ON SINGAPORE LAW LEGAL ADVISER TO OUR COMPANY ON BVI LAW : Shook Lin & Bok LLP 1 Robinson Road #18-00 AIA Tower Singapore 048542
COMPANY SECRETARIES
REGISTERED OFFICE
MANAGER, SPONSOR AND JOINT PLACEMENT AGENT
JOINT PLACEMENT AGENTS
Appleby 2206-19 Jardine House 1 Connaught Place Central Hong Kong
LEGAL ADVISER TO OUR COMPANY ON HONG KONG LAW : Deacons 5th Floor, Alexandra House 18 Chater Road Central Hong Kong Anderson Mo ri & Tomotsune Izumi Garden Tower 6-1, Roppongi 1-chome Minato-ku, Tokyo 106-6036 Japan Tay & Partners 6th Floor, Plaza See Hoy Chan Jalan Raja Chulan 50200 Kuala Lumpur Malaysia Dacheng Law Offices 18F Guoxin Plaza No. 28 Dongchenggenxiajie Chengdu 610031 The Peoples Republic of China Harry Elias Partnership LLP 4 Shenton Way #17-01 SGX Centre 2 Singapore 068807 Aoyama Realty Advisors Inc. ARA Jingumae Building 3-4-9 Jingumae, Shibuya-ku Tokyo 150-0001 Japan C H Williams Talhar & Wong Sdn Bhd 30-01, 30th Floor Menara Multi-Purpose @ CapSquare 8 Jalan Munshi Abdullah P O Box 12157 50100 Kuala Lumpur Malaysia DTZ 42-43/F, Tower 2, Plaza 66 1366 Nanjing West Road Shanghai 200040 The Peoples Republic of China INDEPENDENT MARKET RESEARCHER : Frost & Sullivan (S) Pte Ltd 100 Beach Road #29-01/11 Shaw Tower Singapore 189702
LEGAL ADVISER TO OUR COMPANY ON JAPANESE LAW
LEGAL ADVISER TO OUR COMPANY ON MALAYSIA LAW
LEGAL ADVISER TO OUR COMPANY ON PRC LAW
LEGAL ADVISER TO DMG
INDEPENDENT VALUERS
SINGAPORE SHARE REGISTRAR AND SHARE TRANSFER OFFICE : Boardroom Corporate & Advisory Services Pte Ltd 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 United Overseas Bank (Malaysia) Bhd Level 2 Menara UOB Jalan Raja Laut 50350 Kuala Lumpur Malaysia Shinsei Bank, Limited Nihonbashi Muromachi Nomura Building 4-3, Nihonbashi-muromachi 2-chome, Chuo-ku, Tokyo 103-8303 Japan RECEIVING BANKER : The Bank of East Asia, Limited 60 Robinson Road BEA Building Singapore 068892 Dr. Dominic Er Kong Kiong 8A Orange Grove Road #03-03 Singapore 258343 Healthway Medical Development (Private) Limited 2 Leng Kee Road #06-07 Thye Hong Centre Singapore 159086 Real Empire International Limited P.O. Box 957 Offshore Incorporations Centre Road Town, Tortola British Virgin Islands TMF Trustees Malaysia Berhad (acting in its capacity as trustee for OSK-UOB Pre-IPO Fund) c/o RHB OSK International Asset Management Pte Ltd 10 Collyer Quay #09-08 Ocean Financial Centre Singapore 049315
PRINCIPAL BANKERS
VENDORS
DEFINITIONS
In this Offer Document and the accompanying Application Forms, unless the context otherwise requires, the following definitions apply throughout where the context so admits: Companies within our Group Company or IHC : International Healthway Corporation Limited, a company incorporated in Singapore on 18 February 2013. The terms we, our, our Company or us have correlative meanings Our Company and our subsidiaries following the completion of the Restructuring Exercise, treated for the purpose of this Offer Document as if the group structure had been in existence since 1 January 2011 Our subsidiaries as at the date of this Offer Document Health Kind International Limited, a company incorporated in Hong Kong on 9 June 2010, and a subsidiary of IHC Star Health Kind International (Shanghai) Co., Ltd., a company incorporated in the PRC on 21 September 2010, and a subsidiary of Health Kind (Hong Kong) IHC Chengdu Women and Child Hospital Pte. Ltd. (formerly known as SBCC Women and Child Hospital Pte. Ltd.), a company incorporated in Singapore on 6 January 2012 and a wholly-owned subsidiary of our Company IHC Medical Assets (HK) Limited (formerly known as Healthway Medical Assets (HK) Limited), a company incorporated in Hong Kong on 31 March 2010 and a whollyowned subsidiary of IHC Summit IHC Medical Facilities (HK) Limited (formerly known as Healthway Medical Facilities (HK) Limited), a company incorporated in Hong Kong on 26 March 2010 and a whollyowned subsidiary of IHC Star IHC Japan 1 GK (formerly known as Tokeidai 1 GK), a company incorporated in Japan on 10 September 2012 and a wholly-owned subsidiary of IHC Japan IHC Japan One ISH, a bankruptcy remote entity incorporated in Japan on 20 September 2012 and a subsidiary of IHC Japan IHC Japan Medical Facilities Pte. Ltd., a company incorporated in Singapore on 3 January 2013 and a whollyowned subsidiary of our Company 8
Group or Group Companies
Group Subsidiaries Health Kind (Hong Kong)
: :
Health Kind (Shanghai)
ICWCH
IHC Assets (Hong Kong)
IHC Facilities (Hong Kong)
IHC GK (Japan)
IHC ISH (Japan)
IHC Japan
DEFINITIONS
IHC KLCC : IHC KLCC Investment Pte. Ltd. (formerly known as Healthway Medical Centre (KLCC) Pte. Ltd.), a company incorporated in Singapore on 3 February 2011 and a wholly-owned subsidiary of our Company IHC Peak Limited (formerly known as HMD Peak Limited), a company incorporated in the BVI on 9 January 2012 and a wholly-owned subsidiary of ICWCH IHC Medical Services (HK) Limited (formerly known as Healthway Medical Services (HK) Limited), a company incorporated in Hong Kong on 26 March 2010 and a whollyowned subsidiary of IHC Peak IHC Star Limited (formerly known as HMD Star Limited), a company incorporated in the BVI on 9 January 2012 and a wholly-owned subsidiary of IHC Wuxi IHC Summit Limited (formerly known as HMD Summit Limited), a company incorporated in the BVI on 9 January 2012 and a wholly-owned subsidiary of IMA IHC Japan First TMK, a company incorporated in Japan on 22 February 2013 and a subsidiary of IHC Japan IHC Wuxi Hospital Pte. Ltd. (formerly known as Golden Summit Development Pte. Ltd.), a company incorporated in Singapore on 3 February 2011 and a wholly-owned subsidiary of our Company IHC Medical Assets Pte. Ltd. (formerly known as Healthway Medical Assets Pte. Ltd.), a company incorporated in Singapore on 6 January 2012 and a wholly-owned subsidiary of our Company Kang Hui (Chengdu) Assets Co., Ltd., a company incorporated in the PRC on 26 December 2012 and a wholly-owned subsidiary of IHC Services (Hong Kong) IHC Seasons Residences Sdn. Bhd. (formerly known as Seasons Residences Sdn. Bhd.), a company incorporated in Malaysia on 6 June 2011 and a wholly-owned subsidiary of IHC KLCC Wuxi New District Phoenix Hospital Co., Ltd., a company incorporated in the PRC on 12 July 2005, and a wholly-owned subsidiary of Health Kind (Shanghai)
IHC Peak
IHC Services (Hong Kong)
IHC Star
IHC Summit
IHC TMK (Japan)
IHC Wuxi
IMA
Kang Hui (Chengdu)
Seasons Residences
Wuxi Phoenix
DEFINITIONS
Our Assets and Projects IHC Chengdu Project : The development of an integrated mixed-use development with a hospital and retail space in Dujiangyan, Chengdu City, Sichuan Province, the PRC The development of an integrated mixed-use development with medical centres, retail space and service residences in Kuala Lumpur city centre, Malaysia The re-development of Wuxi Hospital The Wuxi New District Phoenix Hospital located in Wuxi City, Jiangsu Province, the PRC
IHC KLCC Project
IHC Wuxi Project Wuxi Hospital
: :
Other Potential Assets and Projects IHC Iskandar Project : The development of an integrated mixed-use development with medical centres, retail space and service apartments in Puteri Harbour, Iskandar, Johor, Malaysia The proposed development into a medical and wellness resort in Dujiangyan, Chengdu City, Sichuan Province, the PRC The development of an integrated mixed-use development with maternity homes and retail spaces in Holland Village township, Gaoqiao, Pudong New District, Shanghai, the PRC The acquisition and/or development of Aqua Villa Kashiihama Ichibankan and Kashiihama Senior Residence in Fukuoka, Japan
IHC Medical Resort
IHC Shanghai Project
Kashiihama Projects
Other Companies, Organisations and Agencies ASEAN Asset Manager or Cryxis Authority Azusa : : Association of Southeast Asian Nations Cryxis K.K., a Japanese kabushiki kaisha
: :
Monetary Authority of Singapore Azusa Capital K.K., a company authorised by Capbridge to receive 9,570,543 Shares on behalf of Capbridge British and Malayan Trustees Limited The Capbridge Group K.K. (previously known as Capbridge Holdings K.K.) 10
BMT Capbridge
: :
DEFINITIONS
Capbridge Group CDP or Depository Joint Placement Agents CPF Dallacy DMG Elysion Group : : : : : : : Capbridge and/or its affiliated entities The Central Depository (Pte) Limited PPCF, DMG and SAC Capital Central Provident Fund Dallacy International Inc. DMG & Partners Securities Pte Ltd Elysion Matsumoto Co. Ltd. and Safety Life Corporation and/or their affiliated entities Golden Cliff International Limited, a company incorporated in the BVI and wholly-owned by Fan Kow Hin Government of Singapore Investment Corporation godo kaisha Healthway Medical Corporation incorporated in Singapore Limited, a company
Golden Cliff
GIC GK HMC
: : :
HMC Group HMD
: :
HMC and its group of companies, excluding our Group Healthway Medical Development company incorporated in Singapore (Private) Limited, a
IHC Ace
IHC Ace Limited (formerly known as HMD Ace Limited), a company incorporated in the BVI and a wholly-owned subsidiary of IHC Chengdu IHC Apex Limited (formerly known as HMD Apex Limited), a company incorporated in the BVI and a wholly-owned subsidiary of IHC Shanghai IHC Chengdu Medical Resorts Private Limited (formerly known as Neuglow Medical Resorts (Chengdu) Private Limited), a company incorporated in Singapore and a whollyowned subsidiary of HMD IHC Medical Holdings (HK) Limited (formerly known as Healthway Medical Holdings (HK) Limited), a company incorporated in Hong Kong and a wholly-owned subsidiary of IHC Apex
IHC Apex
IHC Chengdu
IHC Holdings (Hong Kong)
11
DEFINITIONS
IHC Iskandar : IHC Iskandar Development Pte. Ltd., a company incorporated in Singapore and a wholly-owned subsidiary of HMD IHC Shanghai Medical Village Pte. Ltd. (formerly known as Healthway Shanghai Medical Village Pte. Ltd. and Healthway Hospitals (China) Pte. Ltd.), a company incorporated in Singapore and a wholly-owned subsidiary of HMD ippan shadan hojin kabushiki kaisha PrimePartners Corporate Finance Pte. Ltd.
IHC Shanghai
ISH KK Manager, Sponsor, PPCF or Joint Placement Agent PWC Real Empire
: : :
: :
PricewaterhouseCoopers LLP Real Empire International Limited, a company incorporated in the BVI and wholly-owned by Aathar Ah Kong Andrew SAC Capital Private Limited Singapore Exchange Securities Trading Limited Boardroom Corporate & Advisory Services Pte. Ltd. TMF Trustees Malaysia Berhad (acting in its capacity as trustee for OSK-UOB Pre-IPO Fund) tokutei mokuteki kaisha Xanery Limited, a company incorporated in the BVI and wholly-owned by Dr. Jong Hee Sen, our Executive Chairman and Group President
SAC Capital SGX-ST Share Registrar TMF
: : : :
TMK Xanery
: :
General Agreed Proportion : The proportion in which the Placement Shares are offered by each of our Company and the Vendors The printed application form to be used for the purpose of the Placement and which forms part of this Offer Document The list of applications for subscription and/or purchase of the Placement Shares
Application Form
Application List
12
DEFINITIONS
Articles or Articles of Association Asset Management Agreement : Articles of Association of our Company, as amended, supplemented or modified from time to time The first amended and restated asset management agreement between IHC TMK (Japan) and Cryxis dated 19 March 2013 pursuant to which IHC TMK (Japan) engaged Cryxis as the manager to provide certain advisory and consultation management services with respect to ownership, operation, management, marketing, leasing and disposition of the assets of our Group in Japan
Associate
(a)
in relation to any director, chief executive officer, substantial shareholder or controlling shareholder (being an individual) means: (i) (ii) his immediate family; the trustees, acting in their capacity as such 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 total votes attached to 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 of the total votes attached to all the voting shares
Associated Company
In relation to a corporation, means: (a) any corporation in which the corporation or its subsidiaries have, or the corporation and its subsidiaries together have, a direct interest of not less than 20% but not more than 50% of the total votes attached to all the voting shares; or any corporation, other than subsidiaries of the corporation or a corporation which is an associated company by virtue of paragraph (a), the policies of which the corporation or its subsidiaries, or the corporation together with its subsidiaries, is able to control or influence materially
(b)
13
DEFINITIONS
Audit Committee : The audit committee of our Company as at the date of this Offer Document, unless otherwise stated The board of Directors of our Company as at the date of this Offer Document, unless otherwise stated 11 June 2013, 5.00 p.m., on which the transfer books and the register of members of HMC was closed to determine the entitlements of HMC Shareholders for the purpose of the Distribution The British Virgin Islands The framework agreement between our Group and Capbridge dated 25 February 2013 pursuant to which our Group engaged the Capbridge Group as an advisor to advise our Group on the acquisition of our healthcare-related real estate portfolio in Japan The sponsor-supervised listing platform of the SGX-ST Any or all of the rules in the SGX-ST Listing Manual Section B: Rules of Catalist The Companies Act (Chapter 50) of Singapore, as amended, supplemented or modified from time to time Hong Kong Companies Ordinance, as supplemented or modified from time to time In relation to a corporation, means: (a) a person who has an interest in the voting shares of a corporation and who exercises control over the corporation; or a person who has an interest of 15% or more of the total votes attached to all the voting shares in a corporation, unless he does not exercise control over the corporation amended,
Board or Board of Directors Books Closure Date
BVI Capbridge Framework Agreement
: :
Catalist Catalist Rule or Catalist Rules Companies Act
: :
Companies Ordinance
Controlling Shareholder
(b)
Convertible Loan
The instrument having an aggregate value as set out in the respective Convertible Loan Agreements issued by Golden Cliff, Real Empire, Xanery, HMC and/or Healthway Medical Group Pte Ltd which entitles the Convertible Loan Investors to convert at the option of the Convertible Loan Investors into Shares in our Company pursuant to terms of the Convertible Loan Agreements
14
DEFINITIONS
Convertible Loan Agreements : The convertible loan agreements dated 7 August 2012, 20 December 2012, 15 January 2013 and 12 March 2013 entered into between Golden Cliff, Real Empire, Xanery, HMC and/or Healthway Medical Group Pte Ltd and the Convertible Loan Investors Asia Growth II, LP, Jimmy Lee Peng Siew, Lee Eng Chuan, Lee Kek Chin, Ng Han Kok, Tan See Tee, Tan Thiam Chye and Teo Cher Koon The convertible loan facilities of S$20 million obtained by Seasons Residences pursuant to a convertible loan agreement entered into between Seasons Residences and Dallacy dated 13 June 2011 and as amended by three (3) supplemental agreements dated 7 June 2012, 30 November 2012 and 28 May 2013 respectively A director of our Company as at the date of this Offer Document The proposed distribution of the Distribution Shares to the shareholders of HMC Up to 189,948,004 Shares in the issued share capital of our Company prior to the Placement Means earnings before interest, taxes, depreciation and amortisation (a) Our Company; (b) a subsidiary of our Company that is not listed on the SGX-ST or an approved exchange; or (c) an Associated Company that is not listed on the SGX-ST or an approved exchange, provided that our Group or our Group and our Interested Person(s), has control over the Associated Company Earnings per Share The instrument having an aggregate value as set out in the respective Exchangeable Loan Term Sheets issued by Golden Cliff which entitles the Exchangeable Loan Investors to convert at the option of the Exchangeable Loan Investors into Shares in our Company pursuant to terms of the Exchangeable Loan Term Sheets Tan Yeo Kee and Tan Koo Chuan
Convertible Loan Investors
Dallacy Loan
Director
Distribution
Distribution Shares
EBITDA
Entity at Risk
EPS Exchangeable Loan
: :
Exchangeable Loan Investors
15
DEFINITIONS
Exchangeable Loan Term Sheets : The binding term sheets dated 23 February 2013 and 8 April 2013 entered into between Golden Cliff and the Exchangeable Loan Investors The executive Directors of our Company as at the date of this Offer Document, unless otherwise stated The executive officers of our Company as at the date of this Offer Document, who are also key executives as defined under the SFR, unless otherwise stated Bobby Lim Chye Huat, Chua Keng Loy, Chua Siew Lian, Robert Jacob Feibusch, Trustee for Laurel Grove Trust, Lee Fang Wen, Lim Sing Tat, Ling Kee Poh, Tan Sze Seng and Yeo Kay Beng Extension to the Marriott MOU pursuant to which the parties agreed to extend the exclusivity period for another six (6) months from the date of the extension to the Marriott MOU The loan facility of S$15 million obtained by HMD pursuant to a loan agreement dated 15 June 2011 entered into between, among others, HMD and The Enterprise Fund II Ltd The financial period from 3 February 2011 to 31 December 2011 Singapore Financial Reporting Standards Financial year ended or, as the case may be, ending 31 December Gross Floor Area Goods and services tax Shareholders of HMC as at the Books Closure Date IHC Assets (Hong Kong), IHC Facilities (Hong Kong), IHC Services (Hong Kong) and Health Kind (Hong Kong) The independent, non-executive Directors of our Company as at the date of this Offer Document, unless otherwise stated The land or properties in which our Group has successfully acquired as at the date of this Offer Document and where the development of such land or properties is commencing or has commenced
Executive Directors
Executive Officers
Existing Investors
Extension to Marriott MOU
First Enterprise Loan
FP2011
FRS FY
: :
GFA GST HMC Shareholders Hong Kong Subsidiaries
: : : :
Independent Directors
Initial Portfolio
16
DEFINITIONS
Interested Person : (a) (b) a Director, chief executive officer Shareholder of our Company; or or Controlling
an Associate of any such Director, chief executive officer or Controlling Shareholder
Interested Person Transaction IPO Issue Price Latest Practicable Date or LPD Listing Listing Manual
Means a transaction between an Entity at Risk and an Interested Person Initial Public Offering S$0.48 for each Placement Share 20 May 2013, being the latest practicable date before the lodgement of this Offer Document with the SGX-ST The listing of the Shares on Catalist Section B of the listing manual of the SGX-ST: Rules of Catalist as amended, supplemented or modified from time to time The full sponsorship and management agreement between our Company, the Vendors and PPCF pursuant to which PPCF shall sponsor and manage the Listing as described in the sections entitled Plan of Placement and General and Statutory Information Management and Placement Arrangements of this Offer Document A day on which the SGX-ST is open for trading in securities Non-legally binding memorandum of understanding entered into between our Group and the Marriott Group pursuant to which the parties intend for the Marriott Group to be appointed to operate the service residences under the IHC KLCC Project under the brand Marriott Executive Apartments Various master lease agreements entered into between our Group and the operators, Hikari Heights-Varus Co., Ltd., Elysion Matsumoto Co. Ltd. and Safety Life Corporation, pursuant to which each of the operators agreed to lease and operate our Nursing Facilities The business of providing healthcare services and the development, investment and management of real estate projects which include medical real estate, healthcare-related assets and integrated mixed-use developments Net asset value
: : :
: :
Management Agreement
Market Day Marriott MOU
: :
Master Lease Agreements
Medical Development Business
NAV
17
DEFINITIONS
New Shares : The 58,517,000 new Shares for which our Company invites applications to subscribe for pursuant to the Placement and on the terms and subject to the conditions set out in this Offer Document The nominating committee of our Company as at the date of this Offer Document, unless otherwise stated The non-executive Directors of our Company (including the Independent Directors) as at the date of this Offer Document, unless otherwise stated The instrument having an aggregate principal amount as set out in the respective Subscription Agreements and bearing interest payable as contemplated in the conditions under the Subscription Agreements, issued by Golden Cliff, Real Empire or Xanery to the Notes Investors which entitles the Notes Investors to convert at the option of the Notes Investors into Shares in our Company pursuant to terms of the Subscription Agreements Ang Peng Huan, Chan Kwan Bian, Hong Heng Chye, Lau Chui Chew@Lau Chui Meng, Lau Lye Teck, Lim Cheng Chai Nicholas, Lim Seet Huat (Lin Shifa), Lim Siew Ooi and Lim Chieng Chieng, Ng Boon Hoo, Ng Kiang Tong, Ong Poi Hwa, Tan Chong Hoe, TMF and Toh Koon Hwa Net tangible assets This Offer Document dated 1 July 2013 issued by our Company in respect of the Placement Has the meaning as prescribed in the section entitled Restructuring Exercise of this Offer Document The lands and/or properties that our Group is in the final stages of negotiations with the intention to acquire but which acquisition will only be completed after the Placement The lands that our Group is in the preliminary stage of negotiations with the intention to acquire The placement of the Placement Shares by the Joint Placement Agents on behalf of our Company and the Vendors for subscription and/or purchase at the Issue Price subject to and on the terms and conditions set out in this Offer Document
Nominating Committee
Non-executive Directors
Notes
Notes Investors
NTA Offer Document
: :
Payment Obligations
Pending Projects
Pipeline Projects
Placement
18
DEFINITIONS
Placement Agreement : The placement agreement entered into between our Company, the Vendors and the Joint Placement Agents pursuant to which the Joint Placement Agents shall procure subscriptions for and/or purchase of the Placement Shares at the Issue Price as described in the sections entitled Plan of Placement and General and Statutory Information Management and Placement Arrangements of this Offer Document The 104,350,000 Placement Shares which are the subject of the Placement, comprising 58,517,000 New Shares and 45,833,000 Vendor Shares The 3,125,000 new Shares to be issued and allotted to PPCF by our Company as part of PPCFs management fees as the Manager and Sponsor The Peoples Republic of China Existing Investors, Convertible Loan Investors, Exchangeable Loan Investors, Notes Investors and Tan Kheen Seng@John Malaysia, Japan and the PRC
Placement Shares
PPCF Shares
PRC or China Pre-IPO Investors
: :
Primary Geographical Markets Promoters
(a) (b)
controlling shareholders and their associates; and executive directors with an interest in 5% or more of the issued share capital at the time of listing
Remuneration Committee
The remuneration committee of our Company as at the date of this Offer Document The restructuring agreement entered into between our Company and HMD dated 28 May 2013 pursuant to which our Company acquired our Group Subsidiaries from HMD The corporate restructuring and expansion exercise undertaken in connection with the Placement, more fully described in the section entitled Restructuring Exercise of this Offer Document Has the meaning as prescribed in the section entitled Restructuring Exercise of this Offer Document
Restructuring Agreement
Restructuring Exercise
Restructuring Novation
19
DEFINITIONS
Sale and Purchase Agreements : The three (3) sale and purchase agreements dated 31 May 2013 between our Company and HMD, pursuant to which our Company will acquire from HMD the following entities: (i) (ii) IHC Iskandar and its subsidiary; IHC Shanghai and its subsidiaries; and
(iii) IHC Chengdu and its subsidiaries, subject to the terms of the sale and purchase agreements Sale of Shares Agreement : The sale of shares agreement dated 28 February 2012 entered into between (i) Real Empire and Golden Cliff; and (ii) Tan Kheen Seng@John, pursuant to which Tan Kheen Seng@John will be entitled to receive Shares from Real Empire or Golden Cliff The loan facility of S$25 million obtained by IHC Japan pursuant to a loan agreement entered into between IHC Japan, The Enterprise Fund II Ltd and The Enterprise Fund III Ltd, among others, dated 19 April 2013 and as amended by a supplemental loan agreement dated 29 May 2013 The securities account maintained by a Depositor with CDP but does not include a securities sub-account The Securities and Futures Act (Chapter 289) of Singapore, as amended, supplemented or modified from time to time The service agreements entered into between our Company and each of our Executive Directors, Dr. Jong Hee Sen and Yip Yuen Leong, and our Executive Officer, Tan Yong Kwang, as described in the section entitled Directors, Management and Staff Service Agreements of this Offer Document The Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore, as amended, supplemented or modified from time to time Singapore Exchange Network, a system network used by listed companies in sending information and announcements to the SGX-ST or any other system networks prescribed by the SGX-ST Ordinary share(s) in the capital of our Company
Second Enterprise Loan
Securities Account
Securities and Futures Act or SFA Service Agreements
SFR
SGXNET
Share(s)
20
DEFINITIONS
Shareholder(s) : Registered holders of Shares, except where the registered holder is CDP, the term Shareholder shall, in relation to such Shares, mean the Depositors whose Securities Accounts are credited with Shares 36,256,250 new Shares in the issued share capital of our Company to be issued and allotted to HMD and/or its nominees/assignees as HMD may direct at the Issue Price pursuant to the Sale and Purchase Agreements The subscription agreements dated 21 September 2012, 3 October 2012 and 17 January 2013 entered into between (i) Golden Cliff, Real Empire, Xanery, Fan Kow Hin, Dr. Jong Hee Sen and Aathar Ah Kong Andrew; and (ii) the Notes Investors, pursuant to which the Notes Investors agreed to subscribe for the Notes on the terms therein Persons who have an interest in one or more voting shares, and the total votes attaching to that share or those shares represent not less than 5% of the total votes attaching to all the voting shares in our Company The supplemental deed entered into between HMC and BMT on 8 April 2013 to vary the terms of the Trust Deed The trust deed entered into between HMC and BMT on 13 April 2012 to hold 500,000 shares in the share capital of HMD for the benefit of the HMC Shareholders Dr. Dominic Er Kong Kiong, HMD, Real Empire and TMF The 45,833,000 issued and fully paid-up Shares owned by the Vendors for which the Vendors invite applications to purchase pursuant to the Placement and on the terms and subject to the conditions set out in this Offer Document The non-cash portion of the purchase consideration for the acquisition of the Wuxi Hospital of US$44 million
SPA Shares
Subscription Agreements
Substantial Shareholders
Supplemental Deed
Trust Deed
Vendors Vendor Shares
: :
Wuxi Acquisition Consideration Currencies RMB HK$ JPY MYR
: : : :
Chinese Renminbi Hong Kong dollars Japanese Yen Ringgit Malaysia
21
DEFINITIONS
SGD or S$ , and cents USD or US$ Units and Others % or per cent. sq m : : Per centum Square metre : : Singapore dollars, and cents respectively United States dollars
The expression subsidiaries shall have the meaning ascribed to it in the SFR and the Companies Act. The expression Business Trust has the same meaning as ascribed to it in Section 2 of the Business Trusts Act (Chapter 31A) of Singapore. The expression Entity includes a corporation, an unincorporated association, a partnership and the government of any state, but does not include a trust. The expressions Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Companies Act. References in this Offer Document to Appendix or Appendices are references to an appendix or appendices respectively to this Offer Document. Any discrepancies in tables included herein between the total sum of amounts listed and the totals shown 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. 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 the Application Form to any statue or enactment is a reference to that statue or enactment as for the time being amended or re-enacted. Any word defined under the Companies Act, the SFA, SFR 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, SFR or any statutory modification thereto, as the case may be. Any reference in this Offer Document and the Application Form to Shares being allotted and/or allocated to you includes allotment and/or allocation to CDP for your account. Any reference to a time of day in this Offer Document and the Application Form is a reference to Singapore time unless otherwise stated. Any reference in this Offer Document to we, our, us or their other grammatical variations is a reference to our Company, or Group, or any member of our Group, as the context requires.
22
GLOSSARY OF TECHNICAL TERMS

To facilitate a better understanding of the business of our Group, the following glossary provides a description of some of the technical terms and abbreviations commonly used in our industry. The terms and abbreviations and their assigned meanings may not correspond to standard industry or common meanings or usage of these terms: Class 2B Hospital : Hospitals in the PRC are organised according to a three-tier system that recognises a hospitals ability to provide medical care, medical education, and conduct medical research. Based on this, hospitals are designated as primary, secondary or tertiary institutions. Secondary hospitals, or Class 2 hospitals, tend to be affiliated with a medium size city, county or district and contain more than 100, but less than 500 beds. They are responsible for providing comprehensive health services, as well as medical education and conducting research. Further, based on the level of service size, medical technology, medical equipment, and management and medical quality, these three (3) grades are further subdivided into three (3) subsidiary levels: A, B and C. CT scan : Computerised tomography scan, a medical imaging method that employs tomography, a process of generating a two-dimensional image of a slice or section through a three-dimensional object (a tomogram) The branch of medicine dealing with the skin and its diseases, a unique specialty with both medical and surgical aspects Means Nursing Facilities and Senior Residences The branch of medicine that focuses on the health of the female reproductive system (uterus, vagina and ovaries) Housing with assisted living facilities, medical and skilled nursing services and caregivers, catered for the elderly who require assistance for daily tasks The branch of medicine that deals with the anatomy, physiology and diseases of the eye The branch of surgery concerned with conditions involving the musculoskeletal system The branch of medicine that deals with the medical care of infants, children, and adolescents Housing catered for the independent elderly, with common facilities for meals and recreational activities The branch of medicine that focuses on the urinary tracts of males and females and on the reproductive system of males The use of a form of electromagnetic radiation to view a non-uniformly composed material such as the human body 23
Dermatology
Nursing Homes Gynaecology
: :
Nursing Facilities
Ophthalmology
Orthopaedics
Paediatrics
Senior Residence
Urology
X-ray
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENT

All statements contained in this Offer Document, statements made in press releases and oral statements that may be made by the Vendors, us or our Directors, Executive Officers or employees acting on our behalf, that are not statements of historical fact, constitute forwardlooking 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 without limitation, statements as to: (a) (b) (c) (d) (e) (f) our revenue and profitability; expected trends in demand and costs; expected industry trends; anticipated expansion plans; anticipated commencement and completion dates for projects; and 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 and economic conditions and the regulatory environment in our Primary Geographical Markets and other countries in which we conduct business; changes in currency exchange rates; diversions from our anticipated growth strategies and expected internal growth; changes in customers preferences; changes in competitive conditions and our ability to compete under such conditions; changes in our future capital needs and the availability of financing and capital to fund such needs; and other factors beyond our control.
(b) (c) (d) (e) (f)
(g)
Some of these risk factors are discussed in more details under the section entitled Risk Factors of this Offer Document. All forward-looking statements 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.
24
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENT

Given the risks and uncertainties that may cause our actual future results, performance or achievements to be materially different from that expected, expressed or implied by the forward-looking statements in this Offer Document, undue reliance must not be placed on these statements which apply only as at the date of this Offer Document. Neither our Company, the Vendors, the Manager and Sponsor, the Joint Placement Agents nor any other person represents or warrants that our Groups actual future results, performance or achievements will be as discussed in those statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of the risks faced by us. We, the Vendors, the Manager and Sponsor as well as the Joint Placement Agents, disclaim any responsibility to update any of those forward-looking statements or publicly announce any revisions to those forward-looking statements to reflect future developments, events or circumstances, 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 Catalist Rules regarding corporate disclosure. In particular, pursuant to Section 241 of the SFA, if after the registration of the Offer Document but before the close of the Placement, our Company becomes aware of (a) a false or misleading statement or matter in the Offer Document; (b) an omission from the 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 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 the Offer Document if it had arisen before the Offer Document was lodged and that is materially adverse from the point of view of an investor, our Company may lodge a supplementary or replacement offer document with the SGX-ST, acting as agent on behalf of the Authority.
25
SELLING RESTRICTIONS
This Offer Document does not constitute an offer, solicitation or invitation to subscribe for and/or purchase our Placement 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 our Placement Shares and the public distribution of this Offer Document in Singapore. The distribution of this Offer Document and the offering of our Placement 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 Vendors, the Manager and Sponsor as well as the Joint Placement Agents to inform themselves about, and to observe and comply with, any such restrictions at their own expense and without liability to us, the Vendors, the Manager and Sponsor as well as the Joint Placement Agents.
26
DETAILS OF THE PLACEMENT

LISTING ON THE CATALIST A copy of this Offer Document has been lodged with the SGX-ST, acting as agent on behalf of the Authority. The registration of this Offer Document by the SGX-ST, acting as agent on behalf of the Authority does not imply that the SFA, the Catalist Rules or any other legal or regulatory requirements, have been complied with. The SGX-ST has not, in any way, considered the merits of our existing issued Shares (including the Vendor Shares) or the New Shares as the case may be, being offered or in respect of which the Placement is made. We have not lodged this Offer Document in any other jurisdiction. We have made an application to the SGX-ST for permission to deal in, and for quotation of, all our Shares already issued (including the Vendor Shares), the New Shares (which, together with the Vendor Shares, are the subject of the Placement), as well as the SPA Shares on Catalist. Such permission will be granted when we have been admitted to Catalist. Acceptance of applications will be conditional upon, inter alia , the issue of the New Shares and permission being granted by the SGX-ST for the listing and quotation of all our existing issued Shares (including the Vendor Shares), the New Shares and the SPA Shares on Catalist. If the admission, listing and trading of our Shares already issued, and the New Shares do not proceed or the said permission is not granted for any reason, monies paid in respect of any application accepted will be returned, without interest or any share of revenue or other benefit arising therefrom and at the applicants own risk, and the applicant will not have any claim whatsoever against us, the Vendors, the Manager and Sponsor as well as the Joint Placement Agents. No Shares will be allotted and/or allocated on the basis of this Offer Document later than six (6) months after the date of registration of this Offer Document by the SGX-ST, acting as agent on behalf of the Authority. 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. You 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 your professional adviser(s). 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 to Catalist but relies on the Sponsor to confirm that the Company is suitable to be listed and complies with the Catalist Rules. Neither the Authority nor the SGX-ST has, in any way, considered the merits of the Shares or units of Shares being offered for investment. Admission to Catalist is not to be taken as an indication of the merits of the Placement, our Company, our subsidiaries, our existing issued Shares (including the Vendor Shares), the New Shares or the SPA Shares. We are subject to the provisions of the SFA and the Catalist Rules regarding corporate disclosure. In particular, if after the registration of this Offer Document, but before the close of the Placement, we become aware of: (a) a false or misleading statement or matter in the Offer Document;
27

(b) an omission from the Offer Document of any information that should have been included in it under Section 243 of the SFA; or a new circumstance that has arisen since the Offer Document was lodged with the SGX-ST, acting as agent on behalf of the Authority and that would have been required by Section 243 of the SFA to be included in the Offer Document if it had arisen before this Offer Document was lodged,
(c)
that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement offer document with the SGX-ST, acting as agent on behalf of the Authority. In the event that a supplementary or replacement offer document is lodged with the SGX-ST, acting as agent on behalf of the Authority, the Placement shall be kept open for at least 14 days after the lodgement of such supplementary or replacement offer document. Where prior to the lodgement of the supplementary or replacement offer document, applications have been made under this Offer Document to subscribe for and/or purchase the Placement Shares and: (a) where the Placement Shares have not been issued and/or transferred to the applicants, our Company and the Vendors shall: (i) within two (2) 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 supplementary or replacement offer document, 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 that they wish to obtain, or have arranged to receive, a copy of the supplementary or replacement offer document; within seven (7) 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
(ii)
(iii) treat the applications as withdrawn and cancelled, in which case the applications shall be deemed to have been withdrawn and cancelled, and our Company (and on behalf of the Vendors) shall return all monies paid in respect of any application, without interest or a share of revenue or other benefit arising therefrom; or (b) where the Placement Shares have been issued and/or transferred to the applicants, our Company and the Vendors shall: (i) within two (2) 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 supplementary or replacement offer document, 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 that they wish to obtain, or have arranged to receive, a copy of the supplementary or replacement offer document; 28

(ii) within seven (7) 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 our Company and/or the Vendors the Placement Shares which they do not wish to retain title in; or
(iii) treat the issue and/or sale of the Placement Shares as void, in which case the issue and/or sale of the Placement Shares shall be deemed void and our Company (and on behalf of the Vendors) shall return all monies paid in respect of any issue and/or sale of the Placement Shares, without interest or a share of revenue or other benefit arising therefrom. Any applicant who wishes to exercise his option under paragraph (a)(i) or (a)(ii) to withdraw his application shall, within 14 days from the date of lodgement of the supplementary or replacement offer document, notify our Company of this, whereupon our Company (and on behalf of the Vendors) shall, within seven (7) days from the receipt of such notification, return the application monies without interest or any share of revenue or other benefit arising therefrom and at his own risk, and he will not have any claim against us, the Vendors, the Manager and Sponsor as well as the Joint Placement Agents. An applicant who wishes to exercise his option under paragraph (b)(i) or (b)(ii) to return the Placement Shares issued and/or transferred to him shall, within 14 days from the date of lodgement of the supplementary or replacement offer document, notify our Company of this and return all documents, if any, purporting to be evidence of title to those Placement Shares to our Company, whereupon our Company (and on behalf of the Vendors) shall, within seven (7) days from the receipt of such notification and documents, if any, pay to him all monies paid by him for those Placement Shares, without interest or any share of revenue or other benefit arising therefrom and at his own risk, and the issue and/or transfer of those Placement Shares shall be deemed to be void, and he will not have any claim against us, the Vendors, the Manager and Sponsor as well as the Joint Placement Agents. Pursuant to Section 242 of the SFA, the Authority may, in certain circumstances issue a stop order (the Stop Order ) to our Company, directing that no Shares or no further Shares to which this Offer Document relates, be allotted or issued. Such circumstances will include a situation where this Offer Document (i) contains any statement or matter which, in the Authoritys opinion, is false or misleading, (ii) omits any information that should have been included in it under the SFA, or (iii) does not, in the Authoritys opinion, comply with the requirements of the SFA. In the event that the Authority issues a Stop Order and applications to subscribe for and/or purchase the Placement Shares have been made prior to the Stop Order, then: (a) where the Placement Shares have not been issued and/or transferred to the applicants, the applications for the Placement Shares shall be deemed to have been withdrawn and cancelled and our Company shall, within 14 days from the date of the Stop Order, pay to the applicants all monies the applicants have paid on account of their applications for the Placement Shares; or where the Placement Shares have been issued and/or transferred to the applicants, the issue of the Placement Shares shall be deemed to be void and our Company (and on behalf of the Vendors) shall, within 14 days from the date of the Stop Order, pay to the applicants all monies paid by them for the Placement Shares.
(b)
29

Such monies paid in respect of an application will be returned to the applicants at their own risk, without interest or a share of revenue or other benefit arising therefrom, and they will not have any claims against us, the Vendors, the Manager and Sponsor as well as the Joint Placement Agents. This Offer Document has been seen and approved by our Directors and the Vendors 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, the facts stated and all expressions of opinion, intention and expectation in this Offer Document are fair and accurate in all material respects as at the date of this Offer Document and that there are no material facts the omission of which would make any statements in the Offer Document misleading, and that this Offer Document constitutes full and true disclosure of all material facts about the Placement and our Group. Neither our Company, the Vendors, the Manager and Sponsor as well as the Joint Placement Agents nor any other parties involved in the Placement is making any representation to any person regarding the legality of an investment 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 professional or other advisers for business, legal, financial or tax advice regarding an investment in our Shares and the Placement Shares. 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 Vendors, the Manager and Sponsor as well as the Joint Placement Agents. Neither the delivery of this Offer Document, the Application Form, any documents relating to the Placement, nor the Placement shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in our affairs or in the 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 required to be disclosed by law, the SGX-ST and/or any other regulatory or supervisory body or agency, we may make an announcement of the same to the SGX-ST and/or the Authority and/or the public and if required, we may lodge a supplementary or replacement offer document with the SGX-ST, acting as agent on behalf of the Authority and will comply with the requirements of the SFA and/or any other requirements of the SGX-ST and/or Authority. All applicants should take note of any such announcements, or supplementary or replacement offer document and, upon the release of such an announcement, or supplementary or replacement offer document, shall be deemed to have notice of such changes. Save as expressly stated in this Offer Document, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies. The Placement Shares are offered for subscription and/or purchase solely on the basis of the information contained and representations made in this Offer Document. This Offer Document has been prepared solely for the purpose of the Placement and may not be relied upon by any other persons other than the applicants in connection with their application for the Placement Shares or for any other purpose. This Offer Document does not constitute an offer, solicitation or invitation of the Placement Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or unauthorised nor does it constitute an offer, solicitation or invitation to any person to whom it is unlawful to make such offer, solicitation or invitation.
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Copies of this Offer Document and the Application Form may be obtained on request, subject to availability during office hours, from: PrimePartners Corporate Finance Pte. Ltd. 20 Cecil Street #21-02 Equity Plaza Singapore 049705 DMG & Partners Securities Pte Ltd 10 Collyer Quay #09-08 Ocean Financial Centre Singapore 049315 SAC Capital Private Limited 1 Robinson Road #21-02 AIA Tower Singapore 048542
A copy of this Offer Document is also available on the SGX-ST website http://www.sgx.com. The Placement will be open from 1 July 2013 to 4 July 2013. The Application List will open at 12.00 noon on 1 July 2013 and will remain open until 12.00 noon on 4 July 2013 or for such further period or periods as our Directors and the Vendors may, in consultation with the Manager and Sponsor as well as the Joint Placement Agents, in their absolute discretion decide, subject to any limitation under all applicable laws and regulations. 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 application of the Placement Shares are set out in Appendix I of this Offer Document.
31

INDICATIVE TIMETABLE FOR LISTING An indicative timetable on the trading of our Shares is set out below: Indicative date/time 1 July 2013, 12.00 noon 4 July 2013, 12.00 noon 8 July 2013, 9.00 a.m. 8 July 2013, 9.00 a.m. 11 July 2013 7 August 2013, 5.06 p.m. Event Open of Placement Close of Application List Commence trading on a ready basis Commence trading in board lots of 1 share Settlement date for all trades done on a ready basis Last day and time for trading in board lots of 1 share
Approval has been obtained from the SGX-ST for the setting up of a temporary counter to allow Shareholders to trade in board lots of 1 share. This temporary counter will be maintained for a period of one (1) calendar month commencing from the date of commencement of trading on a ready basis ( Concessionary Period ). Thereafter, Shareholders can trade in odd lots of Shares on the SGX-ST unit share market. The set up of the temporary trading counter is strictly of a provisional nature. Shareholders who continue to hold odd lots of less than 1,000 Shares after the Concessionary Period may find difficulty and/or have to bear disproportionate transaction costs in realising the fair market price of such Shares. The above timetable is only indicative as it assumes that the date of closing of the Application List will be on 4 July 2013, the date of admission of our Shares to Catalist will be 8 July 2013, the shareholding spread requirement of the SGX-ST will be complied with and the Placement Shares will be issued and fully paid-up prior to 8 July 2013. The above timetable and procedures may be subject to such modification(s) as the SGX-ST may, in its absolute discretion, decide, including the commencement of trading on a ready basis and the commencement date of such trading. 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: (a) through a SGXNET announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com; and in a local newspaper(s).
(b)
We will publicly announce the level of subscription and purchase and the results of the distribution of the Placement Shares pursuant to the Placement, as soon as it is practicable after the close of the Application List through channels in (a) and (b) above. You should consult the SGX-STs announcement on the ready trading date released on the Internet (at the SGX-ST website http://www.sgx.com) or the newspapers, or check with your brokers on the date on which trading on a ready basis will commence.
32
DETAILS OF THE DISTRIBUTION

INTRODUCTION On 28 December 2011, the shareholders of HMC approved, at an extraordinary general meeting of HMC, the distribution of up to 500,000 Shares held by HMC in the share capital of HMD to the HMC Shareholders. The Distribution is subject to, inter alia , the necessary approvals being obtained and is intended to take effect shortly before the proposed listing of HMD. On 2 April 2012, HMC declared a dividend in specie of up to 500,000 shares held by HMC in the share capital of HMD. Subsequently, on 13 April 2012, HMC entered into the Trust Deed with BMT to hold the 500,000 shares in the share capital of HMD for the benefit of the HMC Shareholders. On 22 May 2013, the shareholders of HMC approved, at an extraordinary general meeting of HMC, the distribution of an additional 675,324 shares held by HMC in the share capital of HMD to the HMC Shareholders. Pursuant to the Restructuring Exercise, our Company became the holding company of our Group Subsidiaries, which were previously subsidiaries of HMD and pursuant to the Supplemental Deed entered into with BMT on 8 April 2013, the Distribution will be effected through a distribution of Distribution Shares in our Company. DISTRIBUTION HMC had on 4 June 2013 announced that there will be a distribution of up to 189,948,004 Distribution Shares to HMC Shareholders on the basis of approximately 82.29 Shares for every 1,000 shares in HMC held as at the Books Closure Date by way of a dividend in specie . Upon the completion of the Distribution, HMC Shareholders will own, separately: (a) (b) listed shares in HMC; and listed Shares in our Company upon the admission of our Shares to Catalist.
As at the date of this Offer Document, HMC holds 11.27% of the issued share capital of our Company. HMC will hold 7.95% of the issued share capital of our Company immediately after the Distribution and the Placement. The Distribution will enable HMC to distribute approximately 11.76% of our post-Placement share capital to HMC Shareholders. Once the Distribution and the Placement are completed, the Listing will follow shortly thereafter. RATIONALE FOR THE DISTRIBUTION The directors of HMC believe that the listing of our Company will benefit our Company, HMC and the HMC Shareholders in the following ways: (a) Our Company and HMC can focus on our respective areas of business The principal activities, business strategies and future plans of our Group are different from that of the HMC Group. The HMC Group is principally engaged in the business of providing outpatient medical services while our Group will significantly be involved in the business of providing healthcare services, investing in healthcare-related assets and developing medical real estate, healthcare-related assets and integrated mixed-use developments. 33
DETAILS OF THE DISTRIBUTION

The investment in healthcare services and healthcare-related assets and the development of medical real estate, healthcare-related assets and integrated mixed-use developments by our Group are capital intensive and will involve a higher level of leverage upon the successful implementation of our acquisition plans, while the HMC Groups business of providing outpatient medical services is asset-light with lower gearing. The Distribution will allow HMC to continue to focus on the HMC Groups core activities of outpatient medical services and its business strategies and future plans. This will also allow the HMC Group to present its financial statements which are more reflective of its underlying business while our Group embarks on our acquisition plans. (b) Direct investment opportunity in our Company Following the completion of the Restructuring Exercise and the Distribution, HMC Shareholders would become direct shareholders of two separately listed companies, namely our Company and HMC, without the need for any additional cash outlay. HMC Shareholders will be able to separately manage their portfolio holdings of our Company and HMC in accordance with their individual investment objectives. By allowing HMC Shareholders to hold direct shareholdings in our Company, HMC Shareholders will be able to directly influence the future direction of our Company and benefit directly from any future corporate actions and exercises involving our Company (for example, dividends, bonus issues, rights issues, mergers and/or acquisitions). (c) More reflective and accurate valuation Separating our Group from the HMC Group will enable HMC Shareholders, our Shareholders and potential investors to evaluate our Group and the HMC Group independently based on their respective performance and growth potential. This will allow for valuations that are more reflective of the underlying value and growth potential of the businesses of our Group and the HMC Group respectively.
34
PLAN OF PLACEMENT
The Placement is for 104,350,000 Placement Shares offered in Singapore and the Listing is managed and sponsored by PPCF. Prior to the Placement, there has been no public market for our Shares. The Issue Price is determined by us and the Vendors, in consultation with the Manager and Sponsor as well as the Joint Placement Agents, taking into account, inter alia , prevailing market conditions and the estimated market demand for our Shares, determined through a book-building process. The Issue Price is the same for all Placement Shares and is payable in full on application. Pursuant to the Management Agreement entered into between us, the Vendors and PPCF as set out in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document, we and the Vendors have appointed PPCF and PPCF has agreed to manage and be the full sponsor for the Listing. The Placement Shares are made available to retail and institutional investors who may apply through their brokers or financial institutions by way of the Application Form. Applications for the Placement Shares may only be made by way of printed Application Form as described in Appendix I of this Offer Document. Pursuant to the Placement Agreement entered into between us, the Vendors and the Joint Placement Agents as set out in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document, we have appointed PPCF, DMG and SAC Capital as the Joint Placement Agents and PPCF, DMG and SAC Capital have agreed to procure subscriptions for and/or purchases of the Placement Shares for a placement commission of 3.75% of the aggregate Issue Price payable to us and the Vendors for the total number of Placement Shares successfully subscribed for and/or purchased in the proportion in which the Placement Shares are offered by our Company and the Vendors pursuant to the Placement, subject to any applicable laws and regulations, our Company agrees that the Joint Placement Agents shall be at liberty at their own expense to appoint one or more sub-placement agents under the Placement Agreement upon such terms and conditions as the Joint Placement Agents may deem fit. Subscribers and/or purchasers of the Placement Shares may be required to pay brokerage or selling commission of up to 1.0% of the Issue Price (and the prevailing goods & services tax thereon, if applicable) to the Joint Placement Agents or any sub-placement agent that may be appointed by the Joint Placement Agents. None of our Directors or Substantial Shareholders intends to subscribe for and/or purchase the Placement Shares. As far as we are aware, none of the Independent Directors, members of our Companys management or employees of our Company intends to subscribe for and/or purchase more than 5.0% of the Placement Shares in the Placement. To the best of our knowledge and belief, as at the date of this Offer Document, we are not aware of any person who intends to subscribe for and/or purchase more than 5.0% of the Placement Shares. However, through a book-building process to assess market demand for our Shares, there may be person(s) who may indicate an interest to subscribe for and/or purchase Shares amounting to more than 5.0% of the Placement Shares. If such person(s) were to make an application for more than 5.0% of the Placement Shares pursuant to the Placement and are subsequently allotted and/or allocated such number of Shares, we will make the necessary announcements at an appropriate time. The final allotment and allocation of Shares will be in accordance with the shareholding spread and distribution guidelines as set out in Rule 406 of the Catalist Rules. 35
PLAN OF PLACEMENT
No Shares shall be issued and allotted and/or allocated on the basis of this Offer Document later than six (6) months after the date of registration of this Offer Document. INTERESTS OF MANAGER, SPONSOR AND JOINT PLACEMENT AGENT In the reasonable opinion of our Directors, the Manager, Sponsor and Joint Placement Agent, PPCF, does not have a material relationship with our Company save as disclosed below and in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document: (a) (b) PPCF is the Manager, Sponsor and Joint Placement Agent in relation to the Listing; PPCF will be the continuing Sponsor of our Company for a period of three (3) years from the date our Company is admitted and listed on Catalist; and Pursuant to the Management Agreement and as part of PPCFs management fees as the Manager and Sponsor, our Company issued and allotted to PPCF 3,125,000 new Shares, representing 0.20% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Upon the completion of the relevant moratorium period as set out in the section entitled Shareholders Moratorium of this Offer Document, PPCF will be disposing of its relevant shareholding interests in our Company at its discretion.
(c)
INTERESTS OF JOINT PLACEMENT AGENTS In the reasonable opinion of our Directors, the Joint Placement Agents, DMG and SAC Capital, do not have a material relationship with our Company save that DMG and SAC Capital are the Joint Placement Agents of the Placement and as disclosed in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document.
36
OFFER DOCUMENT SUMMARY

The following summary is qualified in its entirety by, and is subject to, the more detailed information (including the notes thereto) appearing elsewhere in this Offer Document. Terms defined elsewhere in this Offer Document have the same meaning when used herein. You should carefully consider all the information presented in this Offer Document, particularly the matters set out in the section entitled Risk Factors of this Offer Document before deciding to invest in our Shares. OUR COMPANY Our Company was incorporated in Singapore on 18 February 2013 under the Companies Act as a private limited company under the name of International Healthway Corporation Private Limited. Our Companys registration number is 201304341E. Our Company was converted into a public limited company on 30 May 2013 and changed its name from International Healthway Corporation Private Limited to International Healthway Corporation Limited. Pursuant to the Restructuring Exercise as described in the section entitled Restructuring Exercise of this Offer Document, our Company became the holding company of our Group on 29 May 2013. OUR BUSINESS Through our Group Subsidiaries, our Company is principally engaged in the Medical Development Business as an integrated healthcare services and facilities provider. We own, manage and develop our assets portfolio through a series of acquisitions of operating assets, development and re-development projects, as well as land banks earmarked for development. Our portfolio of assets includes or will include: (a) medical real estate (such as hospital facilities); (b) healthcarerelated assets (such as Nursing Homes and maternity homes); and (c) integrated mixed-use developments (such as developments with medical real estate/healthcare-related assets, retail space and/or service residences), which are operational, under development or earmarked for development. Our Groups existing business can be categorised into two (2) segments as follows: (a) Provision of healthcare services through the management and operation of hospital, and investing in healthcare-related assets ( Healthcare Services ); and Development of medical real estate, healthcare-related assets and integrated mixed-use developments ( Integrated Medical Real Estate ).
(b)
The property portfolio of our Group comprises 15 Initial Portfolio in Malaysia, the PRC and Japan. Pursuant to the Restructuring Novation and the Sale and Purchase Agreements, our Company has obtained the rights from HMD to finalise the acquisitions of four (4) Pending Projects. In addition, our Group has commenced negotiation for the acquisitions of three (3) Pipeline Projects. Please refer to the sections entitled General Information on our Company and our Group Business Overview, General Information on our Company and our Group Properties and Fixed Assets and General Information on our Company and our Group Business Strategies and Future Plans of this Offer Document for more information.
37
OFFER DOCUMENT SUMMARY

OUR COMPETITIVE STRENGTHS Our Directors believe that the following competitive strengths have enabled and will continue to enable us to harness the growth potential and to compete effectively in the healthcare industry: We have a strategic portfolio of medical real estate, healthcare-related assets and integrated mixed-use developments; We have broad-based exposure to our Primary Geographical Markets in highly attractive, rapid growth economies in the Asian region (excluding Japan) and the stable economy of Japan; We provide both integrated healthcare services and facilities in our Primary Geographical Markets; We focus our target market on middle to high-income patients, medical users and expatriates; and We have a committed, qualified and experienced management team, medical professionals and support staff.
Please refer to the section entitled General Information on our Company and our Group Competitive Strengths of this Offer Document for more details. OUR BUSINESS STRATEGIES AND FUTURE PLANS Our business strategies and future plans for the continued growth of our business are as follows: Development, redevelopment, and expansion of our existing projects; Grow and strengthen our presence in our Primary Geographical Markets; Purchase of new medical equipment and/or upgrade of our existing medical equipment; Expansion into attractive and large economies in the Asia-Pacific region; and Continue to enhance our business operations and service quality and to enhance shareholders value.
A detailed discussion of our business strategies and future plans is set out in the section entitled General Information on our Company and our Group Business Strategies and Future Plans of this Offer Document. OUR CONTACT DETAILS Our Companys registered office and principal place of business is located at 2 Leng Kee Road, #04-10A Thye Hong Centre, Singapore 159086. Our Companys telephone number is +65 6476 8786 and our facsimile number is +65 6476 8117.
38
THE PLACEMENT
Placement Size : 104,350,000 Placement Shares, comprising 58,517,000 New Shares and 45,833,000 Vendor Shares. The New Shares which form part of the Placement will, upon issue and allotment, rank pari passu in all respects with our existing issued Shares. S$0.48 for each Placement Share, payable in full on application. Our Directors consider that the listing and quotation of our Shares on Catalist will enhance our public image locally and overseas and will enable us to tap the capital markets for the expansion of our business operations. The Placement will also provide the members of the public, our management, employees and business associates who have contributed to our success with an opportunity to participate in the equity of our Company. In addition, the proceeds of the issue of the New Shares will also provide us with, inter alia , additional capital to finance our business expansion. The Placement : The Placement of 104,350,000 Placement Shares subject to and on the terms of this Offer Document. Prior to the Listing, there had been no public market for our Shares. Our Shares will be quoted on Catalist, subject to admission of our Company to Catalist and permission for dealing in, and for quotation of, our Shares being granted by the SGX-ST. Investing in our Shares involves risks which are described in the section entitled Risk Factors of this Offer Document. Please refer to the section entitled Use of Proceeds and Listing Expenses of this Offer Document for more details.
Issue Price
Purpose of the Placement
Listing Status
Risk Factors
Use of Proceeds
39
EXCHANGE RATES
MYR and S$ The exchange rate (1) between MYR and S$ as at the Latest Practicable Date is MYR2.41 to S$1.00. The table below sets out the highest and lowest exchange rates between MYR and S$1.00 for each of the six (6) completed months prior to the Latest Practicable Date. The table indicates how much MYR may be bought with S$1.00. MYR: S$1.00 Lowest (1) Highest (1) November 2012 December 2012 January 2013 February 2013 March 2013 April 2013 May 2013 (2) 2.51 2.51 2.50 2.51 2.51 2.49 2.47 2.49 2.49 2.45 2.50 2.48 2.45 2.41
The following table sets out, for each of the financial year/period indicated, the average and closing exchange rates between MYR and S$. The average exchange rate is calculated by using the average of the exchange rates on the last day of each month during each financial year/period. Where applicable, the exchange rates in this table are used for the translation of our Groups financial statements disclosed elsewhere in this Offer Document. MYR: S$1.00 Closing (1) Average (1) FP2011 FY2011 FY2012 2.44 2.43 2.48 2.44 2.44 2.50
The above exchange rates should not be construed as representations that the MYR amounts actually represent such S$ amounts or could be converted into S$, at the rate indicated, at any other rate or at all.
Notes: (1) Source: The Authority. The Authority has not provided its consent, for the purposes of Section 249 of the SFA, to the inclusion of the information extracted from the relevant reports and is therefore not liable for such information under Sections 253 and 254 of the SFA. While we have taken reasonable actions to ensure that the information from the relevant reports issued by the Authority is reproduced in its proper form and context, and that the information is extracted accurately and fairly from such reports, neither we nor any party has conducted an independent review of the information contained in such reports nor verified the accuracy of the contents of the relevant information. (2) For the period from 1 May 2013 to the Latest Practicable Date.
40
EXCHANGE RATES
RMB and S$ The exchange rate (1) between RMB and S$ as at the Latest Practicable Date is RMB4.89 to S$1.00. The table below sets out the highest and lowest exchange rates between RMB and S$1.00 for each of the six (6) completed months prior to the Latest Practicable Date. The table indicates how much RMB may be bought with S$1.00. RMB: S$1.00 Lowest (1) Highest (1) November 2012 December 2012 January 2013 February 2013 March 2013 April 2013 May 2013 (2) 5.11 5.12 5.10 5.05 5.03 5.02 5.01 5.08 5.09 5.02 5.02 4.96 4.98 4.89
The following table sets out, for each of the financial year/period indicated, the average and closing exchange rates between RMB and S$. The average exchange rate is calculated by using the average of the exchange rates on the last day of each month during each financial year/period. Where applicable, the exchange rates in this table are used for the translation of our Groups financial statements disclosed elsewhere in this Offer Document. RMB: S$1.00 Closing (1) Average (1) FP2011 FY2011 FY2012 5.11 5.13 5.06 4.85 4.85 5.10
The above exchange rates should not be construed as representations that the RMB amounts actually represent such S$ amounts or could be converted into S$, at the rate indicated, at any other rate or at all.
41
EXCHANGE RATES
JPY and S$ The exchange rate (1) between JPY and S$ as at the Latest Practicable Date is JPY81.85 to S$1.00. The table below sets out the highest and lowest exchange rates between JPY and S$1.00 for each of the six (6) completed months prior to the Latest Practicable Date. The table indicates how much JPY may be bought with S$1.00. JPY: S$1.00 Lowest (1) Highest (1) November 2012 December 2012 January 2013 February 2013 March 2013 April 2013 May 2013 (2) 67.55 70.61 73.75 75.90 77.43 80.66 82.23 65.01 67.39 71.21 73.96 74.88 75.02 78.91
The following table sets out, for each of the financial year/period indicated, the average and closing exchange rates between JPY and S$. The average exchange rate is calculated by using the average of the exchange rates on the last day of each month during each financial year/period. Where applicable, the exchange rates in this table are used for the translation of our Groups financial statements disclosed elsewhere in this Offer Document. JPY: S$1.00 Closing (1) Average (1) FP2011 FY2011 FY2012 62.28 63.45 64.22 59.61 59.61 70.35
The above exchange rates should not be construed as representations that the JPY amounts actually represent such S$ amounts or could be converted into S$, at the rate indicated, at any other rate or at all.
42
SUMMARY FINANCIAL INFORMATION

The following summary financial information should be read in conjunction with the full text of this Offer Document, including the sections entitled Managements Discussion and Analysis of Results of Operations and Financial Position, the Independent and Reporting Auditors Report on the Combined Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 and the Independent and Reporting Auditors Report on the Examination of the Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial years ended 31 December 2012 and 31 December 2011 as set out in Appendix A and Appendix B of this Offer Document respectively. Unaudited Pro Forma FY2011 FY2012 35,324 14,530 13,461 0.87
(1)(3)
(S$000) Revenue Profit/(loss) before tax (1) Profit/(loss) attributable to equity holders of the Company (1) EPS (cents) (2) Adjusted EPS (cents)
Notes: (1)
Audited FP2011 FY2012 (18) (18) n.m. (4) n.m.

(4)
37,843 58,728 52,924 3.42 3.30
6,197 6,197 0.40 0.39
0.84
Had the Service Agreements (set out in the section entitled Directors, Management and Staff Service Agreements of this Offer Document) been in place since 1 January 2012, our unaudited pro forma profit before tax, profit attributable to equity holders of the Company and adjusted EPS computed based on our post-Placement share capital of 1,604,845,042 Shares for FY2012 would have been approximately S$58.5 million, S$52.7 million and 3.29 cents respectively. For illustrative purposes, the EPS for the financial period/years under review have been computed based on the profit attributable to equity holders of the Company and the pre-Placement share capital of 1,546,328,042 Shares. For illustrative purposes, the adjusted EPS for the financial period/years under review have been computed based on the profit attributable to equity holders of the Company and the post-Placement share capital of 1,604,845,042 Shares. n.m. means not meaningful.
(2) (3)
(4)
(S$000) Non-current assets Current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Total equity NTA per Share (cents)
Notes: (1) (2)
(1)(2)
Unaudited Pro Forma as at 31 December 2012 386,777 19,706 406,483 15,221 242,943 258,164 148,319 148,319 6.01
Audited as at 31 December 2012 46,441 14,088 60,529 12,586 36,800 49,386 11,143 11,143 0.72
NTA is defined as total tangible assets less total liabilities. For illustrative purposes, the NTA per Share is computed based on the NTA and the pre-Placement share capital of 1,546,328,042 Shares.
43
RISK FACTORS
You should evaluate carefully each of the following risk factors and all of the other information set forth in this Offer Document before deciding to invest in our Shares. Some of the following considerations relate principally to the industry in which we operate and our business in general. Other considerations relate principally to general social, economic, political and regulatory conditions, the securities market and ownership of our Shares, including possible future dilution in the value of our Shares. You should also note that certain of the statements set forth below constitute forward-looking statements that involve risks and uncertainties. If any of the following risk factors and uncertainties develops into actual events, our business, financial position or results of operations or cash flows could be materially and adversely affected. In such circumstances, the trading price of our Shares could decline and you may lose all or part of your investment in our Shares. To the best of our Directors belief and knowledge, all the risk factors that are material to investors in making an informed judgement have been set out below. RISKS RELATING TO OUR BUSINESS We may not be able to obtain the requisite planning approvals, licences and/or permits or renew our current planning approvals, licences and/or permits upon their expiration Our business requires planning approvals, licences and/or permits to commence development or operations. The obtaining of requisite planning approvals, licences and/or permits and the renewal of the same are subject to compliance with the relevant regulations in our Primary Geographical Markets. There is no assurance that we will be able to obtain the requisite planning approvals, licences and/or permits or renew our existing licences and permits upon their expiration in our Primary Geographical Markets and the countries we may expand into in future. In addition, any changes to the existing legislation and regulations may require us to apply for new licences and permits, and there is no assurance that we will be able to obtain these new licences and permits in our Primary Geographical Markets and the countries we may expand into in future. In the event that we are unable to obtain or renew the requisite planning approvals, licences and/or permits, or such planning approvals, licences and/or permits are withdrawn from us, we may be required to cease development or operations and our business, financial position and results of operations may be adversely affected. We may not be able to successfully integrate newly-acquired or newly-developed medical real estate, healthcare-related assets or integrated mixed-use developments with our existing Medical Development Business or achieve the synergies and other benefits we expect from such acquisitions and expansion We may, in the future, face difficulties arising from operating a significantly larger and more complex organisation as a result of acquiring or developing new medical real estate, healthcarerelated assets or integrated mixed-use developments and may not be able to effectively manage such a large corporation or achieve the desired profitability from such acquisitions or expansion. For newly-acquired medical real estate, healthcare-related assets or integrated mixed-use developments, we may face difficulties in renovating, re-building or re-positioning these medical real estate, healthcare-related assets or integrated mixed-use developments that we have acquired or for which we have assumed management responsibility to meet the operational requirements. We may also face difficulties pertaining to the setting up of new operations relating to newly-developed medical real estate, healthcare-related assets or integrated mixed-use developments. 44
RISK FACTORS
Thereafter, we may face difficulties in integrating the operations of newly acquired or newly developed medical real estate, healthcare-related assets or integrated mixed-use developments with our existing Medical Development Business. We may not be able to coordinate and consolidate our corporate and administrative functions, including the integration of internal controls and procedures for timely financial reporting. Difficulties of integration could arise from unforeseen legal, regulatory, contractual, labour or other issues or language, cultural and geographical barriers. As a result, there could be loss of patients or key medical personnel following the acquisitions. In addition, our managements attention may be diverted from our existing Medical Development Business resulting in an interruption of, or a loss of momentum in, the activities of our existing Medical Development Business. Medical personnel and patients may also be diverted from our existing Medical Development Business. In the event that we are unable to effectively manage and integrate a significantly larger and more complex organisation, we may not be able to realise the expected synergies, cost savings, profitability and growth. As a result, our business, financial position and results of operations may be adversely affected. Our newly-developed medical real estate or integrated mixed-use developments may experience delays in reaching full operational capacity New development projects are characterised by long gestation periods and substantial capital expenditures. We may not be able to achieve the operating levels that we expect from our newly-developed medical real estate or integrated mixed-use developments and we may not be able to achieve our targeted return on investment on, or intended benefits from, these development projects. In the event that we are not able to achieve our targeted return on investment on, or intended benefits from, these development projects, our business, financial position and results of operations may be adversely affected. Our operations are heavily concentrated in our Primary Geographical Markets, which makes us sensitive to regulatory, economic, social, political, environmental and competitive conditions and changes in those countries Our operations are heavily concentrated in our Primary Geographical Markets. This concentration makes us particularly sensitive to regulatory, social, political, economic, environmental and competitive conditions and changes in those countries. Any material change in the current government insurance payment systems or policies or regulatory, economic, environmental or competitive conditions in those countries may have a disproportionate and material adverse effect on our business, financial position, results of operations and prospects. Our performance may also be adversely affected by a number of real estate market conditions, such as the capital values of properties and the attractiveness of competing assets in our Primary Geographical Markets. A substantial number of our properties are specialised facilities and have limited uses As a substantial number of our properties may only be used for specific medical healthcarerelated purposes, there is no assurance that we will be able to obtain the requisite approvals to change the use of our properties, in the event we are required to do so, and even if such approvals
45
RISK FACTORS
are obtained, we may be required to incur significant time and expenditure to alter our properties to make them suitable for other uses. If any of the above events were to occur, our financial position, results of operations and prospects may be adversely affected. We currently rely on third parties to carry out our development projects and projects under redevelopment The development work for our development projects and the projects under redevelopment will be performed by third party contractors or sub-contractors. We will not have direct control over the day-to-day activities of such contractors or sub-contractors and will be reliant on such contractors or sub-contractors to perform these services in accordance with the relevant development contracts. If the contractors or sub-contractors fail to perform their obligations in a manner that is consistent with their contracts, our projects may not be completed as and when envisaged, if at all, thus leading to delays and unexpected costs. Even if our management were to take any legal action against any third party contractors or sub-contractors for any breach of their respective obligations, our Group may not recover all or any losses incurred. In addition, if contractors or sub-contractors engaged to work on the development of properties become insolvent, it may not be possible to recover compensation for defective work or materials and our Group may incur losses as a result of funding the repair of such defective work or paying damages to persons who have suffered loss as a result of such defective work. Delay in completion of the properties under development or redevelopment Our Group may be adversely affected by delays in the completion of our properties under development or redevelopment. Property developments typically require substantial capital outlay during the development and construction period and it may take an extended period of time to complete and to be occupied before a potential return can be generated. The time required to complete a property development or redevelopment project may be subject to extensions and correspondingly, costs may increase due to many factors, including shortages of, or price increases with respect to, construction materials (which may prove defective), equipment, technical skills and labour, adverse weather conditions, third party performance risks, environmental risks, changes in market conditions, changes in government or regulatory policies, delays in obtaining the requisite approvals, permits, licences or certifications from the relevant authorities and other unforeseen problems and circumstances. Any of these factors may lead to delays in, or prevent the completion of, a property development project and may result in costs substantially exceeding those originally budgeted, for which our Group may not be adequately compensated by insurance proceeds (if any) and/or contractual indemnities (if any), as well as a delay in the recognition of revenue by our Group. This may adversely affect the business and financial position of our Group. Further, if there are incumbent residents and businesses on sites of future projects, they will need to be relocated. If any incumbent resident or business is dissatisfied with the relocation compensation and refuses to move, such incumbent resident or business may (a) apply to the relevant government entity to resolve the dispute and the relevant government entity will seek to resolve the dispute by negotiating with the relevant resident or business to reach a mutually acceptable relocation compensation arrangement; or (b) apply to the relevant land authority for its determination on whether the relocation compensation and relocation timetable is in compliance with the relevant laws and regulations. The relevant land authority will then make a decision as to the proper relocation compensation and timetable. There can be no guarantee that the relocation of incumbent residents or businesses will proceed smoothly or that they will agree to the compensation. In addition, the amount of compensation to be paid is subject to the relevant government regulations and can be changed at any time. Accordingly, any delays in effecting such 46
RISK FACTORS
relocations of these incumbent residents or businesses may result in delays in the construction schedules and/or increase operating costs, any of which could have a material adverse effect on our business, financial position and results of operations. Our strategy of investing in medical real estate may entail a higher level of risk compared to other companies that have a more diverse range of investments We have invested in and will continue to invest in real estate assets in our Primary Geographical Markets, that are used primarily for medical and/or healthcare-related purposes, whether wholly or partially-owned, and whether directly or indirectly held through the ownership of special purpose vehicles whose primary purpose is to own such real estate. As such, we will be subject to risks inherent in concentrating on investments in this industry. The level of risk could be higher compared to other companies that have a more diverse range of investments. A concentration of investments in a portfolio of such specific real estate assets in our Primary Geographical Markets and elsewhere in the future exposes our Group to downturns in both the real estate market as well as the healthcare sector in our Primary Geographical Markets. Such downturns may lead to a decline in the occupancy rate for medical facilities including those in our portfolio, and/or a decline in the capital value of our portfolio, which may have an adverse impact on the financial position, results of operations and prospects of our Group. We may be affected by competition from existing healthcare providers as well as new entrants to the market The healthcare business is highly competitive, and competition among healthcare providers for patients has intensified in recent years. Generally, other healthcare providers in the local communities we serve provide services similar to those offered by our properties. Quality measures required in Malaysia, the PRC, Japan and other countries into which we may expand our operations may trend towards greater clinical transparency. This may have an unanticipated impact on our competitive position and patient volumes. If any of our properties achieve poor results (or results that are lower than our competitors) in respect of these quality measures or on patient satisfaction surveys or if our standard charges are higher than our competitors, our patient volumes could decline. We compete with other government-owned hospitals, private hospitals and medical facilities in the regions in which we operate. We will also have to compete with any future healthcare business operators located in the regions in which we operate. Moreover, some of these competitors may be more established and have greater financial, personnel and other resources than us. In particular, our competitors include medical facilities owned or managed by government agencies and trusts, which may have access to wider financing options or may be in a better commercial position to negotiate for purchase of inventory on more favourable terms than private hospitals owned and managed by for-profit interests, such as ourselves. In addition, even in situations where one of our medical facilities is the dominant or sole provider of healthcare services in a city or region, patients may favour other medical facilities in surrounding cities or nearby regions. New or existing competitors may price their services at a significant discount to ours or offer greater convenience or better services or amenities than what we provide. Smaller hospitals and other medical facilities may exert pricing pressures on some or all of our services and also compete with us for doctors and other medical professionals. If we are forced to reduce the price of our services or are unable to attract patients and doctors and other healthcare professionals to our Group, our business, financial position, results of operations and prospects may be materially and adversely affected.
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RISK FACTORS
Our revenue is dependent on the provision of specialised healthcare services to individual patients, corporate clients and government clients who opt for private healthcare services, all of which could decline due to a variety of factors One of our sources of revenue is from inpatient treatments. Growth in or maintaining inpatient income and occupancy rates at our medical facilities is highly dependent on brand recognition, wider acceptance in the communities in which we operate and our ability to attract and retain well-known and respected doctors, offer desired and efficient services in the communities in which we operate, develop complex treatment practices and compete effectively with other healthcare providers. Growth in revenue from inpatient treatments may also be impaired by a decrease in medical travellers. Medical travellers tend to require more complex treatment and procedures that are higher in revenue, which results in the average revenue per medical traveller being comparatively higher than the average revenue per inpatient. A decrease in medical travellers may cause a larger decrease in our revenue from inpatient treatments than a similar decrease in local patients. In addition to inpatient treatments, our revenue is dependent on the provision of ancillary services, such as diagnostic laboratory services, as well as the provision of outpatient specialist care. Any inability on our part to increase revenue from inpatient treatments and complex medical treatments that have high revenue intensity, manage inpatient occupancy, or increase revenue from outpatient specialist care and ancillary services, may have a material adverse effect on our business, financial position, results of operations and prospects. In addition, we may be affected by the financial ability and the willingness of individual patients, as well as corporate clients and government clients, to pay for private healthcare services. A slowdown in the economies in which we operate may lead to a decrease in demand for private healthcare services as more individual patients may opt for subsidised public healthcare services or treatment from other private healthcare providers that are more price competitive. Corporate clients typically conduct periodic reviews on the level of medical benefits provided to their employees and any changes to these medical benefits may affect the value of our corporate contracts. A decrease in the demand for private healthcare services from individual patients, corporate clients and government clients may have a material adverse effect on our business, financial performance and prospects. We are highly dependent on our healthcare professionals, as well as other key personnel Our performance and execution of our strategies depend substantially on our ability to attract and retain key healthcare professionals in the fields and regions relevant to our strategies. We compete for healthcare professionals with other healthcare providers in our Primary Geographical Markets. The demand for healthcare professionals is highly competitive. The supply of specialist doctors is limited by the long training period, which can be up to 15 years and even longer for certain medical specialists. We may not compare favourably with other healthcare providers in terms of the reputations of the medical facilities and their owners, the quality of the facilities, the specialties offered by the medical facilities, research and teaching opportunities, compensation, or community relations. The healthcare professionals we aim to recruit or work with will be well-known personalities in their fields and regions in which they practise and will have large patient bases and referral networks. It may be difficult to negotiate favourable terms or arrangements with them. Should medical professionals choose to refer their patients to competing medical facilities or if they choose to leave our medical facilities for competing medical facilities, their patients might move with them. In this case, we may not be able to continue to provide a high
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quality of service at our hospitals and our level of patient or customer-base will be adversely affected, which may have a material adverse effect on our healthcare business, financial position, results of operations and future prospects. The qualifications of medical professionals in one country may not be recognised in another country and they may not be able to easily move across our network due to immigration policies or foreign work quotas. Consequently, this may make it difficult for us to employ or deploy medical professionals outside of their own regions and across our network. We are dependent on certain key senior management for our continued success We are dependent on certain members of our senior management team, including some who have been with our Group since its inception, to manage our current operations and meet future business challenges. Our Executive Chairman and Group President, Dr. Jong Hee Sen and our Executive Director and President, Integrated Medical Real Estate, Yip Yuen Leong, have extensive experience in the healthcare services and/or real estate development industries. Dr. Jong Hee Sen and Yip Yuen Leong have in aggregate more than 30 years of experience in the healthcare services and/or real estate development industries. Our continued success will depend, to a large extent, on our ability to retain the services of these key personnel. We do not maintain, and do not expect to obtain key-man life insurance on any of our key personnel. The loss of the services of our key personnel without suitable and timely replacement, or the inability to attract and retain qualified personnel may adversely affect our operations and hence our financial performance. We do not have a long operating history Our Company was established on 18 February 2013 and as such, we do not have the relevant operating history on which our past performance may be judged. This will make it more difficult for investors to assess our Groups likely future performance and for investors to determine if our Group will be able to meet our projected business plan. Rapid technological advances, technological failures and other challenges related to our medical equipment and information technology systems could adversely affect our business Our information technology systems are a critical part of our business and internal control and management systems. Any technical failures associated with our information technology systems, including those caused by power failure, computer viruses and other unauthorised tampering, may cause interruptions in our ability to provide services. Also, if our information systems are not upgraded as may be needed, we may not be able to adequately manage our clinical systems, inventory, medical records, and other administrative records that our services would require on a regular basis. If we are unable to successfully integrate the information technology systems of our Group, or if there are any technical failures while doing so, the intended operating efficiency of the Groups information technology systems may not be realised and our business, financial position, results of operations and prospects may be materially and adversely affected.
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We could become the subject of or perceived to be associated with regulatory investigations, claims and litigation Healthcare companies are subject to numerous investigations by various regulatory agencies and claims and litigation by patients. Our properties may receive inquiries from, and may be subject to investigations by national, provincial and municipal agencies. Governmental agencies and their agents in Malaysia, the PRC, Japan and other countries in which we operate may conduct audits of our healthcare business. Should we be found to be in non-compliance with any of these laws or regulations, depending on the nature of the findings, we may face penalties, suspension of operations or even revocation of operating licences, which may materially and adversely affect our business, our financial position, results of operations and prospects. In addition, with the advent of new technologies and modalities of treatment, the amount of medical malpractice litigation brought by patients has increased across the industry. Such medical malpractice litigation is typically brought against the patients doctor and may also seek to include, as a defendant, the medical facility at which treatment was given. Due to the fact that we treat complex medical conditions at our facilities which do not have guaranteed positive outcomes, we are exposed to such medical malpractice litigation. Since many of our doctors are independent medical practitioners, we are unable to control their practice even though we may be held vicariously responsible for their actions by a court. The reputation of our medical assets may be adversely affected by our association with the doctor involved in the medical malpractice litigation even if our medical facilities are not involved in such medical malpractice litigation. If such medical malpractice litigation is not decided in our or the doctors favour, our business, financial position, results of operations and prospects may be materially and adversely affected. If we do not receive payment on a timely basis from healthcare insurers, corporate clients or individual patients, our business and results of operations could be adversely affected. The primary collection risk of our account receivables relates to the failure by government healthcare insurers, corporate clients or individuals to pay us in a timely matter and in full for the services we have provided. It is also possible that healthcare insurers and corporate clients may change their reimbursement policies and coverage plans in the future such that services we provide may no longer be covered. In such an event, our business, financial position, results of operations and prospects may be materially and adversely affected. We may suffer material losses in excess of insurance proceeds We are exposed to potential liability risks that are inherent in the provision of healthcare services and the development of medical real estate, healthcare-related assets and integrated mixed-use developments. Liabilities may exceed our available insurance coverage or arise from claims outside the scope of our insurance coverage. We believe we have insured our business operations in line with industry practices in our respective markets; however, we cannot assure you that such insurance coverage will be sufficient to cover all potential liabilities and risks that we face. Should there be adverse developments such as terrorist attacks and other natural or man-made disasters such as earthquakes and floods, fire hazards and other events beyond our control in our Primary Geographical Markets and other countries where we have operations, we may not have adequate insurance coverage to cover these liabilities and risks, and our business, financial position, results of operations and prospects may be materially and adversely affected. As is typical in Japan, the 50
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insurance policies maintained by our Group for most of the Japanese properties in the Initial Portfolio do not cover earthquake and tsunami damages. Our Company believes that our Groups insurance coverage is comparable to other companies with similar operations in Japan. If our arrangements for insurance or indemnification are not adequate to cover claims, including in the case of claims exceeding policy aggregate limitations or exceeding the resources of the indemnifying party, we may be required to make substantial payments, which may have a material adverse effect on our business, financial position, results of operations and prospects. We may not be able to successfully implement our future plans We plan to expand our Group in accordance with our future plans as set out in the section entitled General Information on our Company and our Group Business Strategies and Future Plans of this Offer Document. These future plans will require substantial capital expenditure and financial resources and will involve numerous risks, including but not limited to, the incurrence of substantial working capital requirements. There is no assurance that these plans will generate revenue that will commensurable with our investment costs. If we fail to generate a sufficient level of revenue or if we fail to manage our costs efficiently, we will not be able to recover our investment and our future financial performance and financial position may be adversely affected. If we are unable to identify expansion opportunities or experience delays or other problems in implementing our projects, our growth, business, financial position, results of operations and prospects may be adversely affected Our growth strategy depends, to an extent, on our ability to fund, build or acquire and manage additional properties. We may also expand, improve and augment our existing medical facilities. We have several such projects pending, and are continuously evaluating other projects, including acquisition opportunities, some of which we may realise in the imminent future and which may be material. Such acquisitions and expansions are capital intensive. We may not be able to identify suitable sites for new properties, or negotiate attractive terms for such projects, or expand, improve and augment our existing businesses. The number of attractive expansion opportunities may be limited, and may command high valuations, and we may be unable to secure the necessary financing to implement expansion projects. Furthermore, development and construction costs of these projects may escalate substantially beyond our budgets, resulting in pressure on our financial position and cash flows or in the project being no longer feasible. If we are not able to successfully identify opportunities to build, acquire or expand our additional and existing properties or face difficulties in the process of developing, acquiring or expanding such operations, our business, financial position, results of operations and prospects may be materially and adversely affected. Our acquisition of Pending Projects and Pipeline Projects may not be completed or we may be unable to consummate these acquisitions at commercially attractive prices The acquisition of Pending Projects and Pipeline Projects entails various risks, including the risk that we may be unable to complete acquisition of these projects or that completion of these acquisitions may not be on the terms we originally anticipated. In addition, the actual costs for acquisition and improvements estimated in our pre-acquisition due diligence process for these projects may also exceed our estimates. If we are unable to complete the acquisition of Pending Projects and Pipeline Projects, or if we are unable to acquire the Pending Projects and Pipeline Projects on terms we originally anticipated, it could have a material adverse effect on our business, financial performance and prospects. 51
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We have records of non-compliance with the Companies Ordinance There were some instances of non-compliance by our Hong Kong Subsidiaries with the Companies Ordinance, including the failure to (i) hold their first annual general meetings within 18 months of their incorporation in accordance with Section 111 of the Companies Ordinance; (ii) hold their subsequent annual general meeting in 2012 in accordance with the requirements under the Companies Ordinance; and (iii) prepare and lay audited accounts before their shareholders in their annual general meetings in accordance with Section 122 of the Companies Ordinance. In addition to the preceding, Health Kind (Hong Kong) failed to notify the Hong Kong Companies Registry of a change in directors in accordance with Section 158(4) of the Companies Ordinance. Please refer to the section entitled General Information on our Company and our Group Licences, Permits, Approvals, Certifications and Government Regulations of this Offer Document for more details. In March 2013, the Hong Kong Subsidiaries have made voluntary submissions to the Hong Kong Companies Registry disclosing such non-compliance. The Hong Kong Subsidiaries, save for Health Kind (Hong Kong), have on 17 April 2013 received a letter from the Hong Kong Companies Registry stating that they should rectify the non-compliances by seeking the appropriate court orders. Health Kind (Hong Kong) has on 10 May 2013 received a letter from the Hong Kong Companies Registry stating that it should seek independent legal advice on whether it is appropriate to seek court orders to rectify the non-compliances. The Hong Kong Subsidiaries have on 30 May 2013 submitted the relevant court applications required to obtain court orders to rectify the non-compliances. The court hearing to obtain the court orders has been fixed for 4 September 2013. Notwithstanding this, in the event that the Hong Kong Companies Registry takes action against the Hong Kong Subsidiaries and/or, inter alia , our Executive Directors, Dr. Jong Hee Sen and Yip Yuen Leong who are also directors of the Hong Kong Subsidiaries, we may be required to pay certain penalties and/or our Executive Directors may be subject to prison sentences, which may adversely affect our operations, business continuity, cash flow and results of operations. Our properties are subject to property taxes that may increase or capital gains taxes that may be imposed or incurred in the future, and adversely affect our business, financial position and results of operations Our properties are subject to property taxes that may increase as property tax rates change and as the facilities are assessed or reassessed by tax authorities. If our Groups property tax liabilities increase, our business, financial position and results of operations may be adversely affected. In addition, if our Group Subsidiaries dispose of our properties, the subsidiaries may be subject to capital gains taxes in Malaysia, the PRC, Japan and other countries in which we operate. Therefore, our Company may be indirectly liable to pay these capital gains tax. Compliance with applicable safety, health, environmental and other governmental regulations may be costly and adversely affect our competitiveness and results of operations
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We are subject to national and local laws, rules and regulations in our Primary Geographical Markets and other countries in which we operate, governing among other things: the conduct of our operations; additions to facilities and services; the adequacy of medical care; the quality of medical facilities, equipment and services; the purchase of medications and pharmaceutical drugs; the noise pollution, discharge of pollutants into air and water and handling and disposal of bio-medical, radioactive and other hazardous waste; the qualifications of medical and support personnel; the confidentiality, maintenance and security issues associated with health-related information and medical records; and the screening, stabilisation and transfer of patients who have emergency medical conditions.
Safety, health and environmental laws and regulations in our Primary Geographical Markets and other countries in which we operate are stringent and it is possible that they will become significantly more stringent in the future. If we are held to be in violation of such regulatory requirements, including conditions in the permits required for our operations, by courts or governmental agencies, we may have to pay fines, modify, suspend or discontinue our operations, incur additional operating costs or make capital expenditures. Our employees may also face criminal charges in some instances. Any public interest or class action legal proceedings related to such safety, health or environmental matters could also result in the imposition of financial or other obligations on us. Any such implications may have a material adverse effect on our business, financial position, results of operations and prospects. Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations or generate sufficient cash flow to service all of, or refinance, our indebtedness, limit our ability to react to opportunities and expose us to interest rate risk and currency exchange risk As at the Latest Practicable Date, our Groups total borrowings was approximately S$231.9 million, comprising mainly long-term borrowings. Our high degree of leverage could have important consequences, including: increasing our vulnerability to downturns or adverse changes in general economic, industry or competitive conditions and adverse changes in government regulations; requiring a substantial portion of our cash flows from operations to be dedicated to the payment of principal, premium, if any, and interest on our indebtedness, therefore reducing our ability to use our cash flows to fund our operations, capital expenditures and future business opportunities;
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exposing us to the risk of being unable to maintain sufficient levels of cash flows to permit us to pay the principal, premium and interest, if any, on our indebtedness; exposing us to the risk of increased interest rates or unfavourable terms which financial institutions may impose on us; exposing us to the risk of fluctuations in currency exchange rates since certain of our borrowings are denominated in foreign currencies; limiting our ability to make strategic acquisitions or causing us to make non-strategic divestitures; limiting our ability to refinance our existing borrowings and our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage position compared to our competitors who are less leveraged.
Such consequences may result in us raising funds through the issuance of equity or securities convertible into equity, and such issuance of equity or securities convertible into equity may be priced at a discount to the then prevailing market price of our Shares being traded on the SGX-ST, resulting in a dilution of our Shareholders equity interest. If we fail to utilise the new equity to generate a commensurate increase in earnings, our EPS may be diluted, and this could lead to a decline in the price of our Shares. We currently conduct our operations principally through our Group Subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flows by our Group Subsidiaries and their ability to make such cash available to us by dividend, debt repayment or otherwise. Our Group Subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each Group Subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our Group Subsidiaries. In Japan, due to the nature of our business whereby each of our Nursing Facilities is leased to an external operator and our Group not being able to appoint a replacement external operator readily, the number of lenders which will be willing to extend non-recourse loans to our Japanese subsidiaries is limited as such lenders will rely on the external operators creditworthiness before extending the said non-recourse loans to our Group. Whilst our Group has been able to fund our projects and acquisitions in Japan thus far, there is no assurance that we would be able to continue doing so in the future and in such an event, our Group may not be able to carry out our projected business plans and our results of operations may be adversely affected. Challenges that affect the healthcare industry may have an impact on our operations We are impacted by the challenges currently facing the healthcare industry. We believe that the key ongoing industry-wide challenges are providing high quality patient care in a competitive environment and managing costs.
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In addition, our business, financial position, results of operations and prospects may be affected by other factors that affect the entire industry, including us, such as: technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for, healthcare; general economic and business conditions at local, regional, national and international levels; demographic changes; an increase in the threat of terrorism or armed conflicts and the occurrence of natural and man-made disasters that affect travel security or the global economy could reduce the volume of medical travellers; improvements in the level of quality of healthcare services in neighbouring countries that may affect the stream of medical travellers coming to our medical facilities; changes in the supply distribution chain or other factors that increase the cost of supplies; stricter regulations governing protection of sensitive or confidential patient information from unauthorised disclosure; stricter regulations governing the purchase of medications and pharmaceutical drugs, which are highly regulated; and reputational and potential financial risk to our operations caused by the independent actions of doctors, including the prices they charge patients for their services.
In particular, the patient volumes and operating income at our properties are subject to economic and seasonal variations caused by a number of factors, including, but not limited to: unemployment levels; the cultural and business environment of local communities and in the home countries of medical travellers; the number of uninsured and underinsured patients in local communities; seasonal cycles of illness; and climate and weather conditions.
Any failure by us to effectively manage these challenges may have a material adverse effect on our business, financial position, results of operations and prospects.
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RISKS RELATING TO OUR PROPERTIES The market values of our properties when completed may differ from the appraised values determined by the Independent Valuers The valuations for the land were generally conducted using the direct comparison, capitalisation and residual cash flow methods of valuation. Property valuations generally include a subjective determination of certain factors relating to the relevant properties, such as their relative market positions, competitive strengths and their physical conditions. We have provided the valuations for the IHC KLCC Project and IHC Chengdu Project, which were for the land only, conducted on an as-is basis. In addition, we have provided FOR REFERENCE ONLY , the valuation of our properties under development on an as if complete and fully leased basis, based on the current market conditions. There can be no assurance that the relevant facilities can be leased out at the same or higher market rates once completed. The market values of our properties when completed may therefore differ from the values of the properties as determined by the Independent Valuers. The values of our properties (as determined by the Independent Valuers) are not an indication of, and do not guarantee, a sale price at that value at present or in the future. The price at which our Group may sell a property may be lower than its value as determined by the Independent Valuers. We rely on expert appraisals and engineering, environmental and seismic reports We obtain expert appraisals as well as engineering, environmental and seismic reports to assist us in determining whether to acquire properties and how to operate properties we will own. However, these reports are not intended to be a representation as to the past, present or future value or engineering, environmental or seismic condition of the relevant property. Furthermore, different review methodologies or different sets of assumptions could affect the results of such reports and the conclusions drawn from them. Thus, different experts reviewing the same property could reach significantly different conclusions. Property appraisals are largely based on forwardlooking information that is inherently speculative and difficult to verify, and the appraisal values provided to us may not reflect the prices that we could obtain upon the sale of the relevant property. The appraisal values of the properties provided to us represent the analysis and determination of the relevant appraiser based on his or her particular assumptions, estimations and judgments about the value of the properties appraised, which necessarily include subjective elements. Different sets of assumptions or different estimations and judgments could result in significantly different appraisal values for the same property. Thus, other qualified appraisers could reach materially different conclusions regarding the value of our properties and those we intend to acquire. The engineering, environmental and seismic reports we have obtained for our properties and for those we intend to acquire have not revealed any liabilities that we believe will have a material adverse effect on our business, and as such risks are often hidden or difficult to evaluate, the reports we have obtained may not meaningfully assess such risks. If we were to discover any significant, unidentified engineering, environmental or seismic liabilities, the value of the affected property could fall, and we may be required to incur additional costs to procure the discharge of the liability and the process to procure the discharge of the liability could also be time consuming.
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We have limited experience in operating our properties, some of which are still under development We have limited experience and track record in developing, owning and operating our properties. We had just completed our acquisition of our Initial Portfolio and the completion of our acquisition of the land and/or properties for our Pending Projects will only occur after the Placement. Our land for IHC KLCC Project, land for IHC Chengdu Project and the properties under IHC Wuxi Project are still under development or redevelopment and are expected to complete and commence operations only on or after 2016. Due to our Companys limited experience and track record in operating our properties, it would be difficult for investors to assess the performance of our Company. It would also be difficult for investors to assess the future performance of the properties which are currently under development or redevelopment. We may face risks associated with the acquisition of completed properties While we believe that reasonable due diligence investigations have been conducted with respect to completed properties prior to acquisition, there can be no assurance that our properties will not have defects or deficiencies requiring significant capital expenditures, repair or maintenance expenses, or payment or other obligations to third parties, other than those disclosed in this Offer Document. The expert reports that we have relied upon as part of our due diligence investigations may contain inaccuracies and deficiencies, as certain building defects and deficiencies may be difficult or impossible to ascertain due to the limitations inherent in the scope of the inspections, the technologies or techniques used and other factors. Costs or liabilities arising from such defects and deficiencies may involve significant and potentially unpredictable patterns and levels of expenditure which may have a material and adverse effect on our earnings and cash flows. Statutory or contractual representations, warranties and indemnities given by any developer or seller of real estate may not be able to afford satisfactory protection from costs or liabilities arising from such defects and deficiencies. In addition, laws and regulations (including those in relation to real estate) may have been breached and certain regulatory requirements in relation to the properties may not have been complied with, which our due diligence investigations did not uncover. As a result, we may incur financial or other obligations to rectify such breaches or non-compliance. We may face risks associated with acquiring properties for development or redevelopment Our Group has acquired or has agreed to acquire the land under the IHC KLCC Project, IHC Chengdu Project and IHC Iskandar Project which are development projects and the properties under the IHC Wuxi Project and IHC Shanghai Project which is or will be undergoing extensive redevelopment work. Undertaking development or redevelopment work involves various risks, including regulatory, construction and financing risks, as well as the risk that the assets upon their completion will be unable to attract the desired tenants and patients. These risks may be more pronounced in an emerging market like the PRC, which may subject our Group to discretionary regulatory controls, changes in the laws, regulations, or contracts governing the development projects.
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Our decision to invest in property development projects is based upon our managements assessment of the potential market demand for space for medical real estate, healthcare-related assets and integrated mixed-use developments. There is no guarantee that there will be a demand for these property development projects when completed, whether due to depressed market conditions or other factors. For example, tenants may not be found in a timely manner, and leases may not be entered into on satisfactory terms due to lack of demand. Any significant periods of vacancy or unfavourable lease terms may adversely affect our business, financial position and results of operations. Some of our properties are built on leasehold land, which is subject to renewal and other limitations Some of our properties are built on leasehold land, with our properties in the PRC built on land leased from the government. Although the land has been leased to us on a long-term basis, the valuation of these properties may decrease as the number of years remaining in the lease decreases. We may also face the risk of having to relocate should we not be able to renew these leases in the future. Failure or delay in the delivery of our property developments and increase in costs in completing constructions The period span of a property development project can last more than one (1) year, depending on the size of the development. Consequently, changes in the business environment during the length of the property development project may affect the revenue and cost of the development which may directly depress the profit margin of the project. Factors which affect the profitability of a project may include but are not limited to: (i) risks that government approvals (such as those relating to commencement of construction and pre-sale) may take more time than expected to be obtained; (ii) construction may not be completed on schedule or within budget; (iii) fluctuations in prices of construction materials; and (iv) sale of the properties may not achieve the anticipated level. The time taken and the costs involved in completing construction can be adversely affected by many factors including but not limited to: (i) failure to meet the requisite standards of building construction; (ii) labour shortage; (iii) adverse weather condition; (iv) natural disaster; (v) labour dispute; (vi) dispute with contractor; (vii) accident; (viii) variation of architectural blueprints; and (ix) change in government priorities and policies. If any of our property developments (including the land parcels contained therein), as a result of our failure or prolonged delay in the delivery of such property developments, are forced sold by our creditors in the market, we may not be able to recover our costs incurred and investments made with respect to such property developments. The sales derived from, and the values of, the residential units in our property development projects may be adversely affected by a number of factors, including but not limited to: (i) international, regional and local economic climate; (ii) local real estate conditions; (iii) changes in perceptions by buyers in terms of the convenience and attractiveness of the projects; (iv) competition from other available properties; (v) changes in market rates for comparable projects; and (vi) increase in operating costs. If any of the aforesaid property development risks develop, our financial performance may be materially and adversely affected.
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Our Group will be subject to the operating risks inherent in the service residences industry Our Group will own our service residences and as a result, we will be subject to the operating risks inherent in the service residences industry, notwithstanding that we operate in a relatively niche market in which our integrated mixed-use developments cater to the medical needs of our clients who lease our service residences. These risks include: cyclical downturns arising from changes in general and local economic conditions, resulting in a decline in the amount of medical tourism; competition from other service providers in the countries in which our service residences are located; the recurring need for renovation, refurbishment and improvement of our service residences; changes in wages, prices, energy costs and construction and maintenance costs that may result from inflation, government regulations, changes in interest rates or currency fluctuations leading to changes in our operating costs; availability of financing for operating or capital requirements; and other factors, including acts of terrorism, natural disasters, extreme weather conditions, labour shortages and work stoppages or disputes.
We depend on service residences operator, Marriott Group, to provide support services for our service residences under the IHC KLCC Project Our Group and the Marriott Group (the Operator ) have on 19 October 2012 entered into the Marriott MOU under which the parties have intended for the Operator to be appointed to operate the service residences under the IHC KLCC Project under the brand name Marriott Executive Apartments. Under the Marriott MOU, parties shall deal exclusively with each other with respect to the development of the service residences under the IHC KLCC Project for a period of six (6) months. Our Group and the Operator have on 10 April 2013 entered into the Extension to Marriott MOU, pursuant to which the parties shall extend the exclusivity period for another six (6) months from the date of the Extension to Marriott MOU, whereby the parties shall deal exclusively with each other with respect to the development of the service residences under the IHC KLCC Project. In connection with the Marriott MOU, our Group and the Operator have on 19 October 2012 also entered into an interim advisory services agreement pursuant to which, for the duration of the Marriott MOU, the Operator shall provide certain advisory services in connection with the design, construction, furnishing and equipping of the service residences. Our Group and the Operator intend to enter into definitive agreements in due course with the Operator relating to the construction and operation of the service residences under the IHC KLCC Project. If the Marriott MOU lapses after six (6) months from the date of the Extension to Marriott MOU, or if our Group is not able to enter into the definitive agreements with the Operator, or if the definitive agreements are terminated and our management is not able to engage a suitable replacement for any of the services that are the subject of the definitive agreements, the business, financial position, results of operations and prospects of our Group may be adversely affected.
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We depend on a third party manager to manage our portfolio of Japanese assets Our Group has entered into the Capbridge Framework Agreement with Capbridge whereby the Capbridge Group has been appointed as an advisor to advise our Group on the acquisition of our portfolio of Nursing Homes in Japan. In furtherance of the Capbridge Framework Agreement, our Group has entered into the Asset Management Agreement with Cryxis, part of the Capbridge Group, whereby Cryxis will provide certain advisory and consultation services with respect to the ownership, operation, management, marketing, leasing and disposition of our Nursing Homes which we have acquired or may acquire in the future. The Capbridge Group has the necessary experience and skill in the management of assets similar to our Nursing Homes. As the Capbridge Group has an extensive network and excellent business relationships with many of these service providers and handles the day-to-day liaison with these service providers, if the Capbridge Framework Agreement and/or the Asset Management Agreement is terminated and we are unable to engage a suitable replacement with the expertise, knowledge and business network to manage our portfolio of Japanese assets, the business, financial position, results of operations and prospects of our Group may be adversely affected. Due to difficulties faced when obtaining boundary confirmations for Japanese properties, boundary confirmations have not been obtained from all neighbours in relation to certain of our properties Due to the difficulties faced when obtaining boundary confirmations for Japanese properties, certain of our properties in Japan have been, and future properties may be, acquired by our Group without obtaining boundary confirmations from title holders of adjoining land, or without physically inspecting boundaries. Boundary disputes may cause difficulties in future dispositions of the land or unexpected costs or losses including, but not limited to, the loss of part of the area of the land or liability for damages arising in relation to such properties or future acquisitions. If there is an encroachment on land, such encroachment may restrict the use of the land or lead to claims from neighbours and may adversely affect our business operations and cause additional expense in the removal of the encroachment. These risks may have an adverse effect on our business, financial position and results of operations. The Japanese real property registration system may not accurately reflect the ownership of the real property-related title or right Japan has a system of registering the ownership of real property (which includes land and buildings) as well as certain other real property-related rights, such as security rights over real property and easements, pursuant to which an unregistered owner of real property or an unregistered holder of certain other rights cannot assert its title or such rights against a third party. However, the real property register does not necessarily reflect the legal owner of the real property-related title or right. In practice, parties who plan to enter into a real property transaction usually rely upon the register, as it is generally the best indication of the legal ownership of the real property-related title or right. However, a party has no recourse to anyone but the seller if, relying on the register, it purchases the property or a related right from a seller and the information contained in the register turns out to be incorrect. The purchaser may claim for damages against the seller pursuant to statutory warranties or contractual warranties, but, in general, cannot acquire the ownership of or title to the real property from the legal owner. Imperfect title to one or more of our facilities in Japan could have a material adverse effect on our business, financial position, results of operations and prospects. 60
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Our ownership rights in some of our properties in Japan may be declared invalid or limited The title to each property in Japan will be registered in the name of IHC TMK (Japan). However, such registration of title does not guarantee absolute ownership under Japanese law. For example, if the former owner of a property we acquire subsequently becomes subject to bankruptcy, corporate reorganisation or civil rehabilitation proceedings, we could face a claim for avoidance or fraudulent conveyance. If, for example, we acquired the property while the seller or a former owner was insolvent, or if as a result of the sale of the property to us, the seller becomes insolvent, we may be required to return the property or beneficial interest in the property to the seller or a former owner without refund of the purchase price, or we may be required to pay significant amounts to settle such claims. Further, if the former owner of a property we acquire from was or becomes unable to pay its debts at the time of our acquisition of the property, the acquisition may be voided by the creditors of the former owner. Although we do not believe that any of the properties we have acquired and intend to acquire are currently subject to significant risks of this type, these risks cannot be completely eliminated. As a result, future changes in the conditions of any owners or former owners of the properties we have acquired and intend to acquire could jeopardize our ownership of the properties. We may lose our rights in a property we intend to acquire if the purchase of the property is re-characterised as a secured financing Depending on the underlying facts and circumstances surrounding the purchase of a property, the purchase of a property may not be construed as a true sale under Japanese law and may be re-characterised as a secured financing. In such a case, the relevant property would be deemed to be an asset of the seller, and we would lose our ownership interest in the property. We would instead hold only a security interest in the property. Re-characterisation could occur when the seller becomes insolvent by way of bankruptcy, corporate reorganisation or civil rehabilitation proceedings. Under Japanese law, whether a purchase may be re-characterised as a secured financing is determined through the consideration of various factors, including, without limitation, the intention of the seller and purchaser, whether the seller transferred the economic risk to the purchaser, and whether the seller and purchaser contracted a buy-back arrangement permitting the seller to reacquire the property. Although we have no reason to believe that the acquisition of any of the properties we have acquired or intend to acquire would be re-characterised as a secured financing, any such acquisition may be so re-characterised following a legal or regulatory proceeding. Our cost of complying with regulations applicable to the properties we intend to acquire could adversely affect the results of our operations Although we believe that the properties we intend to acquire are substantially compliant with current requirements imposed by applicable administrative laws and local ordinances, the enactment of new or additional regulations, including those related to building standards and handicap access as well as environmental and zoning restrictions, could force us to incur costs in modifying our properties to comply with such regulations or prevent us from disposing of our properties. In addition, such new regulations may cause us to incur significant additional costs in making any improvements to our properties. The ultimate cost of any such compliance requirements is not currently ascertainable but, if significant, could have a material adverse effect on our business, financial position and results of operations.
61
RISK FACTORS
No legal title and/ or land use right certificate upon the completion of the Placement As at the date of this Offer Document, our Group will not have legal title to the properties earmarked for the IHC Iskandar Project, IHC Shanghai Project and the Kashiihama Projects and although we have obtained the land use rights over the land on which we are developing the IHC Chengdu Project, we have not obtained the land use right certificate. Although we are contractually entitled by way of the Sale and Purchase Agreements to acquire the properties for the Pending Projects in accordance with the terms of the relevant agreements with the respective vendors of the properties after the Placement, there is no guarantee that the vendors would perform their obligations under the terms of the relevant agreements. In the event that any of the vendors fails to perform its obligations under the terms of the agreements including without limitation, failing to transfer the legal title to any of the assets to our Group, and our Group fails to satisfactorily enforce its rights under the relevant agreements, the business and prospects of our Group may be adversely affected. In the event that the authorities do not issue us with the land use right certificate for the IHC Chengdu Project land, the business and prospects of our Group may be adversely affected. The loss of anchor tenants or a significant number of tenants of any of our properties or a downturn in the businesses of anchor tenants or a significant number of tenants could have an adverse effect on our results of operations and financial position Our Groups financial position, results of operations and capital growth may be adversely affected by the bankruptcy and insolvency of or downturn in the businesses of one or more of the anchor tenants or a significant number of tenants of any of our properties, as well as the decision by one or more of these tenants not to renew its lease or to terminate its lease before it expires. If an anchor tenant terminates its lease or does not renew its lease at expiry, it may be difficult to secure replacement tenants at short notice. In addition, the amount of rent and the terms on which lease renewals and new leases are agreed may be less favourable than the current leases. The loss of anchor tenants in any one of our properties, completed developments or future acquisitions could result in periods of vacancy, which could adversely affect the revenue and financial conditions of the relevant property. In such an event, the business, financial position, results of operations and cash flow of our Group may be adversely affected. In Japan, our properties are expected to have an operator as the single tenant. If a lease agreement with the operator were to be terminated, or otherwise the operator were to vacate a property (due to bankruptcy, insolvency or downturn in the business of the operator or its failure to maintain necessary licences or to satisfy regulatory requirements etc.), the pool of potential substitute operators may be limited due to a number of factors unique to our assets in Japan, including the specific use and configuration of the properties as Nursing Facilities and the effective demand of succession of agreements with existing residents. Furthermore, a TMK as property owner is not allowed to operate Nursing Facilities, so we may be forced to decrease the rent in order to secure a substitute operator or incur significant refurbishment expenses to prepare a property for a new operator, and this may adversely affect our business, financial position and results of operations.
62
RISK FACTORS
Renovation works or physical damage to our properties may disrupt our operations and result in an adverse impact on our financial position Our properties may need to undergo renovation works from time to time to retain their attractiveness to tenants and may also require unforeseen ad hoc maintenance or repairs in respect of faults or problems that may develop over structural defects or other parts of buildings or because of new planning laws or regulations. The costs of maintaining a property and the risk of unforeseen maintenance or repair requirements tend to increase over time as the building ages. Furthermore, while the management of our Group will endeavour to keep any disruptions caused by such renovation works to a minimum, the business and operations of our properties may still suffer some disruption. We may not be able to fund future capital expenditures, refurbishments, renovations and enhancement solely from cash provided from our operating activities and we may not be able to obtain additional equity or debt financing or be able to obtain such financing on favourable terms or at all. In addition, physical damage to our properties resulting from adverse weather conditions and natural disasters such as fire, earthquakes or other acts of God may lead to a significant disruption to the business and operation of our properties and together with the foregoing may result in an adverse impact on the financial position and results of operations of our Group. RISKS RELATING TO OUR COUNTRIES OF OPERATION We are subject to political, economic and social developments in our Primary Geographical Markets and other countries in which we operate Our business, prospects, financial position and results of operations may be adversely affected by political, economic, social and legal developments that are beyond our control in Malaysia, the PRC, Japan and other countries in which we operate. Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, expropriation or nullification of contracts, changes in interest rates, rates of economic growth, fiscal and monetary policies of governments, inflation, deflation, methods of taxation and tax policy, unemployment trends, and other matters that influence consumer confidence, spending and tourism. Increasing volatility in financial markets may cause these factors to change with a greater degree of frequency and magnitude. Negative developments in the socio-political environment in Malaysia, the PRC, Japan and other countries in which we operate, may adversely affect our business, financial position, results of operations and prospects. In addition, changes in tax laws or other regulations or actions taken by the government in countries in which we operate to partially or wholly nationalise or compulsorily acquire our properties or the underlying land may have a material adverse effect on our business, financial position, results of operations and prospects. Our Group may be adversely affected by the uncertain global economic outlook Our business is susceptible to the general economic conditions in Malaysia, the PRC, Japan and other countries in which we operate. Factors such as GDP growth, disposable income and unemployment rates may indirectly affect our business operations.
63
RISK FACTORS
Given the uncertainties of the future economic outlook, there is no assurance that we will be able to grow our business, or that we will be able to react promptly to any change in economic conditions. In the event that we fail to react promptly to the changing economic conditions, our performance and profitability could be adversely affected. Our business performance, future plans and operations may be adversely affected if these conditions deteriorate in the future. We may be subject to competition laws and regulations in certain countries in which we operate Competition laws and regulations may limit our growth and subject us to anti-trust and merger control investigations, particularly in the core countries in which we operate. Violation of such laws or regulations could potentially expose us to financial penalties or rights of private action. The Malaysian competition regime generally favours increased competition. While there is no merger control, we may be subject to anti-trust investigations, restricted from continuing to engage in practices found to be anti-competitive and restricted from continuing to engage in practices that are found to be an abuse of that dominance. We cannot predict the effect of any investigations by competition authorities on our business. If, as a result of any investigation by the relevant authorities, we are subject to financial or other penalties or we are prohibited from engaging in certain types of businesses or practices, our business, financial position, results of operations and prospects may be materially and adversely affected. The recurrence and spread of epidemics or large-scale medical emergencies may have an adverse impact on our business The recurrence and spread of epidemics or other communicable diseases may affect our operations. In the event that any of the employees in our Group, or those of our tenants, are infected or suspected to be infected with any communicable diseases, we or our tenants may be required to temporarily shut down our operations to prevent the spread of the diseases. This would restrict our ability to operate our existing business and, where such affected employees are critical to our ongoing development projects, result in delays in the completion of such projects. The restrictions on our ability to travel and deploy personnel across our business could damage our reputation, and may, as a result, lead to loss of business and affect our ability to attract new business. In addition, should employees or patients infected with such illnesses be housed in any of our properties, the relevant facility could see a negative impact in its reputation, resulting in a lower number of people who are willing to visit that facility for other kinds of medical or surgical treatment. In Malaysia, the government may, through regulations made by the Supreme Ruler of Malaysia, take possession, control, forfeit or dispose any property if deemed necessary to secure public safety. An outbreak of any communicable disease may therefore have a material adverse effect on our business, financial position, results of operations and prospects. We may be affected by terrorist attacks, natural disasters such as earthquakes and tsunamis and other events beyond our control Terrorist attacks such as those that occurred in the United States and Indonesia, may lead to uncertainty in the economic outlook of these markets leading to an economic downturn. This may in turn have an adverse impact on our business. There can be no assurance that the terrorists will not target the countries in which we operate in the future.
64
RISK FACTORS
Our Groups current insurance policies do not cover terrorist attacks. The consequences of any such terrorist attacks, natural disasters or other events beyond our control are unpredictable, and we are not able to foresee events of such nature, which could cause interruptions to parts of our businesses and have an adverse effect on our business operations and financial position. There have been major natural catastrophes in the PRC and Japan in recent years. Such events have caused substantial structural and physical damage to properties and infrastructure in these countries. Any further natural disasters of a similar level may cause substantial structural and physical damage to our properties in the PRC and Japan, resulting in the incurrence of expenses to repair the damage caused. The environmental conditions may also cause disruptions, affect investments and result in various other adverse effects on the PRC or Japanese economy in general. This may lead to a decrease in demand for our services, market value of our properties and ability to attract desirable rates for the rental of our properties. This could materially and adversely affect the business and financial position and the results of operations of our Group. In addition, there may be, directly and indirectly, significant impact on the PRC, Japanese and/or the Asian economies. Any further economic deterioration or a prolonged recession, both in the PRC, Japan and overseas, may materially adversely affect our Groups business, financial position and results of operations. We conduct our business of the provision of healthcare services in a heavily regulated industry The operation of our properties is subject to various laws and regulations issued by a number of government agencies at the national, regional and local levels. Such rules and regulations relate mainly to the procurement of large medical equipment, the pricing of healthcare services, the operation of radiotherapy and diagnostic imaging equipment, the licensing and operation of medical institutions, the licensing of medical staff and the prohibition on non-profit civilian medical institutions from entering into cooperation agreements with third parties to set up for-profit centres that are not independent legal entities. Our growth prospects may be constrained by such rules and regulations, particularly those relating to the procurement of large medical equipment. If we fail to comply with such applicable laws and regulations, we could be required to make significant changes to our business and operations or suffer fines or penalties, including the potential loss of our business licences, the suspension from use of our medical equipment, and the suspension or cessation of operations at our medical facilities. The occurrence of such events may materially and adversely affect our business, financial position, results of operations and prospects. The land use rights we have obtained for our properties in the PRC may be forfeited and we may not be vested with land use rights for any land which we may acquire in the future The titles to all our properties in the PRC are held under a limited term of land use rights granted by the government authorities subject to a number of specific conditions. Under the PRC laws, where a developer fails to comply with or develop land according to the terms of the land grant contract (including those relating to payment of fees, land use or the time for commencement and completion of the development of the land), the relevant government authority may give a warning to or impose a penalty on the developer or forfeit the land use rights granted to the developer. There can be no assurance that circumstances leading to a possible breach of terms of the land grant contract, for example delay in the payment of the land grant fees or delay in the commencement of the development of the land for more than two (2) years since the stipulated date of commencement in the land grant contract that may lead to the forfeiture of land use rights, 65
RISK FACTORS
will not arise or forfeiture action may not be taken by the relevant authority in the future. Therefore, if we are affected by circumstances which would cause us to breach the terms of the land grant contract and our land use rights are forfeited by the government, our Groups business and prospects will be adversely affected. Further, the land use rights for any land that we may acquire in the future may not be vested in us. There is also no assurance that there will not be delays in the authorities issuance of the land use rights certificates and that the delays will not materially and adversely affect our operations. Restrictions imposed by the Malaysian government on foreign investments may affect our Malaysian operations Prior to 30 June 2010 and pursuant to the Guidelines on the Acquisition of Interests, Mergers and Take-Overs by Local and Foreign Interests; and the Guidelines on the Acquisition of Properties By Local and Foreign Interests (collectively, the FIC Guidelines ), the approval of the Foreign Investment Committee ( FIC ) under the Prime Ministers Department is required, inter alia , for the following: the acquisition of a substantial fixed asset by Malaysia incorporated companies in which foreign interest holds more than 50% of the voting shares or has management control; the acquisition of any interest in a Malaysian company or business which will result in ownership or control passing to foreign interests; and when a non-Malaysian or foreign company acquires or subscribes for 15% or more of the voting power of a company incorporated in Malaysia.
The FIC Guidelines have been repealed on 30 June 2010. Following the repeal of the FIC Guidelines, the new policy of the Malaysian Government is now enshrined in the Guideline on Acquisition of Properties ( New Guideline ) issued by the Economic Planning Unit of the Prime Minister Department ( EPU ). Under the New Guideline, the following property acquisition transactions, except for residential units, shall require approval of EPU: (i) direct acquisition of property valued at MYR20 million and above, resulting in the dilution in the ownership of property held by Bumiputera interest and/or government agency; and indirect acquisition of property by other than Bumiputera interest through acquisition of shares, resulting in a change of control of the company owned by Bumiputera interest and/or government agency, having property of more than 50 percent of its total assets, and the said property is valued more than MYR20 million.
(ii)
As the Malaysian economy is undergoing a period of development and modernisation, some degree of uncertainty exists as to whether and how the existing laws and regulations pertaining to foreign shareholding will be in the future. In the event that the laws and regulations in Malaysia are amended in the future to impose a more onerous regime on foreign investments, our Groups business operations and financial performance may be adversely affected.
66
RISK FACTORS
Exchange rate instability may adversely affect our business, financial position, results of operations and prospects We are incorporated in Singapore and the reporting currency of our statutory financial statements is presented in S$. However, a significant proportion of our Group Subsidiaries functional currencies are in currencies other than S$, such as MYR, RMB and JPY, and must be translated into S$ for consolidation into our Groups consolidated financial statements. For this purpose, the accounts of our Group Subsidiaries whose functional currencies are not in S$ must be translated into S$ at every reporting date. Any currency exchange gain or loss arising from the exchange rate translation process is recognised as other comprehensive income and accumulated in the foreign currency translation reserve under equity. If the resulting translation differences are significant, they may materially affect the results and shareholders fund position of our Group. Further, the computation of bank covenants and debt servicing ratios may also be affected. In addition, our Group is exposed to foreign exchange risk on sales, purchases, cash and cash equivalents, receivables and payables that are denominated in a currency other than the respective functional currencies of our Group Subsidiaries. In respect of exposure that is certain, our Group will partially hedge these risks in order to keep them at an acceptable level. However, as we and our Group Subsidiaries do not fully hedge against exchange rate fluctuations, any decline in the value of the S$, MYR, RMB and JPY may lead to a decrease in our net income and cash flow amounts. We may be exposed to foreign exchange control risk Our Group may be subject to exchange control or repatriation restrictions in relation to our foreign-incorporated subsidiaries in their respective countries of operation and our Group may encounter difficulties or delay in relation to the receipt of divestments and dividends due to such exchange controls existing in such countries. RISKS RELATING TO AN INVESTMENT IN OUR SHARES Investment in shares quoted on Catalist involves a higher degree of risk and can be less liquid than shares quoted on the Main Board of the SGX-ST An application has been made for our Shares to be listed for quotation on Catalist, a listing platform designed primarily 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 listed on the Main Board of the SGX-ST. 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. Catalist was formed in December 2007 and the future success and liquidity in the market of our Shares cannot be guaranteed. There is no prior market for our Shares and the Placement may not result in an active or liquid market for our Shares Prior to the Listing, there has been no public market for our Shares. Although we have applied to the SGX-ST for the dealing and quotation of our Shares on Catalist, there is no assurance that an active trading market for our Shares will develop or, if developed, will be sustained. There is also no assurance that the market price for our Shares will not decline below the Issue Price.
67
RISK FACTORS
The Issue Price was determined after consultation between our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents after taking into consideration, inter alia , market conditions and estimated market demand for our Shares. The Issue Price may not be indicative of the market price for our Shares after the completion of the Placement. Investors may not be able to resell their Shares at or above the Issue Price. The volatility in the trading price of our Shares may be caused by factors beyond our control and may be unrelated or disproportionate to our financial results. Our share price may be volatile in future which could result in substantial losses for investors purchasing Shares pursuant to the Placement The market price of our Shares may fluctuate significantly and rapidly as a result of, inter alia , the following factors, some of which are beyond our control: changes in general economic and stock market conditions; changes in our operating results; perceived prospects and future plans for our business and the general outlook of our industry; changes in securities recommendations; analysts estimates of our financial performance and
differences between our actual financial operating results and those expected by investors and securities analysts; announcements by our competitors or ourselves of gain or loss of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; our involvement in litigation; and addition or loss of key personnel.
Future sale or issuance of Shares could adversely affect our Share price Any future sale, availability or issuance of a large number of our Shares in the public market can have a downward pressure on our Share price. The sale of a significant amount of Shares in the market after the Placement, or the perception that such sales may occur could materially and adversely affect the market price of our Shares. These factors could also affect our ability to issue additional equity securities in future. Except as otherwise described in the section entitled Shareholders Moratorium of this Offer Document, there are no restrictions on the ability of our Shareholders to sell their Shares either on the SGX-ST or otherwise. Negative publicity which includes those relating to any of our Directors, Executive Officers or Substantial Shareholders may adversely affect our Share price Negative publicity or announcements relating to any of our Directors, Executive Officers or Substantial Shareholders may adversely affect the market perception or the share performance of our Company, whether or not they are justified. Some examples of these include unsuccessful attempts at joint ventures, acquisitions or take-overs, or involvement in insolvency proceedings.
68
RISK FACTORS
We may require additional funding for our growth plans, and such funding may result in a dilution of Shareholders investment We have estimated our funding requirements in order to implement our growth plans as set out in the section entitled General Information on our Company and our Group Business Strategies and Future Plans of this Offer Document. In the event that the costs of implementing such plans should exceed these estimates significantly or that we come across opportunities to grow through expansion plans which cannot be predicted at this juncture, and our funds generated from our operations prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements. These additional funds may be raised by issuing equity or debt securities or by borrowing from banks or from other resources. We cannot ensure that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us, we will not be able to implement such plans fully. Such financing, even if obtained, may be accompanied by conditions that limit our ability to pay dividends or require us to seek lenders consent for payment of dividends, or restrict our freedom to operate our business by requiring lenders consent for certain corporate actions. Further, in the event that we raise additional funds by way of a limited placement or by a rights offering or through the issuance of new Shares to new and/or existing Shareholders after the Placement, they may be priced at a discount to the then prevailing market price of our Shares trading on the SGX-ST, or if any Shareholders is unable or unwilling to participate in such additional round of fund raising, in which case, Shareholders equity interest may be diluted. If we fail to utilise the new equity to generate a commensurate increase in earnings, our EPS will be diluted, and this could cause a decline in our Share price. Investors in our Shares would face immediate and substantial dilution in the NTA per Share and may experience future dilution The Issue Price of our Placement Shares is substantially higher than our Groups pro forma NTA per Share of 7.21 cents based on the post-Placement share capital and after adjusting for the estimated net proceeds due to our Company from the Placement. If we were liquidated immediately following this Placement, each investor subscribing to this Placement would receive less than the price they paid for their Shares. Please refer to the section entitled Dilution of this Offer Document for more information. In addition, we may be issuing and allotting SPA Shares in satisfaction of the consideration for the acquisitions of (i) IHC Iskandar and its subsidiary; (ii) IHC Shanghai and its subsidiaries; and (iii) IHC Chengdu and its subsidiaries from HMD pursuant to the Sale and Purchase Agreements. Accordingly, there may be further dilution to the Shareholders after the completion of the issuance and allotment of the SPA Shares. Please refer to the section entitled Restructuring Exercise of this Offer Document for more information on the SPA Shares and the Sale and Purchase Agreements. Control by our Substantial Shareholders of our share capital after the Placement may limit your ability to influence the outcome of decisions requiring the approval of Shareholders After the completion of the Placement, our Substantial Shareholders, Golden Cliff, Real Empire and Xanery, will hold in aggregate approximately 55.58% of our issued share capital. As a result, these Substantial Shareholders will be able to significantly influence our corporate actions such as mergers or take-over attempts in a manner which may not be aligned with the interests of our public Shareholders. They will also have veto power in relation to any shareholder action or 69
RISK FACTORS
approval requiring a majority vote except in situations where they are required by the rules of the Listing Manual, the SGX-ST or undertakings given by them 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 not benefit our Shareholders. We may not be able to pay dividends in the future Our ability to declare dividends to our Shareholders in the future will be contingent on our future financial performance and distributable reserves of our Company. This is in turn dependent on our ability to implement our future plans, as well as regulatory, competitive, technical and factors such as general economic conditions, demand for and prices of our services and other factors exclusive to the healthcare industry. Any of these factors could have a material adverse effect on our business, financial position and results of operations, and hence there is no assurance that we will be able to pay dividends to our Shareholders after the completion of the Placement. Further, in the event that we are required to enter into any loan arrangements with any financial institutions, covenants in the loan agreements may also limit when and how much dividends we can declare and pay out.
70
ISSUE STATISTICS
ISSUE PRICE NTA Pro forma NTA per Share based on the unaudited pro forma balance sheet of our Group as at 31 December 2012 (the NTA ): (a) before adjusting for the estimated net proceeds from the issue of New Shares and based on the pre-Placement share capital of 1,546,328,042 Shares after adjusting for the estimated net proceeds from the issue of New Shares and based on the post-Placement share capital of 1,604,845,042 Shares 6.01 cents 48.00 cents
(b)
7.21 cents
Premium of Issue Price over the NTA per Share as at 31 December 2012: (a) before adjusting for the estimated net proceeds from the issue of New Shares and based on the pre-Placement share capital of 1,546,328,042 Shares after adjusting for the estimated net proceeds from the issue of New Shares and based on the post-Placement share capital of 1,604,845,042 Shares 698.67%
(b)
565.74%
EPS (1) Pro forma EPS of our Group for FY2012 based on the pre-Placement share capital of 1,546,328,042 Shares Pro forma EPS of our Group for FY2012 had the Service Agreements been in effect from 1 January 2012 and based on the pre-Placement share capital of 1,546,328,042 Shares PRICE EARNINGS RATIO Pro forma price earnings ratio based on the Issue Price and the pro forma EPS of our Group for FY2012 Pro forma price earnings ratio based on the Issue Price and the pro forma EPS of our Group for FY2012 had the Service Agreements been in effect from 1 January 2012 NET OPERATING CASH FLOW (2) Pro forma net operating cash flow per Share of our Group for FY2012 based on the pre-Placement share capital of 1,546,328,042 Shares Pro forma net operating cash flow per Share of our Group for FY2012 had the Service Agreements been in effect from 1 January 2012 and based on the pre-Placement share capital of 1,546,328,042 Shares 1.49 cents 14.04 times 3.42 cents
3.41 cents
14.08 times
1.48 cents
71
ISSUE STATISTICS
PRICE TO NET OPERATING CASH FLOW RATIO Ratio of Issue Price to pro forma net operating cash flow per Share of our Group for FY2012 and based on the pre-Placement share capital of 1,546,328,042 Shares Ratio of Issue Price to pro forma net operating cash flow per Share of our Group for FY2012 had the Service Agreements been in effect from 1 January 2012 and based on the pre-Placement share capital of 1,546,328,042 Shares MARKET CAPITALISATION Market capitalisation based on the Issue Price and the post-Placement share capital of 1,604,845,042 Shares
Notes: (1) (2) EPS is calculated based on the unaudited pro forma profit attributable to equity holders of our Company and the pre-Placement share capital of 1,546,328,042 Shares. Net operating cash flow refers to net cash provided by operating activities.
32.21 times
32.43 times
S$770.33 million
72
USE OF PROCEEDS AND LISTING EXPENSES

The net proceeds to be raised from the Placement (comprising New Shares and Vendor Shares), after deducting the estimated cash expenses in relation to the Placement of approximately S$6.3 million will be approximately S$43.8 million. We will not receive any of the proceeds from the Vendor Shares sold by the Vendors in the Placement. The net proceeds attributable to the Vendors from the sale of Vendor Shares, after deducting the Vendors share of the estimated cash expenses of approximately S$0.9 million, will be approximately S$21.1 million. The net proceeds to be raised by our Company from the issue of the New Shares (after deducting our share of the estimated cash expenses of approximately S$5.4 million) will be approximately S$22.7 million. The following table sets out the breakdown of the use of proceeds to be raised by our Company from the Placement: Estimated amount allocated for each dollar of the gross proceeds raised by our Company (as a % of our Companys gross proceeds)
Purposes Development and redevelopment of our existing projects Acquisition of our Pending Projects Purchase and/or upgrade of medical equipment Working capital Total
Amount in aggregate (S$000)
10,000 8,000 500 4,225 22,725
35.6% 28.5% 1.8% 15.0% 80.9%
Further details of our use of proceeds may be found in the section entitled General Information on our Company and our Group Business Strategies and Future Plans of this Offer Document. The foregoing discussion represents our Companys best estimate of its allocation of the net proceeds of the Placement attributable to our Company based on our current plans and estimates regarding our anticipated expenditures. Actual expenditures may vary from these estimates and our Company may find it necessary or advisable to reallocate the net proceeds within the categories described above or to use portions of the net proceeds for other purposes. In the event that our Company decides to re-allocate such net proceeds for other purposes, our Company will publicly announce its intention to do so through an SGXNET announcement on the internet at the SGX-ST website, http://www.sgx.com. In addition, our Company will make periodic announcements on the use of the proceeds attributable to our Company from the Placement as and when the proceeds attributable to our Company from the Placement are materially disbursed, and provide a status report on the use of the proceeds attributable to our Company from the Placement in our annual reports. Pending the deployment of the net proceeds from the issue of New Shares as aforesaid, the funds will be placed in short-term deposits or money making instruments as our Directors may, in their absolute discretion, deem fit.
73
USE OF PROCEEDS AND LISTING EXPENSES

In the reasonable opinion of our Directors, there is no minimum amount which must be raised by the Placement. None of the proceeds of the Placement will be used to discharge, reduce or retire any indebtedness of our Group. Listing Expenses The aggregate estimated amount of expenses in relation to the Placement and the application for Listing, including the placement commission, management fees, legal and audit fees, fees payable to the SGX-ST and all other incidental expenses in relation to this Placement is approximately S$7.9 million. Save for placement commission which will be borne by our Company and the Vendors in the Agreed Proportion, the aggregate listing expenses will be borne by our Company. A breakdown of these expenses to be borne by our Company in relation to the Placement is as follows: Estimated amount allocated for each dollar of the gross proceeds raised by our Company (as a % of our Companys gross proceeds) 0.3% 19.6% 4.0% 1.1% 25.0%
Expenses borne by our Company Listing and application fees Professional fees
(1)
Estimated amount (S$000) 77 5,501 1,127 300 7,005
Placement commission (2) Miscellaneous expenses Total

Notes: (1)
The professional fees include (i) the management fee of S$1.5 million, which is part of the fee payable to the Manager and Sponsor pursuant to the Management Agreement which has been satisfied in full by the issuance and allotment of 3,125,000 new Shares to PPCF, representing 0.20% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share; and (ii) the consultancy services fees of S$142,000 which has been satisfied in full by the issuance and allotment of 295,833 new Shares to Choong Yoon Fatt pursuant to the letter dated 29 March 2013, representing 0.02% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. For details, please refer to the section entitled Shareholders of this Offer Document. The amount of placement commission per Placement Share, agreed upon between the Joint Placement Agents and our Company is 3.75% of the Issue Price payable for each Placement Share. Please refer to the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document for more details.
(2)
74
DIVIDEND POLICY
Our Company and our Group Subsidiaries have not declared or paid any dividends since their incorporation. We currently do not have a fixed dividend policy. The form, frequency and amount of future dividends on our Shares will depend on our earnings, financial position, results of operations, capital requirements, cash flow, general business condition, our development plans and other factors as our Directors may deem appropriate ( Dividend Factors ). We may declare an annual dividend subject to the approval of our Shareholders in a general meeting but the amount of such dividend shall not exceed the amount recommended by our Directors. Our Directors may also declare an interim dividend without the approval of our Shareholders. Our Company must pay all dividends out of our profits. For information relating to taxes payable on dividends, please refer to the section entitled Taxation of this Offer Document. All dividends are paid pro-rata among the Shareholders in proportion to the amount paid up on each Shareholders Shares, unless the rights attaching to an issue of any Share provides otherwise. Notwithstanding the foregoing, the payment by our Company 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 our Company from any liability to that Shareholder in respect of that payment. No inference shall or can be made from any of the foregoing statements as to our actual future profitability or ability to pay dividends in any of the periods discussed. 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. The form, frequency and amount of future dividends will depend on the Dividend Factors.
75
SHARE CAPITAL
Our Company (Company Registration Number: 201304341E) was incorporated in Singapore on 18 February 2013 under the Companies Act as a private company limited by shares under the name of International Healthway Corporation Private Limited. On 30 May 2013, our Company changed its name to International Healthway Corporation Limited in connection with its conversion into a public company limited by shares. As at the date of incorporation, our issued and paid-up share capital was S$1, comprising one Share. Pursuant to the extraordinary general meeting held on 28 May 2013, our Shareholder approved, inter alia , the following: (a) the conversion of our Company into a public limited company and the change of our name to International Healthway Corporation Limited; the sub-division of one (1) Share in the existing issued share capital of our Company into 71 Shares (the Sub-Division ); subsequent to the Sub-Division, the allotment and issue of new Shares, which are the subject of the Restructuring Exercise which when fully paid, allotted and issued, will rank pari passu in all respects with the existing Shares; the adoption of a new set of Articles of Association; subsequent to the Sub-Division, the allotment and issue of the New Shares which are the subject of the Placement which when fully paid, allotted and issued, will rank pari passu in all respects with the existing issued Shares (the Issue of New Shares ); subsequent to the Sub-Division, the allotment and issue of: (i) such number of new Shares at the Issue Price to PPCF in satisfaction of their management fees as Manager and Sponsor; such number of new Shares at the Issue Price to Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong in satisfaction of the Wuxi Acquisition Consideration;
(b)
(c)
(d) (e)
(f)
(ii)
(iii) such number of new Shares at the Issue Price to Azusa in satisfaction of the Capbridge Groups services as advisor; and (iv) such number of new Shares at the Issue Price to Choong Yoon Fatt in satisfaction of consultancy services fees. (g) the listing and quotation of all the issued Shares (including the New Shares to be allotted and issued pursuant to the Placement and the Vendor Shares) on Catalist; the allotment and issue of the SPA Shares in satisfaction of the consideration under the Sale and Purchase Agreements, which when allotted and issued, will rank pari passu in all respects with the existing issued Shares; and that authority be and is hereby given to our Directors, pursuant to Section 161 of the Companies Act and by way of ordinary resolution in a general meeting to: (A) (i) issue Shares whether by way of rights, bonus or otherwise; and/or
(h)
(i)
76
SHARE CAPITAL
(ii) make or grant offers, agreements or options (collectively, Instruments ) that might or would require Shares to be issued during the continuance of this authority or thereafter, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures, convertible securities or other instruments convertible into Shares; and/or
(iii) notwithstanding that such authority may have ceased to be in force at the time that Instruments are to be issued, issue additional Instruments arising from adjustments made to the number of Instruments previously issued in the event of rights, bonus or other capitalisation issues, 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) issue Shares in pursuance of any Instrument made or granted by our Directors pursuant to (A)(ii) and/or (A)(iii) above, while such authority was in force (notwithstanding that such issue of Shares pursuant to the Instruments may occur after the expiration of the authority contained in this resolution), provided that: (i) the aggregate number of Shares to be issued pursuant to such authority (including the Shares to be issued in pursuance of Instruments made or granted pursuant to this authority but excluding Shares which may be issued pursuant to any adjustments ( Adjustments ) effected under any relevant Instrument, which Adjustment shall be made in compliance with the provisions of the Catalist Rules for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of our Company, does not exceed 100% of the post-Placement issued share capital excluding treasury shares, and provided further that the aggregate number of Shares to be issued other than on a pro rata basis to Shareholders (including Shares to be issued in pursuance of Instruments made or granted pursuant to such authority but excluding Shares which may be issued pursuant to any Adjustments effected under any relevant Instrument) shall not exceed 50% of the post-Placement issued share capital excluding treasury shares; in exercising such authority, our Company shall comply with the provisions of the Catalist Rules for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of our Company; and
(ii)
(iii) unless revoked or varied by our Company in general meeting by ordinary resolution, the authority so conferred shall continue in force until the conclusion of the next annual general meeting of our Company or the date by which the next annual general meeting of our Company is required by law to be held, whichever is the earlier. For the purpose of this resolution, the post-Placement issued share capital shall mean the total number of issued Shares of our Company (excluding treasury shares) immediately after the Placement, after adjusting for (i) new Shares arising from the conversion or exercise of any convertible securities; (ii) new Shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time such authority is given, provided the options or share awards were granted in compliance with the Catalist Rules; and (iii) any subsequent bonus issue, consolidation or sub-division of Shares. 77
SHARE CAPITAL
On 29 May 2013, our Company issued an aggregate of 1,419,999,929 new Shares at an issue price of S$0.06 each to HMD and its shareholders in consideration for the sale by HMD of the entire issued share capital of IHC KLCC, ICWCH, IHC Wuxi, IMA and IHC Japan to our Company. Please refer to the section entitled Restructuring Exercise of this Offer Document for more details. As at the date of this Offer Document, there is only one (1) class of Shares in the capital of our Company, being the Shares. A summary of the Articles of Association of our Company relating to, among others, the voting rights and privileges of our Shareholders is set out in Appendix G entitled Selected Extracts of our Articles of Association of this Offer Document. As at the date of this Offer Document, the issued and paid-up share capital of our Company is S$149,658,462 comprising 1,546,328,042 Shares. Upon the allotment and issue of New Shares, the resultant issued and paid-up share capital of our Company will be increased to S$177,746,622 comprising 1,604,845,042 Shares. There are no founders, management, deferred or unissued Shares reserved for issuance for any purpose. The Placement Shares shall have the same interest and voting rights as our existing issued Shares that were issued prior to this Placement and there are no restrictions to the free transferability of our Shares. No person has, or has the right to be given, an option to subscribe for or purchase any securities of our Company or our subsidiary. No option to subscribe for Shares in our Company has been granted to, or was exercised by, any of our Directors or Executive Officers. Details of the changes in the issued and paid-up share capital of our Company since the date of incorporation and immediately after the Placement are set out below: Issued and paid-up share capital (S$) 1 1 89,021,000 89,021,001
Number of Issued Shares Issued and fully paid Share at incorporation Sub-Division Issue of 1,419,999,929 new Shares to HMD and its shareholders pursuant to the Restructuring Exercise Post-Restructuring Exercise issued and paid-up share capital Issue of 3,125,000 new Shares to PPCF in satisfaction of management fees payable to PPCF as Manager and Sponsor Issue of 113,336,666 new Shares in satisfaction of Wuxi Acquisition Consideration Issue of 9,570,543 new Shares to Azusa Issue of 295,833 new Shares to Choong Yoon Fatt Pre-Placement issued and paid-up share capital New Shares issued pursuant to the Placement Post-Placement issued and paid-up share capital 1 71 1,419,999,929 1,420,000,000
3,125,000 113,336,666 9,570,543 295,833 1,546,328,042 58,517,000 1,604,845,042
1,500,000 54,401,600 4,593,861 142,000 149,658,462 28,088,160 177,746,622
78
SHARE CAPITAL
The issued share capital and the shareholders equity of our Company after adjustments to reflect the Restructuring Exercise, the Sub-Division, the issue of an aggregate of 126,328,042 new Shares in satisfaction of Payment Obligations and the issue and allotment of the New Shares pursuant to the Placement are set forth below. After the Restructuring Exercise, Sub-Division, and the issue of 126,328,042 new Shares in satisfaction of Payment Obligations 1,546,328,042 149,658,462 149,658,462
As at incorporation Issued and fully paid-up shares (number of shares) Share capital (S$) Retained earnings (S$) Total shareholders equity (S$)
Note: (1)
After the Placement 1,604,845,042 177,746,622 (7,005,000)(1) 170,741,622
1 1 1
Includes the estimated listing expenses of approximately S$7.0 million.
Save as disclosed above, there have been no other changes in the share capital of our Company since the date of its incorporation on 18 February 2013. Save as set out in this section and in the following table, there was no change in the issued/registered share capital or the number and classes of shares of our Group Subsidiaries since the date of its incorporation and up to the date of this Offer Document:
Number of Shares Issued/ Registered Capital Contributed Resultant Paid-Up Share Capital/ Registered Capital
Date of Issue IHC KLCC 3 February 2011 14 September 2011 IHC Wuxi 3 February 2011 ICWCH 6 January 2012 IMA 6 January 2012 IHC Japan 3 January 2013
Subscription Price Per Share
Purpose of Issue or Investment
1,000/S$1,000 4,999,000/S$4,999,000
S$1 S$1
Incorporation Working capital
S$1,000 S$5,000,000
1,000/S$1,000
S$1
Incorporation
S$1,000
1/S$1
S$1
Incorporation
S$1
1/S$1
S$1
Incorporation
S$1
1/S$1
S$1
Incorporation
S$1
79
SHARE CAPITAL
Date of Issue Seasons Residences 6 June 2011 21 September 2011 IHC Peak 9 January 2012 IHC Star 9 January 2012 IHC Summit 9 January 2012 IHC TMK (Japan) 22 February 2013 24 April 2013 25 June 2013 IHC ISH (Japan)(1) N.A. IHC GK (Japan) 10 September 2012
2/MYR2 1,631,604/ MYR1,631,604
MYR1 MYR1
MYR2 MYR1,631,606
1,000/S$1,000
S$1 (par value = S$0)
Incorporation
S$1,000
1,000/S$1,000
Incorporation
S$1,000
1,000/S$1,000
Incorporation
S$1,000
4 specified shares/JPY40,000
JPY10,000
Incorporation Working capital Working capital
JPY40,000 (specified shares) JPY2,730,000,000 (preferred shares) JPY445,000,000 (preferred shares)
54,600 preferred JPY50,000 shares/JPY2,730,000,000 8,900 preferred shares/ JPY445,000,000 JPY50,000
N.A.
N.A.
N.A.
N.A.
N.A./JPY10,000
N.A.
Incorporation
JPY10,000
IHC Assets (Hong Kong) 31 March 2010 1/HK$1 HK$1 Incorporation HK$1
IHC Facilities (Hong Kong) 26 March 2010 1/HK$1 HK$1 Incorporation HK$1
IHC Services (Hong Kong) 26 March 2010 1/HK$1 HK$1 Incorporation HK$1
Health Kind (Hong Kong) 9 June 2010 9 November 2012 2/HK$1 998/HK$998 HK$2 HK$1 Incorporation Working capital HK$2 HK$1,000
80
SHARE CAPITAL
Date of Issue Kang Hui (Chengdu) 26 December 2012 21 May 2013 Health Kind (Shanghai) 21 September 2010 Wuxi Phoenix 12 July 2005
Note: (1)
N.A. N.A./RMB46,686,742
N.A N.A.
N.A./ RMB225,000,000 RMB46,686,742/ RMB225,000,000
N.A./US$1,239,604
N.A.
Incorporation
US$1,239,604/ US$2,000,000
N.A./RMB44,000,000
N.A.
Incorporation
RMB44,000,000
IHC ISH (Japan) is a Japanese ippan shadan houjin which is often used for securitisation structure in Japan. Pursuant to the Japanese laws, a Japanese ippan shadan houjin does not have a share capital. IHC ISH (Japan), as a Japanese ippan shadan houjin, may instead accept contribution of foundation funds from its contributors. Please refer to the section entitled Group Structure The TMK Structure of the Offer Document for further details.
Save as disclosed in this section, no share in or debenture of our Company or our subsidiaries have been issued, or is proposed to be issued, as fully or partially paid-up for cash, or for a consideration other than cash, since the date of incorporation of our Company and our Group Subsidiaries and up to the date of lodgement of this Offer Document.
81
SHAREHOLDERS
SHAREHOLDING AND OWNERSHIP STRUCTURE The Directors and Substantial Shareholders of our Company and their respective shareholdings immediately before and after the Placement and Distribution are summarised below:
Before the Placement and the Distribution Direct Interest Number of Shares (000) Directors Dr. Jong Hee Sen(1)(2) Yip Yuen Leong
(3)
After the Placement and the Distribution Direct Interest Number of Shares (000) Deemed Interest Number of Shares (000)
Deemed Interest Number of Shares (000)
485,993 281,519 134,998 174,329 2,082 30,711 61,792 167,127 142,000 3,125 9,571 296
31.43 18.21 8.73 11.27 0.13 1.99 4.00 10.81 9.18 0.20 0.62 0.02
134,998 485,993 281,519
8.73 31.43 18.21
321 2 31 128 44 485,993 271,102 22 134,998 127,661 30,711 40,958 157,416 36,781 16,842 11,018 84 2,154 3,125 9,571 296
0.02
(21)
146,016 67 16 522,774 287,944 2,154
9.10 (21)
(21)
Wong Ong Ming Eric(4) Siew Teng Kean(5) Ong Lay Khiam
(6)
(21) 0.01 (21) 30.28 16.89 (21) 8.41 7.95 1.91 2.55 9.81 2.29 1.05 0.69 0.01 0.13 0.19 0.60 0.02
Teo Cheng Hiang Richard(7) Controlling Shareholders Golden Cliff(8) Fan Kow Hin
(8)(9)
32.57 17.94 0.13
Real Empire(10) Aathar Ah Kong Andrew(10)(11) Substantial Shareholders Xanery(1) HMC(12)(13) Other Shareholders HMD(13) Dr. Lin Kao-Kun(14) Dr. Dominic Er Kong Kiong(14) Pre-IPO Investors(15) Related persons to Fan Kow Hin(9) Related persons to Aathar Ah Kong Andrew(11) Various nominee accounts of Dr. Jong Hee Sen(2) Associates of Directors
(4)(6)
Related persons to Pre-IPO Investors(15) BMT(16) PPCF(17) Azusa

(18)
Choong Yoon Fatt(19) Public Existing public Shareholders(20) Other public Shareholders Total
52,785 1,546,328
3.41 100.00
55,596 219,991 1,604,845
3.46 13.71 100.00
11,798
0.74
82
SHAREHOLDERS
Notes: (1) Dr. Jong Hee Sen, our Executive Chairman and Group President, is deemed interested in the 134,998,154 Shares held by Xanery by virtue of his shareholdings in Xanery. Pursuant to the Distribution, 321,370 Shares were issued and allotted to Dr. Jong Hee Sen and he is deemed interested in the 11,018,031 Shares held by his various nominee accounts. Pursuant to the Distribution, 2,221 Shares were issued and allotted to Yip Yuen Leong, our Executive Director and President, Integrated Medical Real Estate. Pursuant to the Distribution, 30,783 Shares were issued and allotted to Wong Ong Ming Eric, our Non-executive Director and 67,427 Shares were issued and allotted to his spouse, Chong Nancy. Wong Ong Ming Eric is deemed interested in the Shares held by his spouse. Pursuant to the Distribution, 127,827 Shares were issued and allotted to Siew Teng Kean, our Lead Independent Director. Pursuant to the Distribution, 16,458 Shares were issued and allotted to Phua Wan Wu, the spouse of our Independent Director, Ong Lay Khiam. Ong Lay Khiam is deemed interested in the Shares held by his spouse. Pursuant to the Distribution, 43,614 Shares were issued and allotted to Teo Cheng Hiang Richard, our Independent Director. Fan Kow Hin is deemed interested in the 485,993,355 Shares held by Golden Cliff by virtue of his shareholdings in Golden Cliff. Pursuant to the Distribution, 19,291,595 Shares, 5,503,237 Shares, 164,582 Shares and 11,821,206 Shares were issued to One Organisation Limited (OOL), One Organisation Pte Ltd (OOPL), Fan Kow Hins sister, Fan Kwee Lan and his nominee account respectively. Fan Kow Hin is deemed interested in the Shares held by OOL and OOPL by virtue of his shareholdings in OOL and OOPL. He is also deemed interested in the Shares held by Fan Kwee Lan and his nominee account. Aathar Ah Kong Andrew is deemed interested in the 271,102,307 Shares held by Real Empire by virtue of his shareholdings in Real Empire. Pursuant to the Distribution, 22,057 Shares, 16,558,453 Shares and 283,411 Shares were issued and allotted to Aathar Ah Kong Andrew, his various nominee accounts and his brother, Aathar Ah Tuk Henry respectively. Aathar Ah Kong Andrew is deemed interested in the Shares held by his various nominee accounts and his brother, Aathar Ah Tuk Henry. On 22 May 2013, the Shareholders of HMC approved, at an extraordinary general meeting of HMC, the distribution of an addition 675,324 shares held by HMC in the share capital of HMD to the HMC Shareholders. Pursuant to the Distribution, HMC distributed up to 47,948,004 Shares to the HMC Shareholders. On 28 June 2013, HMD transferred 37,918,000 Shares to HMC as repayment of amount owing to HMC. In fulfilment of the Wuxi Acquisition Consideration, our Company had on 28 June 2013 issued and allotted 92,502,666 new Shares to Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong and 20,834,000 new Shares to an assignee of HMD at the direction of Dr. Lin Kao Kun and Dr. Dominic Er Kong Kiong pursuant to a contractual arrangement between HMD, Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong. The Wuxi Acquisition Consideration is converted at an exchange rate of US$1:S$1.2364 as at 26 April 2013.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13) (14)
83
SHAREHOLDERS
(15) The Pre-IPO Investors comprise the Existing Investors, Convertible Loan Investors, Exchangeable Loan Investors, Notes Investors and Tan Kheen Seng@John. The table below sets out the Pre-IPO Investors and their respective shareholdings in our Company: Before the Placement and the Distribution Number of Shares 841,294 59,523,809 4,731,468 1,426,264 788,532 2,365,596 1,141,011 8,289,076 560,862 713,132 1,657,815 1,577,064 7,738,095 713,132 1,402,156 2,852,529 16,560,000 788,532 701,078 5,952,380 701,078 998,385 After the Placement and the Distribution(i) Number of Shares 1,005,876 59,523,809 4,731,632 1,426,264 788,532 2,530,178 1,552,468 8,289,076 560,862 877,714 1,657,815 1,823,938 7,738,095 877,714 1,402,156 2,852,529 16,560,000 788,532 865,660 5,952,380 701,078 1,080,676
Pre-IPO Investors Ang Peng Huan(a) Asia Growth II, LP(iii) Bobby Lim Chye Huat(b) Chan Kwan Bian Chua Keng Loy Chua Siew Lian(c) Hong Heng Chye(d) Jimmy Lee Peng Siew Lau Chui Chew@Lau Chui Meng Lau Lye Teck(e) Lee Eng Chuan Lee Fang Wen(f) Lee Kek Chin Lim Cheng Chai Nicholas(g) Lim Seet Huat (Lin Shifa) Lim Siew Ooi and Lim Chieng Chieng Lim Sing Tat Ling Kee Poh Ng Boon Hoo(h) Ng Han Kok(i) Ng Kiang Tong Ong Poi Hwa
(j)
% of post-Placement share capital 0.06 3.71 0.29 0.09 0.05 0.16 0.10 0.52 0.03 0.05 0.10 0.11 0.48 0.05 0.09 0.18 1.03 0.05 0.05 0.37 0.04 0.07
Robert Jacob Feibusch, Trustee for Laurel Grove Trust Tan Chong Hoe Tan Kheen Seng@John(k) Tan Koo Chuan Tan See Tee Tan Sze Seng Tan Thiam Chye Tan Yeo Kee(l) Teo Cher Koon TMF Toh Koon Hwa(m) Yeo Kay Beng(n) Total
1,577,064 701,078 6,249,687 1,500,326 1,370,247 1,971,468 1,370,247 3,874,221 1,411,770 17,131,398 701,078 7,245,000 167,126,872
1,577,064 701,078 7,450,549 1,500,326 1,370,247 1,971,468 1,370,247 3,882,450 1,411,770 4,631,398 701,078 7,261,458 157,416,117
0.10 0.04 0.46 0.09 0.09 0.12 0.09 0.24 0.09 0.29 0.04 0.45 9.81
Notes: (i) As HMC is a listed company and the Pre-IPO Investors are free to trade their shareholdings in HMC, the number of Shares issued and allotted to the Pre-IPO Investors pursuant to the Distribution stated in this Offer Document may be different from the actual number of Shares issued and allotted to the Pre-IPO Investors.
84
SHAREHOLDERS
(ii) Pursuant to the Distribution, the following number of Shares were issued and allotted to the following Pre-IPO Investors, their associates and/or their respective nominee accounts: (a) (b) (c) (d) (e) (f) (g) (h) 164,582 Shares were issued and allotted to Ang Peng Huan; 164 Shares were issued and allotted to Bobby Lim Chye Huat; 164,582 Shares were issued and allotted to Chua Siew Lian; 411,457 Shares were issued and allotted to Hong Heng Chye; 164,582 Shares were issued and allotted to Lau Lye Teck; 246,874 Shares were issued and allotted to Lee Fang Wen; 164,582 Shares were issued and allotted to Lim Cheng Chai Nicholas; 164,582 Shares were issued and allotted to Ng Boon Hoo and he is deemed interested in 65,833 Shares held by his nominee accounts; Ng Han Kok is deemed interested in 854,020 Shares held by his nominee accounts; 82,291 Shares were issued and allotted to Ong Poi Hwa and he is deemed interested in 699,476 Shares held by his nominee account; 1,200,862 Shares were issued and allotted to Tan Kheen Seng@John; 8,229 Shares were issued and allotted to Tan Yeo Kee; Tan Koon Hwa is deemed interested in 246,874 Shares held by his nominee account; and 16,458 Shares were issued and allotted to Yeo Kay Beng and he is deemed interested in 288,019 Shares held by his nominee account.
(i) (j)
(k) (l) (m) (n)
(iii)
Pursuant to the deed of acknowledgement dated 27 June 2013, Asia Growth Management II Ltd., the general partner of Asia Growth II, LP, holds 59,523,809 Shares upon trust as an asset of Asia Growth II, LP.
The Existing Investors were shareholders of HMD who invested in HMD within one (1) year from the IPO. Pursuant to the Restructuring Exercise, HMD directed our Company to issue and allot new Shares in our Company to its shareholders, which includes the Existing Investors. Pursuant to the Convertible Loan Agreements, Exchangeable Loan Term Sheets and the Subscription Agreements, the Pre-IPO Investors (save for the Existing Investors and Tan Kheen Seng@John) agreed to subscribe for the Convertible Loans, Exchangeable Loans or Notes. The Pre-IPO Investors (save for the Existing Investors and Tan Kheen Seng@John) exercised their rights to convert the Convertible Loans, Exchangeable Loans and the Notes. Accordingly, Shares in our Company were transferred to these Pre-IPO Investors (save for Existing Investors, Tan Kheen Seng@John and Asia Growth II, LP, which shares are held upon trust as an asset of Asia Growth II, LP by Asia Growth Management II Ltd.). Pursuant to the Sale of Shares Agreement, Tan Kheen Seng@John received shares from Golden Cliff. (16) On 28 December 2011, the shareholders of HMC approved, at an extraordinary general meeting of HMC, the distribution of up to 500,000 Shares in HMD to the HMC Shareholders. Pursuant to the Trust Deed, BMT holds 142,000,000 Distribution Shares for the benefit of the HMC Shareholders. Please refer to the section entitled Details of the Distribution of this Offer Document for more information on the Distribution. Pursuant to the Management Agreement and as part of PPCFs management fees as the Manager and Sponsor, our Company issued and allotted to PPCF 3,125,000 new Shares, representing 0.20% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Upon the completion of the relevant moratorium period as set out in the section entitled Shareholders Moratorium of this Offer Document, PPCF will be disposing of its shareholding interests in our Company at its discretion. Pursuant to the Capbridge Framework Agreement and as part of the Capbridge Groups fees as the advisor to advise our Group on the acquisition of our Nursing Homes in Japan and pursuant to a letter from Capbridge dated 7 May 2013 authorising our Company to issue shares to Azusa, our Company issued and allotted to Azusa 9,570,543 new Shares, representing 0.62% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share.
(17)
(18)
85
SHAREHOLDERS
(19) Pursuant to the letter dated 29 March 2013 and as part of our consultancy services fees, our Company issued and allotted to Choong Yoon Fatt 295,833 new Shares, representing 0.02% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Existing public shareholders refer to minority shareholders of HMD who have invested in HMD for more than one (1) year prior to the IPO and who have received our Shares pursuant to the Restructuring Exercise. Please refer to the section entitled Restructuring Exercise of this Offer Document for more details. The percentage of shareholdings is insignificant.
(20)
(21)
There are no relationships among our Directors, Substantial Shareholders and Executive Officers. None of the Pre-IPO Investors is related to any of our Directors, Substantial Shareholders and Executive Officers or is acting as a nominee for our Directors, Substantial Shareholders and Executive Officers. Save as disclosed in the sections entitled Share Capital and Restructuring Exercise of this Offer Document, there has been no change in the percentage ownership of Shares by our Directors and Substantial Shareholders since the incorporation of our Company and up to the date of this Offer Document. The Shares held by our Directors and Substantial Shareholders do not carry voting rights that are different from the New Shares. Our Directors are not aware of any arrangement, the operation of which may, at a subsequent date, result in a change in control of our Company. As at the Latest Practicable Date, our Company has only one class of shares, being our Shares which are in registered form. There is no restriction on the transfer of fully paid ordinary shares in scripless form except where required by law or the Catalist Rules. There has been no public take-over offer by a third party in respect of our Shares or by our Company in respect of the shares of another corporation or units of business trust which has occurred between the date of the incorporation of our Company to the Latest Practicable Date. Save as disclosed above, our Company is not directly or indirectly owned or controlled, whether jointly or severally by any other corporation, government or person. Save as disclosed above and in the sections entitled Share Capital and Restructuring Exercise of this Offer Document, no shares or debentures were issued or agreed to be issued by our Company for cash or for a consideration other than cash since the date of incorporation of our Company and up to the date of lodgement of this Offer Document. There are no Shares in our Company that are held by or on behalf of our Company or by the subsidiaries of our Company.
86
SHAREHOLDERS
SIGNIFICANT CHANGES IN PERCENTAGE OF OWNERSHIP Pursuant to the Convertible Loan Agreements, the Exchangeable Loan Term Sheets and the Subscription Agreements, the Convertible Loan Investors, Exchangeable Loan Investors and the Notes Investors exercised their rights to convert the Convertible Loans, Exchangeable Loans and Notes (as the case may be) into Shares of our Company. The details of the conversions are as follows: Number of Shares received after conversion 841,294
(1)
Pre-IPO Investors Ang Peng Huan Asia Growth II, LP Chan Kwan Bian Hong Heng Chye Jimmy Lee Peng Siew Lau Chui Chew @ Lau Chui Meng Lau Lye Teck Lee Eng Chuan Lee Kek Chin Lim Cheng Chai Nicholas Lim Seet Huat (Lin Shifa) Lim Siew Ooi and Lim Chieng Chieng Ng Boon Hoo Ng Han Kok Ng Kiang Tong Ong Poi Hwa Tan Chong Hoe Tan Koo Chuan Tan See Tee Tan Thiam Chye Tan Yeo Kee Teo Cher Koon TMF Toh Koon Hwa Total
Note: (1)
% of post-Placement share capital 0.05 3.71 0.09 0.07 0.52 0.03 0.05 0.10 0.48 0.05 0.09 0.18 0.04 0.37 0.04 0.06 0.04 0.09 0.09 0.09 0.24 0.09 1.07 0.04 7.68
59,523,809 1,426,264 1,141,011 8,289,076 560,862 713,132 1,657,815 7,738,095 713,132 1,402,156 2,852,529 701,078 5,952,380 701,078 998,385 701,078 1,500,326 1,370,247 1,370,247 3,874,221 1,411,770 17,131,398 701,078 123,272,461
Pursuant to a deed of acknowledgement dated 27 June 2013, Asia Growth Management II Ltd., the general partner of Asia Growth II, LP, holds 59,523,809 Shares due to Asia Growth II, LP upon trust as an asset of Asia Growth II, LP.
87
SHAREHOLDERS
Pursuant to the Sale of Shares Agreement, Tan Kheen Seng@John received Shares from Golden Cliff. The details of the number of shares he received are as follows: % of post-Placement share capital 0.39
Pre-IPO Investor Tan Kheen Seng@John
Number of Shares 6,249,687
Save as disclosed above and in the sections entitled Share Capital and Restructuring Exercise of this Offer Document, there were no significant changes in the percentage of ownership of Shares in our Company between the date of incorporation of our Company on 18 February 2013 and the date of this Offer Document. VENDORS The name of the Vendors and the number of Vendor Shares which they will offer pursuant to the Placement are set out below:
Shares held immediately before Vendor Shares offered pursuant Shares held after the Placement to the Placement the Placement % of post% of pre- % of post% of preNumber of Placement Number of Placement Placement Number of Placement share shares share share Shares share Shares capital (000) capital capital (000) capital (000)
Vendor Dr. Dominic Er Kong Kiong HMD Real Empire TMF
61,792 2,082 281,519 17,131
4.00 0.13 18.21 1.11
20,834 2,082 10,417 12,500
1.35 0.13 0.67 0.81
1.30 0.13 0.65 0.78
40,958 271,102 4,631
2.55 16.89 0.29
Dr. Dominic Er Kong Kiong was formerly a director of our subsidiaries, Health Kind (Hong Kong) and Health Kind (Shanghai). As part of the Restructuring Exercise, our Group, through its subsidiary, IHC Star, acquired a 76.5% interest in Health Kind (Hong Kong) from the vendors. Pursuant to the sale and purchase agreement dated 18 February 2013 and shareholders agreement dated 20 February 2013 entered into as part of this acquisition, Dr. Dominic Er Kong Kiong has with effect from 2 May 2013 resigned as a director of Heath Kind (Hong Kong) and Health Kind (Shanghai). HMD is a private company incorporated in Singapore and is held substantially by our Controlling Shareholders, Golden Cliff and Real Empire. Accordingly, Golden Cliff and Real Empire are deemed to be interested in the Shares held by HMD by virtue of Section 4 of the SFA. Save as disclosed in this Offer Document, HMD does not have any position, office or other material relationship with our Group within the period of three (3) years before the lodgement of this Offer Document.
88
SHAREHOLDERS
Real Empire is a private company incorporated in the BVI and its sole director and shareholder is Aathar Ah Kong Andrew. Accordingly, Aathar Ah Kong Andrew is deemed interested in the Shares held by Real Empire by virtue of Section 4 of the SFA. Save as disclosed in this Offer Document, Real Empire and Aathar Ah Kong Andrew do not have any position, office or other material relationship with our Group within the period of three (3) years before the lodgement of this Offer Document. TMF is the trustee for the OSK-UOB Pre-IPO Fund, a wholesale fund approved by the Securities Commission Malaysia. TMF does not have any any position, office or other material relationship with our Group within the period of three (3) years before the lodgement of this Offer Document. MORATORIUM Substantial Shareholders Each of Golden Cliff, Real Empire and Xanery has undertaken not to, amongst others, sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of their respective shareholdings in our Company immediately after the Placement for a period of six (6) months commencing from our Companys date of admission to Catalist ( Initial Period ), and for a period of six (6) months thereafter not to sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of their respective shareholdings in our Company to below 50% of each of their original shareholdings in our Company. The sole shareholder of Golden Cliff, Fan Kow Hin, has undertaken not to, amongst others, sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of his shareholdings in Golden Cliff for a period of 12 months commencing from our Companys date of admission to Catalist. The sole shareholder of Real Empire, Aathar Ah Kong Andrew, has undertaken not to, amongst others, sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of his shareholdings in Real Empire for a period of 12 months commencing from our Companys date of admission to Catalist. The sole shareholder of Xanery, Dr. Jong Hee Sen, has undertaken not to, amongst others, sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of his shareholdings in Xanery for a period of 12 months commencing from our Companys date of admission to Catalist. Pre-IPO Investors Each of the Pre-IPO Investors has undertaken not to, amongst others, sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of all or any part of their shareholdings in our Company being the profit portion of their investments as at the date of our Companys admission to Catalist as set out below (the Pre-IPO Investors Moratorium Shares ), for a period of 12 months commencing from our Companys date of admission to Catalist:
89
SHAREHOLDERS
Number of Pre-IPO Investors Moratorium Shares 216,294 17,857,142 2,231,466 384,597 371,863 1,115,594 307,678 4,122,409 144,195 192,299 824,482 743,729 5,029,762 192,299 360,489 769,196 7,809,996 371,863 180,245 3,869,047 180,245 269,218 743,729 180,245 458,659 2,083,020 682,747 929,799 682,747 1,790,888 703,437 4,631,398 180,245 1,373,333
Pre-IPO Investors Ang Peng Huan Asia Growth II, LP (1) Bobby Lim Chye Huat Chan Kwan Bian Chua Keng Loy Chua Siew Lian Hong Heng Chye Jimmy Lee Peng Siew Lau Chui Chew@Lau Chui Meng Lau Lye Teck Lee Eng Chuan Lee Fang Wen Lee Kek Chin Lim Cheng Chai Nicholas Lim Seet Huat (Lin Shifa) Lim Siew Ooi and Lim Chieng Chieng Lim Sing Tat Ling Kee Poh Ng Boon Hoo Ng Han Kok Ng Kiang Tong Ong Poi Hwa Robert Jacob Feibusch, Trustee for Laurel Grove Trust Tan Chong Hoe Tan Koo Chuan Tan Kheen Seng@John Tan See Tee Tan Sze Seng Tan Thiam Chye Tan Yeo Kee Teo Cher Koon TMF Toh Koon Hwa Yeo Kay Beng
Note: (1)
% of post-Placement share capital 0.01 1.11 0.14 0.02 0.02 0.07 0.02 0.26 0.01 0.01 0.05 0.05 0.31 0.01 0.02 0.05 0.49 0.02 0.01 0.24 0.01 0.02 0.05 0.01 0.03 0.13 0.04 0.06 0.04 0.11 0.04 0.29 0.01 0.09
Pursuant to the deed of acknowledgement dated 27 June 2013, Asia Growth Management II Ltd, the general partner of Asia Growth II, LP, holds 59,523,809 Shares due to Asia Growth II, LP upon trust as an asset of Asia Growth II, LP. Accordingly, Asia Growth Management II Ltd has undertaken not to, amongst others, sell, transfer, assign dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of all or any part of their shareholdings in our Company being the profit portion of Asia Growth II, LPs investment as at the date of our Companys admission to Catalist for a period of 12 months commencing from our Companys date of admission to Catalist.
90
SHAREHOLDERS
The number of Pre-IPO Investors Moratorium Shares being the profit portion of their investments was calculated based on the difference between the value of the Pre-IPO Investors Shares as at IPO and the value of their investments. Please refer to the section entitled Shareholders Shareholding and Ownership Structure of this Offer Document for further details on the number of Shares issued. Others Each of Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong who holds 30,710,885 Shares and 40,957,781 Shares respectively of our Companys issued share capital immediately after the Placement, has undertaken not to, amongst others, sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of their respective shareholdings in our Company for the Initial Period and for a period of six (6) months thereafter not to sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of their respective shareholdings in our Company to below 50% of its original shareholdings in our Company. Pursuant to the Management Agreement and as part of PPCFs management fees as the Manager and Sponsor, our Company issued and allotted to PPCF 3,125,000 new Shares, representing 0.20% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. PPCF has undertaken not to sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of its shareholdings in our Company immediately after the Placement for a period of three (3) months commencing from our Companys date of admission to Catalist. Upon completion of the aforesaid relevant moratorium period, PPCF will be disposing of its relevant shareholding interests in our Company at its discretion. Pursuant to the Capbridge Framework Agreement and as part of the Capbridge Groups fees as the advisor to advise our Group on the acquisition of our Nursing Homes in Japan and pursuant to a letter from Capbridge dated 7 May 2013 authorising our Company to issue Shares to Azusa, our Company issued and allotted 9,570,543 new Shares to Azusa, representing 0.62% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Azusa has undertaken not to sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of its shareholdings in our Company immediately after the Placement for a period of three (3) months commencing from our Companys date of admission to Catalist, and for a period of three (3) months thereafter not to sell, transfer, assign, dispose of, realise or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of its shareholdings in our Company to below 50% of its original shareholdings in our Company.
91
CAPITALISATION AND INDEBTEDNESS

The following table, which should be read in conjunction with the Independent and Reporting Auditors Report on the Examination of the Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial years ended 31 December 2012 and 31 December 2011 as set out in Appendix B of this Offer Document and the section entitled Managements Discussion and Analysis of Results of Operations and Financial Position of this Offer Document, shows our cash and cash equivalents, capitalisation and indebtedness as at 31 December 2012: (i) (ii) on a pro forma basis; and as adjusted for the net proceeds to the Company from the Placement, after deducting estimated listing expenses related to the Placement. (S$000) Cash and cash equivalents Indebtedness Current Borrowings 10,518 10,518 Non-current Borrowings 230,225 230,225 Total indebtedness Total shareholders equity Total capitalisation and indebtedness 240,743 144,021 384,764 230,225 230,225 240,743 166,746 407,489 10,518 10,518 As at 31 December 2012 14,851 As adjusted 37,576
As at the Latest Practicable Date, on a pro forma basis, there were no material changes to our capitalisation and indebtedness as disclosed above, save for: (i) (ii) the increase in our cash and cash equivalents to S$15.1 million; the decrease in our borrowings to S$231.9 million; and
(iii) changes in our reserves arising from day-to-day operations in the ordinary course of business. As at the Latest Practicable Date, the total banking and loan facilities available to our Group amounted to approximately S$273.0 million, of which approximately S$41.1 million remained unutilised.
92

Banking and Loan Facilities As at the Latest Practicable Date, our Groups banking and loan facilities from financial institutions and other lenders are as follows:
Unutilised Amount as at the Latest Practicable Date
Financial Institutions and other Lenders
Nature of Facility
Amount of Facility available as at the Latest Practicable Date RMB8,000,000
Utilised Amount as at the Latest Practicable Date RMB8,000,000
Interest rates 8.625% per annum
Maturity Profile Repayable on 12 March 2017
Bank of Nanjing Entrusted Co., Ltd, loan Shanghai Branch(1) Dallacy(2) Convertible loan (3) Junior TMK bonds
S$20,000,000
S$14,000,000
S$6,000,000
8% per annum
Repayable on 13 June 2014 Repayable on 25 April 2016
Deutsche Bank AG, Tokyo Branch The Enterprise Fund II Ltd(4)
JPY3,300,000,000
JPY3,300,000,000
13.7%
Term loan
S$15,000,000
S$10,000,000
S$5,000,000
12% per annum
Repayable on the earlier of within seven (7) days after listing or 1 January 2014 Repayable on 24 April 2014
The Enterprise Fund II Ltd and The Enterprise Fund III Ltd
Term loan
S$25,000,000
S$25,000,000
Interest-free (5)
Hong Leong Working Finance Limited capital term loan
S$6,250,000
S$6,250,000
1.00% per annum Repayable two above the banks (2) years after prevailing drawdown date Enterprise Base Rate (EBR) 2.25% per annum Repayable on over the three (3)- 25 April 2016 year Tokyo Swap Reference Rate Repayable on 24 April 2017
Shinsei Bank, Limited
Senior TMK bonds
JPY9,600,000,000
JPY9,600,000,000
United Overseas Term loan Bank (Malaysia) and Bhd bridging loan
MYR114,500,000
MYR57,000,000
MYR57,500,000 2.25% per annum over the banks prevailing one (1) month Effective Cost of Fund (Kuala Lumpur Inter Bank Offer rate plus the banks cost to maintain reserve) on monthly rests
Total
S$66,250,000, MYR114,500,000, RMB8,000,000 and JPY12,900,000,000
S$49,000,000, S$17,250,000 MYR57,000,000, and RMB8,000,000 and MYR57,500,000 JPY12,900,000,000
93

Notes: (1) (2) Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong intend to repay this loan within five (5) days from the admission of our Company on the Official List of the SGX-ST. On 28 May 2013, Dallacy had entered into a deed of novation with Seasons Residences and IHC Holdings (Hong Kong) to novate S$11.25 million of the Dallacy Loan to IHC Holdings (Hong Kong). Accordingly, the amount of facility available to our Group was S$8.75 million, of which S$2.75 million was utilised as at 28 May 2013. Please refer to the sections entitled Restructuring Exercise, Interested Person Transactions Past Interested Person Transactions and Interested Person Transactions On-going Interested Person Transactions of this Offer Document for more details. Dallacy is entitled to convert the convertible loan into residential/office units under the IHC KLCC Project. On 29 May 2013, HMD entered into a novation agreement with, amongst others, our Company and The Enterprise Fund II Ltd to novate the First Enterprise Loan to our Company. Please refer to the section entitled Restructuring Exercise, Interested Person Transactions Past Interested Person Transactions and Interested Person Transactions On-going Interested Person Transactions of this Offer Document for more details. The interest in respect of the Second Enterprise Loan from The Enterprise Fund II Ltd and The Enterprise Fund III Ltd will be borne by HMD. Please refer to the section entitled Interested Person Transactions On-going Interested Person Transactions.
(3) (4)
(5)
As at the Latest Practicable Date, we had utilised approximately S$231.9 million of our banking and loan facilities, which comprise entrusted loan, term loans, bridging loan and bonds. Save as disclosed, we do not have any committed borrowing facilities. As at the Latest Practicable Date, we are not in breach of any terms and conditions or covenants associated with any credit arrangement or bank loan which could materially affect our Groups financial position and results of business operations, or the investments of our Shareholders. Prior to the novation of the Dallacy Loan on 28 May 2013, the Dallacy Loan was secured by a joint and several gurantee granted by Dr. Jong Hee Sen, Fan Kow Hin and Aathar Ah Kong Andrew. Please refer to the section entitled Interested Person Transactions Past Interested Person Transactions of this Offer Document for more details. In relation to the financing from Deutsche Bank AG, Tokyo Branch and Shinsei Bank, Limited via the issuance of Junior and Senior TMK Bonds ( tokutei shasai ) respectively, it is anticipated that statutory general security ( ippan tampo ) over the Japanese properties of our Group will be created under the Act on Securitization of Assets of Japan (the TMK Act ) in favour of Deutsche Bank AG, Tokyo Branch and Shinsei Bank, Limited. The First Enterprise Loan is secured by, inter alia, a joint and several guarantee from our Executive Chairman and Group President, Dr. Jong Hee Sen, and our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew. Please refer to the section entitled Interested Person Transactions On-going Interested Person Transactions of this Offer Document for further details. The loan from Hong Leong Finance Limited shall, upon drawdown, be secured by security of not less than 60% of the loan amount acceptable to Hong Leong Finance Limited, as well as a joint and several guarantee to be granted by our Executive Chairman and Group President, Dr. Jong Hee Sen and our Controlling Shareholder, Fan Kow Hin. Please refer to the section entitled Interested Person Transactions On-going Interested Person Transactions of this Offer Document for more details. The term loan and bridging loan with United Overseas Bank (Malaysia) Bhd is secured by the following: (a) charges dated 3 October 2012 in favour of United Overseas Bank (Malaysia) Bhd over the land held under title Pajakan Negeri (WP) No. Hakmilik 46289, Lot 84, Section 63, Town and District of Kuala Lumpur, Malaysia, where the IHC KLCC Project will be sited; 94

(b) a deed of debenture dated 3 October 2012 over, inter alia , (i) all immovable properties, (ii) all stocks, shares, bonds and securities, (iii) all book and other debts, revenues and claims, (iv) the uncalled capital goodwill and all patents and patent applications, trademarks and trade names, registered designs and copyrights and all licences and ancillary and connected rights and (v) the undertaking and all other property assets and rights of Seasons Residences pertaining to the IHC KLCC Project, both present and future; and a deed of assignment dated 3 October 2012 of Season Residences full and entire rights and entitlements to collect and receive the sale proceeds pursuant to the sale and purchase of units in the IHC KLCC Project and shall include all credit balances in the accounts to be opened by Seasons Residences with United Overseas Bank (Malaysia) Bhd and all profits from the IHC KLCC Project together with all Season Residences present and future proceeds and remedies for enforcing payment of and recovery of the sale proceeds.
(c)
As at the Latest Practicable Date, the loan from The Enterprise Fund II Ltd and The Enterprise Fund III Ltd is secured by, inter alia , a charge over the share in IHC Japan held by HMD. Please refer to the section entitled Interested Person Transactions Past Interested Person Transactions of this Offer Document for further details. In addition, our Executive Chairman and Group President, Dr. Jong Hee Sen and our Controlling Shareholders, Aathar Ah Kong Andrew and Fan Kow Hin, HMC and HMD have provided securities and/or guarantees for certain banking facilities extended to our Group. Please refer to the section entitled Interested Person Transactions On-going Interested Person Transactions of this Offer Document for further details. Operating Lease Commitments Our Group has entered into commercial leases for the rental of office premises. As at 31 December 2012 and the Latest Practicable Date, the future minimum lease payable under the non-cancellable operating leases are as follows: (S$000) Within one (1) year After one (1) year but within five (5) years Total 31 December 2012 79 77 156 Latest Practicable Date 38 50 88
Capital Commitments Our Group does not have any material capital commitments as at the Latest Practicable Date. Contingent Liabilities Save as disclosed in the section entitled General and Statutory Information Litigation of the Offer Document, as at the Latest Practicable Date, to the best of our knowledge, information and belief, we are not aware of any contingent liabilities which may have a material effect on the financial position and profitability of our Group.
95
WORKING CAPITAL
Our Group finances its operations through both internal and external sources. Our internal sources of funds comprise cash generated from our operating activities. Our external sources of funds comprise mainly banking and loan facilities from financial institutions and other lenders, credit granted by suppliers and capital investment from Shareholders. As at 31 December 2012, on a pro forma basis, our Group had cash and cash equivalents of approximately S$14.9 million. In FY2012, net cash provided by operating activities was approximately S$23.0 million. As at 31 December 2012, on a pro forma basis, our Group recorded positive working capital of approximately S$4.5 million. As at the Latest Practicable Date, our Group had cash and cash equivalents of approximately S$15.1 million and total banking and loan facilities of S$273.0 million, of which S$231.9 million was utilised, or 15.1% of the total loan facilities remained unutilised. Please refer to the section entitled Capitalisation and Indebtedness of this Offer Document for further details. Our Directors are of the reasonable opinion that, after having made due and careful enquiry and after taking into account our Groups net positive working capital as at 31 December 2012, our cash flows generated from our operations, our loan 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. The Sponsor is of the reasonable opinion that, after having made due and careful enquiry and after taking into account our Groups net positive working capital as at 31 December 2012, our cash flows generated from our operations, our loan 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.
96
DILUTION
Dilution is the amount by which the Issue Price paid by the subscribers and/or purchasers of our Shares in the Placement exceeds our NTA per Share immediately after the Placement. Our NTA per Share as at 31 December 2012, before adjusting for the estimated net proceeds due to our Company from the Placement and based on the pre-Placement issued and paid-up share capital of 1,546,328,042 Shares was 6.01 cents per Share. Pursuant to the Placement in respect of 104,350,000 Placement Shares at the Issue Price, our NTA per Share as at 31 December 2012, after adjusting for the estimated net proceeds due to our Company from the Placement and based on the post-Placement issued and paid-up share capital of 1,604,845,042 Shares, would have been 7.21 cents. This represents an immediate increase in NTA per Share of 1.20 cents to our existing Shareholders and an immediate dilution in NTA per Share of 40.79 cents or approximately 84.98% to our new public investors. The following table illustrates the dilution per Share as at 31 December 2012: Cents Issue Price NTA per Share based on the pre-Placement share capital of 1,546,328,042 Shares Increase in NTA per Share attributable to existing Shareholders NTA per Share after the Placement Dilution in NTA per Share to new public investors Dilution in NTA per Share to new public investors (%) 48.00
6.01 1.20 7.21 40.79 84.98
The following table summarises the total number of Shares acquired by and/or issued to our existing Shareholders from the date of the incorporation of our Company to the date of lodgement of this Offer Document, the total consideration paid by them and the average effective cash cost per Share to them and to the new public investors who subscribe for and/or purchase the Placement Shares pursuant to the Placement:
Average effective cash cost per Share (cents)
Number of Shares Existing Shareholders Golden Cliff Real Empire Xanery HMC BMT
(1)
Total consideration (S$)
532,887,000 287,523,000 138,000,000 189,200,276 142,000,000 40,000,000 37,604,724 52,785,000
33,407,136 18,025,060 8,651,337 11,861,125 8,902,100 2,507,634 2,357,472 3,309,136
6.27 6.27 6.27 6.27 6.27 6.27 6.27 6.27
HMD Existing Investors Existing public Shareholders
97
DILUTION
Average effective cash cost per Share (cents)
Number of Shares Pre-IPO Investors (save for Existing Investors)(2) Dr. Lin Kao-Kun Dr. Dominic Er Kong Kiong Azusa(4) Choong Yoon Fatt PPCF
(6) (5)
Total consideration (S$)
129,522,148 37,627,773
(3)
39,950,000 18,061,331 36,340,269 4,593,861 142,000 1,500,000 28,088,160
30.84 48.00 48.00 48.00 48.00 48.00 48.00
75,708,893(3) 9,570,543 295,833 3,125,000 58,517,000
New public Shareholders

Notes: (1)
On 28 December 2011, the shareholders of HMC approved, at an extraordinary general meeting of HMC, the distribution of up to 500,000 Shares held by HMC in the share capital of HMD to the shareholders of HMC. Pursuant to the Trust Deed and the Supplemental Deed, BMT holds 142,000,000 Distribution Shares for the benefit of the HMC Shareholders and no consideration was paid by BMT for these Shares. Please refer to the section entitled Details of the Distribution of this Offer Document for more information on the Distribution. The average effective cash cost per Share is determined by the ratio of the aggregate consideration invested by the Pre-IPO Investors (save for Existing Investors) and the aggregate shares transferred to them as a result of the conversion of the Convertible Loans, the Exchangeable Loans and the Notes and pursuant to the Sale of Shares Agreement. Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong had on 28 June 2013, pursuant to a contractual arrangement between HMD, Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong, directed our Company to issue and allot 20,834,000 shares to an assignee of HMD. Pursuant to the Capbridge Framework Agreement and as part of the Capbridge Groups fees as the advisor to advise our Group on the acquisition of our Nursing Homes in Japan and pursuant to a letter from Capbridge dated 7 May 2013 authorising our Company to issue shares to Azusa, our Company issued and allotted to Azusa 9,570,543 new Shares, representing 0.62% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Pursuant to the letter dated 29 March 2013 as part of our consultancy services fees, our Company issued and allotted to Choong Yoon Fatt 295,833 new Shares, representing 0.02% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Pursuant to the Management Agreement and as part of PPCFs management fees as the Manager and Sponsor, our Company issued and allotted to PPCF 3,125,000 new Shares, representing 0.20% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. After the completion of the relevant moratorium period as set out in the section entitled Shareholders Moratorium of this Offer Document, PPCF will be disposing of its shareholdings in our Company at its discretion.
(2)
(3)
(4)
(5)
(6)
98
RESTRUCTURING EXERCISE
On 18 February 2013, our Company was incorporated as the investment holding company of our Group and we undertook the Restructuring Exercise pursuant to which the following steps were taken: Sub-Division (a) On 29 May 2013, pursuant to the extraordinary general meeting of the Company held on 28 May 2013, each Share in the existing issued share capital of our Company was sub-divided into 71 Shares.
Acquisitions of the Group Subsidiaries (b) Our Company had on 28 May 2013 entered into a restructuring agreement with HMD to acquire the entire interest in the Group Subsidiaries from HMD for S$89.0 million (the Restructuring Consideration ). The Restructuring Consideration was arrived at taking into consideration the Group Subsidiaries net asset values as at 31 December 2012 and the costs of acquisition of the Initial Portfolio by the Group Subsidiaries less the loan facilities acquired in connection with the acquisition of the Initial Portfolio from 1 January 2013 to the Latest Practicable Date and the payment obligations under the Wuxi Acquisition Consideration. Please refer to the sections entitled Capitalisation and Indebtedness and Restructuring Exercise Novation of loan agreements of this Offer Document for more information on our Groups loan and banking facilities. Prior to the completion of the Restructuring Exercise, the Group Subsidiaries had completed the acquisitions of the Initial Portfolio as set out below:
Date of completion of acquisition 29 October 2012
Name of Group Subsidiary Seasons Residences
Name of company/ property acquired Land for IHC KLCC Project
% acquired 100.0
Consideration MYR81.4 million (MYR21.6 million in cash and MYR59.8 million in loan facility) RMB45.5 million (RMB45.5 million in cash) USD45.0 million (USD1.0 million in cash and USD44.0 million in Shares)
25 May 2013(1)
Kang Hui (Chengdu)
Land for IHC Chengdu Project
100.0
30 April 2013
IHC Star
Health Kind (Hong Kong)
76.5
99
Date of completion of acquisition 25 April 2013
Name of Group Subsidiary IHC TMK (Japan)
Name of company/ property acquired Hikari Heights Varus Fujino Hikari Heights Varus Ishiyama Hikari Heights Varus Kotoni Hikari Heights Varus Makomanai-Koen Hikari Heights Varus Tsukisamu-Koen Varus Cuore Yamanote Varus Cuore Sapporo-Kita Elysion Gakuenmae Elysion Mamigaoka/ Elysion Mamigaoka Annex Elysion Amanohashidate Elysion Kaichi North Elysion Kaichi West
% acquired 100.0
Consideration JPY14.5 billion (JPY14.5 billion in loan facilities)
Note: (1) The government is in the process of issuing the land use rights certificate for the land for IHC Chengdu Project.
The vendors of the above Initial Portfolio and companies are not related to any of our Directors or Substantial Shareholders. Dr. Lin Kao-Kun, one of the vendors of Health Kind (Hong Kong), has been retained as the President, China Medical Services and managing director of Wuxi Hospital by our Group under an employment contract. Hikari Heights-Varus Co., Ltd., Elysion Matsumoto Co. Ltd. and Safety Life Corporation, vendors of the Nursing Facilities in Japan, have entered into separate Master Lease Agreements with our Group to continue to operate the Nursing Facilities for a period of 30 years from 25 April 2013, the date of completion of the acquisitions of the Nursing Facilities. Assignment of Restructuring Consideration (c) The Restructuring Consideration was to be satisfied by the issuance of 1,419,999,929 Shares to HMD (and/or its shareholders as it may direct). Pursuant to a deed of assignment and undertaking dated 28 May 2013, HMD assigned a portion of the Restructuring Consideration, amounting to 1,379,999,929 Shares, to the shareholders of HMD.
Novation of project agreements to our Company (d) Pursuant to the Restructuring Exercise, HMD had on 23 May 2013 entered into new memoranda of understanding with the vendor of the Kashiihama Projects, two (2) of the Pending Projects, which novated the rights to the following agreements to our Company: (i) the sale and purchase agreement for the acquisition of Aqua Villa Kashiihama Ichibankan; and (ii) the memorandum of understanding for the acquisition of Kashiihama Senior 100
Residence to our Company (the Restructuring Novation ). Accordingly, the negotiations leading up to the completion of acquisition of the Kashiihama Projects and the sourcing of the relevant financing required to complete the acquisitions will be undertaken by our Company. Novation of loan agreements (e) Seasons Residences had on 13 June 2011, 7 June 2012 and 30 November 2012 entered into a convertible loan agreement and two supplemental loan agreements respectively with Dallacy for the Dallacy Loan, of which S$11.25 million was utilised by IHC Shanghai for the acquisition of the buildings for the IHC Shanghai Project while S$2.75 million was utilised for the acquisition of the land for the IHC KLCC Project. As part of the Restructuring Exercise, Seasons Residences and Dallacy have entered into a third supplemental and restructuring agreement on 28 May 2013 whereby it was agreed that the Dallacy Loan will be restructured by novating the S$11.25 million utilised by IHC Shanghai to IHC Holdings (Hong Kong). A deed of novation between Seasons Residences, IHC Holdings (Hong Kong) and Dallacy dated 28 May 2013 was entered into to give effect to that intention. (f) HMD had on 15 June 2011 entered into a loan agreement with The Enterprise Fund II Ltd for the First Enterprise Loan. As at the Latest Practicable Date, a total amount of S$10 million has been drawn down and is currently outstanding. As part of the Restructuring Exercise, HMD novated the First Enterprise Loan to our Company, pursuant to a novation agreement entered into between, amongst others, HMD, our Company and The Enterprise Fund II Ltd on 29 May 2013. Amount owing from HMD to our Company (g) HMD had made advances to our Group Subsidiaries for the purpose of the acquisition of our Initial Portfolio. Pursuant to the Restructuring Exercise and the novation of the loan agreements, HMD owes our Group a net amount of S$818,134. HMD had on 11 June 2013 repaid the outstanding amount to our Company in cash.
Issue of Shares in fulfilment of payment obligations (h) On 28 June 2013, our Company, in fulfilment of our payment obligations, issued and allotted an aggregate of 126,328,042 Shares as follows: (i) 92,502,666 Shares at the Issue Price to Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong and 20,834,000 Shares at the Issue Price to an assignee of HMD at the direction of Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong pursuant to a contractual arrangement between HMD, Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong, amounting to an aggregate of US$44.0 million in satisfaction of the Wuxi Acquisition Consideration; 9,570,543 Shares at the Issue Price representing 0.62% of the pre-Placement share capital of our Company credited as fully paid-up, to Azusa, amounting to S$4,593,861, in satisfaction of the Capbridge Groups fees as the advisor to advise our Group on the acquisition of our Nursing Homes in Japan pursuant to the Capbridge Framework Agreement and a letter from Capbridge dated 7 May 2013;
(ii)
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(iii) 295,833 Shares at the Issue Price representing 0.02% of the pre-Placement share capital of our Company credited as fully paid-up, to Choong Yoon Fatt, amounting to S$142,000, as part of our consultancy services fees; and (iv) 3,125,000 Shares at the Issue Price representing 0.20% of the pre-Placement share capital of our Company credited as fully paid-up, to PPCF, as part of their fees as the Manager and Sponsor pursuant to the Management Agreement. The following table sets forth the changes in the percentage of ownership of Shares in our Company pursuant to the Restructuring Exercise:
After the assignment of the Restructuring Consideration on 29 May 2013 No. of Shares % After the issuance of Shares in fulfilment of payment obligations on 28 June 2013 No. of Shares %
As at 28 May 2013 after the Sub-Division No. of Shares % Directors Dr. Jong Hee Sen Yip Yuen Leong Wong Ong Ming Eric Siew Teng Kean Ong Lay Khiam Teo Cheng Hiang Richard Controlling Shareholders Golden Cliff Real Empire Substantial Shareholders Xanery HMC Others HMD Dr. Lin Kao-Kun Dr. Dominic Er Kong Kiong Existing Investors BMT Azusa Choong Yoon Fatt PPCF Public Existing public Shareholders Total 71 100.0
(1)
532,887,000 287,523,000
37.5 20.3
532,887,000 287,523,000
34.5 18.6
71
100.0
138,000,000 189,200,276
9.7 13.3
138,000,000 210,034,276
8.9 13.6
40,000,000 37,604,724 142,000,000
2.8 2.7 10.0
40,000,000 30,710,885 61,791,781 37,604,724 142,000,000 9,570,543 295,833 3,125,000
2.6 2.0 4.0 2.4 9.2 0.6 0.0(2) 0.2
52,785,000 1,420,000,000
3.7 100.0
52,785,000 1,546,328,042
3.4 100.0
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Notes: (1) The table below sets out the Existing Investors and their respective shareholdings in our Company pursuant to the Restructuring Exercise: % of post-Restructuring Exercise share capital 0.5 0.3 0.1 0.2 0.1 0.1 0.1 0.1 1.2 2.7
Existing Investors Yeo Kay Beng Bobby Lim Chye Huat Lee Fang Wen Chua Siew Lian Tan Sze Seng Ling Kee Poh Chua Keng Loy Robert Jacob Feibusch, Trustee for Laurel Grove Trust Lim Sing Tat Total (2) The percentage of shareholdings is insignificant.
Number of shares 7,245,000 4,731,468 1,577,064 2,365,596 1,971,468 788,532 788,532 1,577,064 16,560,000 37,604,724
On 31 May 2013, our Company entered into three (3) Sale and Purchase Agreements with HMD to acquire: (i) (ii) IHC Iskandar and its subsidiary; IHC Shanghai and its subsidiaries; and
(iii) IHC Chengdu and its subsidiaries, which will be the holding companies for (i) two (2) of our Groups Pending Projects buildings for the IHC Iskandar Project and IHC Shanghai Project; and (ii) one (1) of our Groups Pipeline Projects land for the IHC Medical Resort, subject to the terms and conditions of the Sale and Purchase Agreements. Completion of the Sale and Purchase Agreements with HMD is envisaged to take place after the Listing. The consideration for the acquisition of IHC Iskandar and its subsidiary is S$1,368,000, to be satisfied via the issuance and allotment to HMD (and/or its nominees/assignees as it may direct) of 2,850,000 SPA Shares in the Company at the Issue Price. The consideration for the acquisition of IHC Shanghai and its subsidiaries is S$13,185,000, to be satisfied via the issuance and allotment to HMD (and/or its nominees/assignees as it may direct) of 27,468,750 SPA Shares in the Company at the Issue Price. The consideration for the acquisition of IHC Chengdu and its subsidiaries is S$2,850,000, to be satisfied via the issuance and allotment to HMD (and/or its nominees/assignees as it may direct) of 5,937,500 SPA Shares in the Company at the Issue Price. Pursuant to the Sale and Purchase Agreements, HMD has agreed to allow IHC and its directors to negotiate, vary and amend the terms of the sale and purchase agreements for the acquisition of the properties for the IHC Iskandar Project, IHC Shanghai Project and IHC Medical Resort. 103
Accordingly, the negotiations leading up to the completion of the acquisition of these three (3) properties and the sourcing of the necessary financing required for the acquisition of each of the properties ( Acquisition Financing ) will be undertaken by our Company. The completion of the acquisition of the respective companies and their subsidiaries is conditional upon, inter alia , (i) our Company finalising the terms of, and the respective project companies executing, the sale and purchase agreements for the acquisition of the buildings for the IHC Iskandar Project and land for the IHC Medical Resort respectively; and (ii) our Company obtaining the Acquisition Financing. Accordingly, our Company may not acquire the companies under the Sale and Purchase Agreements and the acquisition of the properties for the IHC Iskandar Project, IHC Shanghai Project and IHC Medical Resort may not materialise. Please refer to the section entitled Risk Factors of the Offer Document for the relevant risk factor. As at the Latest Practicable Date, our Company has not secured the relevant Acquisition Financing. The source of the Acquisition Financing may come from, inter alia , the proceeds raised by our Company as part of the Placement (please refer to the section entitled Use of Proceeds and Listing Expenses of this Offer Document for more details on the use of proceeds) or any banks or financial institutions or lenders as our Company may decide.
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GROUP STRUCTURE
Our Group structure immediately after the Restructuring Exercise and as at the date of this Offer Document is as follows:
IHC
100% ICWCH IHC Wuxi IMA
100% 100%
100%
100% IHC Japan
IHC KLCC
100% 100% IHC Summit 76.5% Health Kind (Hong Kong) 98% Health Kind (Shanghai) 100% Wuxi Phoenix 100% IHC Assets (Hong Kong) IHC Peak IHC Star
100%
100%
105
100% IHC Services (Hong Kong) IHC Facilities (Hong Kong) 100% Kang Hui (Chengdu) 100%
Seasons Residences
TMK Structure (Please refer to the section entitled Group Structure The TMK Structure of this Offer Document for more details.)
GROUP STRUCTURE
The details of our Group Subsidiaries are as follows: Principal Business Activities/Principal Place of Business Investment holding/Singapore Investment holding/Singapore Investment holding/Singapore Investment holding/Singapore Investment holding/Singapore Development of, and investment in properties/ Malaysia Investment holding/BVI Investment holding/BVI Investment holding/BVI Investment holding/Japan Investment holding/Japan Investment in properties/ Japan Investment holding/ Hong Kong Investment holding/ Hong Kong Investment holding/ Hong Kong Investment holding/ Hong Kong Investment holding/PRC % Ownership Interest held by our Group 100% 100% 100% 100% 100% 100%
Company ICWCH IHC Japan IHC KLCC IHC Wuxi IMA Seasons Residences
Date and Place of Incorporation 6 January 2012/ Singapore 3 January 2013/ Singapore 3 February 2011/ Singapore 3 February 2011/ Singapore 6 January 2012/ Singapore 6 June 2011/ Malaysia 9 January 2012/ BVI 9 January 2012/ BVI 9 January 2012/ BVI 10 September 2012/ Japan 20 September 2012/ Japan 22 February 2013/ Japan 31 March 2010/ Hong Kong 26 March 2010/ Hong Kong 9 June 2010/ Hong Kong 26 March 2010/ Hong Kong 21 September 2010/ PRC
IHC Peak IHC Star IHC Summit IHC GK (Japan) IHC ISH (Japan) IHC TMK (Japan) IHC Assets (Hong Kong) IHC Facilities (Hong Kong) Health Kind (Hong Kong) IHC Services (Hong Kong) Health Kind (Shanghai)
100% 100% 100% 100% 50% (1) 62.5% (2) 100% 100% 76.5% (3) 100% 74.97% (4)
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GROUP STRUCTURE
Principal Business Activities/Principal Place of Business Development of, and investment in properties/PRC Operation of a general hospital/PRC % Ownership Interest held by our Group 100% 74.97% (4)
Company Kang Hui (Chengdu) Wuxi Phoenix
Date and Place of Incorporation 26 December 2012/ PRC 12 July 2005/PRC
Notes: (1) IHC Japan holds 50% membership in IHC ISH (Japan) while the remaining membership is held by Hiroko Takizawa, an independent director of IHC ISH (Japan). For more details, please refer to the section entitled Group Structure The TMK Structure of this Offer Document. IHC Japan holds a direct interest of 25% in IHC TMK (Japan) and an indirect interest of 75% through its 50% membership in IHC ISH (Japan). Dr. Lin Kao-Kun continues to hold the remaining 23.5% of the shares in Health Kind (Hong Kong). Our Group holds a 76.5% interest in Health Kind (Hong Kong), which in turn holds a 98% interest in Health Kind (Shanghai). Health Kind (Shanghai) holds 100% interest in Wuxi Phoenix. The effective percentage ownership interest held by our Group in both Health Kind (Shanghai) and Wuxi Phoenix is thus 74.97%. Dr. Lin Kao-Kun continues to hold the remaining 2% of the shares in Health Kind (Shanghai).
(2) (3) (4)
Save as disclosed above, our Group does not have any subsidiaries or Associated Companies. Our Group Subsidiaries are not listed on any stock exchange. The TMK Structure
IHC
100% ownership
IHC Japan (Singapore)

100% ownership 49% preferred shares 25% common shares
Singapore Japan
50% membership
IHC GK (Japan)
51% preferred shares
75% common shares
IHC TMK (Japan)

100% ownership
IHC ISH (Japan)
Nursing Facilities
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GROUP STRUCTURE
Introduction of TMK Various legal entities such as kabushiki kaisha , godo kaisha and tokutei mokuteki kaisha , generally provide limited liability to their shareholders and are common for owning properties in Japan. TMK (tokutei mokuteki kaisha) , a special purpose company established under the Act on Securitization of Assets of Japan, is entitled to reduced tax rates (upon acquisition of a real estate) provided certain criteria are met. TMK can also constitute a tax pass-through entity (although only with respect to profits), if certain criteria are satisfied. The incorporation of a TMK is not difficult and is not materially different from the incorporation of the other forms of companies such as kabushiki kaisha or godo kaisha . However, in the case of a TMK, a commencement of business with an asset liquidation plan must be submitted to the relevant Local Finance Bureau of the Ministry of Finance of Japan prior to the commencement of any asset liquidation businesses as defined in the Act on Securitization of Assets of Japan. Shares in a TMK have equity rights such that it is possible that shareholders of the TMK will not receive any dividends on their shares or return of their original capital investments from the TMK if the value of the real estate owned by the TMK decreased. In addition, in a non-recourse loan transaction, a lender usually requests shareholders or other ultimate equity investor(s) of a TMK, as a sponsor to the TMK, to submit a sponsor letter to the lender. Typically, in case of misrepresentation, fraud, or such other acts of the TMK and sponsor-related parties, the sponsor is required to indemnify the lender against damage caused by such acts, although the scope and coverage of a sponsors indemnification under a sponsor letter depends on the deal. Shareholding structure of IHC TMK (Japan) Our Company invests in its properties in Japan via a TMK. In order to be a tax-qualifying TMK, more than 50% of the common shares must be issued to a Japanese resident and more than 50% of the preferred shares must also be issued in each offering to Japanese residents. To satisfy this requirement, the following shareholding structure was established for IHC TMK (Japan): (i) 75% of the common shares in IHC TMK (Japan) have been issued to and is held by IHC ISH (Japan), an ISH, which is a bankruptcy remote entity established solely to act as the common shareholder of IHC TMK (Japan). IHC ISH (Japan) has no potential income, loss or net worth; and 51% of the preferred shares in IHC TMK (Japan) have been issued to and is held by IHC GK (Japan), a GK established under the Company Act of Japan, which is a limited liability company.
(ii)
The remaining 25% of the common shares and 49% of the preferred shares of IHC TMK (Japan) are held by IHC Japan. IHC GK (Japan) is a wholly-owned subsidiary of IHC Japan, a special purpose company incorporated in Singapore, and which is in turn a wholly-owned subsidiary of our Company. IHC TMK (Japan) holds the properties of our Company, as well as acts as lessor to the Master Lease Agreements entered into with the various operators of our Nursing Facilities.
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GROUP STRUCTURE
Economic benefits of IHC TMK (Japan) IHC Japan owns directly and indirectly 100% of the preferred shares in IHC TMK (Japan). Notwithstanding that IHC Japan owns directly and indirectly 100% of the preferred shares in IHC TMK (Japan), it does not have full beneficial ownership of IHC TMK (Japan) as preferred shareholders generally do not have voting rights in IHC TMK (Japan). IHC Japan and IHC ISH (Japan), being the common shareholders of IHC TMK (Japan), are entitled to the economic benefits of IHC TMK (Japan). However, both IHC Japan and IHC ISH (Japan), as common shareholders, have waived their rights to receive the economic benefits of IHC TMK (Japan). Under Japanese laws, as the common shareholders have waived their rights to receive economic benefits of IHC TMK (Japan), IHC Japan is entitled to the full economic benefit of IHC TMK (Japan) via its direct and indirect ownership of 100% of the preferred shares in IHC TMK (Japan), notwithstanding that IHC Japan does not have full beneficial ownership of IHC TMK (Japan). The profit and losses of IHC TMK (Japan) will be allocated to IHC GK (Japan) and IHC Japan via dividends on the preferred shares held by IHC GK (Japan) and IHC Japan respectively. The TMK Agreements In relation to the TMK structure, IHC TMK (Japan) has entered into Master Lease Agreements with Hikari Heights-Varus Co., Ltd., Elysion Matsumoto Co. Ltd. and Safety Life Corporation, TMK bond agreements with Deutsche Bank AG and Shinsei Bank, Limited and an Asset Management Agreement with Cryxis. Operating IHC TMK (Japan) and the role of the Asset Manager The Asset Manager will conduct the management and disposition of the assets of IHC TMK (Japan).
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SELECTED PRO FORMA FINANCIAL INFORMATION

The following summary financial information should be read in conjunction with the full text of this Offer Document, including the sections entitled Managements Discussion and Analysis of Results of Operations and Financial Position, the Independent and Reporting Auditors Report on the Combined Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 and the Independent and Reporting Auditors Report on the Examination of the Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial years ended 31 December 2012 and 31 December 2011 as set out in Appendix A and Appendix B of this Offer Document respectively. A summary of the unaudited pro forma financial information of our Group in respect of the financial years ended 31 December 2011 and 2012 is set out below: Results of operations of our Group Unaudited Pro Forma FY2011 FY2012 35,324 (11,548) 23,776 9,140 (5,428) (12,958) 14,530 (707) 13,823 2,463 16,286 13,461 362 13,823 Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests 15,702 584 16,286 EPS (cents) (3) Adjusted EPS (cents) (2)(4)
Notes: (1) The other operating income in FY2011 and FY2012 comprises net fair value gains on investment properties and investment properties under development amounting to approximately S$4.5 million and S$49.0 million respectively.
(S$000) Revenue Cost of sales Gross profit Other operating income (1) Expenses Administrative Finance Profit before tax (2) Income tax expense Profit after tax Other comprehensive income/(loss): Currency translation differences arising from consolidation Total comprehensive income Profit attributable to: Equity holders of the Company (2) Non-controlling interests
37,843 (13,984) 23,859 53,227 (5,477) (12,881) 58,728 (5,394) 53,334 (7,943) 45,391 52,924 410 53,334 45,187 204 45,391 3.42 3.30
0.87 0.84
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SELECTED PRO FORMA FINANCIAL INFORMATION

(2) Had the Service Agreements (set out in the section entitled Directors, Management and Staff Service Agreements of this Offer Document) been in place since 1 January 2012, our unaudited pro forma profit before tax, profit attributable to equity holders of the Company and adjusted EPS computed based on our post-Placement share capital of 1,604,845,042 Shares for FY2012 would have been approximately S$58.5 million, S$52.7 million and 3.29 cents respectively. For illustrative purposes, the EPS for the financial years under review have been computed based on the profit attributable to equity holders of the Company and the pre-Placement share capital of 1,546,328,042 Shares. For illustrative purposes, the adjusted EPS for the financial years under review have been computed based on the profit attributable to equity holders of the Company and the post-Placement share capital of 1,604,845,042 Shares.
(3) (4)
Financial position of our Group Unaudited Pro Forma As at 31 December 2012
(S$000) ASSETS Current assets Cash and cash equivalents Trade and other receivables Other current assets Inventories
14,851 4,067 17 771 19,706
Non-current assets Intangible assets Property, plant and equipment Investment properties Investment properties under development
55,378 5,214 250,545 75,640 386,777
Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Current income tax liabilities
406,483
3,795 10,518 908 15,221
Non-current liabilities Trade and other payables Borrowings Deferred income tax liabilities
8,396 230,225 4,322 242,943
Total liabilities NET ASSETS EQUITY Capital and reserves attributable to equity holders of the Company Non-controlling interests Total equity
258,164 148,319
144,021 4,298 148,319
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MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION

The following summary financial information should be read in conjunction with the full text of this Offer Document, including the sections entitled Selected Pro Forma Financial Information, the Independent and Reporting Auditors Report on the Combined Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 and the Independent and Reporting Auditors Report on the Examination of the Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial years ended 31 December 2012 and 31 December 2011 and the related notes as set out in Appendix A and Appendix B of this Offer Document respectively. BASIS OF PREPARATION (a) The unaudited pro forma financial statements of our Group for the financial years ended 31 December 2012 and 31 December 2011 as set out in Appendix B of this Offer Document ( Unaudited Pro Forma Financial Statements ) have been prepared for illustrative purposes only and are based on certain assumptions after making certain adjustments to show what: (i) the financial results of our Group for the financial years ended 31 December 2012 and 31 December 2011 would have been if the Restructuring Exercise had occurred on 1 January 2011; the financial position of our Group as at 31 December 2012 would have been if the Restructuring Exercise had occurred on 31 December 2012; and
(ii)
(iii) the cash flows of our Group for the financial year ended 31 December 2012 would have been if the Restructuring Exercise had occurred on 1 January 2012. The objective of the Unaudited Pro forma Financial Statements is to show what the financial results, financial position and cash flows might have been, had the Restructuring Exercise occurred at an earlier date. However, the Unaudited Pro Forma Financial Statements is not necessarily indicative of the financial results, financial position and cash flows of the operations that would have been attained had the Restructuring Exercise actually occurred earlier. The Unaudited Pro Forma Financial Statements have been prepared for illustrative purposes only, and because of their nature, may not give a true picture of the actual financial results, financial position and cash flows of the operations of our Group. (b) The Unaudited Pro Forma Financial Statements of our Group for the financial years ended 31 December 2011 and 31 December 2012 have been compiled based on the following: (i) the Combined Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 which were prepared in accordance with the FRS and audited by PWC, Public Accountants and Certified Public Accountants, in accordance with Singapore Standards on Auditing as set out in Appendix A of this Offer Document;
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(ii) the unaudited management accounts of Health Kind (Hong Kong) and its subsidiaries for the financial years ended 31 December 2012 and 31 December 2011. These financial information were re-stated to our Groups accounting policies which are based on Singapore Financial Reporting Standards; and
(iii) Nursing Facilities: Income Rental income from the leasing of the respective Nursing Facilities is based on the Master Lease Agreements entered into between our Group and the lessees of the respective assets. Expenses Expenses comprised mainly property taxes and asset management fees estimated to be charged by the Asset Manager. Property taxes are derived based on the applicable tax rate and asset management fees are derived based on the Asset Management Agreements entered into between our Group and the Asset Manager. (iv) Investment properties and investment properties under development The fair value of the investment properties and investment properties under development are based on independent valuations with valuation dates as follows: Valuation date 2012 28 February 2013 28 February 2013 2011 31 December 2011 31 December 2011
Property/Land Japan Properties KLCC Land
Independent Valuer Aoyama Realty Advisors Inc. C H Williams Talhar & Wong Sdn Bhd DTZ
Chengdu Land (c)
28 February 2013
31 December 2011
The auditors reports on the respective audited financial statements used in compilation of the unaudited pro forma financial statements for the years presented were not subject to any qualification.
For the basis of presentation of the Unaudited Pro Forma Financial Statements, please refer to notes 3 and 4 of the Independent and Reporting Auditors Report on the Examination of the Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and 31 December 2011 as set out in Appendix B of this Offer Document.
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OVERVIEW Revenue Through our Group Subsidiaries, our Company is principally engaged in the Medical Development Business. Our Groups existing business can be categorised into two (2) segments as follows: (i) Provision of healthcare services through the management and operation of hospital, and investing in healthcare-related assets ( Healthcare Services ); and Development of medical real estate, healthcare-related assets and integrated mixed-use developments ( Integrated Medical Real Estate ).
(ii)
Revenue for FY2011 and FY2012 is derived solely from the Healthcare Services business segment which comprises: (i) medical fees relating to the provision of healthcare services through the operation of the Wuxi Hospital; and (ii) rental income from the Nursing Facilities. The properties under the Integrated Medical Real Estate are still under development or earmarked for development and hence no revenue was generated in FY2011 and FY2012 for the Integrated Medical Real Estate business segment. Revenue from medical fees is recognised in the period in which the services are rendered. Rental income from operating leases is recognised on a straight-line basis over the lease term. Our revenue is mainly dependent on the following factors: (a) nature, complexity and duration of medical treatment as well as the level of medical expertise required; ability to attract and retain experienced and qualified healthcare professionals and other key personnel to meet the demands of our patients; ability to maintain a good reputation as a quality integrated healthcare service and facilities provider; rental rates and rental renewal rates for the properties; changes in governmental regulations which affect the healthcare and medical real estate industry; and general macroeconomic and supply/demand trends affecting the healthcare and medical real estate industries.
(b)
(c)
(d) (e)
(f)
Please refer to the section entitled Risk Factors of this Offer Document for other factors which may affect our revenue.
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Cost of sales Cost of sales comprises mainly drugs and medicine and other consumables used, property taxes, property insurance and payroll and related costs. Cost of sales accounted for approximately 32.7% and 37.0% of our revenue for FY2011 and FY2012 respectively. Our cost of sales is mainly dependent on the following factors: (a) (b) changes in prices of drugs and medicine and other consumables; changes in employee compensation due to factors such as fixed wage levels and the variable components of the salary scheme, qualifications of the professionals and employees hired and staff headcount; changes in property insurance rates; and changes in government policies and regulations.
(c) (d)
Please refer to the section entitled Risk Factors of this Offer Document for other factors which may affect our cost of sales. Gross profit and gross profit margin Gross profit is determined after deducting the cost of sales from revenue. Accordingly, the key determinants of gross profit are the revenue generated from medical fees and rental income from operating leases and cost of sales. Our gross profit margins were approximately 67.3% and 63.0% in FY2011 and FY2012 respectively. Other operating income Other operating income comprises mainly (i) fair value differences on investment properties and investment properties under development; (ii) guarantee fee; (iii) currency translation differences; and (iv) compensations and penalties. Other operating income was approximately S$9.1 million and S$53.2 million in FY2011 and FY2012 respectively. Other operating income accounted for approximately 25.9% and 140.7% of our revenue for FY2011 and FY2012 respectively. Expenses Our expenses comprise administrative expenses and finance costs. Administrative expenses Administrative expenses comprise mainly (i) amortisation of intangible assets; (ii) employee compensation; (iii) advertising expense; (iv) repair and maintenance; and (v) asset management fee. Our administrative expenses accounted for 15.4% and 14.5% of our revenue in FY2011 and FY2012 respectively.
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Finance costs Finance costs are mainly made up of interest expenses incurred on the borrowings to finance the acquisition of our Groups asset portfolio. Finance costs accounted for 36.7% and 34.0% of our revenue in FY2011 and FY2012 respectively. Income tax expense Income tax expense is mainly attributable to the taxable profits generated from the Wuxi Hospital and the lease of the Nursing Facilities. The statutory tax rates for the PRC and Japan are 25% and 38% respectively. Our overall effective tax rates were 4.9% and 9.2% for FY2011 and FY2012 respectively. Our overall effective tax rate is lower than the statutory tax rates, mainly due to lower effective preferential tax rate in Japan as our Nursing Facilities are held under a TMK structure. Please refer to the section entitled Group Structure of this Offer Document for more information on the TMK structure. RESULTS OF OPERATIONS Breakdown of our past performance by business segments A breakdown of our revenue, gross profit and gross profit margin by business segments for the financial years under review is summarised as follow: Revenue FY2011 S$000 Healthcare Services Integrated Medical Real Estate Total 35,324 35,324 FY2012 S$000 37,843 37,843
% 100 100
% 100 100
Gross Profit FY2011 S$000 Healthcare Services Integrated Medical Real Estate Total 23,776 23,776 FY2012 S$000 23,859 23,859
% 100 100
% 100 100
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Gross Profit Margin (%) Healthcare Services Integrated Medical Real Estate Breakdown of our revenue by geographical markets A breakdown of our revenue by geographical markets for the financial years under review is summarised as follows: Revenue FY2011 S$000 The PRC Japan Total 14,711 20,613 35,324 FY2012 S$000 17,360 20,483 37,843 FY2011 67.3 FY2012 63.0
% 41.6 58.4 100.0
% 45.9 54.1 100.0
REVIEW OF PAST PERFORMANCE FY2011 compared to FY2012 Revenue Our revenue increased by S$2.5 million or 7.1% from S$35.3 million in FY2011 to S$37.8 million in FY2012 due to the increases in revenue from the Healthcare Services business segment. Revenue of Healthcare Services comprises medical fees derived from the operation of the Wuxi Hospital and the rental income from the Nursing Facilities. Medical fees derived from the operation of the Wuxi Hospital increased from S$14.7 million in FY2011 to S$17.4 million in FY2012 as a result of an increase in the number of patients. The Wuxi Hospitals average bed occupancy rate increased from 71.6% in FY2011 to 77.2% in FY2012. We derive a fixed rental income from the Nursing Facilities under the Master Lease Agreements for a period of 30 years. The decrease in the rental income from the Nursing Facilities from S$20.6 million in FY2011 to S$20.5 million in FY2012 is due to the different exchange rates used to translate the rental income from JPY to SGD in FY2011 and FY2012. Cost of sales Cost of sales increased by approximately S$2.5 million or 21.1% from S$11.5 million in FY2011 to S$14.0 million in FY2012. This increase was mainly due to increases in drugs and medicine and other consumables of S$1.1 million, employee compensation costs of S$0.5 million and other expenses of S$0.9 million.
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Drugs and medicine and other consumables increased by S$1.1 million or 19.3% from S$5.6 million in FY2011 to S$6.7 million in FY2012. This is in line with the increase in revenue derived from the operation of the Wuxi Hospital. Employee compensation costs increased by S$0.5 million or 18.8% from S$2.5 million in FY2011 to S$3.0 million in FY2012 as a result of the increase in headcount of the Wuxi Hospital. The increase in other expenses by S$0.9 million or 26.5% from S$3.4 million in FY2011 to S$4.3 million in FY2012 is mainly due to the increase in expenses such as depreciation of property, plant and equipment and utilities expenses. Gross profit and gross profit margin Our gross profit remained relatively unchanged at S$23.8 million in FY2011 and FY2012. This was brought about by a decline in gross profit margin and partially offset by higher revenue registered. Gross profit margin was lower at 63.0% in FY2012 as compared to 67.3% in FY2011 mainly due to higher drugs and medicine and other consumables and employee compensation costs incurred. Other operating income Other operating income increased by S$44.1 million or 482.4% from S$9.1 million in FY2011 to S$53.2 million in FY2012 which is mainly contributed by the increase in net fair value gains on investment properties and investment properties under development of S$44.4 million and offset by the increase in currency translation losses of S$0.2 million. Administrative expenses Administrative expenses increased by S$0.1 million or 0.9% from S$5.4 million in FY2011 to S$5.5 million in FY2012 which is mainly contributed by the increase of employee compensation costs. Finance costs Finance costs relate to interest expense on our borrowings and it remained relatively stable at S$12.9 million for FY2011 and FY2012 as there was no change in the financing amounts and interest rates. Profit before tax Profit before tax increased by S$44.2 million or 304.2% from S$14.5 million in FY2011 to S$58.7 million in FY2012 due mainly to an increase in other operating income which resulted substantially from an increase in net fair value gains on investment properties and investment properties under development. Income tax expense Income tax expense increased by S$4.7 million or 662.9% from S$0.7 million in FY2011 to S$5.4 million in FY2012. Our overall effective tax rates were 4.9% and 9.2% for FY2011 and FY2012 respectively. The increase in our effective tax rate was mainly due to a higher amount of fair value gains in FY2012 which was subjected to tax at a higher effective tax rate.
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REVIEW OF FINANCIAL POSITION Non-current assets Non-current assets comprise intangible assets, property, plant and equipment, investment properties and investment properties under development. As at 31 December 2012, our non-current assets of S$386.8 million accounted for 95.2% of our total assets. The largest component of our non-current assets was investment properties of S$250.5 million which accounted for 64.8% of the total non-current assets as at 31 December 2012. Investment properties comprise our Nursing Facilities in Japan. Investment properties under development accounted for S$75.6 million or 19.6% of the total non-current assets as at 31 December 2012 which relates to our IHC KLCC Project and IHC Chengdu Project. Intangible assets accounted for S$55.4 million or 14.3% of the total non-current assets as at 31 December 2012 which relates to lease prepayments of our land use rights under Wuxi Phoenix and the goodwill arising from the acquisition of Health Kind (Hong Kong) and its subsidiaries. Property, plant and equipment of S$5.2 million or 1.3% of the total non-current assets as at 31 December 2012 comprise buildings, office renovation, furniture, fixtures and equipment, medical equipment and motor vehicles. Current assets As at 31 December 2012, our current assets of S$19.7 million accounted for approximately 4.8% of our total assets. Our current assets mainly comprise cash and cash equivalents, trade and other receivables and inventories. Cash and cash equivalents amounted to S$14.9 million or 75.4% of the total current assets as at 31 December 2012. Trade and other receivables accounted for S$4.1 million or 20.6% of the total current assets as at 31 December 2012. Inventories, which comprise pharmacy supplies and medical and surgical supplies, accounted for S$0.8 million or 3.9% of the total current assets as at 31 December 2012. Current liabilities As at 31 December 2012, our current liabilities of S$15.2 million accounted for approximately 5.9% of our total liabilities. Our current liabilities comprise trade and other payables, borrowings and current income tax liabilities. Borrowings accounted for S$10.5 million or 69.1% of the total current liabilities as at 31 December 2012. Trade and other payables amounted to S$3.8 million or 24.9% of the total current liabilities as at 31 December 2012. Current income tax liabilities accounted for S$0.9 million or 6.0% of the total current liabilities as at 31 December 2012.
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Non-current liabilities Non-current liabilities which comprise trade and other payables, borrowings and deferred income tax liabilities, amounted to approximately S$242.9 million and accounted for 94.1% of our total liabilities as at 31 December 2012. Borrowings accounted for S$230.2 million or 94.8% of the total non-current liabilities as at 31 December 2012. Trade and other payables amounted to S$8.4 million or 3.4% of the total non-current liabilities as at 31 December 2012. Deferred tax liabilities accounted for S$4.3 million or 1.8% of the total non-current liabilities as at 31 December 2012. Shareholders equity As at 31 December 2012, our capital and reserves attributable to equity holders of our Company amounted to S$144.0 million. LIQUIDITY AND CAPITAL RESOURCES Our Group finances its operations through both internal and external sources. Internal sources refer to cash generated from our Groups operating activities. External sources of funds comprise mainly borrowings from financial institutions and other lenders, credit granted by suppliers and capital investment from Shareholders. The principal uses of these cash sources are to finance acquisitions of investment properties and investment properties under development, capital expenditures and operating expenses such as administrative expenses. The following table sets out a summary of our Groups cash flows for FY2012: (S$000) Net cash provided by operating activities Net cash used in investing activities Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Pro forma effects Cash and cash equivalents at the end of the financial year FY2012 23,019 (31,316) 35,555 27,258 4,860 (17,267) 14,851
Net cash provided by operating activities of S$23.0 million in FY2012 arose from our operating profit after tax of S$53.3 million, adjusted for non-cash items amounting to S$28.4 million, cash outflow from a net decrease in working capital of S$1.1 million, payment of income tax of S$0.4 million and payment of interest expense of S$0.4 million. Net cash used in investing activities of S$31.3 million in FY2012 comprised mainly acquisition of investment property under development of S$32.3 million and purchase of property, plant and equipment of S$0.9 million and partially offset by net cash inflow from acquisition of subsidiaries of S$1.9 million.
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Net cash provided by financing activities of S$35.6 million comprised mainly net advances from related parties of S$1.5 million and proceeds from borrowings of S$34.1 million. Based on the above, we had a net increase in cash and cash equivalent of S$27.3 million in FY2012 and our cash and cash equivalent stood at S$14.9 million as at 31 December 2012. CAPITAL EXPENDITURE AND DIVESTMENTS Save for the Restructuring Exercise (please refer to the section entitled Restructuring Exercise of this Offer Document for more information), the capital expenditure and disposal of property, plant and equipment made by our Group in the financial years ended 31 December 2011 and 2012 and for the period from 1 January 2013 up to the Latest Practicable Date were as follows: From 1 January 2013 to the Latest Practicable Date
(S$000) Acquisitions under business combination Buildings Office renovation, furniture, fixtures and equipment Medical equipment Motor vehicles Total Disposals under business combination Buildings Office renovation, furniture, fixtures and equipment Medical equipment Motor vehicles Total
FY2011
FY2012
57 245 302
75 148 579 92 894
18 212 230
3 3
206 416 76 698
6 4 10
The above capital expenditures were financed primarily by internally generated cash resources.
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FOREIGN EXCHANGE MANAGEMENT Accounting Treatment of Foreign Currencies (a) Functional and presentation currency Items included in the financial statements of each entity in our Group are measured using the currency of the primary economic environment in which the entity operates ( functional currency ). The financial statements are presented in Singapore Dollars, which is the functional currency of our Company and presentation currency of the consolidated financial statements of our Group. (b) Transactions and balances Transactions in a currency other than the functional currency are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profit or loss. When a foreign operation is disposed of or any loan forming part of the net investment of the foreign operation is repaid, a proportionate share of the accumulated currency translation differences is reclassified to profit or loss, as part of the gain or loss on disposal. Foreign exchange gains and losses that relate to borrowings are presented in the income statement within finance cost. All other foreign exchange gains and losses impacting profit or loss are presented in the income statement within other operating income. 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. (c) Translation of Group Subsidiaries financial statements The results and financial position of all Group Subsidiaries (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) (ii) assets and liabilities are translated at the closing exchange rates at the reporting date; 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 currency translation differences are recognised in other comprehensive income and accumulated in the currency translation reserve. These currency translation differences are reclassified to profit or loss on disposal or partial disposal of the subsidiary giving rise to such reserve. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting date. 122

Foreign Exchange Exposure The proportions of our revenue and purchases denominated in SGD and foreign currencies were as follows: FY2011 (%) 41.6 58.4 100.0 FY2012 (%) 45.9 54.1 100.0
Percentage of revenue denominated in RMB JPY
Percentage of purchases denominated in RMB JPY
FY2011 (%) 81.3 18.7 100.0
FY2012 (%) 85.0 15.0 100.0
Percentage of expenses denominated in RMB JPY SGD MYR
FY2011 (%) 56.6 36.8 6.5 0.1 100.0
FY2012 (%) 56.0 35.8 7.5 0.7 100.0
Our Groups dominant transactional currency for the years under review was RMB and JPY. With the natural hedging of the revenue and costs being denominated in RMB and JPY respectively, our Groups transactional foreign currency exposure for the years under review was insignificant. At present, we do not have any hedging policy with respect to our foreign exchange exposure. In the future, we may hedge our material foreign exchange transactions after considering net foreign exchange currency exposure, exposure periods and transaction costs. Prior to entering into any hedging transactions, we may put in place adequate procedures which must be reviewed and approved by our Audit Committee and seek our Boards approval for the adoption of the hedging policy. INFLATION Our financial performance for the periods under review was not materially affected by inflation. SIGNIFICANT ACCOUNTING POLICY CHANGES The accounting policies have been consistently applied by our Group during the periods under review, except for certain changes in accounting policies and related notes which are not material. 123
GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP

HISTORY The origin of our Group could be traced back to 2010, when HMD was formed by, inter alia , our Executive Chairman and Group President, Dr. Jong Hee Sen, and Fan Kow Hin and Aathar Ah Kong Andrew, our Controlling Shareholders, to pursue opportunities in the Medical Development Business. Dr. Jong Hee Sen, Fan Kow Hin and Aathar Ah Kong Andrew sought to take advantage of the growing opportunities and demand for healthcare in Asia and the lack of good healthcare facilities to improve patient care and experience and to create an eco-system of healthcare services. With that vision, HMD sought to become an integrated healthcare services and facilities provider and integrated medical real estate company, focusing on integrated care from preventive medicine to specialists care, covering children, women, adult and elder care. Our Medical Development Business commenced shortly after the major recession in the major Western economies and the slow-down of the emerging Asian economies, whereupon HMD started to source for new projects as the downturn represented an excellent opportunity to build a platform in this sector in Asia. Our Medical Development Business involves the provision of healthcare services and the investment, management and development of healthcare assets which include medical real estate, healthcare-related assets and integrated mixed-use developments. This also includes the holding of land banks, both for long-term investment and trading. The types of assets under our Medical Development Business include, but not limited to, the following: (a) (b) (c) medical real estate (such as hospital facilities); healthcare-related assets (such as maternity homes and Nursing Homes); and integrated mixed-use developments (such as developments with estate/healthcare-related assets, retail space and/or service residences), medical real
which are either operational, under development or earmarked for development. Several of our business development initiatives commenced from the end of 2010. With a disciplined approach in business development, HMD developed a portfolio of quality assets. Since 2011, we have been actively engaged in discussions with various counterparts in our Primary Geographical Markets in respect of potential acquisitions to develop our business. Our Group made our first breakthrough on 16 June 2011 when we, through our subsidiary in Malaysia, Seasons Residences, signed our first sale and purchase agreement to acquire a piece of land located at Jalan Kia Peng, Kuala Lumpur, Malaysia for the IHC KLCC Project. On 9 January 2012, our wholly-owned subsidiaries, IHC Peak, IHC Star and IHC Summit (collectively, the BVI Subsidiaries ) were incorporated in the BVI as intermediary holding companies. On 10 January 2012, IHC Peak, IHC Star and IHC Summit acquired from Crane Medical Pte. Ltd., the entire issued and paid-up share capital of each of (i) IHC Services (Hong Kong); (ii) IHC Facilities (Hong Kong); and (iii) IHC Assets (Hong Kong) for a consideration of S$1.00 for each
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entity. Please refer to the section entitled Group Structure in this Offer Document for more details. The purpose of these acquisitions was to put in place the structure for holding our Groups PRC subsidiaries and projects. On 16 October 2012, our subsidiary in Hong Kong, IHC Services (Hong Kong), entered into an agreement with the Land and Resource Bureau of Dujiangyan, Chengdu City, Sichuan Province, the PRC pursuant to which our Group acquired a piece of land located in Dujiangyan, Chengdu City, Sichuan Province, the PRC for the IHC Chengdu Project. The land will be developed into an integrated mixed-use development with a 150-bed hospital specialising in women and childrenrelated medical disciplines and a wellness themed retail and lifestyle centre. On 29 October 2012, our Group successfully acquired our first property when we obtained the title of the land for the IHC KLCC Project. Our Group intends to develop the land into an integrated mixed-used development comprising specialist medical suites, retail space and service residences. As at the Latest Practicable Date, construction for the IHC KLCC Project has not commenced. It is intended that the Marriott Group operates the service residences under the IHC KLCC Project under the brand name Marriott Executive Apartments. To this end, our Group has entered into the Marriott MOU on 19 October 2012 and the Extension to Marriott MOU on 10 April 2013 with the Marriott Group. Our Group intends to, in due course, enter into definitive agreements with the Marriott Group in relation to the operation of the service residences under the IHC KLCC Project when it is completed. On 3 January 2013, IHC Japan was incorporated and it acquired IHC GK (Japan) in February 2013. Our Group incorporated IHC TMK (Japan) on 22 February 2013 to hold our entire portfolio of Japanese assets consisting of 12 Nursing Facilities which were acquired by our Group pursuant to the signing of sale and purchase agreements with the respective vendors between February 2013 to April 2013. On 18 February 2013 and 20 March 2013, HMD entered into a binding sale and purchase agreement and a supplemental sale and purchase agreement for the purchase of 76.5% of Health Kind (Hong Kong) from Dr. Lin Kao-Kun and Dr. Dominic Er Kong Kiong. Health Kind (Hong Kong) and its subsidiaries, namely Health Kind (Shanghai) and Wuxi Phoenix, own a strategically located and fully functional hospital, the Wuxi Hospital. Pursuant to the sale and purchase agreement, our Group acquired the business and operations of the Wuxi Hospital. The existing building, together with the adjacent piece of land, has a total land size of 22,681 sqm. Our Group intends to redevelop the Wuxi Hospital, together with the adjacent land to house a 800-bed hospital. On 18 February 2013, our Company was incorporated as the investment holding company of our Group. In April 2013, our Group successfully completed the acquisition of the 12 Nursing Facilities in Japan and the Wuxi Hospital. Pursuant to the Restructuring Exercise, HMD had on 29 May 2013 disposed of its entire interest in its subsidiaries, namely IHC KLCC, ICWCH, IHC Wuxi, IMA and IHC Japan at the Restructuring Consideration to our Company in consideration of the issue and allotment of new shares in the share capital of our Company to HMD. INDUSTRY OVERVIEW Please refer to the section entitled Market Research Report on the Healthcare Services Industry in China, Japan and Malaysia as set out in Appendix F of this Offer Document for more information. 125

BUSINESS OVERVIEW Overview of our Business Through our Group Subsidiaries, our Company is principally engaged in the Medical Development Business as an integrated healthcare services and facilities provider. We own, manage and develop our assets portfolio through a series of acquisitions of operating assets, development and re-development projects, as well as land banks earmarked for development. Our portfolio of assets includes or will include (a) medical real estate (such as hospital facilities); (b) healthcarerelated assets (such as Nursing Homes and maternity homes); and (c) integrated mixed-use developments (such as developments with medical real estate/healthcare-related assets, retail space and/or service residences), which are operational, under development or earmarked for development. The healthcare portfolio of our Group comprises 15 Initial Portfolio in Malaysia, the PRC and Japan. Currently, our Group provides medical and healthcare services through the ownership of several fully operational medical real estate and healthcare-related assets. Such assets include the Wuxi Hospital in Wuxi city, Jiangsu Province, the PRC, which our Group operates through our subsidiary, Wuxi Phoenix and 12 Nursing Facilities in Japan which are operated by established operators in Japan. Our Group has also acquired land banks in (i) Kuala Lumpur, Malaysia; (ii) Dujiangyan in Chengdu city, Sichuan Province, the PRC; and (iii) Wuxi city, Jiangsu Province, the PRC, which have been earmarked for development into hospitals and integrated mixed-use developments. These land banks, when developed, will provide more facilities with healthcare services in the respective countries. Pursuant to the Restructuring Novation and the Sale and Purchase Agreements, our Company has obtained the rights from HMD to finalise the acquisition of four (4) Pending Projects. In addition, our Group has commenced negotiation for the acquisitions of three (3) Pipeline Projects. Each of the Initial Portfolio, Pending Projects and Pipeline Projects is located in various cities of the PRC, Japan and Malaysia to meet the growing demand for healthcare services. Please refer to the section entitled General Information on our Company and our Group Business Strategies and Future Plans of this Offer Document for more information on the Pending Projects and Pipeline Projects. Our Business Segments Our Groups existing business can be categorised into two (2) segments as follows: (i) Provision of healthcare services through the management and operation of hospital, and investing in healthcare-related assets ( Healthcare Services ); and Development of medical real estate, healthcare-related assets and integrated mixed-use developments ( Integrated Medical Real Estate ).
(ii)
Our Group will be developed into an integrated healthcare services and healthcare facilities provider. We intend to develop a balanced portfolio taking into account market opportunities, risk-reward ratios and industry outlook. Our Directors reasonably believe that our Groups assets will comprise between 40% to 60% in terms of Healthcare Services and 40% to 60% in terms of Integrated Medical Real Estate respectively.
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Healthcare Services Hospital Our Group currently manages and operates the Wuxi Hospital which is located in Wuxi City, Jiangsu Province, the PRC. The Wuxi Hospital, with a GFA of approximately 4,664 sq m, is a Class 2B Hospital in the PRC. Covering five (5) floors, the Wuxi Hospital provides a range of medical specialisations such as Ophthalmology, Urology, Dermatology, Gynaecology, Paediatrics and Orthopaedics, and it is well equipped with medical facilities, such as X-ray and CT scan facilities. The Wuxi Hospital houses approximately 125 beds and employs more than 300 staff of which more than 70 are doctors and more than 100 are nurses. It also holds a licence to operate an ambulance service. The Wuxi Hospital had an average bed occupancy rate of approximately 77.2% in FY2012. Its customers mainly comprise walk-in patients, referral patients and corporate clients. Please refer to the section entitled General Information on our Company and our Group Properties and Fixed Assets of this Offer Document for more details on the Wuxi Hospital. Nursing Facilities Our Group owns a portfolio of fully operational Nursing Facilities in Japan. The sizes of each of our Nursing Facilities range from a GFA of approximately 1,561 sq m to 20,756 sq m and house between 29 rooms to 281 rooms. All rooms are well-equipped with, inter alia , beds, toilet facilities and panic alarm buttons. Some of the rooms in our higher-end Nursing Facilities are furnished with kitchens, televisions and sofas. Our Nursing Facilities also provide common facilities such as lounges, cafeteria, shared baths, hair salon and community spaces. Several of the Nursing Facilities are equipped with high-technology baths to ensure that even wheelchair-bound residents are able to enjoy the shared bath facility in the Nursing Facilities. In order to ensure that the needs of the elderly residents, who require assisted care, are adequately looked after, our Nursing Facilities are staffed with caretakers, nurses and/or doctors to provide 24-hour healthcare service to the residents. The Nursing Facilities are also located near hospitals. The geographical distribution of our Nursing Facilities is as follows: Percentage of number of Nursing Facilities (%) 58.3 16.7 8.3 16.7 100.0
City Hokkaido Nara Kyoto Nagano Total
Number of Nursing Facilities 7 2 1 2 12
Our Group has entered into Master Lease Agreements with the operators of the Nursing Facilities, for which our Group will derive rental income from the operators of the Nursing Facilities, while the operators will continue with the operations of the Nursing Facilities. These operators have more than 10 years of experience in operating Nursing Facilities in Japan.
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Asset management of all the properties in Japan is outsourced to a single Asset Manager, Cryxis, while property management is undertaken by the operators under the Master Lease Agreements. Please refer to the section entitled Asset Management Arrangement in Japan of this Offer Document for more information on our asset management arrangement. As at the Latest Practicable Date, our Group owns the following Nursing Facilities in Japan: Master Lease Tenure from Latest Practicable Date (Years) 30 30 30 30 30 30 30 30 30
Name of Nursing Facility Hikari Heights Varus Fujino Hikari Heights Varus Ishiyama Hikari Heights Varus Kotoni Hikari Heights Varus Makomanai-Koen Hikari Heights Varus Tsukisamu-Koen Varus Cuore Sapporo-Kita Varus Cuore Yamanote Elysion Gakuenmae Elysion Mamigaoka/Elysion Mamigaoka Annex Elysion Amanohashidate Elysion Kaichi North
Operator Hikari HeightsVarus Co., Ltd. Hikari HeightsVarus Co., Ltd. Hikari HeightsVarus Co., Ltd. Hikari HeightsVarus Co., Ltd. Hikari HeightsVarus Co., Ltd. Hikari HeightsVarus Co., Ltd. Hikari HeightsVarus Co., Ltd. Safety Life Corporation Safety Life Corporation Safety Life Corporation Elysion Matsumoto Co. Ltd. Elysion Matsumoto Co. Ltd.
Location Hokkaido Hokkaido Hokkaido Hokkaido Hokkaido Hokkaido Hokkaido Nara Nara
Monthly rental income (JPYmillion) 8.60 5.50 27.00 19.40 3.80 7.90 4.80 6.99 11.22
Kyoto Nagano
30 30
4.56 6.55
Elysion Kaichi West
Nagano
30
2.39
Please refer to the section entitled General Information on our Company and our Group Properties and Fixed Assets of this Offer Document for more information on the Nursing Facilities.
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Integrated Medical Real Estate Our Group is also involved in developing quality medical real estate, healthcare-related assets and integrated mixed-use developments in Malaysia and the PRC. Our Group has recently acquired land banks which our Group intends to develop into integrated medical real estate. Details of our projects earmarked for development are as follows:
Approximate area (sq m) Project Name IHC KLCC Project Location Jalan Kia Peng, Kuala Lumpur, Malaysia Tenure 99-year leasehold, expiring on 29 April 2108 Description Integrated mixed-use development comprising specialist medical suites and retail space and service residences Integrated mixed-use development comprising a 150-bed hospital specialising in women and childrenrelated medical disciplines and a wellness themed retail and lifestyle centre Hospital Proposed Land Area GFA 4,724 47,162
Expected year of completion of development 2016
IHC Chengdu Project
Dujiangyan, Chengdu City, Sichuan Province, the PRC
40-year leasehold, expiring on 2053 for the commercial land
18,074
54,223
2016
IHC Wuxi Project
Wuxi City, Jiangsu Province, the PRC
50-year leasehold, expiring on 4 February 2055 for the hospital land
22,681
99,796 (1)
2018
Note: (1) Subject to planning authorities approval.
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For more information on the land banks recently acquired by our Group, please refer to the section entitled General Information on our Company and our Group Properties and Fixed Assets. Acquisition Strategy Our Group diversifies our investments among the PRC, Japan and Malaysia to minimise our overall investment risks based on several key quantitative and qualitative factors, having due consideration to the investment opportunities in the PRC, Japan and Malaysia. The factors considered include, but are not limited to, the following: economic growth potential; level and growth of foreign direct investment; growth potential of private healthcare industry; openness of the private healthcare industry; level of investment in infrastructure; differential between the yield of the property market and the cost of funding; level of liquidity in the property market; level of urbanisation; demographics such as projected population growth; and supply and cost of employment of medical and healthcare professionals.
Our Group assesses investments in completed projects based on factors such as the strength of the projects current yields and potential for yield enhancement, capital gains, and on the overall growth strategy and future direction of our Group. Projects under development will be assessed based on the gross development value opportunities and gains. Our Group may also acquire other medical-related real estate which we perceive to be undervalued or with potential for improvement or re-positioning, with a view to carrying out enhancement works to create greater value for Shareholders. Business Process Healthcare Services Our general process of providing healthcare services in hospitals is generally as follows: Outpatient Cases Registration Our nurses will register the patient on our centralised registration system.
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Check-up The doctor, via the centralised information system, will attend to each patient after the patient has completed the registration process. Further check-ups After further examination or inspection, the doctor will decide on the prescription or whether there is a need for the patient to be hospitalised. Hospitalisation Cases If the doctor determines that the patient has to be hospitalised, he will issue a hospitalisation certificate. The patient will bring the required documents such as the hospitalisation certificate, the hospitalisation permission card and his personal identification card to the registration counter of the ward for registration. The nurse will assign patients to their rooms and will arrange for medication and inspection upon receiving the instructions of the doctor. Discharge When the patient is ready for discharge, the doctor will sign off on the hospitalisation permission card. Transferred Inpatients For inpatients who are transferred from other hospitals, they would have to go through the abovementioned process for diagnosis and hospitalisation, if necessary. Emergency Cases For emergency cases, the doctor will provide all necessary urgent treatment to rescue patients sent to our hospital. Physical Examination Our hospital also conducts medical physical examination for patients. The patient will undergo a series of physical checks and tests at different departments within the hospital. If the cost for the physical examination is to be borne by the patients employer, the patients employer shall provide, in advance, basic information of the employee, including a copy of his personal identification, to our hospital to facilitate the identification of the employee.
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Although we are currently not involved in the operations of the Nursing Facilities in Japan, we understand from the operators that the general process of operating the Nursing Facilities in Japan is as follows: (i) Registration and monthly maintenance fee Elders or senior residents who are interested to stay in our Nursing Facilities in Japan will pay an upfront deposit upon registration. Subsequent to moving in, the elders or senior residents are required to pay a monthly maintenance fee. (ii) Maintenance of facilities Our Nursing Facilities are fully equipped with senior residents safety features such as panic alarm buttons, handle bars and monitoring devices. Common facilities such as lounges, cafeteria, shared baths, hair salon and community spaces are also provided in the premises. All facilities in the premises are maintained regularly by the operators. (iii) Round-the-clock assistance Residents of our Nursing Facilities will be able to participate in activities organised by the caregivers and/or use the shared facilities in the premises. Caregivers provide round-theclock care for the elderly residents in our Nursing Facilities. Meals are also provided to elders or senior residents who do not wish or do not have the ability to cook their own meals. For residents who require medical attention in our Nursing Facilities, there are doctors and nurses stationed in our Nursing Facilities to provide 24-hour healthcare services to these residents. Integrated Medical Real Estate In our business of developing medical real estate, healthcare-related assets and integrated mixed-use developments, the key stages of our development process are as follows: (i) Initiation Phase We identify potential sites through the network of our Executive Directors, referrals and private tenders. We take into consideration various factors such as, but not limited to, the locations accessibility and surrounding infrastructure, gross plot ratio, the available financing, the purchase price, government statistics and plans for the area, data such as sale prices, performance of nearby projects, the potential demand by our target market for medical or medical-related facilities, financial feasibility when assessing whether the site is viable for acquisition and the risks involved in the development of the site. When performing our assessment, general market characteristics in our Primary Geographic Markets such as general economic outlook, state of the property market, population growth and business trends will also be taken into consideration. Following our assessment, we will then determine a bidding price for each site so as to avoid overbidding and ensure recoverability and profitability. Thereafter, we will negotiate and bid for or offer to acquire the targeted sites.
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We have acquired all the sites for our development projects directly from companies with ownerships of the development sites or directly from the government land bureaus through public tender or auction. Project Control Committee Once a potential site has been identified, a project control committee in our Group would be set-up to manage, control and monitor the overall development of the project. Project control committees usually comprise: (a) the board of directors of the special purpose vehicle for the project; (b) the development committee; and (c) the project control group ( PCG ). The development committee is formed if we intend to acquire the potential site through joint-ventures. At the joint venture company level, the development committee is formed to steer, manage and implement the project through regular progress monitoring by a working or steering committee that typically holds meetings on a monthly basis. The PCG is typically made up of senior management of our Group and is a committee established within our Group responsible for ensuring the proper implementation and management of the project from the time an investment is approved and until the time when the project is completed. The PCGs key responsibilities are to approve the business plans, the infrastructure, organisational structure, policies and staffing, the budgets, schedules and specifications for the project and to monitor the progress and performance of the project. Development Team The key members of the development team for a project consists of the development manager and the investment manager. The development manager has the overall responsibility of managing the development of the project and takes instructions from the PCG. He is responsible for the following: (a) managing the development process from the establishment of the project until completion and/or the realisation of the investment in the property has been realised; advising the investment manager and asset manager (if any) on development matters during deal evaluation and the due diligence process for the acquisition of a project; ensuring the timely progress reporting of the project; setting up the operational and leasing teams as required for the property management, facility management and marketing and leasing activities and to coordinate the activities of the different teams; establishing of appropriate accounting control systems and procedures and proper risk management controls; and ensuring the smooth transition from development phase to asset stabilisation phase.
(b)
(c) (d)
(e)
(f)
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The investment manager is in charge of the following: (a) handling and resolving post-acquisition investment-related issues, such as amount of financing, funding structure, the obtaining of the land titles and the setting up the investment holding special purpose vehicles; ensuring that the project is implemented in accordance with the approved plan; procuring loan facilities from finance companies and banks; and ensuring a smooth transition from pre-acquisition phase to implementation phase.
(b) (c) (d) (ii)
Planning Phase After the development team has been established, the structure of the consultant team shall be submitted to the PCG for approval. This involves identifying the appropriate project consultants required for the project and the communication structure. Typically, the team of professional consultants include the architect, medical planner, civil and structural engineers, mechanical and electrical engineers, quantity surveyors, project managers, marketing consultants and such other consultants as may be specifically required by the project. The architect and medical planner are responsible for developing the concept design to full schematic design. The engineers will carry out the schematic design of engineering systems based on the architects concept/schematic design. The quantity surveyor shall provide the detailed cost plan, based on the schematic design drawings produced by the architect and engineers. The schematic drawings would be approved by the PCG before being submitted to the local planning authorities for their approval. The next stage of the design development would take place after the approvals from the relevant local planning and building authorities have been obtained, whereby the consultant team will develop detailed design and working drawings in compliance with the requirements of the local planning authorities. In certain cases, the development of the design would proceed in parallel with the obtaining of approvals from the local planning authorities. The primary purpose of the design and working details is for accurate costing, tendering and submission to the respective approving authorities, such as the fire services and utilities board departments for approval of the building plan. The construction of the project may commence only when all necessary permits have been obtained from these approving authorities. During the production of the contract documents and drawings, the quantity surveyor shall estimate the cost of the construction work more accurately and will prepare and compile the contract documents for the calling of the tender for the construction. Procurement for the tender for the construction work is carefully deliberated and established for each project. The development team studies all the relevant information and works with the consultant team to formulate and recommend a strategy for the procurement of the construction work.
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For our projects, we engage main contractors for the main structural building construction work and nominated sub-contractors for sub-contract work through a tender process. Contractors are engaged taking into consideration various factors, including but not limited to, licensed qualifications, track record, reliability, financial status and commitment. Depending on the complexity of our projects, we may also engage a quantity surveyor to advise on the contract quotations. The quality and timeliness of the construction are usually warranted by contractors by way of a security deposit that will be placed with the developers. In addition, we may also appoint an independent construction supervisory company for supervision and management of the construction progress and quality of the construction work for our development projects. Third party civil engineers and other contractors may also be appointed as and when required. Our management and project teams will closely supervise and manage the progress of each project and provide assistance to the external professionals when necessary so as to meet the required building standards and scheduled timeline. (iii) Implementation Construction Upon the award of the tender for the construction of the project to the main contractor, the main contractor will be responsible for the supervision, quality control and implementation of the construction and shall supervise and ensure that the construction complies with specifications and the quality as specified in the contract. The main contractor will be responsible for completing the project within the specified time frame and budget. The development manager of each project will monitor the project and ensure that it is properly managed. In furtherance thereof, the development manager will establish appropriate system and procedures for the project, including the following: budget, cost and cash flow controls; contract administration structure and procedures; reporting system and maintenance of reports; operational procedures; preparation of design and contract documents; procurement, including the selection of contractors and sub-contractors; quality control mechanisms; changes and variations to contract; claims and payment procedures and controls; commissioning system and procedures; and site safety and security issues.
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(iv) Implementation Marketing, Pre-Leasing and Pre-Operational During the construction of the project and prior to completion, our Group will also conduct pre-operational activities such as the marketing and the preparation of the leasing strategy for the project. The asset manager and/or the development manager of the project will spearhead the efforts and shall ensure that these activities are co-ordinated with the other activities taking place for the development. Typically, the asset manager and/or the development manager will formulate broad policies and strategies for leasing and marketing, engage service providers to carry out the management, marketing, leasing, branding of the property and other promotional activities, and supervise and monitor the performance of the service providers. (v) Completion As the construction of the project nears completion, our Group will closely monitor the following activities to ensure the timely completion of the project: (a) obtaining the permits and approvals from the local authorities, such as the temporary occupation permit, the occupation permit and the temporary occupation licence as may be necessary; conducting tests and commissioning of systems; inspection by the local authorities on the property and obtaining clearances from the same; inspection by the project consultants, such as the architects and the project engineers, and obtaining certification by the same; installation and connection of the necessary utilities, such as the water supply, the electricity supply, gas, etc; managing and rectification of defects during the defects liability period; and preparing the documentation for completion, including an inventory list for the project, and handing over the property to the asset manager.
(b) (c)
(d)
(e)
(f) (g)
As our Group operates in different countries, the above development process for the Integrated Medical Real Estate may vary to meet the specific requirements of each country. Asset Management Arrangement in Japan Our Nursing Facilities are managed by the Asset Manager, Cryxis, a kabushiki kaisha incorporated in Japan in May 2003 and a wholly-owned management subsidiary of Capbridge, a real estate investment and asset management firm that focuses primarily on the Japanese market. The Asset Manager is the real estate asset management arm of the Capbridge Group. As a discretionary investment manager registered under the Financial Instruments and Exchange Act of Japan, the Asset Manager develops business plans for its investments that aim to maximise the value of individual real estate assets, portfolios and invested entities. The Asset Manager has an established track record of enhancing capital value by maintaining an active management 136

focus throughout the entire investment cycle. The Asset Manager possesses extensive experience and expertise in managing a wide range of properties in the Japanese market. Since 2000, the Capbridge Group has directly managed over US$4 billion of real estate investments throughout Japan and other parts of Asia on behalf of various clients. On 19 March 2013, our Group, through our subsidiary, IHC TMK (Japan), entered into the Asset Management Agreement with the Asset Manager pursuant to which IHC TMK (Japan) engaged the Asset Manager to provide certain advisory and consultation management services with respect to ownership, operation, management, marketing, leasing and disposition of the Nursing Homes. Specifically, the Asset Manager will provide, amongst others, advice and assistance for the daily operations of IHC TMK (Japan), including: (i) establishing operating budgets and annual plans for the operation, management, marketing and maintenance of the Nursing Homes; providing administrative services to IHC TMK (Japan), including sourcing financing arrangements;
(ii)
(iii) providing contract management services including collection of rent and filing of applications with the relevant government offices; (iv) monitoring property conditions and arranging for repairs and capital expenditure as and when necessary; and (v) managing the activities of the operators of the Nursing Homes.
Each party may terminate the Asset Management Agreement by giving written notice to the other party following the occurrence of an event of default and the subsequent failure to cure such event of default in accordance with the Asset Management Agreement. The Asset Manager shall have no right to resign or terminate the Asset Management Agreement otherwise. The Asset Management Agreement shall also terminate two (2) months (or immediately upon written notice by IHC TMK (Japan)) following the date that IHC TMK (Japan) ceases to own all our Nursing Facilities. Our Group leases our Nursing Facilities to the operators and the lease arrangements are governed by the Master Lease Agreements entered into between the operators and our Group. The Master Lease Agreements are for long-term periods of 30 years. Lease rentals are subject to periodic review. The operators, are responsible for the general upkeep and maintenance of the respective properties, including the regulatory fire and safety checks. A rental deposit is payable on each lease, and interest will accrue in the event of any delay in rental payments. QUALITY MANAGEMENT We are committed to providing quality products and services to our customers. Our employees are therefore a very important resource and play a critical role in contributing to the success of our business. Our medical staff are trained and assessed on standard operating protocols in relation to various procedures at medical practices. Monthly group-wide staff meetings are held to train our medical staff on these standard operating protocols and other new programmes. 137

Our Group places strong emphasis on quality control to ensure that the quality of our properties complies with the relevant regulations and requirements, as we believe that the quality of our properties is crucial to our continued growth, reputation and market standing. For properties under development, we implement strict quality control measures at every stage of the construction process, including project conceptualisation, planning and design and construction to ensure compliance with the applicable national quality control standards and market practice. Our quality control measures include: selection and appointment of reliable contractors; evaluation of architecture and design concepts; use of quality building and construction materials; quality and safety checks by professional engineers and surveyors; and stringent requirements on craftsmanship and interior fittings.
CREDIT POLICY We derive our trade receivables mainly from Wuxi Phoenix, and the bulk of its sales is contributed by individual patients. All our individual patients are charged on a cash basis for medical services rendered and the sale of medicine and related products. As the bulk of our revenue is collected in cash over the counter at the hospital, we have put in place a cash control procedure to ensure that cash collected is properly accounted for and deposited into our bank accounts in a safe and secured manner. Save for our individual clients, we generally grant credit terms of up to 60 days. We grant credit terms based on our risk assessment of our corporate clients, taking into account various factors such as our relationship with the client, repayment history, credit checks and trade reference, clients management profile and prevailing economic conditions. For individual patients utilising their social insurance for payment, the hospital will submit the payment request to Wuxi Social Security Fund Management Centre at the beginning of every month for payment. In accordance with the prevailing government regulation on social insurance, a certain portion of the amount claimed will be repaid to the hospital in the following month by Wuxi Social Security Fund Management Centre, and the balance will be paid to the hospital in the following year, after the completion of social insurance audit, which usually takes place in May every year. Trade receivables turnover days Our trade receivables turnover days for FY2011 and FY2012 were as follows: FY2011 Trade receivables turnover days (1) 86 FY2012 79
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Note: (1) Trade receivables turnover days is computed as follows: Average trade receivables balance Revenue Where: Average trade receivables balance is based on the average of the opening and closing trade receivables balances for the relevant financial year. Number of days is defined as the number of calendar days in the relevant financial year. X Number of days
The decrease in trade receivables turnover days from 86 days in FY2011 to 79 days in FY2012 was due mainly to collections by our Group in May 2012 from the Wuxi Social Security Fund Management Centre for the period from FY2011 up to March 2012. The trade receivables for our Group as at 31 December 2012 amounted to approximately S$1.2 million. The trade receivables ageing profile for our Group as at 31 December 2012 was as follows: Less than 30 days 454 454 31 to 60 days 319 319 61 to 90 days 317 317 More than 90 days 62 62
(S$000) Gross trade receivables Less: Allowance for impairment Net trade receivables
Total 1,152 1,152
We monitor all outstanding trade receivables closely and make specific provision in the event the recovery of any trade receivables appears doubtful. The quantum of such provision is dependent on the duration for which the trade receivables are overdue as well as our assessment of the likelihood that such trade receivables may be unrecoverable. We have no allowance for doubtful debts and no bad debts written off for trade receivables in FY2011 and FY2012. Credit terms granted by our suppliers The credit terms generally granted by our suppliers of drugs, consumables, medical supplies, laboratory services and other expenses is typically 90 days. Our trade payables turnover days for FY2011 and FY2012 were as follows: FY2011 Trade payables turnover days (1) 78 FY2012 76
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Note: (1) Trade payables turnover days is computed as follows: Average trade payables balance Cost of sales Where: Average trade payables balance is based on the average of the opening and closing trade payables balances for the relevant financial year. Number of days is defined as the number of calendar days in the relevant financial year. X Number of days
Our trade payables turnover days of 78 days and 76 days in FY2011 and FY2012 respectively were generally in line with the credit terms of 90 days granted by our suppliers. INVENTORY MANAGEMENT Our inventory comprises medicine and related products. We usually maintain a stock of medicine and related products at a level which is sufficient, at any one point in time, for the needs and requirements of our patients. We manage our inventories of medicine and related products on a first-in, first-out basis so that supplies first received will be used at our medical facilities. As at FY2012, our inventory levels were worth approximately S$0.8 million. The adequacy of our inventory is reviewed by our local management in the PRC on a regular basis. Our policy on expired or damaged inventory is to write off such inventory when our management considers the expired or damaged inventory to have no residual value. In addition, specific provisions are made on the diminution in market value of the inventory should our management decide that the current level of provision is inadequate. Expired and damaged inventory are returned to the suppliers. Our inventory turnover days for FY2011 and FY2012 were as follows: FY2011 Inventory turnover days (1)
Note: (1) Inventory turnover days is computed as follows: Average inventory balance Cost of sales Where: Average inventory balance is based on the average of the opening and closing inventory balances for the relevant financial year. Number of days is defined as the number of calendar days in the relevant financial year. X Number of days
FY2012 23
22
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SALES AND MARKETING Our Executive Chairman and Group President, Dr. Jong Hee Sen, spearheads our sales and marketing efforts and is responsible for formulating and planning the marketing strategies and activities of our Group to promote our properties, services and brand to our customers. He is assisted by our Executive Director and President, Integrated Medical Real Estate, Yip Yuen Leong. Where necessary, we engage external consultants to execute the necessary sales and marketing activities. Our sales and marketing efforts will generally be conducted through the media such as newspapers, magazines, outdoor advertising boards, television, buses, text messages, direct mailers and brochures. INSURANCE Our insurance policies typically cover loss of rental, fire, flood, malicious damage, other material damage to property and development sites, business interruption and public liability (including third parties property damage and/or personal injury). In addition, for our projects under development, our contractors will generally take up the necessary insurance policies relating to projects under construction. We have taken up group term policy in respect of hospital and surgical insurance for our employees. We have also complied with the relevant PRC laws and regulations relating to social welfare insurance. No medical negligence insurance policies are allowed by the authorities to be taken in respect of our operations in the PRC. There are certain types of risks that are not covered by our insurance policies, including acts of war, environmental damage and breaches of environmental laws and regulations. Our Directors believe, having considered the risk levels and the cost of procuring insurance for the risks associated with our business, that the insurance policies taken up by our Group are in accordance with industry practices and adequate for our business operations. Notwithstanding our insurance coverage, damage to our facilities, equipment, machinery or buildings could have a material adverse effect on our results of operations and financial position, to the extent that this disrupts the normal operation of our properties or our businesses. Please refer to the section entitled Risk Factors We may suffer material losses in excess of insurance proceeds of this Offer Document for more details. We periodically review the insurance coverage of our Group and will consider taking up additional insurance, if necessary. INTELLECTUAL PROPERTY As at the Latest Practicable Date, our Group owns the following copyright: Registered Owner Health Kind (Shanghai) Place of Registration National Copyright Administration of Peoples Republic of China Date of Registration 22 March 2012
Copyright Health Dian Management System V1.0 ( [ EHIS]V1.0)
Class Computer Software Copyright
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Save as disclosed above, our Group does not own or use any trademark, patent or other intellectual property which are material to our business or profitability. LICENCES, PERMITS, APPROVALS, CERTIFICATIONS AND GOVERNMENT REGULATIONS To the best of our knowledge, our Group has obtained all necessary licences, permits, approvals and certifications required for our business and operations. As at the Latest Practicable Date, except as disclosed herein and in the sections entitled Risk Factors and Description of Relevant Laws and Regulations as set out in Appendix H of this Offer Document, our business and operations are not subject to any special legislation or regulatory controls which have a material effect on our business and operations. In the course of our Groups operations, we have in the past breached or were not in compliance with the following laws in the context of our Groups operations: IHC Assets (Hong Kong), IHC Services (Hong Kong) and IHC Facilities (Hong Kong) Section 111(1) of the Companies Ordinance requires a company to hold its annual general meeting ( AGM ) at intervals of not more than 15 months between the date of one AGM and the next, provided that so long as the company holds its first AGM within 18 months of its incorporation, it shall not be required to hold another AGM in the year of its incorporation or in the following year. Failure to hold an AGM will result in a breach of section 111(1) of the Companies Ordinance, and pursuant to section 111(5) of the Companies Ordinance, the defaulting company and every officer of the company would be liable for a maximum fine of HK$50,000. Section 122 of the Companies Ordinance further provides that directors of a company incorporated in Hong Kong are required to cause a copy of the audited accounts to be laid before the company and its shareholders at each of its AGMs. Such audited accounts shall be made up to a date falling not more than nine (9) months before the date of the relevant annual general meeting. Section 122(3) of the Companies Ordinance provides that a director who fails to take all reasonable steps for compliance would be liable to a maximum imprisonment of 12 months and a maximum fine of HK$300,000. Three (3) of our Hong Kong Subsidiaries, namely, IHC Assets (Hong Kong), IHC Services (Hong Kong), and IHC Facilities (Hong Kong) were incorporated in March 2010. Written resolutions had been prepared by the respective sole shareholders of IHC Assets (Hong Kong), IHC Services (Hong Kong) and IHC Facilities (Hong Kong) in lieu of their AGMs. However, as no audited accounts were prepared and provided to the respective sole shareholders, those written resolutions failed to comply with section 111(6) of the Companies Ordinance. Accordingly, the three (3) Hong Kong Subsidiaries failed to comply with sections 111 and 122 of the Companies Ordinance. As remedial measures, the three (3) Hong Kong Subsidiaries have taken active steps to rectify the above. As at the Latest Practicable Date, copies of the audited accounts required to be laid before the Hong Kong Subsidiaries and their respective shareholders at their respective AGMs have been approved, ratified and confirmed by their respective sole shareholders. The three (3) Hong Kong Subsidiaries have also made voluntary submissions to the Hong Kong Companies Registry on 28 March 2013, disclosing such non-compliance. The three (3) Hong Kong Subsidiaries have on 17 April 2013 received a letter from the Hong Kong Companies Registry stating that the three (3) Hong Kong Subsidiaries should rectify the non-compliance by seeking the appropriate court orders pursuant to section 111 of the Companies Ordinance.
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The three (3) Hong Kong Subsidiaries had on 30 May 2013 filed the relevant court applications and the court hearing to obtain the court orders has been fixed for 4 September 2013. Health Kind (Hong Kong) Section 111(1) of the Companies Ordinance requires a company to hold its AGM at intervals of not more than 15 months between the date of one AGM to the next, failing which the company and every officer of the company would be liable for a maximum fine of HK$50,000 pursuant to section 111(5) of the Companies Ordinance. Section 122 of the Companies Ordinance further provides that, the directors of a company incorporated in Hong Kong are required to prepare a copy of the audited accounts to be laid before the company and its shareholders at each of its AGMs. Such audited accounts shall be made up to a date falling not more than nine (9) months before the date of the relevant annual general meeting. Section 122(3) of the Companies Ordinance provides that a director who fails to take all reasonable steps for compliance would be liable to a maximum imprisonment of 12 months and a maximum fine of HK$300,000. Furthermore, under section 158(4) of the Companies Ordinance, where there is any change in the companys directors contained in its register of directors, the company shall notify the Hong Kong Registrar of Companies within 14 days from the change. Pursuant to section 158(8) of the Companies Ordinance, a company and every officer of the company who is in default of section 158(4) of the Companies Ordinance shall be liable to a maximum fine of HK$10,000, and for a continued default, a daily default fine of HK$300. Our subsidiary, Health Kind (Hong Kong) was incorporated in June 2010. Health Kind (Hong Kong) had failed to prepare and lay the audited accounts in its AGM in accordance with section 122 of the Companies Ordinance. It had also failed to convene AGM in accordance with section 111(1) of the Companies Ordinance. On 2 January 2013, Health Kind (Hong Kong) appointed Heng Hian Mok, Yip Yuen Leong and Dr. Jong Hee Sen as directors. Health Kind (Hong Kong) notified the Hong Kong Companies Registry of such change on 18 March 2013 by filing Form D2A. As the notification was filed after 14 days from the change, Health Kind (Hong Kong) had failed to comply with section 158(4) of the Companies Ordinance. Health Kind (Hong Kong) has also made a voluntary submission to the Hong Kong Companies Registry on 27 March 2013, disclosing such non-compliances. Health Kind (Hong Kong) had received a letter dated 10 May 2013 from the Hong Kong Companies Registry stating that it should seek independent legal advice on whether it is appropriate to seek court orders to rectify the non-compliances. On 30 May 2013, Health Kind (Hong Kong) had filed the relevant court applications and the court hearing to obtain the court orders has been fixed for 4 September 2013. Kang Hui (Chengdu) Kang Hui (Chengdu)s total registered capital is RMB225 million. Pursuant to Article 30 of the Rules for the Implementation of the Law of the PRC on Foreign Capital Enterprises (the Foreign Capital Enterprises Rules ), the shareholder of Kang Hui (Chengdu), IHC Services (Hong Kong), is required to contribute a minimum of 15% of its registered capital by 31 March 2013, amounting to approximately RMB34 million. Kang Hui (Chengdu) failed to comply with Article 30 of the 143

Foreign Capital Enterprises Rule. Article 30 of the Foreign Capital Enterprises Rules also provides that the failure to make such a payment would result in the automatic invalidation of the certificate of approval for the establishment of the foreign capital enterprise and the foreign capital enterprise is required to commence the registration cancellation process with the relevant administrative department for industry and commerce. Kang Hui (Chengdu) has informed the local government in Dujiangyan, Chengdu city of the non-compliance and provided the reasons for the non-compliance. In addition, Fan Kow Hin, our Controlling Shareholder, has provided a deed of indemnity to indemnify our Company and Kang Hui (Chengdu) against any penalties that may be imposed. On 21 May 2013, IHC Services (Hong Kong) contributed the sum of approximately RMB46.7 million. On 28 May 2013, the Chengdu Administration for Industry and Commerce ( CAIC ) issued a Notice on Demand for Corrective Action (the Notice on Demand ) which indicated that the company was in default of the payment of the initial capital contribution and requested the company to make payment of the same within 30 days from the Notice on Demand. On the same day, the company filed an application with the CAIC to amend article 11 of its articles of association whereby the initial capital contribution was reduced to RMB46 million and to reflect that the payment of paid-up capital had been made on 21 May 2013. The application was approved by the CAIC on 28 May 2013 and the new business licence of the company, reflecting the updated paid-up capital of RMB46 million, was issued on 29 May 2013. Please refer to section entitled Description of Relevant Laws and Regulations as set out in Appendix H of this Offer Document for a summary of the relevant laws and regulations in our Primary Geographical Markets applicable to us. The following are the main licences, permits, approvals and certificates that are essential for the business operations of our Group: Licences, permits, approvals and certificates Practising Certificate of Medical Institution
Administrative body Wuxi Health Bureau
Issued to Wuxi Phoenix
Date of expiry 19 March 2016
As at the Latest Practicable Date, none of the aforesaid licences, permits, approvals and certificates have been suspended, revoked or cancelled and to the best of our Directors knowledge and belief, we are not aware of any facts or circumstances which would cause such licences, permits, approvals and certificates to be suspended, revoked or cancelled, as the case may be, or any applications for, or renewal of, any of these licences, permits, approvals and certificates to be rejected by the relevant authorities.
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OUR MAJOR CUSTOMERS Our major customers contributing 5.0% or more of our Groups total revenue for FY2011 and FY2012 are set out below: Percentage of our Groups total revenue FY2011 FY2012 41.3 12.2 38.3 11.3
Major Customers (%) Hikari Heights-Varus Co., Ltd. Safety Life Corporation
Each of the abovementioned customers entered into Master Lease Agreements with our Group pursuant to which the said customers agreed to lease and operate the Nursing Facilities. Save as disclosed above, there was no customer whose revenue contribution accounted for more than 5.0% of our Groups total revenue in FY2011 and FY2012. None of our Directors or Substantial Shareholders or their respective Associates has any interest, direct or indirect, in our major customers. OUR MAJOR SUPPLIERS Our main supplies are medical products such as pharmaceuticals and medical equipment. While we currently do not enter into any formal long term contracts with suppliers, we believe that we will not encounter any difficulty in obtaining adequate medical products and equipment in the future. We are also not dependent on any single one of our major suppliers. Further, our Group has not experienced any material difficulties in obtaining medical products and equipment since its establishment. Our suppliers who each accounted for 5% or more of our Groups total purchases in FY2011 and FY2012 are as follows: Percentage of our Groups total purchases FY2011 6.6 FY2012 5.7
Major Suppliers (%) Cryxis
Services/Products provided Asset management services Pharmaceuticals
Jiangyin Huahong Pharmaceutical Co., Ltd
10.8
17.6
None of our Directors or Substantial Shareholders or their respective Associates has any interest, direct or indirect, in our major suppliers.
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RESEARCH AND DEVELOPMENT The nature of our business does not require us to carry out any significant research and development activities. SEASONALITY Due to the nature of our Medical Development Business, we have not observed any significant seasonal trends during the period under review. Our Directors believe that there is no apparent seasonality factor affecting our industry. STAFF TRAINING We recognise that our staff are one of our important resources and we thus aim to equip our staff with the relevant skills and knowledge. The need for training for all employees in the fast changing environment, which is regularly assessed by our Directors and our management, arises when: the employees job description or responsibilities changes due to job enrichment or job enlargement; new technology is introduced; the management system is updated or changed; or there are changes in laws and regulations which affect our Groups operations.
In addition, we provide various types of training programmes, through a combination of on-the-job training, external and in-house courses as well as seminars and workshops for our employees according to their job scopes and functions, to ensure a high level of competency amongst our staff. Such training includes courses on human resources and working skills upgrades and provides an avenue for staff to upgrade their functional skills. In addition, supervisory and senior executives are further sent for external training courses and seminars on operations supervision and management development. Armed with such skills, our staff will be able to perform with greater efficiency and effectiveness, thus raising their performance standards and operational readiness. Since most of our training is conducted in-house and comprises mainly on-the-job training, the expenses incurred in relation to external staff training for each of the last two (2) financial years ended 31 December 2011 and 2012 were not material. COMPETITION We operate in a highly competitive environment and are subject to intense competition from existing players and new entrants to the industry. For our businesses in Malaysia, the PRC and Japan, we face competition from public and private healthcare institutions. Whilst we do not have any direct competitors for the businesses that we are engaged in, to the best of our knowledge, we consider the following to be our competitors: Malaysia IHH Healthcare Berhad
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Singapore Raffles Medical Group Limited
The PRC Wuxi City Rende Hospital
Japan Nichii Gakkan Company
COMPETITIVE STRENGTHS Our Directors believe that the following competitive strengths have enabled and will continue to enable us to harness the growth potential and to compete effectively in the healthcare industry: We have a strategic portfolio of medical real estate, healthcare-related assets and integrated mixed-use developments Our Initial Portfolio, Pending Projects and Pipeline Projects will provide multiple earning drivers in various stable and emerging countries and enable us to reach out to a broad base of patients and doctors. We will be able to capitalise on this wide base across our network to build and compete effectively in the growing healthcare markets and generate stable and healthy annual operating income. Most of our assets are strategically located at prime locations and offer the prospects of premium rental and capital appreciation. We have broad-based exposure to our Primary Geographical Markets in highly attractive, rapid growth economics in the Asian region (excluding Japan) and the stable economy of Japan We currently focus primarily on highly attractive and rapidly growing markets in the PRC and ASEAN countries like Malaysia and in the stable economy of Japan. We see significant growth potential in the healthcare industry in these countries, driven both by organic growth and increasing private healthcare consumption, fuelled by rising affluence and improved standard of living. This demand in growth for healthcare services and facilities is further driven by the current limited supply of good medical facilities to support ageing populations and government policies seeking to provide and develop a sustainable healthcare system through healthcare policies and better insurance coverage to support private healthcare expenditure. In addition, we believe that the healthcare sector is generally more resistant against poor economic conditions. Accordingly, as we continue to benefit from the increasing affluence and the growing economies of the countries we operate in, we also benefit from our industry being generally more resistant to poor economic conditions. Our Primary Geographical Markets are also becoming increasingly crucial hubs for medical travel within their respective regions, which provides us with the opportunities to further expand our patient catchment area and provide growth potential for our business.
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We provide both integrated healthcare services and facilities in our Primary Geographical Markets We are not a pure and conventional real-estate developer or investor. Our business model is scalable by the expansion and the efficient development of assets that can lead to shorter gestation time, cash conversion, assets enhancement and risks minimisation which gives us an edge over typical healthcare providers. Our business model of investing in medical assets, healthcare-related assets and integrated mixed-use developments and healthcare services will put us in good stead to reach out for more growth. We leverage on our managements experience in the healthcare industry and in real estate development to make sound, rational and informed investment decisions. We have the expertise and know-how to acquire, build, design and operate a large spectrum of medical assets, healthcare-related assets and integrated mixed-use developments catering to our target markets. We believe that our Directors prior work experiences coupled with our brands becoming more recognised internationally will allow us to provide suitable healthcare facilities and platforms for the increasingly discerning demands of our target markets. Our portfolio of medical real estate differentiates our services and properties from other conventional developments. These medical real estate cater to patients seeking an all-rounded healthcare solution in line with higher standards of living and cater to doctors and medical professionals seeking good working environments with opportunities to develop their professional capabilities. Our portfolio provides us with a profile that will enable us to achieve better performance as compared to the typical healthcare providers. In Malaysia, our properties for the IHC KLCC Project and the IHC Iskandar Project, which will be developed into integrated mixed-use developments, will be positioned to service demand from the high-income domestic customers and patients as well as premium medical travellers requiring upmarket private specialist healthcare services. In the PRC, we have secured good sites in various cities to develop our medical assets, healthcare-related assets and integrated mixed-use developments. This will also put us in a good position to secure future sites in the PRC. We work closely with local government authorities to obtain good sites in key and potential cities for our medical assets, healthcare-related assets and integrated mixed-use developments, thereby increasing the potential for asset value gains. Our hospital under the IHC Wuxi Project is positioned to serve the needs of middle to high income domestic markets and expatriates employed by multi-national corporations with operations in Wuxi City, Jiangsu Province, the PRC. We have also entered into various agreements and tie-ups with corporate clients in Wuxi City, Jiangsu Province, the PRC to provide primary healthcare services as well as specialised medical services to their employees and middle and senior management levels. In addition, we have a section of the hospital primarily set aside for Korean expatriates with Korean doctors to harness the growth of the Korean market in Wuxi City, Jiangsu Province, the PRC. We also have a tie up with the local government to provide ambulance services. The IHC Chengdu Project is our integrated mixed-use development, with a 150-bed hospital specialising in women and children-related medical disciplines and a wellness themed retail and lifestyle centre. The hospital is expected to complement the wellness themed retail and lifestyle centre as it will be able to generate sustained human traffic. In addition, the IHC Chengdu Project is located near large catchment areas of residential hubs, town amenities and industrial estates.
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This development is expected to fill an existing gap in medical care in the area as there is a lack of international and quality healthcare facilities in Dujiangyan and it is targeted at the international and domestic tourists of Dujiangyan, as well as affluent PRC residents. The IHC Shanghai Project will be a mixed-use development with an 86-room maternity home, specialist medical suites specialising in women wellness, wellness medicine, reproductive medicine and aesthetics as well as niche retail shops and a lifestyle and entertainment centre. By developing our own facilities and services, we have the control and flexibility to sustain our investment and operating strategy in accordance with the specific needs of our targeted market segments. We focus our target market on middle to high-income patients, medical users and expatriates Our medical real estate, healthcare-related assets and integrated mixed-use developments are modern and incorporate a patient-centric operating approach and our facilities and equipment are designed to enable the medical professionals to cater to the needs of our patients and improve patient care. We target middle to high-income patients, medical users and expatriates by operating and developing medical real estate, healthcare-related assets and integrated mixed-use developments to cater to the needs of these segments of consumers. By concentrating on middle to high-income patients and medical users, we are able to focus our time and effort on recognising the latest trends, identifying and purchasing suitable assets, properties and plots of land and developing additional medical real estate, healthcare-related assets and integrated mixed-use developments which would appeal to our targeted patients and medical users. We also target expatriates who will be more familiar with, and will thus be drawn to, the international healthcare standards of our medical facilities. We have a committed, qualified and experienced management team, medical professionals and support staff We believe the diversified experience of our management team will be a distinct competitive advantage in the complex and rapidly evolving healthcare and property development industry in which we operate in. Our management team comprises experienced property development and management experts and qualified medical doctors, which gives us first-hand and in-depth knowledge of the intricacies of property development and management, and hospital operations. Our senior management team comprises our Executive Directors, Dr. Jong Hee Sen and Yip Yuen Leong, who have in aggregate more than 30 years of experience in the property development and management sector and/or the healthcare industry. They have the track record and proven ability to source for and execute attractive real estate transactions, develop medical real estate, healthcare-related assets and integrated mixed-use developments in Asia, and manage and operate the developed assets. They are committed to excellence and provide us with a strong knowledge in general property development and management in the Asia-Pacific region.
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Our management team is supported by a pool of committed staff, who are experienced in their respective fields including finance, accounting and management. Since our Groups inception, our management has structured investments of an aggregate gross development value in excess of S$1 billion in Asia. Our medical professionals are qualified and are rigorously screened prior to joining us. We believe that our facilities and equipment will continue to help our medical professionals improve and grow with our Group. With their assistance, our medical real estate, healthcare-related assets and integrated mixed-use developments will operate efficiently and will be of high quality, providing us with high returns. With our current experience in managing our Initial Portfolio, our management team will be able to discover new and good investment opportunities to expand our network. With the emerging Asian economies and abundance of investment opportunities, our Group will be able to hinge on the growth potential of each economy and, with the contribution of our management teams expertise in healthcare real estate development, build an increasingly robust asset portfolio. PROPERTIES AND FIXED ASSETS The following table sets out the properties leased by our Group which are used as offices as at the Latest Practicable Date:
Tenant/ Lessee Our Company Approximate GFA (sq m) 106 Monthly Rental S$2,840 (before GST) Description of Use Office
Location 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 Room EF, Building 9, Yonghua Mansion, Pudong Avenue, Pudong New District, Shanghai The Peoples Republic of China Room 106, Building 6, No. 2310, Tanglu Road, Pudong New District, Shanghai The Peoples Republic of China
Tenure 2 years from 15 May 2013
Lessor Thye Hong Properties Pte Ltd
273
2 years from 1 July 2011
RMB29,029
Office
Shanghai Yonghua Real Estate Development Company
179
3 years from 19 August 2010
RMB5,355
Office
Shanghai Huazhong Industry Co., Ltd.
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The following are properties owned by our Group as at the Latest Practicable Date: Malaysia IHC Medical & Commercial Centre in Kuala Lumpur city centre, Malaysia
IHC KLCC Project: Artists Impression

(Note: This picture is an artists impression of the IHC Medical & Commercial Centre in Kuala Lumpur and may differ from the actual view of the completed project)
The IHC KLCC Project will be a 33-storey integrated mixed-use development comprising specialist medical suites, retail space and service residences located at No. 19 & 19A, Jalan Kia Peng, in Kuala Lumpur, Malaysia. It is strategically located within walking distance of the Kuala Lumpur Convention Centre, Kuala Lumpur city centre business district, Petronas Twin Towers, Pavillion Shopping Centre and Prince Court Medical Centre, and is also near the Bukit Bintang shopping district and Kuala Lumpur General Hospital. The IHC KLCC Project occupies a land area of approximately 4,724 sq m and on completion, and, subject to regulatory requirements and demand changes, is planned to have a total built-up GFA of approximately 47,162 sq m, comprising mainly specialist medical suites (4,200 sq m), retail units (9,300 sq m) and service residences (33,662 sq m). The development shall also include both an underground and multi-storey building as a car park with approximately 700 lots. The IHC KLCC Project will be used for an upscale medical retail hub with specialist medical suites and is targeted at the upper middle to high net worth market segment and to meet the growth in demand for upmarket private specialist health care services and medical tourism. Together with the retail units, the specialist medical suites will be retained by our Company to generate recurring income. It is intended that the Marriott Group operates the service residences under the IHC KLCC Project under the brand name Marriott Executive Apartments. These service residences will cater to locals and medical tourists in Kuala Lumpur, Malaysia. As it is located in the heart of the city, the service residences would also be catered to the business community. Completion of the IHC KLCC Project is targeted for 2016 for the retail space and service residences.
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Summary Location Land lot Land size Total GFA : : : : No 19 & 19A, Jalan Kia Peng, 50450, Kuala Lumpur, Malaysia Lot 84, Section 63, Town and District of Kuala Lumpur, Wilayah Persekutuan KL, WP No 46289 Approximately 4,724 sq m Approximately 47,162 sq m, comprising mainly: Land use Land tenure Target completion date Plot ratio Interest attributable to us Land cost : : : : : : Specialist medical suites 4,200 sq m Retail units 9,300 sq m Service residences 33,662 sq m
Integrated mixed-use development Leasehold interest of 99 years, expiring on 29 April 2108 2016 9.98 100% MYR81,358,400
According to the Independent Valuation Report on the properties in Malaysia as set out in Appendix D of this Offer Document, on an as-is basis, the market value of the land for the IHC KLCC Project is approximately MYR117.0 million as at 28 February 2013. The PRC Hospital in Wuxi City, Jiangsu Province, the PRC
Photo of Existing Wuxi Hospital
The Wuxi Hospital is a hospital with 125 beds located at No. 20 Changjiang North Road in Wuxi City, Jiangsu Province, the PRC that is currently in operation. IHC Wuxi had purchased an adjacent piece of land. The land that the hospital building is sited on and the adjacent piece of land have a total land size of approximately 22,681 sq m.
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The plan is to redevelop the Wuxi Hospital together with the adjacent land to house a 800-bed hospital, various retail facilities to cater to the human traffic generated by the hospital and a service apartment block for step-down medical care. The IHC Wuxi Project is strategically located in the heart of the new district in Wuxi City and is in close proximity to upmarket hotels and train stations. There is also a large catchment of local, interstate and expatriate population in Wuxi City, Jiangsu Province, the PRC as many large multi-national corporations have a presence in Wuxi city. Completion of the IHC Wuxi Project is targeted for 2018. Summary Location Land size Current total GFA : : : No. 20 Changjiang North Road Approximately 22,681 sq m Approximately 4,664 sq m, comprising mainly: Land use Land tenure Land use right certificate number Plot ratio Estimated total GFA after development : : : : : Hospital block of 5 floors 4,347 sq m Hospital block of 2 floors 317 sq m
Hospital/Medical 50-year leasehold, expiring on 4 February 2055 Land use Rights Certificate No. (2005) 297 issued by Wuxi Municipal Government ( ) on 26 October 2005 4.4 99,796 sqm comprising mainly: Hospital block of 19 floors planned 40,000 sqm Retail podium block of seven (7) floors planned 30,000 sqm Service residences of 24 floors planned 30,000 sqm
(the development plan and the planned GFA have yet to be finalised, subject to planning authorities approval) Interest Attributable to Us : 74.97%
According to the Independent Valuation Report on the properties in the PRC as set out in Appendix C of this Offer Document, on an as-is basis, the market value of the Wuxi Hospital, together with the adjacent piece of land, is approximately RMB80.6 million as at 28 February 2013.
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IHC Medical and Commercial Centre in Dujiangyan, Chengdu City, Sichuan Province, the PRC
IHC Chengdu Project: Artists Impression

(Note: This picture is an artists impression of the IHC Medical & Commercial Centre in Dujiangyan, Chengdu city, the PRC and may differ from the actual view of the completed project.)
The IHC Chengdu Project is our integrated mixed-use development, with a 150-bed hospital specialising in women and children-related medical disciplines and a wellness themed retail and lifestyle centre. The hospital is expected to complement the wellness themed retail and lifestyle centre as it will be able to generate sustained human traffic. In addition, the IHC Chengdu Project is located near large catchment areas of residential hubs, town amenities and industrial estates. This development is expected to fill an existing gap in medical care in the area as there is a lack of international and quality healthcare facilities in Dujiangyan and it is targeted at the international and domestic tourists to Dujiangyan, as well as affluent PRC residents. Completion of the IHC Chengdu Project is targeted for 2016. Summary Location Land size Total GFA : : : East of Second Ring Road and South of Baolian Road Approximately 18,074 sq m Approximately 54,223 sq m, consisting: Land use Land tenure Plot ratio Interest attributable to us Land cost : : : : : Hospital block 26,654 sq m Shopping complex 27,569 sq m (floor area to be finalised based on planning approval)
Part hospital and part commercial 50-year leasehold for the hospital land 40-year leasehold for the commercial land, expiring in 2053 <3.0 100% RMB45,547,488
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According to the Independent Valuation Report on the properties in the PRC as set out in Appendix C of this Offer Document, on an as-is basis, the market value of the land for the IHC Chengdu Project is approximately RMB90.0 million as at 28 February 2013. FOR REFERENCE ONLY , the following table summarises the estimated values for the Initial Portfolio under construction by the respective valuers on an as if complete and fully leased basis as at 28 February 2013: Local Currency (000)
Initial Portfolio
S$ (000)
IHC KLCC Project IHC Chengdu Project IHC Wuxi Project

Note: (1)
MYR566,445 RMB545,200
(1)
226,521 108,331 (1)
Valuation was not conducted as the IHC Wuxi Project is still pending government approval.
The values are derived by the respective valuers with assumptions that the development of the projects are completed and are fully leased out. They generally adopted the comparison and investment method in arriving at the values. These gross development values are estimates only and are meant to serve as a guide as to the value of the Initial Portfolio when these development projects are completed and fully leased out.
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Japan
Acquisition Price (JPYmillion) Land Area (sq m) Operator Hikari Heights-Varus Co., Ltd. Hikari Heights-Varus Co., Ltd. Hikari Heights-Varus Co., Ltd. Hikari Heights-Varus Co., Ltd. Hikari Heights-Varus Co., Ltd. Hikari Heights-Varus Co., Ltd. Hikari Heights-Varus Co., Ltd. Safety Life Corporation Safety Life Corporation 2,927.1 5,057.9 1,561.5 Safety Life Corporation Elysion Matsumoto Co. Ltd. Elysion Matsumoto Co. Ltd. 7,230.0 4,411.0 11,033.6 6,653.0 2,241.6 1,667.9 2,683.8 1,898.3 6,997.2 2,694.4 2,833.3 773.8 3,790.0 10,258.9 5,213.3 2,807.8 4,362.5 13,301.3 20,756.4 8,747.0 9,668.4 GFA (sq m) 1,049.1 637.8 3,518.7 2,527.5 480.6 651.7 1,050.0 1,116.8 1,621.4 636.8 914.5 338.0 Yearly Rental Rate (JPYmillion) 103.2 66 324 232.8 45.6 57.6 94.9 83.9 134.6 54.7 78.6 28.7
Name of Nursing Facilities 1,250 702 4,540 3,270 530 791 1,300 1,280 1,830 756 1,010 385
Valuation (JPYmillion)
Hikari Heights Varus Fujino
Hikari Heights Varus Ishiyama
Hikari Heights Varus Kotoni
Hikari Heights Varus Makomanai-Koen
Hikari Heights Varus Tsukisamu-Koen
Varus Cuore Yamanote
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Varus Cuore Sapporo-Kita
Elysion Gakuenmae
Elysion Mamigaoka/ Elysion Mamigaoka Annex
Elysion Amanohashidate
Elysion Kaichi North
Elysion Kaichi West
The Nursing Facilities are situated on freehold land.

Hikari Heights Varus Skilled Nursing Facilities
Hikari Heights Varus Fujino
Hikari Heights Varus Ishiyama
Hikari Heights Varus Kotoni
Hikari Heights Varus Makomanai-Koen
Hikari Heights Tsukisamu-Koen
Varus Cuore Yamanote
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Interior View of Hikari Heights Properties
Hikari Heights Varus Fujino, Hikari Heights Varus Ishiyama, Hikari Heights Varus Kotoni, Hikari Heights Varus Makomanai-Koen, Hikari Heights Varus Tsukisamu-Koen and Varus Cuore Yamanote (the Hikari Heights Properties ) are middle to high-end skilled Nursing Facilities located in Sapporo, Hokkaido, Japan. They consist of fully furnished rooms, with common facilities such as lounges, restaurants and community spaces, and provide easy access to medical care by affiliated hospitals, clinics and dentists. Each Nursing Facility is staffed by nurses and caregivers, whose services are available 24 hours a day, and has an attached clinic which services not just the residents of the facility, but also walk-in patients. The Hikari Heights Properties are operated by Hikari Heights-Varus Co., Ltd., a listed company in Japan, and a well-known and reputable name in Sapporo. Hikari Heights-Varus Co., Ltd. is an experienced and well-established operator, which has been operating senior residences since its incorporation in 1987, and has nine (9) residences under its management. The Hikari Heights Properties have close to full resident occupancy rate, and a majority of their residents are long-term residents, ensuring a continuous and stable flow of income for the operator. The properties are well-maintained and well-equipped with both technology and staff to provide high quality care and services as well as a comfortable and conducive living environment for their residents, who come from not just Hokkaido, but all over Japan. Hikari Heights Varus Fujino is located in the residential Minami area in Sapporo, Hokkaido, a 50-minute drive away from the Sapporo city centre, and has been in operation since 1994. It consists of 144 rooms, and as at March 2013, the occupancy rate is at 80.2%. Majority of its residents are long-term residents, with more than 75% of its residents staying for more than 10 years. Hikari Heights Varus Ishiyama is located further away from the Sapporo city centre than the other Hikari Heights Properties, but is easily accessible via a nearby train station. The property has been operated by Hikari Heights-Varus Co., Ltd. since its completion in 1986. It consists of 119 senior resident rooms, with a 77.9% occupancy rate as at March 2013. A large proportion of its residents stay for more than 15 years.
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Hikari Heights Varus Kotoni is located a short walking distance away from the train station in a residential area in Sapporo, Hokkaido, 20 minutes away from the Sapporo city centre. It has been in operation since 2003, and consists of 281 single and double rooms with an occupancy rate of 86.0%, as at March 2013. Majority of its residents are long-term residents, with 80% staying for five (5) to 10 years. Hikari Heights Varus Makomanai-Koen is located in a residential area just outside the Sapporo city centre, and is a short walking distance from the train station. The Nursing Facility consists of 157 rooms, with an occupancy rate of 84.2% as at March 2013. The Nursing Facility has been operated by Hikari Heights-Varus Co., Ltd. since its completion in 2006. Hikari Heights Varus Tsukisamu-Koen is located in a suburban area on the fringe of the Sapporo city centre, with easy access via a nearby train station. The Nursing Facility consists of 57 rooms with an occupancy rate of 93.2% as at March 2013. The Nursing Facility has been in operation since 1990, and more than 50% of its residents have stayed for more than 15 years. Varus Cuore Yamanote is located in a residential area in Sapporo, Hokkaido, not far from the Sapporo city centre. The Nursing Facility has been in operation since 2005, and has been operated by Hikari Heights-Varus Co., Ltd. from March 2011. The Nursing Facility consists of 59 rooms, and as of December 2012, the facility has a 96.7% occupancy rate, with half its residents staying for one (1) to five (5) years, and the other half staying for five (5) to 10 years. We acquired these six (6) Hikari Heights Properties and Hikari Heights-Varus Co., Ltd. remains as the operator of these Nursing Facilities pursuant to the Master Lease Agreement. Varus Cuore Sapporo-Kita Skilled Nursing Facility
Varus Cuore Sapporo-Kita
Interior View of Varus Cuore Sapporo-Kita
Varus Cuore Sapporo-Kita is a skilled Nursing Facility, located in Sapporo, Hokkaido. The property consists of 126 fully furnished rooms of single and double occupancy, is well-staffed with nurses and counsellors, and provides easy access to clinics and hospitals. Majority of its residents stay 159

for one (1) to five (5) years. As of January 2013, the Nursing Facility has an occupancy rate of 92.2%. Hikari Heights-Varus Co., Ltd. also remains as the operator of this Nursing Facility pursuant to the Master Lease Agreements. Elysion Skilled Nursing Facilities
Elysion Gakuenmae
Elysion Mamigaoka/Elysion Mamigaoka Annex
Elysion Amanohashidate
Elysion Kaichi North
Elysion Kaichi West
Interior View of Elysion Skilled Nursing Facilities
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Elysion Gakuenmae, Elysion Mamigaoka/Elysion Mamigaoka Annex, Elysion Amanohashidate, which are operated by Safety Life Corporation, and Elysion Kaichi North and Elysion Kaichi West, which are operated by Elysion Matsumoto Co. Ltd., (collectively, the Elysion Properties ) are high-end skilled Nursing Facilities with fully furnished rooms, and staffed by nurses and caregivers round-the-clock. The properties all have common facilities such as lounges, cafeteria, shared baths, healthcare rooms, community spaces, and a restaurant that is open to the public. The properties also provide access to medical care by affiliated hospitals, clinics and dentists. The Elysion Group is a group of medical-related companies which operates numerous Nursing Homes under the Elysion name, an established high-end and up-market brand name. In addition to Nursing Homes, the Elysion Group also runs healthcare and nutrition consultation services. Elysion Gakuenmae is located in a residential area in Nara, within walking distance from a train station, with easy access to the highway leading to Naras city centre. It consists of approximately 92 fully furnished single rooms. A large hypermart and a hospital nearby also make it an attractive location for residents. Occupancy rate as at February 2013 is 95.7%. Elysion Mamigaoka/Elysion Mamigaoka Annex is located in a residential area in Kitakatsuragi, Nara, and is the only senior Nursing Facility in the area. It has 160 fully furnished rooms which cater to residents who wish to stay close to their families who live in the vicinity. As such, the property is generally fully occupied, with a long waiting list. Occupancy rate as at February 2013 is 97.6%. Elysion Amanohashidate is a 60-room facility located in Miyazu, Kyoto, next to the famous Amanohashidate scenic coastline. Parks and and facilities such as a shopping centre, train station, hospital and city office are all within walking distance. Occupancy rate as at February 2013 is 98.3%. Elysion Kaichi North and Elysion Kaichi West are located next to each other, in a residential area of Matsumoto, Nagano, a short distance away from the Matsumoto Castle and Castle Park. Elysion Kaichi North consists of 74 single rooms and six (6) double rooms, all fully furnished. Elysion Kaichi West has a total of 29 rooms for residents and four (4) rooms for guests on short stays. Both properties are equipped with common facilities such as a cafeteria, shared bath, consultation room, activity space and event hall. Elysion Kaichi North and Elysion Kaichi West have occupancy rates of 93.0% and 82.8% respectively as at February 2013. The Elysion Properties will be leased to the current operators, Safety Life Corporation and Elysion Matsumoto Co. Ltd., via the Master Lease Agreements. AWARDS AND ACCOLADES As at the Latest Practicable Date, our Group has not been awarded any major awards or accolades. PROSPECTS AND TREND INFORMATION Please refer to the section entitled Market Research Report on the Healthcare Services Industry in China, Japan and Malaysia as set out in Appendix F of this Offer Document for more information.
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ORDER BOOK Due to the nature of our business, we do not maintain an order book. BUSINESS STRATEGIES AND FUTURE PLANS Our business strategies and future plans for the continued growth of our business are as follows: Development, redevelopment and expansion of our existing projects We will develop and complete the development of our existing projects and redevelop, enhance and expand our assets to cater to the growing demands and requirements of the private healthcare sector in the countries in which we operate. We aim to have an outstanding portfolio of assets which includes integrated mixed-use developments with modern, state-of-the-art healthcare facilities and commercial facilities. On a longer term basis, we may also plan to develop large-scale medical parks. We intend to utilise approximately S$10.0 million or approximately 35.6% of the gross proceeds raised by our Company from the Placement for the development and redevelopment of our existing projects. Any balance financing required in respect of the development and redevelopment of our existing projects will be funded through internally generated funds and/or borrowings. Grow and strengthen our presence in our Primary Geographical Markets Our strategy is to continue developing our asset portfolio with an Asian-centric approach. To meet the growing demand for private healthcare services in our Primary Geographical Markets, we will continue to source for and invest in attractive land banks, develop medical real estate, healthcarerelated assets and integrated mixed-use developments and also add healthcare services in the region with the objective to increase future income and enjoy capital growth prospects. The healthcare industry in Japan is mature and established and we believe that the growth of the eldercare sector of the healthcare industry in which we operate will be supported by the ageing population and increased government expenditure on healthcare. We are in a good position to capitalise on such growth. We aim to selectively acquire additional well-designed healthcare assets in Japan and develop new healthcare facilities that will increase our network across Japan and will enable us to obtain leadership position in the high-growth sub-sectors of the healthcare industry in Japan. Our Company will also pursue partnerships with companies and entities to secure land concessions and pertinent healthcare operating licences to operate at locations with statutory constraints. Our Company will endeavour to employ an appropriate mix of debt and equity in financing acquisitions, and utilise interest rate and currency hedging strategies, where appropriate, to optimise risk adjusted returns.
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Pursuant to the Restructuring Novation and the Sale and Purchase Agreements, our Company has obtained the rights from HMD to finalise the acquisition of the four (4) Pending Projects. Details of the Pending Projects of our Group are as follows: Pending Projects Malaysia IHC Commercial Centre and Service Residences in Puteri Harbour, Iskandar, Johor, Malaysia The IHC Iskandar Project will be taken over en blo c upon its completion, targeted to be in 2017, from the main developer, Nusajaya Consolidated Sdn Bhd, a joint venture company between United Malayan Land Bhd and UEM Land Bhd. The IHC Iskandar Project is a 35-storey integrated mixed-use development consisting of a retail podium which houses specialist clinics, dental clinics and other lifestyle services such as aesthetic services; rejuvenation and wellness services and healthcare products; and a service apartment tower located at Puteri Harbour in Iskandar, Johor, Malaysia. The development is located in one of the fastest growing commercial, tourism, administration and educational regions in Malaysia, at a prominent sea-front and in close proximity to Singapore. It is within the heart of the new commercial and recreational district and is strategically and conveniently located near to a ferry terminal, currently being constructed, for ferries to Singapore as well as amenities such as hotels, theme parks, and the Iskandar Convention Centre and Transportation Hub. The development occupies a land area of approximately 27,106 sq m and has a total built-up GFA of approximately 55,700 sq m, consisting of a retail podium which houses medical, lifestyle and retail units and a serviced apartment block. These are strata-titled properties within a mixed development consisting of retail, hotel and service residence development developed by the master developer. Completion of the sale and purchase agreement is targeted for August 2013. We will take possession upon completion of the development of the IHC Iskandar Project in 2017. Summary Location Land lot Land size Total GFA Land use Land tenure Target completion date Plot ratio Interest attributable to us Land cost : : : : : : : : : : Puteri Harbour, Iskandar, Johor, Malaysia HSD 458139, PTD 166949, Mukim of Pulai, Johor Bahru District Approximately 27,106 sq m Approximately 55,700 sq m (strata title) Integrated mixed-use development Freehold 2017 Not applicable 100% Not applicable as it will be strata-titled
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The PRC IHC Maternity Homes & Commercial Centre in Shanghai, the PRC The IHC Shanghai Project is located in Gaoqiao, Pudong New District, Shanghai, the PRC. It consists of three (3) blocks of Dutch-themed architectural designed mixed-use development with a total GFA of 41,663 sq m. The development after undergoing renovations, will house a 86-room maternity home, specialist medical suites specialising in women wellness, wellness medicine, reproductive medicine and aesthetics as well as niche retail shops and a lifestyle and entertainment centre, including a cinema, spa, supermarket, restaurants and other food & beverage outlets, gymnasium and recreational centre. The IHC Shanghai Project is located strategically in the heart of the integrated Holland Village township in Gaoqiao that covers an area of 15 sq km, consisting of high-end villas and apartments. It is a prominent development that is planned to be the commercial and lifestyle hub of the Holland Village township. The target market of the completed development under the IHC Shanghai Project is the affluent PRC residents and expatriate community. The development is accessible and within 30 minutes drive from the financial heart of Shanghai and 40 minutes from Shanghai Pudong International Airport. The IHC Shanghai Project enables our Company to have a foothold in the lucrative and captive wellness cum tourism industry in the PRC. Completion of the acquisition of the IHC Shanghai Project is targeted by end September 2013. Summary Location Land lot Land size Total GFA : : : : 4288 Laiyang Road, Gaoqiao, Pudong New District, Shanghai, the PRC Lot 26, Section , Gaoqiao, Pudong, Shanghai 21,614 sq m 41,663 sq m, comprising mainly: Other floor areas Land use Land tenure Interest attributable to us Asset cost : : : : : Number 2 Building 19,252 sq m Number 3 Building 17,749 sq m Number 4 Building 4,662 sq m
Basement car park connecting the three (3) buildings 15,441 sq m Mixed commercial development 50 years, expiring on 5 August 2053 100% RMB777,000,000
According to the Independent Valuation Report on the properties in the PRC as set out in Appendix C of this Offer Document, on an as-is basis, the market value of the buildings for the IHC Shanghai Project is approximately RMB885.0 million as at 28 February 2013.
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Japan Aqua Villa Kashiihama Ichibankan Aqua Villa Kashiihama Ichibankan is located within a residential area in Fukuoka, Japan and is easily accessible from the Fukuoka city centre via a 20-minute drive. The property is located by the sea, near seaside parks and is also conveniently located near a shopping mall and the train station. Its convenient and ideal location provides a comfortable and relaxing environment suitable for senior residents. The property caters to residents above the age of 60, and is similar to service residences with fully furnished rooms, equipped with additional facilities such as panic call buttons and common areas that include lounges, community activity areas and restaurants. Aqua Villa Kashiihama Ichibankan has been in operation since 2009. The property is operated by Unica Inc., a residential real estate company that deals mainly with the sale and management of condominiums in Kyushu. The land surrounding the property is also owned by Unica Inc., and it is planned that condominiums will be developed on this land, creating a residential cluster in the area. Completion of the acquisition is targeted for August 2013. Kashiihama Senior Residence Kashiihama Senior Residence is expected to be completed in late 2013. Similar to Aqua Villa Kashiihama Ichibankan, it is located within a residential area in Fukuoka, Japan, and is easily accessible from the Fukuoka city centre via a 20-minute drive. The property is located by the sea, near seaside parks, and is also conveniently located near a shopping mall and the train station. Its convenient and ideal location provides a comfortable and relaxing environment suitable for senior residents. The property will cater to residents above the age of 60, and will be similar to service residences with fully furnished rooms, equipped with additional facilities such panic call buttons and common areas that include lounges, community activity areas and restaurants. The property is being developed by Unica Inc., a residential real estate company that deals mainly with the sale and management of condominiums in Kyushu. The land surrounding the property is also owned by Unica Inc., and it is planned that condominiums will be developed on this land, creating a residential cluster in the area. Completion of the acquisition is targeted for January 2014. FOR REFERENCE ONLY , the following table summarises the estimated values of our Pending Projects by the respective valuers on an as if complete and fully leased basis as at 28 February 2013: Local Currency (000) MYR430,000 RMB1,110,000 JPY1,790,000 JPY1,770,000
Pending Projects IHC Iskandar Project IHC Shanghai Project Aqua Villa Kashiihama Ichibankan Kashiihama Senior Residence
SGD (000) 171,957 220,557 23,965 23,697
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The values of the Pending Projects (save for Aqua Villa Kashiihama Ichibankan) are derived by the respective valuers with assumptions that the development of the projects is completed and the projects are fully leased out. The value of Aqua Villa Kashiihama Ichibankan is derived by the Valuer on the assumption that it is a fully operational entity. The Valuers have generally adopted the comparison and investment method in arriving at the gross development values. These above gross development values are estimates and are meant to serve as a guide as to the value of our Pending Projects when these projects are completed and fully leased out or fully operational (as the case may be). We intend to utilise approximately S$8.0 million or approximately 28.5% of the gross proceeds raised by our Company from the Placement for the acquisition of our Pending Projects. Any balance financing required in respect of the acquisition of our Pending Projects will be funded through internally generated funds and/or borrowings. Pipeline Projects Our Company is also in negotiations with two (2) other vendors to respectively acquire (i) the land for the IHC Medical Resort; and (ii) two (2) plots of land in Seri Alam, Johor, Malaysia for the development into a retirement village and an aesthetic and wellness centre. Details of our Pipeline Projects are as follows: Pipeline Projects Land for the IHC Medical Resort Location Dujiangyan, Chengdu City, Sichuan Province, the PRC Seri Alam, Johor, Malaysia Seri Alam, Johor, Malaysia Type of development Medical and wellness resort
Land bank Land bank
Retirement cluster houses Aesthetic and wellness centre
Purchase of new medical equipment and/or upgrade our existing medical equipment We provide healthcare services through the operation of the Wuxi Hospital in the Wuxi City, Jiangsu Province, the PRC. We intend to utilise S$0.5 million or approximately 1.8% of the gross proceeds raised to equip the Wuxi Hospital with new medical equipment and/or upgrade existing medical equipment for its operation. In the event that the allocated proceeds are insufficient, we will finance such shortfall through internally generated funds and/or borrowings. Expansion into attractive and large economies in the Asia-Pacific region Our investment strategy is to invest primarily in real estate in the Asia-Pacific region that are used primarily for medical or healthcare purposes. Our Initial Portfolio will comprise properties that are located in our Primary Geographical Markets. However, we believe that there are attractive opportunities for us to continue to expand into other regions. Where opportunities arise, we will also invest in ASEAN countries such as Singapore, Indonesia, the Philippines and large regional economies such as Australia and India. This may take the form of developing partnerships with suitable strategic partners or developing private development funds through collaborations with third party investors. This will provide us with additional sources of funds to drive our growth. 166

We intend to develop our presence across the markets where we have identified strong growth potential and where we can leverage our existing capabilities, expertise, value creation capabilities and reputation. This will enhance our network and further build our reputation and brand name. We believe that our assets in Japan will provide us with a stable and recurrent source of income, cash flow, capital, technical know-how and operating standards to drive our growth in the emerging Asian markets such as the PRC and the ASEAN countries. Continue to enhance our business operations and service quality and to enhance shareholders value For the properties under our management, we will implement proactive measures to improve our operational performance and maximise the cash flow and the value of such assets. Our ability to attract, retain and develop quality personnel to support our expansion plans is crucial to our growth strategy. We believe that we will be able to tap on the core expertise and networks of our Directors and management in order for us to build and sustain a strong and competent team of personnel and this will allow us to enhance our business operations and expansion plans. We aim to enhance shareholders value by improving capital performance by strategically deploying our capital in emerging economies. This approach involves utilising strong cash flows from the income streams of our current operating assets to drive our expansion in Asia. We may eventually establish listing vehicles, such as real estate investment trusts, which will enable us to monetise part of our asset portfolio.
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INTERESTED PERSON TRANSACTIONS

In general, transactions between our Group and any of its Interested Persons (namely, our Directors or Controlling Shareholders of our Company or the Associates of such Directors or Controlling Shareholders) would constitute Interested Person Transactions for the purposes of Chapter 9 of the Catalist Rules. This section sets out the Interested Person Transactions entered into by our Group for FY2011, FY2012 and up to the Latest Practicable Date (the Relevant Period ) on the basis of each member of our Group (namely, our Company and the Group Subsidiaries) being an Entity At Risk and with Interested Persons being construed accordingly. Save as disclosed in this section and in the section entitled Restructuring Exercise of this Offer Document, there has been no Interested Persons Transaction in the Relevant Period involving our Group which are material in the context of this Placement. PAST INTERESTED PERSON TRANSACTIONS (a) Acquisition of three (3) of our Hong Kong Subsidiaries from Crane Medical Pte. Ltd. On 10 January 2012, three (3) of our subsidiaries acquired the following Hong Kong Subsidiaries from Crane Medical Pte. Ltd.: (i) 100% of the issued share capital of IHC Facilities (Hong Kong), via our wholly-owned subsidiary, IHC Star, for the consideration of S$1.00; 100% of the issued share capital of IHC Services (Hong Kong), via our wholly-owned subsidiary, IHC Peak, for the consideration of S$1.00; and
(ii)
(iii) 100% of the issued share capital of IHC Assets (Hong Kong), via our wholly-owned subsidiary, IHC Summit, for the consideration of S$1.00. Crane Medical Pte. Ltd. is an indirectly-held wholly-owned subsidiary of HMC. The consideration for the acquisitions was based on a willing-buyer, willing-seller basis and were entered into on an arms length basis and on normal commercial terms, taking into account the net assets of the relevant subsidiaries. (b) Personal and corporate guarantees provided for Dallacy Loan Seasons Residences had on 13 June 2011, 7 June 2012 and 30 November 2012 entered into a convertible loan agreement and two supplemental loan agreements respectively with Dallacy for the Dallacy Loan, of which S$11.25 million was utilised by IHC Shanghai for the acquisition of the buildings for the IHC Shanghai Project while S$2.75 million was utilised for the acquisition of the land for the IHC KLCC Project. The Dallacy Loan was secured by (i) personal guarantees from our Executive Chairman and Group President, Dr. Jong Hee Sen and our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew; (ii) corporate guarantee from IHC Shanghai to Dallacy; and (iii) corporate guarantee granted by IHC KLCC (Singapore) to Dallacy.
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As part of the Restructuring Exercise, Seasons Residences and Dallacy have entered into a third supplemental and restructuring loan agreement dated 28 May 2013 whereby it was agreed that the Dallacy Loan will be restructured by novating the S$11.25 million utilised by IHC Shanghai to IHC Holdings (Hong Kong). A deed of novation between Seasons Residences, IHC Holdings (Hong Kong) and Dallacy dated 28 May 2013 was entered into to give effect to that intention. On the same date, the personal guarantees from our Executive Chairman and Group President, Dr. Jong Hee Sen and our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew and the corporate guarantees, granted by IHC KLCC and IHC Shanghai have been released. As no fees were paid to our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew for the provision of the Personal Guarantees, the above arrangements were not carried out on an arms length basis but are beneficial to our Group. Please refer to the sections entitled Interested Person Transactions On-going Interested Person Transactions, Capitalisation and Indebtedness, Restructuring Exercise and Interested Persons Transactions On-going Interested Persons Transactions of this Offer Document for more details on the Dallacy Loan. (c) Securities provided for the Second Enterprise Loan IHC Japan had on 19 April 2013 and 29 May 2013 entered into a loan agreement and a supplemental loan agreement respectively with The Enterprise Fund II Ltd and The Enterprise Fund III Ltd (the Lenders ) for the Second Enterprise Loan. As at the Latest Practicable Date, a total amount of S$25 million has been drawn down and is currently outstanding. The Second Enterprise Loan was secured by (i) a corporate guarantee from HMD to the Lender; (ii) a charge on the IHC Japans share held by HMD; and (iii) a joint and several guarantee from our Executive Chairman and Group President, Dr. Jong Hee Sen, and our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew. Pursuant to the supplemental loan agreement dated 29 May 2013, the securities given for the Second Enterprise Loan (save for the joint and several guarantee from our Executive Chairman and Group President, Dr. Jong Hee Sen, and our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew) were released and discharged and was replaced by a corporate guarantee from our Company and a fresh charge over the share in IHC Japan held by our Company. As no fees were paid to the guarantors for the provision of security, the above arrangements were not carried out on an arms length basis but are beneficial to our Group. (d) Service Fees paid to HMD by our Group for project management services In September 2011 and January 2012, HMD entered into separate service agreements with Seasons Residences and ICWCH for the provision of project management services by HMD (the HMD Management Services ) to these subsidiaries. The HMD Management Services include, inter alia , project planning and organisation and the securing and managing of project resources as may be required, from time to time.
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The aggregate amounts paid by the above subsidiaries in connection with the HMD Management Services during the Relevant Period were as follows: 1 January 2013 to the Latest Practicable Date
(S$000) Amount paid by Seasons Residences and ICWCH to HMD for the HMD Management Services
FY2011
FY2012
27
370
150
HMD has since ceased providing the HMD Management Services as of 30 April 2013. The fees payable for the HMD Management Services were based on cost plus mark-up basis and were carried out on an arms length basis and the HMD Management Services were provided on the basis that Seasons Residences and ICWCH were wholly-owned subsidiaries of HMD at the relevant time. The largest amount outstanding during the Relevant Period was S$547,000. We do not expect to enter into similar transactions with HMD in the future following our admission to the Official List of the SGX-ST. In addition to the above, there were service fees paid to HMD by our Group for the provision of advisory services in relation to setting up of medical facilities in the potential acquisition targets of our Group. These services were provided and charged by HMC (the HMC Management Services) to HMD of which HMD recharged to Seasons Residences and ICWCH. The aggregate amounts paid by the above subsidiaries in connection with the HMC Management Services for the Relevant Period were as follows: 1 January 2013 to the Latest Practicable Date
(S$000) Amount paid by Seasons Residences and ICWCH to HMD for the HMC Management Services
FY2011
FY2012
401
409
128
HMC has since ceased providing the HMC Management Services as of 30 April 2013. The payment of fees for the HMC Management Services was based on a willing-buyer, willing-seller basis and was entered into on an arms length basis and on normal commercial terms and the HMC Management Services were recharged to Seasons Residences and ICWCH on the basis that Seasons Residences and ICWCH were wholly-owned subsidiaries of HMD at the relevant time. The largest amount outstanding during the Relevant Period was S$1,003,000. We do not expect to enter into similar transactions with HMC in the future following our admission to the Official List of the SGX-ST.
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ON-GOING INTERESTED PERSON TRANSACTIONS (a) Payment of Guarantee Fees to IHC Japan in respect of TMK Bond issued to IHC TMK (Japan) IHC TMK (Japan) had on 25 April 2013 entered into a bond agreement with Deutsche Bank AG, Tokyo Branch, pursuant to which IHC TMK (Japan) issued a junior TMK bond of JPY3.3 billion (the TMK Bond ) to Deutsche Bank AG, Tokyo Branch, for a period of three (3) years, for the purpose of the acquisition of the 12 Nursing Facilities in Japan. As a form of credit enhancement and to provide a one-off financial support to our Company for its acquisition of the 12 Nursing Facilities in Japan, HMD, pursuant to an agreement entered into with IHC Japan on 25 April 2013, agreed to pay a total sum of JPY519.75 million (amounting to the 9% coupon rate per annum on the TMK Bond for a period of 21 months) (the Guarantee Fees ) to IHC Japan. The Guarantee Fees shall be paid to IHC Japan on a quarterly basis over seven (7) quarters commencing from 15 July 2013. Accordingly, our Group will incur an effective coupon rate of 4.7% per annum on the TMK Bond for the period of 21 months. The obligation to repay the TMK Bond still lies with IHC TMK (Japan). In the event that HMD is not able to pay the Guarantee Fees, our Group will have to bear an additional interest expense of JPY519.75 million for the period of 21 months. HMD has on 17 May 2013 undertaken to pay for an additional three (3) months of the 9% coupon rate per annum on the TMK Bond, if necessary. The payment of the Guarantee Fees by HMD is not on an arms length basis as no fee or compensation has been paid or is payable by us to HMD for such payment. However, our Directors are of the view that this payment of the Guarantee Fees by HMD is beneficial to our Group. (b) Payment of Profit Share to Dallacy in respect of the Dallacy Loan Seasons Residences had on 13 June 2011, 7 June 2012 and 30 November 2012 entered into a convertible loan agreement and two supplemental loan agreements respectively with Dallacy for the Dallacy Loan, of which S$11.25 million was utilised by IHC Shanghai for the IHC Shanghai Project while S$2.75 million was utilised by Seasons Residences for the IHC KLCC Project. As part of the Restructuring Exercise, Seasons Residences and Dallacy have entered into a third supplement and restructuring agreement dated 28 May 2013 to give effect to the intention of the parties to novate the S$11.25 million utilised for the IHC Shanghai Project to IHC Holdings (Hong Kong) (the Dallacy Novation Exercise ). As a condition (amongst others) to the Dallacy Novation Exercise, in addition to a corporate guarantee entered into by IHC in favour of Dallacy, our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew and our Executive Chairman and Group President, Dr. Jong Hee Sen, have entered into a profit sharing agreement dated 28 May 2013 in which they have agreed and undertaken to pay to Dallacy an amount of MYR15,300,000, which represents the profit share in relation to the IHC KLCC Project and IHC Shanghai Project, (the Profit Share ) no later than six (6) months from the listing and quotation of the Companys Shares on Catalist.
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The payment of the Profit Share by our Controlling Shareholders, Fan Kow Hin and Aathar Ah Kong Andrew, and our Executive Chairman and Group President, Dr. Jong Hee Sen, is not on an arms length basis as no fee or compensation has been paid or is payable by us to Fan Kow Hin, Aathar Ah Kong Andrew and Dr. Jong Hee Sen. However, our Directors are of the view that this payment of the Profit Share, which is a one-off transaction and is not expected to recur, is beneficial to the interests of our Group or our minority Shareholders. (c) Assignment of shares of HMC in respect of the First Enterprise Loan HMD had on 15 June 2011 entered into a loan agreement with The Enterprise Fund II Ltd (the Lender ) for a loan facility of S$15 million (the Enterprise Loan ), repayable on 22 June 2013. The interest rate on the First Enterprise Loan is 12% per annum of the disbursed and outstanding amount, computed on a daily basis. As at the Latest Practicable Date, a total amount of S$10 million has been drawn down and is currently outstanding. As part of the Restructuring Exercise, HMD novated the First Enterprise Loan to our Company, pursuant to a novation agreement entered into with the Lender and our Company, amongst others, on 29 May 2013 (the First Enterprise Loan Novation ). The First Enterprise Loan shall then be repayable by our Company within seven (7) days of the admission of the Company to the Official List of the SGX-ST, or on 1 January 2014, whichever is earlier. Prior to the First Enterprise Loan Novation, the First Enterprise Loan had been secured by, amongst others, charges over the shares of HMC (the Charged Shares ) held by our Executive Chairman and Group President, Dr. Jong Hee Sen, One Organisation Limited (an associate of our Controlling Shareholder, Fan Kow Hin) and HMC (the Security Providers ). As part of the First Enterprise Loan Novation, the Security Providers have entered into a deed of undertaking dated 29 May 2013 in favour of the Lender, agreeing and undertaking to secure our Companys obligations under the First Enterprise Loan with the Charged Shares. Subsequently, the charges over the shares of HMC held by our Executive Chairman and Group President, Dr. Jong Hee Sen and One Organisation Limited were endorsed in the register of charges. The provision of the security of the Charged Shares for the First Enterprise Loan by the Security Providers is not on an arms length basis as no fee or compensation has been paid or is payable by us to the Security Providers. However, our Directors are of the view that this provision of the security of the Charged Shares, which is one-off and is not expected to recur, is beneficial to the interests of our Group or our minority Shareholders. (d) Payment of Investor Returns to the Lenders in respect of the Second Enterprise Loan IHC Japan had on 19 April 2013 and 29 May 2013 entered into a loan agreement and a supplemental loan agreement respectively with the Lenders for the Second Enterprise Loan. HMD has provided an undertaking to the Lenders, pursuant to the supplemental loan agreement, to pay an investors return to the Lenders of approximately S$3.1 million (the Investors Return ) on the outstanding principal value of the Second Enterprise Loan no later than 15 days after the listing and quotation of the Companys Shares on Catalist.
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The payment of the Investors Return by HMD is not on an arms length basis as no fee or compensation has been paid or is payable by us to HMD for such payment. However, our Directors are of the view that this payment of the Investors Return, which is a one-off transaction and is not expected to recur, is beneficial to the interests of our Group or our minority Shareholders. (e) Personal Guarantees provided by our Executive Director, Dr. Jong Hee Sen, and our Controlling Shareholders, Fan Kow Hin (1) and Aathar Ah Kong Andrew (2) for banking facilities with financial and non-financial institutions Our Groups current bank borrowings and banking facilities are secured by personal guarantees provided by our Executive Director, Dr. Jong Hee Sen, and our Controlling Shareholders, Fan Kow Hin (1) and Aathar Ah Kong Andrew (2). Information on the guarantees currently provided by such persons is set out below:
Details of Guarantee and Facilities Largest Amount Guaranteed Amount Outstanding as at LPD
Institution/ Borrower United Overseas Bank (Malaysia) Bhd/ Seasons Residences The Enterprise Fund II Ltd/ the Company
Guarantee provided by Dr. Jong Hee Sen, Fan Kow Hin and Aathar Ah Kong Andrew
Date of Guarantee 3 October 2012
MYR57,000,000 MYR57,000,000 Joint and several all-monies guarantee for loan facility of MYR114,500,000 Joint and several all-monies guarantee for loan facility of S$15,000,000 Joint and several all-monies guarantee for loan facility of S$25,000,000 Joint and several all-monies guarantee for loan facility of S$6,250,000 S$10,000,000 S$10,000,000
Dr. Jong Hee Sen, Fan Kow Hin and Aathar Ah Kong Andrew Dr. Jong Hee Sen, Fan Kow Hin and Aathar Ah Kong Andrew
13 June 2011
The Enterprise Fund II Ltd and The Enterprise Fund III Ltd/ IHC Japan Hong Leong Finance Limited (3)
19 April 2013
S$25,000,000
S$25,000,000
Dr. Jong Hee Sen and Fan Kow Hin
14 May 2013
S$6,250,000
Notes: (1) (2) (3) Fan Kow Hin is the sole shareholder of Golden Cliff, a Controlling Shareholder of our Company. Aathar Ah Kong Andrew is the sole shareholder of Real Empire, a Controlling Shareholder of our Company. The loan from Hong Leong Finance Limited will be available for draw down upon the admission of our Company to the Official List of the SGX-ST.
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The largest aggregate amount guaranteed in respect of the aforesaid facilities obtained by our Group for the Relevant Period was approximately S$72,684,000. As at the Latest Practicable Date, the aggregate amount outstanding, in respect of the aforesaid facilities obtained by our Group and for which guarantees have been extended by the relevant Interested Persons stated in the above table was approximately S$66,434,000. The provision of the aforesaid guarantees was not on an arms length basis as no consideration was paid to Dr. Jong Hee Sen, Fan Kow Hin and Aathar Ah Kong Andrew for the provision of the guarantees. The interest rates on the interest-bearing facilities range between 2.25% above the banks prevailing one (1) month effective cost of funding per annum and 12% per annum, or such other rates as the respective financial institutions/finance companies may determine from time to time. Our Company intends to procure the release and discharge of the above guarantees from the relevant financial institutions/finance companies after our admission to the Official List of the SGX-ST by substituting the same with other securities acceptable to the financial institutions/finance companies. In the event that the financial institutions/finance companies do not release our Director and Controlling Shareholders from their obligations under the guarantees and we are unable to secure alternative bank facilities on similar terms, they will continue to provide the relevant guarantees until such time when we are able to secure suitable alternative facilities from other financial institutions/finance companies similar to the current facilities. GUIDELINES AND REVIEW PROCEDURES FOR ON-GOING AND FUTURE INTERESTED PERSON TRANSACTIONS Our Audit Committee will review and approve all Interested Person Transactions to ensure that they are on normal commercial terms and on arms length basis, that is, the transactions are transacted on terms and prices not more favourable to the Interested Persons than if they were transacted with a third party and are not prejudicial to the interests of our Group or our Shareholders in any way. To ensure that all future Interested Person Transactions are carried out on normal commercial terms and will not be prejudicial to the interests of our Group or our minority Shareholders, the following procedures will be implemented by our Group: (a) When purchasing any products or engaging any services from an Interested Person, two (2) other quotations from non-interested persons will be obtained for comparison to ensure that the interests of our Group or our minority Shareholders are not disadvantaged. The purchase price or fee for the products or services shall not be higher than the most competitive price or fee of the two (2) other quotations from non-interested persons. In determining the most competitive price or fee, all pertinent factors, including but not limited to quality, requirements, specifications, delivery time and track record will be taken into consideration; When selling any products or supplying any services to an Interested Person, the price or fee and terms of two other successful transactions of a similar nature with non-interested persons will be used as comparison to ensure that the interests of our Group or our minority
(b)
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Shareholders are not disadvantaged. The price or fee for the supply of products or services shall not be lower than the lowest price or fee of the two (2) other successful transactions with non-interested persons; (c) When renting properties from or to an Interested Person, appropriate steps will be taken to ensure that such rent is matched with 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 (where necessary). The rent payable shall be based on the most competitive market rental rates of similar properties in terms of size and location, based on the results of the relevant enquiries; Where it is not possible to compare against the terms of other transactions with unrelated third parties and where the products and/or services may be purchased only from an Interested Person, the Interested Person Transaction will be approved by our Group President or an equivalent of the relevant company in our Group, who has no interest in the transaction, in accordance with our Groups usual business practices and policies. In determining the transaction price payable to the Interested Person for such products and/or service, factors such as, but not limited to, quantity, requirements and specifications will be taken into account; and In addition, we shall monitor all Interested Person Transactions entered into by us and categorise these transactions as follows: (i) a Category 1 Interested Person Transaction is one where the value thereof is in excess of 3.0% of the NTA of our Group; and a Category 2 Interested Person Transaction is one where the value thereof is below or equal to 3.0% of the NTA of our Group.
(d)
(e)
(ii)
All Category 1 Interested Person Transactions must be approved by our Audit Committee prior to entry whereas Category 2 Interested Person Transactions need not be approved by our Audit Committee prior to entry but shall be reviewed at least on a quarterly basis by our Audit Committee. Our Audit Committee will review all Interested Person Transactions, if any, on a quarterly basis to ensure that they are carried out on an arms length basis and in accordance with the procedures outlined above. It will take into account all relevant non-quantitative factors. Such review includes the examination of the transaction and its supporting documents or such other data deemed necessary by our Audit Committee. Our Audit Committee shall, when it deems fit, have the right to require the appointment of independent sources, advisers or valuers to provide additional information pertaining to the transaction under review. In the event that a member of our Audit Committee is interested in any such transaction, he will abstain from participating in the review and approval process in relation to that particular transaction. Our Company shall prepare all the relevant information to assist our Audit Committee in its review and will keep a register to record all Interested Persons Transactions. The register shall also record the basis for entry into the transactions, including the quotations and other evidence obtained to support such basis. Disclosure will be made in our Companys annual report of the aggregate value of Interested Person Transactions during the relevant financial year under review and in the subsequent annual reports for the subsequent financial years of our Company. 175

Internal auditors will be appointed and their internal audit plan will incorporate a review of all the Interested Person Transactions at least on an annual basis. The internal audit report will be reviewed by the Audit Committee to ascertain whether the guidelines and procedures established to monitor Interested Person Transactions have been complied with. Our Audit Committee shall also review from time to time such guidelines and procedures to determine if they are adequate and/or commercially practicable in ensuring that Interested Person Transactions are conducted on normal commercial terms, on an arms length basis and do not prejudice our interests and the interests of our Shareholders. Further, if during these periodic reviews by our Audit Committee, our Audit Committee is of the opinion that the guidelines and procedures as stated above are not sufficient to ensure that Interested Person Transactions will be on normal commercial terms, on an arms length basis and not prejudicial to our interests and the interests of our Shareholders, our Audit Committee will adopt such new guidelines and review procedures for future Interested Person Transactions as may be appropriate. In addition, our Audit Committee will include the review of Interested Person Transactions as part of the standard procedures while examining the adequacy of our internal controls. Our Board will also ensure that all disclosure, approval and other requirements on Interested Person Transactions, including those required by prevailing legislation, the Catalist Rules and accounting standards, are complied with. In addition, such transactions will also be subject to Shareholders approval if required by the Catalist Rules. POTENTIAL CONFLICTS OF INTEREST HMC Group Our Controlling Shareholders, Fan Kow Hin (sole shareholder and director of Golden Cliff) and Aathar Ah Kong Andrew (sole shareholder and director of Real Empire), are substantial shareholders of HMC. In addition, Dr. Jong Hee Sen, our Executive Chairman and Group President, is a non-executive director of HMC and Siew Teng Kean, our Lead Independent Director, is an independent director of HMC. Our Shareholder, HMC, who holds approximately 7.95% of our Companys issued share capital immediately after the Placement, is in the business of providing outpatient medical healthcare services. HMC is currently listed on Catalist. Even though HMC is also in the healthcare services industry, our Directors are of the opinion that the current business of the HMC Group is not in competition with our Group based on the following reasons: (a) The HMC Group is principally engaged in the business of providing outpatient medical services in small format clinics and/or medical centres. The small format clinics typically have one (1) or two (2) doctors in each of the clinics. Our Group, on the other hand, is principally engaged in the business of providing and investing in healthcare-related assets and developing large format medical real estate and integrated mixed-use developments; The HMC Groups revenue is mainly derived from clinics outpatient consultation fees while our Groups revenue will mainly be derived from rental income from the healthcare-related facilities and hospitals inpatient treatment fees; The HMC Group of approximately 60 clinics, which it owns and operates, are principally located in Singapore. In Singapore, the HMC Group is also a manager of approximately 40 176
(b)
(c)

clinics. In Shanghai and Hangzhou, the PRC, HMC only manages approximately 10 medical and dental clinics. Most of the clinics are leased from third parties, and HMC does not own any of the properties. Our Groups facilities are located in Japan, Malaysia and Wuxi and Chengdu, the PRC; and (d) Other than the medical and dental clinics in Shanghai, the HMC Group does not hold any interests in medical developments or integrated hospitals in the PRC, Japan and Malaysia that may compete with the business of our Group.
Notwithstanding the above, the HMC Group may in future expand into businesses that may compete with our Group in the locations that our Group is already in. Conversely, we may expand into jurisdictions in which HMC may already, or in the future, have interests in competing businesses. In this regard, we believe that any potential conflicts of interests arising from the above relationship between us and HMC are mitigated by the following: (a) HMC has on 19 March 2013 provided an undertaking to PPCF that it shall, within twelve (12) months upon the admission of our Company to the Official List of the SGX-ST, dispose of all its interests in the Shares of our Company; Dr. Jong Hee Sen, Fan Kow Hin and Aathar Ah Kong Andrew have on 3 May 2013 provided separate undertakings to PPCF that they shall abstain from voting on any shareholders resolutions in relation to HMCs shareholdings in our Company. Fan Kow Hin has also undertaken to abstain from the deliberation and voting on all directors resolutions of HMC in respect of HMCs shareholdings in our Company; Neither Fan Kow Hin nor Aathar Ah Kong Andrew will have any executive role in our Group nor are they involved in the day-to-day management of our Group; Dr. Jong Hee Sen has on 22 April 2013 provided an undertaking to our Company that he shall resign as director of HMC and of all the relevant subsidiaries of HMC (save for the PRC subsidiaries of HMC) with immediate effect upon the admission of our Company to the Official List of the SGX-ST; Dr. Jong Hee Sen has on 22 April 2013 provided an undertaking to our Company that he shall resign, or initiate the relevant applications and/or filings with the authorities in the PRC to resign as director of all PRC subsidiaries of HMC and all HMC related companies with immediate effect upon the admission of our Company to the Official List of the SGX-ST; and Siew Teng Kean has on 26 March 2013 provided an undertaking to our Company that he shall resign as director of HMC with immediate effect upon the admission of our Company to the Official List of the SGX-ST.
(b)
(c)
(d)
(e)
(f)
Accordingly, our Group and the HMC Group shall be separate listed groups with certain common shareholders. Our Group and the HMC Group will not have common board members and shall be managed by separate and distinct management teams.
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In addition, our Group will put in the place following procedures to monitor any interested person transactions with the HMC Group: (a) Our Audit Committee will, following the admission of our Company to the Official List of the SGX-ST, undertake the following additional responsibilities: (i) review and assess from time to time whether additional processes are required to be put in place to manage any material conflicts of interest within our Group and propose, where appropriate, the relevant measures for the management of such conflicts; and review and resolve all conflicts of interest matters referred to it;
(ii) (b)
Upon the admission of our Company to the Official List of the SGX-ST, we will be subject to the SGX-ST Catalist Rules on interested person transactions. The objective of these rules is to ensure that our interested person transactions do not prejudice the interests of our Shareholders as a whole. These rules require us to make prompt announcements, disclosures in our annual report and/or seek Shareholders approval for certain material interested person transactions. Our Audit Committee may also have to appoint independent financial advisers to review such interested person transactions and opine on whether such transactions are fair and reasonable to us, and not prejudicial to our interests and the interests of our minority Shareholders; Our Audit Committee will review all interested person transactions for potential conflicts of interests; and Our Group has established an annual internal audit plan which establishes the guidelines and review procedures to monitor interested person transactions.
(c)
(d)
HMD Our Controlling Shareholders, Fan Kow Hin (the sole shareholder and director of Golden Cliff) and Aathar Ah Kong Andrew (the sole shareholder and director of Real Empire), are also controlling shareholders of HMD. In addition, Dr. Jong Hee Sen, our Executive Chairman and Group President, Yip Yuen Leong, our Executive Director and President, Integrated Medical Real Estate, and Teo Cheng Hiang Richard, our Independent Director, were also directors of HMD ( HMD Directors ). Our Financial Controller, Tan Yong Kwang was the company secretary for HMD. HMD has on 22 April 2013 provided an undertaking to our Company that save for acting as the holding company for the remaining subsidiaries of HMD after the Restructuring Exercise, HMD shall cease all its business activities from the date of completion of the Restructuring Exercise. The undertaking further provides that HMD shall commence winding-up proceedings upon the sale of its remaining subsidiaries to our Company in accordance with the Sale and Purchase Agreements, and subject to the aforesaid, HMD shall not be involved in any business that may compete with our Group. The HMD Directors had on 22 April 2013 provided undertakings to resign as directors of HMD with immediate effect upon the completion of the Restructuring Exercise. Our Financial Controller, Tan Yong Kwang had on 22 April 2013 provided an undertaking to resign as the company secretary of HMD with immediate effect upon the completion of the Restructuring Exercise. On 31 May 2013, Dr. Jong Hee Sen, Yip Yuen Leong, Teo Cheng Hiang Richard and Tan Yong Kwang had resigned from their respective positions in HMD. 178

Pathway Biomed Ltd. Our Controlling Shareholders, Fan Kow Hin (sole shareholder and director of Golden Cliff) and Aathar Ah Kong Andrew (sole shareholder and director of Real Empire), are also shareholders of Pathway Biomed Ltd. ( Pathway ). In addition, Wong Ong Ming Eric, our Non-executive Director, and our Controlling Shareholder, Fan Kow Hin, are also directors of Pathway. Pathway is in the business of manufacturing and supplying bio-medical products, including diagnostic test kits for outpatient usage. Fan Kow Hin and Wong Ong Ming Eric had on 15 May 2013 provided an undertaking to our Company that Pathway shall not be involved in any business that may compete with our Group. SBCC Womens Clinic Pte. Ltd. Wong Ong Ming Eric, our Non-executive Director, is the director and sole shareholder of SBCC Womens Clinic Pte. Ltd ( SBCC Clinic ). SBCC Clinic is in the business of providing obstetrics and gynaecology medical services. It operates two (2) outpatient clinics in Singapore. Wong Ong Ming Eric had on 26 March 2013 provided an undertaking to our Company that SBCC Clinic shall not be involved in any business that may compete with our Group. Healthway Medical Enterprises Pte Ltd Wong Ong Ming Eric, our Non-executive Director, is a non-executive director of Healthway Medical Enterprises Pte Ltd ( HME ). HMEs principal business activities involve the provision of general and specialist medical services. Wong Ong Ming Eric had on 26 March 2013 provided an undertaking to our Company that HME shall not be involved in any business that may compete with our Group. Save as disclosed above and in the section entitled Interested Person Transactions of this Offer Document, none of our Directors, Controlling Shareholders or any of their Associates has an interest, direct or indirect in: (a) (b) any transaction to which our Group was or is to be a party; any entity carrying on the same business or dealing in similar services which competes materially and directly with the existing business of our Group; and any enterprise or company that is our Groups customer or supplier of goods and services.
(c)
Save as disclosed in the sections entitled Interested Person Transactions and Directors, Management and Staff Service Agreements of this Offer Document, none of our Directors has any interests in any existing contract or arrangement which is significant in relation to the business of our Company and our subsidiaries, taken as a whole.
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Interests of Experts No expert is interested, directly or indirectly, in the promotion of, or in any property or assets which have, within the two (2) years preceding the date of this Offer Document, been acquired or disposed of by or leased to our Company or its subsidiaries or are proposed to be acquired or disposed of by or leased to our Company or its subsidiaries. No expert (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 the shares of our subsidiaries; or (iii) has a material economic interest, whether direct or indirect, in our Company, including an interest in the success of the Placement. Interests of Manager, Sponsor and Joint Placement Agent In the reasonable opinion of our Directors, the Manager, Sponsor and Joint Placement Agent, PPCF, does not have a material relationship with our Company save as disclosed below and in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document: (a) (b) PPCF is the Manager, Sponsor and Joint Placement Agent in relation to the Listing; PPCF will be the continuing Sponsor of our Company for a period of three (3) years from the date our Company is admitted and listed on Catalist; and Pursuant to the Management Agreement and as part of PPCFs management fees as the Manager and Sponsor, our Company issued and allotted to PPCF 3,125,000 new Shares representing 0.20% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Upon completion of the relevant moratorium period as set out in the section entitled Shareholders Moratorium of this Offer Document, PPCF will be disposing of its shareholding interest in our Company at its discretion.
(c)
Interests of Joint Placement Agents In the reasonable opinion of our Directors, the Joint Placement Agents, DMG and SAC Capital, do not have a material relationship with our Company, save as DMG and SAC Capital are the Joint Placement Agents of the Placement and as disclosed in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document.
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DIRECTORS, MANAGEMENT AND STAFF

DIRECTORS Our Board of Directors is entrusted with the responsibility for the overall management of our Group. The particulars of each of our Directors are set out below: Country of Principal Residence Singapore
Name Dr. Jong Hee Sen
Age 53
Address 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086
Position Executive Chairman and Group President
Yip Yuen Leong
48
Singapore
Executive Director and President, Integrated Medical Real Estate Non-executive Director
Wong Ong Ming Eric
65
Singapore
Siew Teng Kean
54
Singapore
Lead Independent Director
Ong Lay Khiam
65
Singapore
Independent Director
Teo Cheng Hiang Richard
58
Singapore
Independent Director
The business and working experience and areas of responsibility of our Directors are set out below: Dr. Jong Hee Sen was appointed as our Director on incorporation and is our Executive Chairman and Group President, primarily responsible for leading the overall strategic development of our Group and providing management leadership in our business. Prior to joining us, Dr. Jong Hee Sen held senior positions in various private firms. Dr. Jong Hee Sen was an executive director and the president of HMC from 2007 to 2010, where HMC grew from a small primary care medical chain in Singapore to become a provider of a wider range of primary and specialists healthcare out-patient services, providing leadership in the Singapore operations as well as expansion into the PRC. Between 2000 and 2006, Dr. Jong Hee Sen was a director overseeing technology development and innovations with Universal Gateway International group of companies providing real estate and technology services. From 1996 to 2000, he was with the Government of Singapore Investment Corporation and was responsible for real estate investments and fund management in Asia markets and held the position of vice president of GIC Real Estate Pte Ltd when he left in 2000. 181

Dr. Jong Hee Sen holds a Doctor of Philosophy in Business Administration and a Master of Science (Psychology) from the University of Michigan, Ann Arbor, USA, a Master of Business Administration from the University of Wisconsin, Madison, USA and a Bachelor of Science from the National University of Singapore. Yip Yuen Leong was appointed as our Executive Director and President, Integrated Medical Real Estate upon our incorporation and is primarily responsible for the development, operation and control of our medical assets, healthcare-related assets and integrated mixed-use developments. Yip Yuen Leong has over 20 years of real estate experience including asset management, property development and property management, leasing and marketing. Prior to joining us, Yip Yuen Leong was with Pacific Star Asset Management from 2008 to 2012, where he last held the position of executive vice president, and was responsible for maximising asset returns, enhancing asset management controls, and portfolio management of their real estate assets. From 2003 to 2008, Yip Yuen Leong was with Singapore Airlines Limited, during which he last held the position of vice president of the properties department, and was responsible for real estate development and infrastructure management, property acquisition and divestment, property management and real estate leasing. Yip Yuen Leong holds a Master of Applied Finance from the University of Adelaide and a Master of Science (Project Management) and a Bachelor of Engineering (Mechanical) from the National University of Singapore. Wong Ong Ming Eric is our Non-executive Director and was appointed to our Board on 17 May 2013. Wong Ong Ming Eric started his career as a police officer, holding the highest rank of acting assistant superintendent, with the Singapore Police Force from 1967 to 1978. From 1978 to 1983, he was a senior personnel executive in charge of industrial relations, personnel welfare and plant security, at Fairchild Semiconductor (S) Pte Ltd. Thereafter, he was with SGS-Thomson Microelectronics Singapore from 1983 to 1990, where he was the personnel and security director responsible for the full spectrum of human resource management of the company. From 1990 to 2003, Wong Ong Ming Eric was with TECH Semiconductor (S) Pte Ltd as a human resource and security director where he was responsible for human resource management and plant security. He then left to assume the position of human resource and security director with Universal Gateway International Pte Ltd from 2004 to 2005. From 2005 to 2007, Wong Ong Ming Eric was a director for central services, responsible for human resource and general management functions, with Healthway Medical Group. Wong Ong Ming Eric is currently a non-executive director of Healthway Medical Enterprises Pte Ltd (since 1 December 2010) and Pathway Biomed Ltd. (since 31 December 2010) and the sole proprietor and director of SBCC Womens Clinic Pte Ltd (since 22 March 2011). Wong Ong Ming Eric obtained a Higher School Certificate in 1966. Thereafter, he attended numerous in-house and external management courses and workshops as well as overseas trainings. Siew Teng Kean is our Lead Independent Director and was appointed to our Board on 17 May 2013. Siew Teng Kean worked in 1997 as a senior analyst with Peregrine Securities Singapore Pte Ltd. He was a managing director at Temasek Holdings (Private) Ltd where he worked from 1998 to 2006. He is currently a senior director with UOB Asset Management, having joined in 2006, and heads its institutional business business development department. Siew Teng Kean sits as a non-executive director on the board of HMC.
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Siew Teng Kean graduated from the University of Adelaide with a Bachelor of Engineering in 1982 and obtained a Master of Science from the National University of Singapore in 1988. In 1990, he obtained a Master of Science in Engineering from the University of Michigan. Siew Teng Kean was conferred the Chartered Financial Analyst charter from the CFA Institute in 1997. Ong Lay Khiam is our Independent Director and was appointed to our Board on 17 May 2013. Ong Lay Khiam has worked in the banking and finance industry in Singapore since 1971, principally as a commercial banker. Ong Lay Khiam has held various positions in local financial institutions during his long career, including the positions of vice president, National Banking Group, DBS Bank; director and executive vice president, Tat Lee Bank; general manager, Corporate Banking, Keppel TatLee Bank; and executive vice president, Hong Leong Finance. After retiring from Hong Leong Finance in 2007, he joined Nanyang Technological University as the inaugural executive director, Lien Ying Chow Legacy Fellowship but left the post in 2008 to resume his banking career at UBS AG, Wealth Management. He is currently an executive director of UBS AG, Wealth Management. He was also an Adjunct Associate Professor attached to the Nanyang Technoprenuership Centre of the University from 2007 to 2009. Ong Lay Khiam has served 12 years as a council member of the Singapore Chinese Chamber of Commerce and Industry (1987 1999) and is currently an honorary council member of the Chamber. From 1991 to 1999, he was a member of the Nanyang Technological University Council. He was conferred the Friend of Labour award by the National Trade Union Congress (NTUC) in 1990. Ong Lay Khiam graduated with First Class Honours in Accountancy from Nanyang University in 1971. He also obtained a Masters degree in Accounting and Finance from the London School of Economics and Political Science, University of London in 1974 and is a member of the Institute of Certified Public Accountants of Singapore. Teo Cheng Hiang Richard is our Independent Director and was appointed to our Board on 17 May 2013. Teo Cheng Hiang Richard has more than 30 years of experience in managing funds in senior fiduciary positions in the Government of Singapore Investment Corporation and for large blue chip financial institutions and ultra high net worth individuals. His experience extends across North America, Europe and Asia, where he was responsible for funds, investment and asset management, corporate restructuring companies, asset turn-around and repositioning and value creation for the shareholders. From 1982 to 1988, after completing his tertiary education, Teo Cheng Hiang Richard served his bond as an executive architect in the Public Works Department and Singapore Changi Airport Development. Teo Cheng Hiang Richard then spent 18 years from 1988 to 2005, with the highest position of executive vice president, as part of the pioneer team that built the GIC Real Estate Pte Ltd into one of the top 10 largest global real estate organisations. Teo Cheng Hiang Richard then joined Pacific Star Group from 2005 to 2010. As president (asset management), he successfully built a strong asset management team with more than US$3 billion in assets under management. He later led the private clients and REIT management business of Pacific Star Group where he was responsible for business development in Europe and Asia focusing on Asian business and investments.
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Teo Cheng Hiang Richard graduated with a Bachelor of Science on a Colombo Plan Scholarship (Australia) and a Bachelor of Architecture (First Class Honours) in 1979 from the University of Newcastle under the Colombo Plan (Australia) Scholarship program. He subsequently obtained a Master of Business Administration from the National University of Singapore in 1987. Rule 406(3)(a) of the Catalist Rules states that as a pre-quotation disclosure requirement, a listing applicant must release a statement (via SGXNET or in the offer document) identifying for each director, whether the person has prior experience (and what) or, if the director has no prior experience as a director of a listed company, whether the person has undertaken training in the roles and responsibilities of a director of a listed company. With regards to Rule 406(3)(a) of the Catalist Rules, three (3) of our Directors, Dr. Jong Hee Sen, Siew Teng Kean and Ong Lay Khiam, have prior and/or current experience as directors of other public listed companies in Singapore, and are familiar with the roles and responsibilities of a director of a public listed company in Singapore. Our other Directors, Yip Yuen Leong, Wong Ong Ming Eric and Teo Cheng Hiang Richard do not have prior experience as a director of a listed company in Singapore and they had attended the relevant training at the Singapore Institute of Directors on 28 May 2013 to familiarise themselves with the roles and responsibilities of a director of a public listed company in Singapore. Save as disclosed in the sections entitled Shareholders Shareholding and Ownership Structure, none of our Directors are related to each other, our Executive Officers, our Controlling Shareholders or our Substantial Shareholders. Our Independent Directors do not have any existing business or professional relationship of a material nature with our Group, our Directors, our Controlling Shareholders or our Substantial Shareholders. None of our Independent Directors sits on the boards of our subsidiaries.
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The list of present and past directorships of each Director over the last five (5) years preceding the date of this Offer Document, excluding those held in our Company, is set out below: Name Dr. Jong Hee Sen Present Directorships Group Companies ICWCH IHC Assets (Hong Kong) IHC Facilities (Hong Kong) IHC Japan IHC KLCC IHC Peak IHC Services ((Hong Kong) IHC Star IHC Summit IHC Wuxi IMA Kang Hui (Chengdu) Seasons Residences Other Companies 1Property Pte. Ltd. 8Applesmall Pte Ltd Aaron CTP Dental Surgery Pte. Ltd. Aaron Dentalcare Pte. Ltd. Aaron Seow International Pte Ltd BCNG Holdings Pte. Ltd. China Healthway Pte. Ltd. China Unimedic Pte. Ltd. Claas Medical Centre Pte. Ltd. Construction Exchange Pte Ltd Core-Link Pte Ltd Crane Medical Pte. Ltd. Healthway China Co., Ltd. Healthway Dental Pte. Ltd. Healthway Medical Group Pte Ltd HMC IHC Ace IHC Apex IHC Chengdu IHC Iskandar IHC Medical Enterprises (HK) Limited IHC Holdings (Hong Kong) IHC Seasons Harbour View Sdn. Bhd. IHC Shanghai Medical Village Pte. Ltd. Island Orthopaedic Consultants Pte Ltd Island Orthopaedic Consultants Holdings Pte. Ltd. Kang Hui Maternity Center Services (Shanghai) Co., Ltd. Melana International Pte Ltd 185 Past Directorships Group Companies Nil
Other Companies Healthway Medical Enterprises Pte Ltd Hemphill Pte. Ltd. HMD Universal Capital Partners Pte. Ltd.

Name Present Directorships Octastar Pte. Ltd. Peace Family Clinic and Surgery (AMK) Pte. Ltd. Peace Family Clinic and Surgery (Anchorvale) Pte. Ltd. Peace Family Clinic and Surgery (Sembawang) Pte. Ltd. Picton Medical Centre Pte. Ltd. Popular Dental (Woodlands) Pte. Ltd. SBCC Clinic Pte Ltd SBCC Services & Trading Pte Ltd Shanghai Daruitong Hospital Investment and Management Co., Ltd Shanghai Hengjie Computers Co., Ltd. Shanghai Hongyi Investment Management Co., Ltd. Shanghai Kang An Hospital Investment Co., Ltd Shanghai Kang Hong Medical Equipment Leasing Co., Ltd Shanghai Longguo Investment Consulting Co., Ltd. Shanghai Weiyi Industries Co., Ltd. Shanghai Xinyi Dental Clinic Pte Ltd Shanghai Zhinuo Dental Clinic Pte Ltd Silver Cross 21 Pte. Ltd. Silver Cross 24Hrs Pte Ltd Silver Cross AC Pte. Ltd. Silver Cross Healthcare Pte Ltd Silver Cross Medical Centre Pte Ltd Silver Cross North Pte Ltd Thomson Paediatric Clinic Pte Ltd UG Singapore Private Limited UG Tech Pte. Ltd. Unilink Innovations Pte Ltd Unimedic Pte. Ltd. Universal Dental Group(Braddell) Pte. Ltd. Universal Dental Group(Woodlands) Pte. Ltd. Universal Dentalcare Pte Ltd Universal Gateway International Pte. Ltd. Vista Medicare Pte. Ltd. World Health Pte. Ltd. Past Directorships
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Name Yip Yuen Leong Present Directorships Group Companies ICWCH IHC Assets (Hong Kong) IHC Japan IHC KLCC IHC Facilities (Hong Kong) IHC Peak IHC Services (Hong Kong) IHC Star IHC Summit IHC Wuxi IMA Seasons Residences Other Companies IHC Ace IHC Apex Limited IHC Chengdu IHC Holdings (Hong Kong) IHC Iskandar IHC Medical Enterprises (HK) Limited IHC Seasons Harbour View Sdn. Bhd. IHC Shanghai Past Directorships Group Companies Nil
Other Companies Ace Ahead Limited Alvbage Limited AREIF (Mauritius I) Limited AREIF (Offshore) Pte. Ltd. AREIF (Singapore I) Pte. Ltd. AREIF Korea 1 Pte. Ltd. AREIF Korea 2 Pte. Ltd. Better Way Group Limited Brigton Investment Holding Pte Ltd Caperidge Investments Limited City Asset Fund Conradville Limited Ducette Investments Limited Edmanerik Limited Ericaddo International Limited Gorgeous International Limited Hildebrand International Limited HMD KOCREF-AREIF Korea 1 CR-REIT Landreau International Limited Macleay International Limited Pavello International Limited Perpetual Sunshine Limited Sathorn Ria Company Limited Suan Orapin (Thailand) Ltd. Vista City Limited Group Companies Nil Other Companies Healthgrow Pte. Ltd. Pathway Biomed Trading Private Limited Pathway Wellness Pte. Ltd. Rockeby Biomed (Australia) Pty Ltd
Wong Ong Ming Eric
Group Companies Nil Other Companies Healthway Medical Enterprise Pte Ltd Pathway Biomed Ltd. SBCC Womens Clinic Pte. Ltd.
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Name Siew Teng Kean Present Directorships Group Companies Nil Other Companies HMC Past Directorships Group Companies Nil Other Companies Hemphill Pte. Ltd. M Development Ltd. Mediacorp Pte. Ltd. NTI International Ltd Group Companies Nil Other Companies Singapore Chinese Orchestra Company Limited Group Companies Nil Other Companies HMD Pacific Star Asset Management Pte Ltd Pacific Star REIT Management Holdings Pte Ltd Pacific Star Ventures Pte Ltd YTL Starhill Global REIT Management Holdings Pte. Ltd.
Ong Lay Khiam
Group Companies Nil Other Companies Tiong Seng Holdings Limited
Teo Cheng Hiang Richard
Group Companies Nil Other Companies Nil
EXECUTIVE OFFICERS The 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: Country of Principal Residence Singapore
Name Tan Yong Kwang
Age 40
Address 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086 2 Leng Kee Road #04-10A Thye Hong Centre Singapore 159086
Position Financial Controller
Liew Ed Mun
37
Singapore
Vice President, Integrated Medical Real Estate (South East Asia)
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Country of Principal Residence PRC
Name Zhang Qi
Age 49
Address Room 1002 Lane #177-40 Zhen Ping Road Shanghai The Peoples Republic of China
Position Vice President, Integrated Medical Real Estate (China)
The business and working experience and areas of responsibility of our Executive Officers are set out below: Tan Yong Kwang is our Financial Controller and is in charge of our Companys financial and accounting functions in Singapore. In addition, he is responsible for overseeing the financial reporting and accounting functions relating to our Group with respect to the laws and regulations of Singapore. Tan Yong Kwang started out his career with PricewaterhouseCoopers, Personal Tax Solutions in 1995 and spent four (4) years with the firm. He then joined Arthur Andersen, Assurance in 1999 and subsequently Ernst & Young, Assurance & Advisory Business Services in 2002 following the merger between the two firms where he was responsible for managing the statutory audit of a portfolio of public, private and global clients in the retail, service and manufacturing industries. His last designation held at Ernst & Young when he left in 2004 was that of manager. In November 2004, he joined Sinopipe Holdings Limited, a company listed on the SGX-ST as the chief financial officer where he was in charge of the companys financial and accounting functions in Singapore and responsible for overseeing the financial reporting and accounting functions relating to the company and its subsidiaries with respect to the laws and regulations of Singapore. In November 2011, he joined HMD as its financial controller in charge of HMDs financial and accounting functions. Tan Yong Kwang holds a Diploma in Business with Merit (majoring in Accounting and Finance) from Temasek Polytechnic. He is a fellow member of The Association of Chartered Certified Accountants and a non-practising member of the Institute of Certified Public Accountants of Singapore. Liew Ed Mun is our Vice President, Integrated Medical Real Estate (South East Asia) and is in charge of our Companys Southeast Asia operations and strategic directions. He first joined our Group as a Manager (Asset Management) in July 2012 where he was in charge of the management and value enhancement of our Groups Malaysian real-estate assets. Ed Mun started out his career with JTC Corporation in 1998 and spent more than three (3) years with the company and its corporatized technical division, Jurong Consultants Singapore, holding the position of senior engineer (civil and structural), where he was in charge of the design and project management of some of Singapores most notable specialised industrial parks and buildings. He left in 2002 to assume the position of company strategist at Jamington Co Ltd. In 2003, he joined Singapore Airlines Ltd where he was its posted to the properties department, attaining the post of assistant manager. He was put in charge of project development, implementation and subsequent management of the airlines operational and investment real 189

estate assets. From January 2011 to January 2012, Liew Ed Mun was posted to the Contracts Department where he was responsible for budget management, value engineering, contract administration and vendor negotiations of the airlines ground handling and catering contracts. From January 2012 to July 2012, he was rotated to the Network Revenue Management Department as a network revenue analyst where he played a pivotal role in maximising the route profitability and market share of the airlines West Asia and Americas markets. Liew Ed Mun graduated from the Monash University, Australia, in 1997 with a Bachelor of Engineering (Civil) with First Class Honours. Zhang Qi is our Vice President, Integrated Medical Real Estate (China) and is in charge of our Companys operations in North Asia and has extensive real estate investment, asset management, development management and property management experience in the PRC. He first joined our Group as Senior Manager (Asset Management) in August 2012. Zhang Qi was a manager in charge of property management with Henderson Real Estate China from March to October 1997. Thereafter from October 1997 to April 2001, he was the manager in charge of estate management with Hutchison & Whampoa Real Estate Group. He left to join Premas Real Estate Services and was its director of operations until September 2005. From September 2005 to September 2007, he was the associate director in charge of asset management with DTZ China. Prior to joining our Group from October 2007 to June 2012, he was the vice president in charge of asset management with the Pacific Star Real Estate Group. Zhang Qi graduated from the Shanghai Telecommunication College in July 1987 with a Bachelor of Business Administration. There is no family relationship between any of our Directors and/or Executive Officers, or between any of our Directors, Executive Officers, our Controlling Shareholders and our Substantial Shareholders. There is no arrangement or understanding with any of our Substantial Shareholders, customers, suppliers or any other person, pursuant to which any of our Directors or Key Executive Officers was selected as our Director or Executive Officer. The list of present and past directorships of each Executive Officer over the last five (5) years preceding the date of this Offer Document, excluding those held in our Company, is set out below: Name Tan Yong Kwang Present Directorships Group Companies Nil Other Companies Nil Liew Ed Mun Group Companies Nil Other Companies Nil Past Directorships Group Companies Nil Other Companies Nil Group Companies Nil Other Companies Nil
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Name Zhang Qi Present Directorships Group Companies Nil Other Companies Nil Past Directorships Group Companies Nil Other Companies Nil
MANAGEMENT REPORTING STRUCTURE Our management reporting structure is as follows:
Board of Directors Dr. Jong Hee Sen (Executive Chairman) Yip Yuen Leong (Executive Director) Wong Ong Ming Eric (Non-executive Director) Siew Teng Kean (Lead Independent Director) Ong Lay Khiam (Independent Director) Teo Cheng Hiang Richard (Independent Director)
Group President Dr. Jong Hee Sen
Financial Controller Tan Yong Kwang
President, Integrated Medical Real Estate Yip Yuen Leong
Vice President, Integrated Medical Real Estate (South East Asia) Liew Ed Mun
Vice President, Integrated Medical Real Estate (China) Zhang Qi
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EMPLOYEES The functional distribution of our Groups employees as at 31 December 2011 and 2012 and as at the Latest Practicable Date are as follows: As at Latest Practicable Date (1) 1 59 309 369
As at 31 December Function Corporate Finance, Human Resource and Administration Operations Total 2011 (1) 1 37 230 268 2012 (1) 1 54 293 348
The distribution of our Groups employees according to the business segment of our Group as at 31 December 2011 and 2012 and as at the Latest Practicable Date are as follows: As at Latest Practicable Date (1) 4 358 7 369
As at 31 December Business Segment Corporate (2) Healthcare Services Integrated Medical Real Estate Total 2011 (1) 1 265 2 268 2012 (1) 3 339 6 348
The geographical distribution of our Groups employees as at 31 December 2011 and 2012 and as at the Latest Practicable Date is as follows: As at Latest Practicable Date (1) 9 360 369
As at 31 December Country Singapore PRC Total

Notes: (1)
2011 (1) 3 265 268
2012 (1) 8 340 348
HMD was the parent company of our Group Subsidiaries prior to the Restructuring Exercise. Pursuant to the Restructuring Exercise and as at the date of the Offer Document, the employees of HMD will be under the employment of our Group. The corporate segment includes the finance personnel at the Companys level which cannot be categorised into the two (2) business segments of our Group.
(2)
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We do not employ a significant number of temporary employees. Our employees are not covered by any collective bargaining agreements and are not unionised. The relationship and co-operation between the management and staff have been good and are expected to continue and remain as such in the future. There has not been any incidence of work stoppages or labour disputes which affected our operations. Other than amounts set aside or accrued in respect of mandatory employee funds, we have not set aside or accrued any amount of money to provide for pension, retirement or similar benefits to our employees. DIRECTORS AND EXECUTIVE OFFICERS REMUNERATION The compensation paid to our Directors and our Executive Officers by our Group for FY2011 and FY2012, and the estimated compensation to be paid to our Directors and our Executive Officers by our Group for FY2013 (on an aggregate basis and in remuneration bands (1)) are as follows: FY2011 FY2012 FY2013 (2) (Estimated)
Directors Dr. Jong Hee Sen Yip Yuen Leong Wong Ong Ming Eric Siew Teng Kean Ong Lay Khiam Teo Cheng Hiang Richard Executive Officers Tan Yong Kwang Liew Ed Mun Zhang Qi
Notes: (1) A means between S$0 and S$249,999. B means between S$250,000 and S$499,999. C means between S$500,000 and S$999,999. D means between S$1,000,000 and S$1,499,999. E means between S$1,500,000 and S$1,999,999. (2) For the purpose of this estimation, no account is made for the bonuses or profit sharing that our Executive Directors and Executive Officers are entitled to under their respective service agreements, the details of which are set out under the section entitled Directors, Management and Staff Service Agreements. Teo Cheng Hiang Richard received payments of directors fees from HMD in FY2012 up to May 2013.
(3)
A A A
B B A A A A
A A A
A A A
(3)
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SERVICE AGREEMENTS Our Company entered into separate service agreements dated 20 May 2013 as amended by separate supplemental letters dated 19 June 2013 (collectively, the Service Agreements and individually, the Service Agreement ) with Dr. Jong Hee Sen, Yip Yuen Leong and Tan Yong Kwang (collectively, the Appointees and individually, the Appointee ) for an initial period of three (3) years with effect from 1 July 2013 ( Initial Term ). Upon the expiry of the Initial Term, the employment of the Appointees may be extended for such further period on the terms and subject to the conditions to be agreed between the Appointees and our Company unless otherwise terminated by either party giving not less than six (6) months notice (in the case of Tan Yong Kwang, not less than three (3) months notice) in writing to the other. With respect to the abovementioned Appointee, notwithstanding the other provisions of the relevant Service Agreement, our Company shall be entitled to terminate the appointment, but without prejudice to the rights and remedies of our Company for any breach of the Service Agreement and to the Appointees continuing obligations under the Service Agreement, in any of the following cases: (a) if the Appointee is convicted or otherwise found guilty by any court of competent jurisdiction, or pleads guilty to, any offence involving fraud or dishonesty, or of a felony, serious misdemeanour, or crime involving moral turpitude; or if the Appointee commits an act of bankruptcy under applicable law, is declared a bankrupt or has bankruptcy proceedings commenced against him or any such analogous event occurs under any provisions under applicable law; or if the Appointee is guilty of any act or thing which may bring discredit or disrepute on our Company or any related company; or if the Appointee neglects or refuses, without reasonable cause, to attend to the business of our Company or any related company to which he is assigned duties; or if the Appointee misappropriates assets of our Company or any related company; or if the Appointee fails to observe and perform any of the duties and obligations imposed by the Service Agreement or which are imposed by law; or if the Appointee otherwise acts in breach of the Service Agreement; or if the Appointee becomes of unsound mind; or if the Appointee is guilty of dishonesty; or if the Appointee is incapacitated by reason of his health or accident from performing his duties and obligations stipulated on the Service Agreement and shall have been so incapacitated for a total period of 180 days or more (whether or not consecutive) in the preceding 12 months; or if the Appointee shall cease to hold the office of director pursuant to the Articles of Association of our Company, or is disqualified from holding the office of, or acting as, a director of any company, pursuant to any applicable law, for whatever reason,
(b)
(c)
(d)
(e) (f)
(g) (h) (i) (j)
(k)
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and no compensation or liability whatsoever shall be payable or incurred by our Company to the Appointee for termination under the above circumstances. Pursuant to the terms of the Service Agreements, the Appointees are entitled to annual salaries as set out in bands of remuneration below. In addition, each of the Appointees shall be entitled to a discretionary bonus depending on the relevant Appointees performance in each financial year. The remuneration of the Appointees is subject to review by our Remuneration Committee at the end of each financial year of our Company. The relevant Appointee 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 his Service Agreement. Annual Salary (In remuneration bands) (1) B B A
Appointees Dr. Jong Hee Sen Yip Yuen Leong Tan Yong Kwang
Note: (1) A means between S$0 and S$249,999. B means between S$250,000 and S$499,999.
All entertainment, travelling, hotel and other out-of-pocket expenses reasonably incurred by Dr. Jong Hee Sen, Yip Yuen Leong and Tan Yong Kwang in the process of discharging their duties on behalf of our Group will be borne by our Company, subject to limits from time to time set by our Directors. Under the Service Agreement, except as disclosed or declared to our Company in writing prior to the date of the Service Agreement, each of the Appointees shall not, until six (6) months (12 months in the case of Dr. Jong Hee Sen) after the termination of the appointment: (a) except in the case of Tan Yong Kwang, within any jurisdiction or marketing area in which our Company or any related company is doing business, directly or indirectly own, manage, operate, control, be employed by or participate in the ownership, management, operation or control of, or be connected in any manner with, any business of the type and character engaged in and in competition with that conducted by our Company or any related company. For these purposes, ownership of securities not exceeding 5% of any class of securities of a public company listed on a stock exchange shall not be considered to be in competition with our Company or any related company; or persuade or attempt to persuade any potential customer or client to which our Company or any related company has made a presentation, or with which our Company or any related company has been in negotiations or having discussions, not to deal with or hire our Company or any related company or to deal with or hire another company; or solicit for himself or any person other than our Company or any related company the business of any supplier, customer or client of our Company or any related company, or who was its supplier, customer or client within six (6) months prior to the date of termination of the appointment; or
(b)
(c)
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(d) persuade or attempt to persuade any employee of our Company or any related company, or any individual who was an employee during the six (6) months prior to the date of termination of the appointment, to leave our Companys or any related companys employment, or to become employed by any person other than our Company or any related company.
Each Appointee shall keep secret and shall not at any time (whether during the appointment or after the termination of the appointment for whatever reason) use for his own or anothers advantage, or reveal to any person, firm or company, any of the trade secrets, business methods or information which the Appointee knew or ought reasonably to have known to be confidential concerning the business or affairs of our Company or any related company so far as they shall have come to his knowledge during the appointment. Had the Service Agreements been in place since 1 January 2012, the aggregate remuneration (including CPF contributions, bonus and benefits-in-kind) payable to the Appointees in FY2012 would have been approximately S$0.9 million instead of S$0.6 million and the unaudited pro forma profit attributable to equity holders of the Company would be approximately S$52.7 million instead of S$52.9 million. Save as disclosed above, there are no other existing or proposed service contracts entered or to be entered into by our Directors or our Executive Officers with our Company or our subsidiaries. There are no existing or proposed service agreements entered into or to be entered into by our Directors with our Company or Group Subsidiaries which provide for benefits upon termination of employment.
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CORPORATE GOVERNANCE
Corporate governance refers to the processes and structure by which the business and affairs of a company are directed and managed, in order to enhance long-term shareholder value through enhancing corporate performance and accountability. Good corporate governance therefore embodies both enterprise (performance) and accountability (conformance). Recognising the importance of corporate governance and the importance of offering high standards of accountability to our Shareholders, our Company has implemented the corporate governance model as set out below:
Board of Directors
Audit Committee Chairman Siew Teng Kean Members Ong Lay Khiam Wong Ong Ming Eric
Remuneration Committee Chairman Siew Teng Kean Members Teo Cheng Hiang Richard Wong Ong Ming Eric
Nominating Committee Chairman Ong Lay Khiam Members Dr. Jong Hee Sen Teo Cheng Hiang Richard
Based on the above, our Directors are of the view that there are sufficient safeguards and checks to ensure that the process of decision-making by our Board is independent and based on collective decision-making without our Executive Chairman and Group President, Dr. Jong Hee Sen, being able to exercise considerable power or influence. Board of Directors Our Articles of Association provide that our Board will consist of not less than one (1) Director. We currently have six (6) Directors on our Board, comprising two (2) Executive Directors, a Non-executive Director and three (3) Independent Directors. Board Practices Our Directors do not currently have a fixed term of office. At each annual general meeting, one-third of our Directors for the time being (or, if their number is not a multiple of three (3), the number nearest to but not less than one-third) shall retire from office by rotation. A retiring Director shall be eligible for re-election at the meeting at which he retires. The Directors to retire in every year shall be those who have been longest in office since their last re-election or appointment. All Directors (except for a Chief Executive Officer/Managing Director who may be appointed for a term of up to three (3) years) shall retire from office at least once every three (3) years.
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Audit Committee Our Audit Committee, represented in the chart above, comprises Siew Teng Kean, Ong Lay Khiam and Wong Ong Ming Eric. The Chairman of our Audit Committee is Siew Teng Kean. Our business and operations are presently under the management and close supervision of our Executive Directors who are assisted by our Executive Officers. After our listing on Catalist, our Executive Directors and Executive Officers will manage the business and operations of our Group. Our Audit Committee will assist our Board of Directors to discharge its responsibility to safeguard our Companys assets, maintain adequate accounting records, and develop and maintain effective systems of internal controls with an overall objective of ensuring that our management creates and manages an effective control environment in our Group. Our Directors recognise the importance of corporate governance and the offering of high standards of accountability to our Shareholders. Our Audit Committee will meet, at a minimum, on a half-yearly basis to discuss and performs the following (non-exhaustive) functions where applicable: (a) review with the external auditors the audit plan, their evaluation of the system of internal controls, their audit report, their management letter and our managements response; review with the internal auditors the internal audit plan and their evaluation of the adequacy and effectiveness of our internal control and accounting system, including financial, operational, compliance and information technology controls (such review to be carried out internally or with the assistance of any competent third parties), before submission of the results of such review to our Board for approval prior to the incorporation of such results in our annual report; review the financial statements before submission to our Board for approval, focusing in particular, on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, the going concern statement, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements; review the internal control and procedures and ensure co-ordination between the external auditors and our management, reviewing the assistance given by our management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of our management where necessary); review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on our Groups operating results or financial position, and our managements response; consider the appointment or re-appointment of the external auditors and matters relating to resignation or dismissal of the auditors; review transactions falling within the scope of Chapter 9 of the Catalist Rules;
(b)
(c)
(d)
(e)
(f)
(g)
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(h) review the procedures by which employees of our Group may, in confidence, report to the chairman of our 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; undertake such other reviews and projects as may be requested by our Board of Directors and report to our Board its findings from time to time on matters arising and requiring the attention of our Audit Committee; review at least annually our Groups key financial risk areas, with a view to providing an independent oversight on our Groups financial reporting, the outcome of such review to be disclosed in the annual reports of our Company or, where the findings are material, to announce such material findings immediately via SGXNET; and generally to undertake such other functions and duties as may be required by statute or the Catalist Rules, and by such amendments made thereto from time to time.
(i)
(j)
(k)
Currently, our Board, with the concurrence of our Audit Committee, based on the internal controls established and maintained by our Group, work performed by the internal and external auditors, and reviews by our Board and our Audit Committee, is of the view that our internal control procedures are adequate to address financial, operational and compliance risks. Notwithstanding the above, our Audit Committee shall also commission an annual internal controls audit until such time as our Audit Committee is satisfied that our Groups internal controls are robust and effective enough to mitigate our Groups internal control weaknesses that may arise (if any). Prior to the decommissioning of such an 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 our Audit Committees decision to decommission the annual internal controls audit. Thereafter, such audits may be initiated by our Audit Committee as and when it deems fit to satisfy itself that our Groups internal controls remain robust and effective. Upon completion of the internal controls audit, appropriate disclosure must be made via SGXNET on any material, price-sensitive internal controls weaknesses and any follow-up actions to be taken by our Board. Our Audit Committee having (i) conducted an interview with Tan Yong Kwang; (ii) considered the professional qualifications and past working experience and expertise of Tan Yong Kwang (as described in the section entitled Directors, Management and Staff Executive Officers of this Offer Document); (iii) observed his abilities, familiarity and diligence in relation to the financial matters and information of our Group; (iv) conducted interviews with our Executive Directors on their review and employee appraisal of his performance and contributions to our Group since his appointment as Financial Controller; and (v) considered the feedback from the professional parties to the Listing on his delivery and performance during the execution of the Listing, taking into account the above and after making the relevant enquiries, is of the view that Tan Yong Kwang is suitable for the position of Financial Controller. Based on current available information, after making all reasonable enquiries, and to the best of their knowledge and belief, nothing has come to the attention of our Audit Committee members to cause them to believe that Tan Yong Kwang, the Financial Controller, does not have the competence, character and integrity expected of a Financial Controller of a listed company.
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Apart from the duties listed above, our Audit Committee will also 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 Companys operating results or financial position. In the event that a member of our Audit Committee is interested in any matter being considered by our Audit Committee, he will abstain from reviewing that particular transaction or voting on that particular transaction. In addition, all future transactions with related parties shall comply with the requirements of the Catalist Rules. Our Directors shall also abstain from voting in any contract or arrangement or proposed contract/arrangement in which he has a personal material interest. Remuneration Committee Our Remuneration Committee, represented in the chart above, comprises Siew Teng Kean, Teo Cheng Hiang Richard and Wong Ong Ming Eric. The Chairman of our Remuneration Committee is Siew Teng Kean. Our Remuneration Committee is responsible for the following: (a) to recommend to our Board a framework of remuneration for our Directors and Executive Officers, and to determine specific remuneration packages for each Executive Director and any Chief Executive Officer (or executive of equivalent rank), if a Chief Executive Officer is not an Executive Director, such recommendations to be submitted for endorsement by our entire Board and should cover all aspects of remuneration, including but not limited to directors fees, salaries, allowances, bonuses, options, share-based incentive and awards, and benefits in kind; in the case of service contracts (if any) for any Director or Executive Officer, to consider what compensation commitments the Directors or Executive Officers contracts of service, if any, would entail in the event of early termination with a view to be fair and avoid rewarding poor performance; and in respect of any long-term incentive schemes including share schemes as may be implemented, to consider whether any Director should be eligible for benefits under such long-term incentive schemes.
(b)
(c)
Each member of our Remuneration Committee shall abstain from voting on any resolution and making any recommendations and/or participating in any deliberations of our Remuneration Committee in respect of matters in which he is interested. The recommendations of our Remuneration Committee on remuneration of our Directors should be submitted for endorsement by our entire Board. All aspects of remuneration, including but not limited to directors fees, salaries, allowances, bonuses, and benefits in kind shall be covered by our Remuneration Committee.
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Nominating Committee Our Nominating Committee, represented in the chart above, comprises Ong Lay Khiam, Teo Cheng Hiang Richard and Dr. Jong Hee Sen. The Chairman of our Nominating Committee is Ong Lay Khiam. The Nominating Committee is responsible for the following: (a) to make recommendations to our Board on all board appointments, including re-nominations, having regard, to the Directors contribution and performance (for example, attendance, preparedness, participation and candour) including, if applicable, as an Independent Director; to ensure that all Directors submit themselves for re-nomination and re-election at regular intervals and at least every three (3) years; to determine annually whether or not a Director is independent; in respect of a Director who has multiple board representations on various companies, to decide whether or not such Director is able to and has been adequately carrying out his/her duties as Director, having regard to the competing time commitments that are faced when serving on multiple boards; and to decide how our Boards performance is to be evaluated and propose objective performance criteria, subject to the approval by our Board, which address how our Board has enhanced long term shareholders value. Our Board will also implement a process to be proposed by the Nominating Committee for assessing the effectiveness of our Board as a whole and for assessing the contribution of each individual Director to the effectiveness of our Board (if applicable).
(b)
(c) (d)
(e)
Each member of our Nominating Committee shall abstain from voting on any resolution and making any recommendations and/or participating in any deliberations of our Nominating Committee in respect of the assessment of his performance or re-nomination as Director. In the event that any member of our Nominating Committee has an interest in a matter being deliberated upon by our Nominating Committee, he will abstain from participating in the review and approval process relating to that matter.
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DESCRIPTION OF ORDINARY SHARES

The following statements are brief summaries of the rights and privileges of our Shareholders conferred by the laws of Singapore and our Articles of Association. The following description summarises the material provisions of our Articles but is qualified 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 (6) 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 own 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 100% (or such other limit as may be prescribed by the SGX-ST) of our issued share capital, of which the aggregate number of Shares to be issued other than on a pro rata basis to our Shareholders may not exceed 50% (or such other limit as may be prescribed by the SGX-ST) of our issued share capital (the percentage of issued share capital being based on our Companys issued share capital at the time such authority is given after adjusting for new shares arising from the conversion of convertible securities or employee share options on issue at the time such authority is given and any subsequent consolidation or subdivision of Shares). 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 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 the Register of Members 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 Members for any time or times if we provide the SGX-ST at least five (5) clear market days notice. However, the Register of Members may not be closed for more than 30 days in aggregate in any calendar year. We typically close our Register of Members to determine shareholders entitlement to receive dividends and other distributions.
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Transfer of Shares There is no restriction on the transfer of fully paid Shares except where required by law or the Catalist Rules 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 properly notified and if the applicant pays a fee which will not exceed S$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 that 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 the share capital, share premium account or capital redemption reserve fund. 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 has 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 Shareholder 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 (provided that in the case of a Shareholder who is represented by two proxies, only one of the two proxies as determined by that shareholder or, failing such determination, the chairman of the meeting in his sole discretion shall be entitled to vote on a show of hands), 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 10% of the total voting rights of all Shareholders having the right to attend and vote at the meeting or by any two 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. 203

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. Our Board of Directors may also declare an interim dividend without the approval of its Shareholders. All dividends are paid pro rata among our Shareholders in proportion to the amount paid up on each Shareholders 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. Capitalisation and Rights Issues Our Board of Directors may, with approval by our Shareholders at a general meeting, capitalise any reserves or profits (including profits or money carried and standing to an reserve) and distribute the same as Shares credited as paid-up to the 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. Take-overs The SFA and the Singapore Code on Take-overs and Mergers (the Take-over Code ) regulate the acquisition of ordinary shares of public companies and certain provisions that may delay, deter or prevent a future take-over or change in control of the Company. 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 take-over offer for the remaining voting Shares in accordance with the provisions of the Take-over Code. Persons presumed to be acting in concert include and are not limited to, a company and its parent company, its subsidiaries, fellow subsidiaries and its parent company, a company and its directors (including their relatives), a company and its pension funds, a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis, and a financial or other professional advisor and its client in respect of shares held by the financial advisor and shares in the client held by funds managed by the financial advisor on a discretionary basis. A mandatory offer for consideration other than cash must be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the preceding six (6) months. A mandatory take-over offer is also 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 (6) month period. Under the 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 (6) 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.
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Indemnity To the extent permitted by Singapore law, our Articles provide that, subject to the Companies Act, our Board of Directors and Executive 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 judgment 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 Executive Officers against any liability which by law would otherwise attach to them in respect of any negligence, wilful 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 the sections entitled Description of Ordinary Shares Voting Rights and Take-overs 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 the Shares. Minority Rights The rights of minority shareholders of Singapore-incorporated companies are protected, inter alia , 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: (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 we take an action, or threaten to take an action, or Shareholders pass a resolution, or propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of the shareholders, including the applicant.
(b)
Singapore courts have 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, Singapore courts may: (a) (b) (c) direct or prohibit any act or cancel or vary any transaction or resolution; regulate the conduct of the affairs of the Company in the future; authorise civil proceedings to be brought in our name of, or on behalf of, the Company by a person or persons and on such terms as the court may direct; make an order for the purchase of a minority Shareholders 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; make an order that the Memorandum of Association or the Articles be amended; or make an order that we be wound up.
(d)
(e) (f)
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Treasury Shares Our Articles of Association expressly permits our Company to purchase or acquire Shares or stocks of our Company and to hold such Shares or stocks (or any of them) as treasury shares in accordance with requirements of Section 76B of the Companies Act. Our Company may make a purchase or acquisition of our own Shares on a securities exchange, if the purchase or acquisition has been authorised in advance by our Company in general meeting, or otherwise than on a securities exchange, if the purchase or acquisition is made in accordance with an equal access scheme authorised in advance by our Company in general meeting. The aggregate number of Shares held as treasury shares shall not at any time exceed 10% of the total number of Shares of our Company at that time. Any excess Shares shall be disposed or cancelled before the end of a period of six (6) months beginning with the day on which that contravention of limit occurs, or such further period as the Registrar may allow. Where Shares or stocks are held as treasury shares by our Company through purchase or acquisition by our Company, our Company shall be entered in the register as the member holding those Shares or stocks. Our Company shall not exercise any right in respect of the treasury shares and any purported exercise of such a right is void. Such rights include any right to attend or vote at meetings and our Company shall be treated as having no right to vote and the treasury shares shall be treated as having no voting rights. In addition, no dividend may be paid, and no other distribution (whether in cash or otherwise) of our Companys assets (including any distribution of assets to members on a winding up) may be made, to our Company in respect of the treasury shares. However, this would not prevent an allotment of Shares as fully paid bonus Shares in respect of the treasury shares, or the subdivision or consolidation of any treasury share into treasury shares of a smaller amount, if the total value of the treasury shares after the subdivision or consolidation is the same as the total value of the treasury share before the subdivision or consolidation, as the case may be. Where Shares are held as treasury shares, our Company may at any time (i) sell the Shares (or any of them) for cash; (ii) transfer the Shares (or any of them) for the purposes of or pursuant to an employees share scheme; (iii) transfer the Shares (or any of them) as consideration for the acquisition of shares in or assets of another company or assets of a person; or (iv) cancel the Shares (or any of them).
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EXCHANGE CONTROLS
The following is a description of the exchange controls that exist in the jurisdictions which our Group operates in. Singapore There are no Singapore government laws, decrees, regulations or 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 the remittance of dividends, interest or other payments to non-resident holders of our Companys securities.
(b)
Malaysia In accordance with the current Exchange Control Notices of Malaysia issued by Bank Negara Malaysia, foreign direct investors have the freedom to repatriate their investments including capital, profit and dividends without being subject to any levy. There are also no restrictions on the repatriation of capital, profits, dividends, interests, fees or rental income by foreign direct investors or portfolio investors. However, Bank Negara Malaysia requires the completion of a prescribed form and documentary evidence to be furnished to the remitting banks for any remittance or payment in foreign currency exceeding the equivalent of MYR200,000 to a non-resident. Japan Foreign exchange control regulations in Japan are applicable to a real property investment from a non-resident of Japan into a resident of Japan. However, most of the investments from a non-resident of Japan are subject only to ex post facto reporting requirements. The PRC The principal regulations governing foreign currency exchange in the PRC are the Foreign Exchange Administration Regulations, as amended in August 2008. Under these regulations, the RMB is only freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of the PRC, unless the prior approval of the State Administration of Foreign Exchange ( SAFE ) is obtained and/or prior registration with the SAFE is made. On 29 August 2008, SAFE promulgated a notice, Circular 142, regulating the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used. The notice requires that the registered capital of a foreign-invested company settled in RMB converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the registered capital of a foreign-invested company settled in RMB converted from foreign currencies. The use of such RMB capital may not be changed without SAFEs approval, and may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Violations of Circular 142 will result in severe penalties, such as heavy fines.
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EXCHANGE CONTROLS
The dividends paid by a subsidiary to its overseas shareholder are deemed income of the shareholder and are taxable in the PRC. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in the PRC may purchase or remit foreign currency, subject to a cap approved by the SAFE depending on different current account transactions for settlement of current account transactions without the approval of the SAFE. Foreign currency transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities.
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TAXATION
TAXATION The summary below of certain taxes in Singapore, the PRC, Malaysia, Japan, the BVI and Hong Kong that may be applicable to our operations in these countries are of a general nature. The summary is based on laws, regulations, interpretations, rulings and decisions in effect as at the Latest Practicable Date. These laws, regulations, interpretations, rulings and decisions, however, may change at any time, and any change could be retrospective. These laws and regulations are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the comments herein. The summary is not intended to constitute a complete analysis of the taxes mentioned nor of all the taxes that may be applicable to our operations in each of the countries. It is not intended to be and does not constitute legal or tax advice. Shareholders should consult their own tax advisors regarding taxation in Singapore, the PRC, Malaysia, Japan, the BVI and Hong Kong and other consequences of owning and disposing of the Shares. It is emphasised that neither the Company, the 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 Singapore Income Tax Corporate income tax Singapore imposes tax on a modified territorial basis i.e. income is subject to tax only when it is accrued in or derived from Singapore (i.e. Singapore-sourced) and when it is received in Singapore from outside Singapore (i.e. foreign-sourced income received or deemed received in Singapore). This applies to both resident and non-resident companies. A Singapore tax resident corporate taxpayer is subject to Singapore income tax on foreignsourced income received or deemed received in Singapore, unless otherwise exempted. Foreign-sourced income in the form of branch profits, dividends and service fee income ( specified foreign income ) received or deemed received in Singapore by a Singapore tax resident company are exempted from Singapore tax provided certain qualifying conditions are met. A company is regarded as a tax resident in Singapore if the control and management of the companys business is exercised in Singapore. In general, control and management of the company is vested in its board of directors and the place of residence of the company is generally where its directors meet. The prevailing corporate income tax rate in Singapore is 17% with the first S$300,000 of chargeable income of a company being partially exempt from tax as follows: (a) (b) 75% of the first S$10,000 of chargeable income; and 50% of the next S$290,000 of chargeable income.
For the Years of Assessment ( YA ) 2013 to 2015, companies will be granted a 30% corporate income tax rebate capped at $30,000 for each YA. 209
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Individual income tax An individual taxpayer (both resident and non-resident) is subject to Singapore income tax on income accrued in or derived from Singapore, subject to certain exceptions. Foreign-sourced income received or deemed received by a Singapore tax resident individual is generally exempt from income tax in Singapore except for such income received through a partnership in Singapore. Certain Singapore-sourced investment income received or deemed received by individuals is also exempt from tax. Currently, a Singapore tax resident individual is subject to tax at the progressive rates, ranging from 0% to 20%, after deductions of qualifying personal reliefs where applicable. All resident individual taxpayers will be given a personal income tax rebate for the tax payable for YA2013. The rate of tax rebate granted depends on the age of the resident individual as at 31 December 2012, subject to a cap of S$1,500: (a) (b) 30% for resident individuals aged below 60; and 50% for resident individuals aged 60 and above.
A non-Singapore tax resident individual is generally taxed at the tax rate of 20% except that Singapore employment income is taxed at a flat rate of 15% or at progressive resident rates, whichever yields a higher tax. An individual is regarded as a tax resident in Singapore if in the calendar year preceding the year of assessment, he was physically present in Singapore or exercised an employment in Singapore (other than as a director of a company) for 183 days or more, or if he ordinarily resides in Singapore. Dividend Distributions Under the one-tier corporate tax system, the tax paid by a resident company is a final tax and the distributable profits of the company can be paid to shareholders as tax exempt (one-tier) dividends, regardless of the tax residence status or the legal form of the shareholders. However, foreign shareholders receiving tax exempt (one-tier) dividends are advised to consult their own tax advisors to take into account the tax laws of their respective countries of residence and the existence of any double taxation agreement which their country of residence may have with Singapore. Capital Gains Tax Singapore currently does not impose tax on capital gains. However, there are no specific laws or regulations which deal with the characterisation of capital gains. In general, gains or profits derived from the disposal of our Shares acquired for long-term investment purposes are considered as capital gains and not subject to Singapore tax. On the other hand, where such gains or profits arise from activities which the Comptroller of Income Tax regards as the carrying on of a trade or business of dealing in shares in Singapore, gains or profits will be taxed as income.
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Gains derived by a resident company from the disposal of ordinary shares, made during the period 1 June 2012 to 31 May 2017 (both dates inclusive), are not taxable if immediately prior to the date of the disposal, the divesting company had held at least 20% of the ordinary share capital of the company in the investment for a continuous period of at least 24 months. Bonus Shares Any bonus shares received by our Shareholders are not taxable. Stamp Duty There is no stamp duty payable on the subscription, allotment or holding of our Shares. Stamp duty is payable on the instrument of transfer of our Shares at the rate of S$0.20 for every S$100 or any part thereof, computed on the consideration paid or market value of our Shares registered in Singapore, whichever is higher. The purchaser is liable for stamp duty, unless there is an agreement to the contrary. 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 instruments of transfer to be executed) or if the instrument of transfer is executed outside Singapore. However, stamp duty may be payable if the instrument of transfer which is executed outside Singapore is subsequently received in Singapore. Goods and Services Tax The sale of our Shares by a GST-registered investor to another person belonging in Singapore is an exempt supply that is not subject to GST. Where our Shares are sold by a GST-registered investor in the course of a business to a person belonging outside Singapore, and that person is outside Singapore when the sale is executed, the sale should generally, subject to satisfaction of certain conditions, be considered a taxable supply subject to GST at zero-rate. Subject to the normal rules for input tax recovery, any GST incurred by a GST-registered investor in the making of this supply in the course of or furtherance of a business carried on by him is recoverable from the Comptroller of GST as input tax. Services such as brokerage, handling and clearing services rendered by a GST-registered person to an investor belonging in Singapore in connection with the investors purchase, sale or holding of our Shares will be subject to GST at the current rate of 7%. Similar services rendered to an investor belonging outside Singapore is generally subject to GST at zero-rate, provided that the investor is outside Singapore when the services are performed and the services provided do not benefit any Singapore persons. Estate Duty With effect from 15 February 2008, no estate duty will be leviable in respect of deaths occurring on or after 15 February 2008.
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Japan Corporate income taxes Japanese domestic corporations are subject to corporate income taxes on their worldwide income. Taxable income is determined as the positive net amount of revenue (including net capital gains) and deductible expenses. Corporate income taxes comprise national corporation tax ( houjin zei ), special local corporation tax ( chihou houjin tokubetsu zei ), local inhabitants tax ( houjin jumin zei ) and enterprise tax ( jigyou zei ). Foreign corporations without a permanent establishment in Japan are obliged to pay income tax (national tax only) on their Japanese source income. The basic national corporation tax rate is 25.5%. With the additional local taxes and the special corporate income tax for reconstruction, the effective corporate income tax rate is approximately 39.4% (if the head office is located in Tokyo). The Business Scale Taxation of local enterprise tax ( gaikei hyojun kazei ) applies to corporations with capital of more than JPY 100.0 million. Under Business Scale Taxation, a corporation is subject to tax on the basis of: (i) added value; (ii) amount of capital; and (iii) taxable income. As added value and capital based tax (not based on income) is levied, the effective corporate income tax rate under Business Scale Taxation is approximately 38.0% (if the head office is located in Tokyo). Inhabitants equalization tax is also assessed on all corporations, determined based on the amount of capital/capital reserve and the number of employees. Dividend distributions from a Japanese corporation (as a private company not listed on the securities market) to its shareholders are subject to withholding tax at the rate of 20.42% under Japanese domestic income tax laws (including the Special Measures Act for the Reconstruction Funding). In the case of certain foreign shareholders, the withholding tax rate may be reduced under applicable income tax treaties. Under the Singapore-Japan tax treaty, the withholding tax rate would be reduced to 5.0%, provided that the Singapore resident shareholder receiving the dividends owns at least 25.0% of the voting shares of the Japanese company paying the dividends during the period of six months immediately before the end of the accounting period for which the distribution of dividends takes place. Otherwise, the rate would be reduced to 15.0%. Real property transaction and holding taxes Registration license tax and real estate acquisition tax Acquisition of Japanese real estate, including land and buildings, is generally subject to registration license tax ( toroku menkyo zei ) of 2.0% (1.5% for land until 31 March 2015) and real estate acquisition tax ( fudosan shutoku zei ) of 4.0% (3.0% for land and residential buildings until 31 March 2015). The taxable base for these real estate transaction taxes is normally the value assessed by local municipalities. Currently, the tax base of real estate acquisition tax for land is reduced by half. The acquisition of trust beneficiary interests, representing real estate as entrusted assets, is not subject to real estate acquisition tax. A change to the holder of a trust beneficiary interest is subject to registration license tax of JPY1,000 for each underlying entrusted real estate. Consumption tax Acquisition of assets, except for land, is subject to consumption taxes ( shohi zei and chiho shohi zei ) at the combined rate of 5.0%. Consumption taxes combined rate will increase to 8.0% from 1 April 2014 and to 10% from 1 October 2015. 212
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Real estate holding tax Real property owners are subject to fixed asset tax ( kotei shisan zei ) of 1.4% and city planning tax ( toshi keikaku zei ) of 0.3% on the real estate value assessed by local municipalities. The enforcement of other taxes imposed on land holdings, i.e., special land holding tax ( tokubetsu tochi hoyu zei ) and land value tax ( chika zei ), is currently suspended. Special tax treatment of TMK A TMK is a special purpose company incorporated pursuant to the Law Regarding Securitisation of Assets ( Shisan no Ryudouka ni Kansuru Houritsu ); (the SPC Law ) as a vehicle for the liquidation of assets. Under the SPC Law, a TMK is required to specify its investment assets, purchase/own the investment assets with the issuance of certain specified securities (bonds and preferred investment certificates), and be liquidated upon the disposition of the specified investment assets. The assets in which a TMK can invest are defined as general property interests and therefore, in addition to real properties, include non-performing loans backed by real estate, trust beneficiary certificates, as well as most other types of property interests. A TMK, as a domestic corporation, is subject to corporate income taxes at the effective tax rate of approximately 38.0%/39.4%. However, based on the characteristic of a TMK as a kind of conduit for investors, Japanese tax law specifically allows (subject to certain requirements such as more than 90.0% of its distributable profit is distributed to investors as dividends) a TMK to deduct dividend distributions from taxable income. Accordingly, corporate income taxation at TMK level should normally be minimal. Dividends distributed by a TMK are treated in the same way as a distribution from a Japanese corporation. The dividend distributions are subject to withholding tax at the rate of 20.42% under Japanese domestic income tax laws (including the Special Measures Act for the Reconstruction Funding). In the case of dividend distributions to certain foreign shareholders, the withholding tax rate may be reduced under applicable income tax treaties. Further, concessional registration license tax and real estate acquisition tax may apply to a TMK on the acquisition of real properties; the tax base for real estate acquisition tax is presently reduced by three-fifths and the current applicable registration license tax rate is 1.3%. The PRC Corporate income tax (CIT) The new Corporate Income Tax Law of the PRC ( new CIT Law ) was promulgated by the National Peoples Congress on 16 March 2007 and became effective on 1 January 2008. Under the new CIT Law, enterprises and other organisations which generate income in the PRC are required to pay CIT in the PRC. The new CIT Law provides a unified tax rate of 25.0% for all PRC resident enterprises, including domestic enterprises and foreign invested enterprises. PRC foreign invested real estate enterprises ( Project Companies ), being real estate development or operation companies, are generally not entitled to any PRC statutory preferential CIT treatment and therefore subject to CIT on their taxable profits at 25.0%. Taxable profits include sales revenue, rental income, and gains on disposal of the property. Tax losses can be carried forward for five consecutive years. However, tax losses cannot be carried back to prior years.
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According to Circular Guoshuifa [2009] No. 31 ( Circular 31 ) issued by the State Administration of Taxation ( SAT ), with effect from 1 January 2008, real estate development enterprises should prepay CIT on income from an advance sale of properties under development based on estimated assessable gross profit margins. The estimated assessable gross profit margin rate will be no less than 15.0%, 10.0% or 5.0%, depending on where the real property is located (i.e. urban and suburban areas of provinces, autonomous regions and cities specifically designated in the state plan, a prefecture or its suburban region, or other areas), and the estimated assessable gross profit margin rate for economically affordable housing, price-restricted housing and properties reconstructed from damaged housing will be no less than 3.0%. Upon completion of construction, real estate development enterprises should calculate the deductible costs and the actual profit of the advance sales. Any difference between the actual profit and the estimated assessable profit which is calculated for prepaying CIT purpose during the construction phase will be included in the taxable income of the year when the project is completed. According to Circular 31, the construction of a real estate development project, except for a land development project, shall be deemed to be completed upon the occurrence of any of the following event: certificate of completion and supporting documents have been filed with the relevant real estate administration departments; the real estate property has been put into use; or the real estate property has obtained the Initial Certificate of Property Right.
Deductible costs refers to all types of expenses incurred by real estate development enterprises during the process of developing and constructing properties (including fixed assets) and shall be calculated and measured by certain cost objectives in accordance with the taxation provisions. Business tax (BT) Pursuant to the Provisional Regulations of the PRC Concerning Business Tax and their implementation rules, BT is imposed on enterprises that provide taxable services, transfer intangible property or sell real estate within the territories of the PRC. Taxable services is defined as services where either the provider or the recipient of the services is within the territories of the PRC. BT is levied at a rate ranging from 3.0% to 20.0%. Project Companies are subject to BT at 5.0% on the sales revenue of completed real estate properties, rental income derived from the leasing of the completed real estate properties, and other related services income derived from the properties. PRC real estate development enterprises are required to prepay BT at 5.0% on income from an advance sale of properties under development. According to Circular Caishui [2003] No. 16, where enterprises and individuals sell the real estate properties which are purchased from developers or other owners, the taxable income for BT purpose will be the balance of the total sales proceeds less the original purchase prices provided that BT had been paid by the previous owner. Loss on disposal of one property cannot be used to offset against gains on disposal of another property.
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In addition, pursuant to relevant BT regulations and rules, where the service provider is located outside the PRC while the service recipient is in the PRC, the services provided by an overseas service provider would be subject to BT. If the overseas service provider does not appoint any Chinese agent to handle the BT filing and settlement, its BT should be withheld by the Chinese service recipient. In this connection, if Project Companies pay service fees, such as commissions, handling charges, etc., to foreign enterprises and the foreign enterprises do not appoint any Chinese agents to handle BT filing and settlement, the relevant BT should be withheld by Project Companies at 5.0%. Land value appreciation tax (LAT) Pursuant to the Provisional Regulations of the PRC on Land Value Appreciation Tax (the LAT Provisional Regulations ) and their implementation rules, any appreciation amount gained from transfer of property shall be subject to LAT. LAT is calculated at a 4-band excess progressive tax rate ranging from 30.0% to 60.0% on the appreciation value realized from the transfer of real estate properties (i.e., transfer price less the allowed deductible items) as follows: Land appreciation value Not exceeding 50.0% of deductible items The portion over 50.0% but not more than 100.0% The portion over 100.0% but not more than 200.0% The portion over 200.0% Deductible items include the following: payments for obtaining the land use rights; costs incurred for land development and construction of new buildings and auxiliary installations; expenses incurred for land development and construction of new buildings and auxiliary installations, or estimated prices of old buildings and constructions; taxes and fees incurred for the transfer of real estate; and other deductible items as specified by the Ministry of Finance. LAT rate 30.0% 40.0% 50.0% 60.0%
Subject to the approval of the relevant tax authorities, persons who develop ordinary housing for sale (excluding high-class apartments, office buildings, villas and holiday villas) are exempt from LAT provided that the appreciation value does not exceed 20.0% of the deductible items. Meanwhile, ordinary housing shall refer to residential buildings constructed according to local standards for ordinary residential buildings for civil use. The specific methods for distinguishing an ordinary housing from other ordinary housing shall be determined by the various provincial, autonomous regional and directly administered municipal peoples governments. If the seller sells the real estate properties that it has self-used for a certain period, then the appreciation value is calculated by deducting the appraised price of the property, the land-use fees paid for the acquisition of the land use right and the relevant expenses paid in accordance 215
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with the unified provisions of the state as well as the tax paid during the process of the transfer for the computation and collection of the LAT. For those taxpayers who fail to pay the land-use fees when acquiring the land use right or is unable to provide a voucher for the payment of the land-use fees shall not be granted a deduction of the amount paid for the acquisition of the land use right. According to Circular Caishui [2006] No. 21, if a seller who disposes of old buildings or structures, fails to obtain an appraised price for the real estate property, then subject to the approval of the relevant local tax authority and the availability of the original property purchase invoice, the seller may claim a deduction calculated based on the amount stated in the property purchase invoice with an annual indexation of 5.0% from the year of purchase to the year of transfer. If the seller can present the original deed tax payment certificate in relation to original acquisition of land use rights and building, then the deed tax can be deducted as taxes and fees incurred for the transfer of real estate. However, the deed tax paid is not subject to the above annual indexation. If the seller who disposes of old buildings or structures (i.e. non-primary sales) cannot obtain an appraised price nor provide the original property purchase invoice, then the relevant local tax authorities may impose LAT based on their own assessment pursuant to Article 35 of the PRC Tax Collection and Administration Law. Under the current PRC tax regulations, real estate development enterprises are required to file and pay provisional LAT for pre-sale revenue received during the construction phase. The provisional LAT liabilities are calculated based on the pre-sales revenue received as follows: Provisional LAT = Pre-sale revenue received x provisional LAT levy rate 1 When the development project is completed and all the properties are sold, the real estate development enterprise is required to make LAT final settlement with the relevant local tax bureau. Pursuant to Circular GuoShuiFa [2006] No. 187, LAT final settlement is to be made within 90 days upon occurrence of any of the following events: the real estate development project is completed and all the properties are sold; or the entire real estate development project has been transferred prior to the completion of construction; or the land use right has been transferred directly.
Furthermore, LAT final settlement may be requested by the tax authorities, if any of the following conditions is met: more than 85.0% of the saleable construction areas of the entire project has been sold; or though the sold areas do not exceed 85.0% of the saleable construction areas of the entire project, the remaining saleable construction area is used or leased out; or it is more than three years since the property sales (pre-sales) permit has been obtained even though property sales have not been completed; or
Provisional LAT levy rates vary from location to location and on the types of properties being developed.
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the foreign invested enterprise is applying for tax de-registration, but has not yet completed the LAT final settlement procedures; or other conditions stipulated by the relevant provincial tax authorities have been met.
During LAT final settlement, an audited LAT clearance report might be required by local tax authority in particular to a real estate development enterprise, in practice. Real estate tax (RET) Pursuant to Notice 546 issued by the PRC State Council, all foreign invested enterprises, foreign enterprises and foreign individuals shall also be subject to RET from 1 January 2009. RET is levied on the owner/landlord of real estate properties. However, the owner of construction in progress (i.e. unfinished real estate properties) is not subject to RET. Project Companies as the lessors and owners of the properties are liable to RET. Based on current practice, there are two types of tax calculation methods depending on whether the property is for self-use or held for lease. If the property is for self-use, then the tax base is the original cost of the property net of a deduction of 10.0% to 30.0% depending on the location of the property, and the tax rate is 1.2% per annum. The formula for calculating the annual RET for this type of property is as follows: Annual RET payable = Tax base x (1 Statutory deduction proportion) x 1.2% On the other hand, if the property is held for lease, then the tax base is the rental income derived from the lease of the property and the applicable tax rate is 12.0% per annum. For this type of property, the RET is calculated as follows: RET payable = Rental income x 12.0% However, in practice, the charging mechanism for enterprises deriving rental income may not be consistent due to local practices. Land use tax (LUT) The PRC State Council issued the revised LUT regulation on December 31, 2006 which took effect on 1 January 2007. According to the revised LUT regulation, foreign enterprises and foreign invested enterprises are subject to LUT on the use of land within the boundaries of cities, county towns, towns/bases operated under an organizational system, and industrial and mining districts. The LUT rate in big cities ranges from RMB1.5 to RMB30 per square meter per year, the LUT rate in medium cities ranges from RMB1.2 to RMB24 per square meter per year, the LUT rate in small cities ranges from RMB0.9 to RMB18 per square meter per year and the LUT rate in county towns, towns/bases operated under an organizational system and industrial and mining districts ranges from RMB0.6 to RMB12 per square meter per year. The exact LUT rate would be subject to the detailed implementation rules issued or to be issued by the relevant local governments where the real estate properties are located.
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Stamp duty (SD) According to the relevant SD regulations, SD should be affixed on all dutiable documents at the time when dutiable documents are signed or formed. Applicable SD rates would depend on the type of the dutiable documents. SD is levied at 0.05% on the stated value of a contract for transfer of real estate, 0.1% on rental for a leasing contract, 0.005% on the loan amount for a loan contract with a financial institution, 0.03% on the purchase or sales price for a purchase and sales contract, etc. SD on dutiable contract and agreement is payable by each party to the contract. Deed tax (DT) According to the relevant DT regulations, the transferee of land use rights or real estate property is subject to DT at 3.0% to 5.0% (subject to practice and implementation of the local tax authorities) on the transaction price at the time of acquisition. Project Companies should be subject to DT when they acquire land use rights for property development or when they acquire completed real estate properties for self use or for rental purpose. Withholding tax (WHT) Pursuant to the new CIT Law and its implementation rules, foreign enterprises, which have no establishment or place in the PRC but derive dividend, interest, rental, royalty or other income (including capital gains) from sources in the PRC will be subject to Chinese WHT at 10.0%. Investors who do not reside in the PRC but reside in countries that have entered into tax treaties with the PRC may be entitled to a reduction of the WHT rate imposed on the payment of dividend, interest, royalties and capital gains. Meanwhile, according to Circular Guoshuifa [2009] No. 124, in order to enjoy the preferential tax treatment provided under the PRC tax treaties for the payment of dividend, interest, royalties and capital gains, tax payer shall file an application of approval with the competent tax authority. In addition, the PRC State Administration of Taxation ( SAT ) promulgated Circular Guoshuifa [2009] No. 601 ( Circular 601 ) on 27 October 2009, which set out SATs interpretation of beneficial ownership for the purpose of claiming Chinas tax treaties benefits by treaty residents in respect Of dividends, royalties and interests. According to Circular 601, tax treaty benefits will be denied to conduit or shell companies without business substance and a beneficial ownership analysis will be used based on a substance-over-form principle to determine whether or not to grant tax treaty benefits. Dividend payment by Chinese companies According to Circular Caishui [2008] No. 1, Project Companies which declare dividends for 2008 or any subsequent years to foreign shareholders which do not have a permanent establishment in the PRC, and are not deemed a tax resident enterprise in the PRC, are required to withhold and pay Chinese WHT on behalf of such shareholders at a rate of 10.0%. This rate may be reduced under applicable tax treaties subject to certain conditions and the approval of relevant PRC tax authority.
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Interest and royalty payments by Chinese companies Interest payable by Project Companies on foreign shareholder loans (assuming the lenders do not have a permanent establishment in the PRC, are not banks or financial institutions, and are not deemed tax resident enterprises in the PRC) and royalties payable by Project Companies to overseas companies (assuming the licensors do not have a permanent establishment in the PRC and are not deemed tax resident enterprises in the PRC) are both subject to Chinese WHT at a rate of 10.0%. This rate may be reduced under applicable tax treaties subject to certain conditions and the approval of relevant PRC tax authority. Gains on disposal of interests in Chinese companies Capital gains realized by foreign investors on the sales of the equity interests in the Project Companies are subject to Chinese WHT at a rate of 10.0%. This rate may be reduced under applicable tax treaties subject to certain conditions and the approval of relevant PRC tax authority. Malaysia Corporate income tax Generally, corporate tax in Malaysia is imposed on income accruing in or derived from Malaysia and foreign sourced income remitted into Malaysia is exempted from corporate tax with the exception of resident companies carrying on business of air/sea transport, banking or insurance where they are assessable on a world income scope. Malaysian companies are subject to income tax, currently levied at the rate of 25%, on all income accruing in or derived from Malaysia. In arriving at their taxable income, these companies are entitled to deduct all expenses that were wholly and exclusively incurred in the production of their gross income, including interest paid on money borrowed and laid out on assets used or held for the production of gross income. They will also be entitled to capital allowances on qualifying expenditure incurred on the acquisition of assets that are used for the purposes of their businesses. Expenditure incurred on land and buildings is generally not qualifying expenditure unless the buildings are designated as industrial buildings as prescribed in Schedule 3, Income Tax Act 1967. Business losses and capital allowances that cannot be utilized in a particular year can be carried forward indefinitely to subsequent years except in a case where the company has become dormant and there is a substantial change in the shareholders of the company. Dividends paid by Malaysian tax-resident companies With effect from the year of assessment 2008 (in respect of income earned during the financial year or other basis period ending in 2008), a single-tier tax system of taxation replaces the full imputation system. Under the single-tier tax system, dividends paid, credited or distributed by a company resident in Malaysia are exempt from tax in the hands of the shareholders. However, a six-year transitional rule provides that Malaysian tax-resident companies may continue to pay franked dividends in cash and with respect to ordinary shares to their shareholders up to 31 December 2013 under the prior full imputation system by using corporate income tax that has been paid or deemed paid up to 31 December 2007. Such franked dividends received by the shareholders are subject to tax but a tax credit is allowed in calculating the tax payable by the shareholders.
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There is no withholding tax on payment of dividends to non-resident shareholders. Withholding tax on the payment of interest to non-residents A non-resident person receiving interest derived from Malaysia will be subject to a withholding tax of 15% on the gross amount of the interest. It is the responsibility of the payer of the interest to remit the amount withheld to the Malaysian Inland Revenue Board within one month from the date of paying or crediting the interest to the non-resident person. A reduced withholding tax rate of 10% is applicable to residents of Singapore pursuant to the Malaysia-Singapore tax treaty. Interest paid or credited in respect of certain instruments, including the following, is exempt from tax: debentures or Islamic securities, other than convertible loan stock, approved by the Securities Commission of Malaysia where the recipient of the interest is any individual, unit trust or a listed closed-end fund; and Islamic securities or debentures issued in MYR, other than convertible loan stock, approved by the Securities Commission of Malaysia where the recipient of the interest is any company not resident in Malaysia and where such interest does not accrue to a place of business in Malaysia of such company.
Real property gains tax Under the Real Property Gains Tax Act, 1976 ( RPGT Act ), RPGT is levied on any chargeable gain arising from the disposal of a chargeable asset. Chargeable assets are defined to mean real property and shares in real property companies ( RPCs ). Real property means any land situated in Malaysia and any interest, option or other right in or over such land. A RPC is defined to mean a controlled company which, as at 21 October 1988 or any later date, acquires real property or shares in a real property company or both, whereby the defined value of the real property or shares or both, owned at that date is not less than 75% of the value of its total tangible assets. The Minister of Finance has exempted all persons from the provisions of the RPGT Act in respect of chargeable assets disposed between 1 April 2007 to 31 December 2009. For disposal of chargeable assets after 31 December 2009, the Minister of Finance imposed tax at a fixed rate of 5% on gains arising from chargeable assets that are disposed of within 5 years from the date of acquisition of such chargeable assets. RPGT is exempted for chargeable assets disposed after a 5-year holding period. With effect from 1 January 2012, a tax rate of 10% was imposed on chargeable assets disposed during a holding period of up to 2 years, 5% for a holding period exceeding 2 years up to 5 years and RPGT was exempted for a holding period exceeding 5 years. The recent 2013 Budget proposed an increase of tax rates i.e. 15% for assets disposed during a holding period up to 2 years and 10% for a holding period exceeding 2 years and up to 5 years and RPGT is exempted for chargeable assets disposed after a holding period of 5 years. The relevant law has since been passed and from 1 January 2013 the rates of RPGT are as aforementioned.
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Nevertheless, where the gains on the disposal of real property or shares in RPCs are revenue in nature (for example, where the investments are disposed as part and parcel of an investment trading business carried on by the seller in Malaysia), such gains would be subject to Malaysian income tax, instead of RGPT. Service tax Service tax is a consumption tax levied and charged on taxable service provided by taxable persons. It applies throughout Malaysia excluding Langkawi, Labuan, Tioman, Free Zones and Joint Development Area. The current rate of service tax is 6% of the price, charge or premium of the taxable services. Prior to 1 January 2010, the Malaysian Customs authorities had taken the position that fund and/or asset management services are taxable management services and/or consultancy services where investment advisory services are provided. Thus, companies providing such services are required to license for and charge service tax on the taxable services provided. However, the Minister of Finance has with effect from 1 January 2010, exempted fund and asset management services from service tax, subsequent to appeals made by the Malaysian Association of Asset Managers. Stamp duty Stamp duty is chargeable on instruments and not on transactions. Instruments executed for the transfer of properties such as shares and real properties are chargeable for stamp duty. An instrument executed for the transfer of shares is subject to stamp duty at a rate of 0.3% on the price or value thereof whichever is greater. The Inland Revenue Board of Malaysia may value the ordinary shares of private limited companies based on sale consideration, price earnings ratio or the NTA of the shares and adopt the method which gives rise to the highest stamp duty liability. For shares which are traded on Bursa Malaysia, such transfer should not attract ad valorem stamp duty since they are scripless. However, contract notes will attract stamp duty at a maximum duty of MYR200 per contract note. Where real property is transferred, the instrument of transfer would be subject to stamp duty at the following ad valorem rates based on the sale consideration or the market value of the property transferred, whichever is higher: 1.0% on the first MYR100,000; 2.0% on the next MYR400,000; and 3.0% of in excess of MYR500,000.
In general, stamp duty is payable on instruments executed in Malaysia or if executed outside Malaysia, when brought into Malaysia. Whilst stamp duty relief is available in limited circumstances, such relief is not automatic and must be applied for under the relevant provisions of the Malaysian Stamp Act 1949. The property cannot be legally transferred until the stamp duty is paid or relief obtained.
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BVI A BVI business company is exempt from all provisions of the Income Tax Ordinance of the BVI (including with respect to all dividends, interests, rents, royalties, compensations and other amounts payable by the company to persons who are not resident in the BVI). Capital gains realized with respect to any shares, debt obligations or other securities of the company by persons who are not resident in the BVI are also exempt from all provisions of the Income Tax Ordinance of the BVI. No estate, inheritance, succession or gift tax is payable by persons who are not resident in the BVI with respect to any shares, debt obligations or other securities of the company, save for interest payable to or for the benefit of an individual resident in the European Union. No stamp duty is payable in the BVI on a transfer of shares, debt obligations or other securities in a BVI business company which is not a land owning company. A company is a land owning company if it, or any of its subsidiaries, has an interest in any land in the BVI. Hong Kong Hong Kong adopts a territorial basis of taxation. Profits tax is chargeable when the following conditions are satisfied: a person (including corporation, partnership and sole proprietorship) carried on a trade, profession or business in Hong Kong; there are profits arising in or derived from such trade, profession or business (excluding capital gain); and the profits must be arising in or derived from Hong Kong.
Dividends derived by our subsidiaries incorporated in Hong Kong (our Hong Kong subsidiaries ) from our subsidiaries incorporated in the PRC (our PRC subsidiaries ) are not regarded as taxable income in Hong Kong as the income is offshore sourced, and therefore such income will not be subject to Hong Kong profits tax. Hong Kong does not impose tax on capital gains. There are no specific laws or regulations outlining the characterization of capital gains. In general, the gains derived by our Hong Kong subsidiaries on the disposal of shares in the PRC subsidiaries held for long-term investment purposes are considered as capital in nature or offshore sourced, and hence the gains should not be subject to profits tax in Hong Kong. Hong Kong stamp duty will apply in relation to transfer of Hong Kong stock and immovable property. In relation to the transfer of Hong Kong stock, stamp duty will be payable at an aggregate amount equal to 0.2% (the buyer and seller will each pay 0.1%) on the higher of the actual consideration stated in the relevant instrument and the value of the stock as at the transfer date, plus a fixed duty of HK$5 for stamping the instrument of transfer. Generally, persons executing chargeable instruments are jointly and severally liable for the stamp duty. Where our BVI subsidiaries dispose of its interest in our Hong Kong subsidiaries, Hong Kong stamp duty will apply. There is no Hong Kong withholding tax applicable on dividends and interest payments made to non-Hong Kong residents. In this regard, dividends and interest payment made by the Hong Kong subsidiaries to our BVI subsidiaries would not be subject to withholding tax in Hong Kong.
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CLEARANCE AND SETTLEMENT

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 the Shares through Catalist will be effected in accordance with the terms and conditions for the operation of securities accounts with the CDP, as amended, modified or supplemented from 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 and the Companies Act, as members of our Company in respect of the number of Shares credited to their respective securities accounts. Persons holding our 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. A fee of S$10.00 for each withdrawal of 1,000 Shares or less and a fee of S$25.00 for each withdrawal of more than 1,000 Shares is payable upon withdrawing Shares from the book-entry settlement system and obtaining physical share certificates. In addition, a fee of S$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 S$10.00 is also payable where our Shares are withdrawn in the name of the person withdrawing our Shares or S$0.20 per S$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 S$20.00 is payable upon the deposit of each instrument of transfer with CDP. Transactions in our Shares under the book-entry settlement system will be reflected by the sellers securities account being debited with the number of Shares sold and the buyers 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 S$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). Dealings of 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.
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GENERAL AND STATUTORY INFORMATION

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS 1. Save as disclosed below, none of our Directors, Executive Officers and Controlling Shareholders: (a) has, at any time during the last 10 years, had 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 he was a partner or at any time within two (2) years from the date he ceased to be a partner; has, at any time during the last 10 years, had 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 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 (2) 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; has any unsatisfied judgement against him; 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; has ever 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; has, at any time during the last 10 years, had judgement 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, nor has he 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; has ever been convicted in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust; has ever been disqualified from acting as a director or equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust; has ever been the subject of any order, judgement or ruling of any court, tribunal or governmental body, permanently or temporarily enjoining him from engaging in any type of business practice or activity;
(b)
(c) (d)
(e)
(f)
(g)
(h)
(i)
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(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; 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,
(ii)
(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; and (k) has ever 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 government agency, whether in Singapore or elsewhere.
Disclosure in relation to Dr. Jong Hee Sen Dr. Jong Hee Sen sits on the board of HMC. On 14 December 2012, the SGX-ST released a regulatory announcement stating that they had concluded, after investigations, that an announcement issued by HMC on 14 July 2009 regarding the appointment of Dr. Lu Jiade as an independent director was inaccurate pursuant to Catalist Rule 704(6). The announcement issued by HMC failed to disclose disciplinary proceedings and actions against Dr. Lu Jiade while he was practising as a doctor in the United States of America. The board of HMC had relied significantly on the declaration from Dr. Lu Jiade for the announcement, given his seniority and professional standing in established medical and academic institutions. Dr. Lu Jiade admitted that the inaccurate declaration was an error on his part and arose due to his limited corporate experience prior to his appointment. Dr. Lu Jiade has since resigned from the board of HMC effective from 22 March 2012. Disclosure in relation to Siew Teng Kean On 17 December 2007, Siew Teng Kean received a supervisory warning from the Authority for a delay in informing the Authority of a change of personal particulars of a holder of a Capital Market Services Representative Licence for Fund Management within the stipulated 14 days. The Authority did not impose any penalties and the relevant particulars have been updated with the Authority on 23 October 2007. Siew Tang Kean sits on the board of HMC. On 14 December 2012, the SGX-ST released a regulatory announcement stating that they had concluded, after investigations, that an announcement issued by HMC on 14 July 2009 regarding the appointment of Dr. Lu Jiade as an independent director was inaccurate pursuant to Catalist Rule 704(6). 225

The announcement issued by HMC failed to disclose disciplinary proceedings and actions against Dr. Lu Jiade while he was practising as a doctor in the United States of America. The Board of HMC had relied significantly on the declaration from Dr. Lu Jiade for the announcement, given his seniority and professional standing in established medical and academic institutions. Dr. Lu Jiade admitted that the inaccurate declaration was an error on his part and arose due to his limited corporate experience prior to his appointment. Dr. Lu Jiade has since resigned from the board of HMC effective from 22 March 2012. Disclosure in relation to Golden Cliff Mr. Fan sits on the board of HMC. On 14 December 2012, the SGX-ST released a regulatory announcement stating that they had concluded, after investigations, that an announcement issued by HMC on 14 July 2009 regarding the appointment of Dr. Lu Jiade as an independent director was inaccurate pursuant to Catalist Rule 704(6). The announcement issued by HMC failed to disclose disciplinary proceedings and actions against Dr. Lu Jiade while he was practising as a doctor in the United States of America. The board of HMC had relied significantly on the declaration from Dr. Lu Jiade for the announcement, given his seniority and professional standing in established medical and academic institutions. Dr. Lu Jiade admitted that the inaccurate declaration was an error on his part and arose due to his limited corporate experience prior to his appointment. Dr. Lu Jiade has since resigned from the board of HMC effective from 22 March 2012. 2. The aggregate remuneration paid to our Directors for services rendered in all capacities to our Group for FY2012 was approximately S$518,000. There is no shareholding qualification for Directors under the Articles of Association. No option to subscribe for shares in, or debentures of, our Company or our subsidiaries have been granted to, or was exercised by, any of our Directors or Executive Officers within the two (2) financial years. No person has been, or is entitled to be given an option to subscribe for or purchase any Shares in or debentures of our Company or our subsidiaries. Save as disclosed in the section entitled Restructuring Exercise of this Offer Document, none of our Directors is interested, directly or indirectly, in the promotion of, or in any property or assets which have, within the two (2) years preceding the date of this Offer Document, been acquired or disposed of by or leased to, our Company or our subsidiaries. No sum or benefit has been paid or is agreed to be paid to any Director or expert, or to any firm in which such Director or expert is a partner or any corporation in which such Director or expert holds shares or debentures, in cash or shares or otherwise, by any person to induce him to become, or to qualify him as, a Director, or otherwise for services rendered by him or by such firm or corporation in connection with the promotion or formation of our Company. Save as disclosed above and in the sections entitled Interested Person Transactions Potential Conflicts of Interest and Restructuring Exercise of this Offer Document: (a) none of our Directors, Executive Officers, Substantial Shareholders or any of their Associates has had any interest, direct or indirect, in any transactions to which our Company was or is to be a party; 226
3. 4.
5.
6.
7.
8.

(b) none of our Directors, Executive Officers, Substantial Shareholders or any of their Associates has any interest, direct or indirect, in any company carrying on the same business or a similar trade which competes materially and directly with the existing business of our Group; none of our Directors, Executive Officers, Substantial Shareholders or any of their Associates has any interest, direct or indirect, in any company that is our customer or supplier of goods and services; and none of our Directors has any interest in any existing contract or arrangement which is significant in relation to the business of our Company and our subsidiaries, taken as a whole.
(c)
(d)
SHARE CAPITAL 9. As at the Latest Practicable Date, there is only one (1) class of shares in the capital of our Company. There are no founder, management or deferred shares. The rights and privileges attached to our Shares are stated in our Articles.
10. Save as disclosed below and in the sections entitled Share Capital and Restructuring Exercise of this Offer Document, there are no changes in the issued and paid-up share capital of our Company and our subsidiaries within the last three (3) years preceding the date of this Offer Document. 11. Save as disclosed below and in the sections entitled Share Capital and Restructuring Exercise of this Offer Document, no Shares in, or debentures of, our Company or any of our subsidiaries have been issued, or are proposed to be issued, as fully or partially paid for cash or for a consideration other than cash, during the last three (3) years.
The interests of our Directors and Substantial Shareholders in our Shares as at the Latest Practicable Date and as recorded in the Register of Directors Shareholdings and the Register of Substantial Shareholders maintained under the provisions of the Companies Act are set out in the section entitled Shareholders Shareholding and Ownership Structure of this Offer Document. MEMORANDUM AND ARTICLES OF ASSOCIATION 12. Memorandum of Association The Memorandum of Association of our Company states, among others, that the liability of members of our Company is limited. Our Memorandum of Association is available for inspection at our registered office as stated in the section entitled General and Statutory Information Documents for Inspection of this Offer Document. 13. Articles of Association An extract of the relevant provisions of our Articles of Association, providing, inter alia , for Directors voting rights, borrowing powers of Directors and dividend rights is set out in Appendix G entitled Selected Extracts of our Articles of Association of this Offer Document.
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The complete Articles are available for inspection by Shareholders at our registered office as stated in the section entitled General and Statutory Information Documents for Inspection of this Offer Document. MATERIAL CONTRACTS 14. The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by our Company within the two (2) years preceding the date of lodgement of this Offer Document and are or may be material: (a) Deed of novation and amendment dated 7 May 2013 between our Company and Dr. Lin Kao-Kun, Dr. Dominic Er Kong Kiong and HMD, pursuant to which our Company acquired Health Kind (Hong Kong) as a Group Subsidiary; Restructuring Agreement dated 28 May 2013 between our Company and HMD pursuant to which our Group Subsidiaries were acquired from HMD for the consideration of S$89.0 million; Sale and Purchase Agreement dated 31 May 2013 between our Company and HMD pursuant to which our Company will acquire IHC Iskandar and its subsidiary for the consideration of S$1,368,000; Sale and Purchase Agreement dated 31 May 2013 between our Company and HMD pursuant to which our Company will acquire IHC Shanghai and its subsidiaries for the consideration of S$13,185,000; Sale and Purchase Agreement dated 31 May 2013 between our Company and HMD pursuant to which our Company will acquire IHC Chengdu and its subsidiaries for the consideration of S$2,850,000; Memorandum of understanding dated 23 May 2013 entered into between our Company, HMD and Unica Inc., pursuant to which the rights to the sale and purchase agreement for the acquisition of Aqua Villa Kashiihama Ichibankan shall be novated from HMD to our Company; Memorandum of understanding dated 23 May 2013 entered into between our Company, HMD and Unica Inc., pursuant to which the rights to the memorandum of understanding for the acquisition of Kashiihama Senior Residence shall be novated from HMD to our Company; Novation agreement dated 29 May 2013 entered between our Company, HMD and The Enterprise Fund II Ltd, pursuant to which HMD novated the First Enterprise Loan to our Company; Service Agreements dated 20 May 2013 and supplemental letters dated 19 June 2013 between our Company and each of Dr. Jong Hee Sen, Yip Yuen Leong and Tan Yong Kwang, details of which are set out under the section entitled Directors, Management and Staff Service Agreements of this Offer Document;
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
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(j) Management Agreement dated 1 July 2013 entered into between our Company, the Vendors and PPCF as the Manager and Sponsor, our Company and the Vendors appointed PPCF to sponsor and manage the Listing; and Placement Agreement dated 1 July 2013 entered into between our Company, the Vendors and the Joint Placement Agents, pursuant to which the Joint Placement Agents have agreed to procure subscriptions for and/or purchases for the Placement Shares for a placement commission of 3.75% of the aggregate Issue Price for the total number of Placement Shares successfully subscribed for.
(k)
Save as disclosed above, our Group and our subsidiaries have not entered into any material contracts, not being contracts entered into in the ordinary course of business, within the two (2) years preceding the date of this Offer Document. LITIGATION 15. Save as disclosed below, to the best of our knowledge and belief, having made all reasonable enquiries, neither our Company nor any our subsidiaries is engaged in any legal or arbitration proceedings as plaintiff or defendant, including those which are pending or known to be contemplated, which may have or which have had in the 12 months immediately preceding the date of lodgement of the Offer Document, a material effect on our Groups financial position or profitability of our Company or our subsidiaries. Disclosure in relation to Wuxi Phoenix In November 2011, a claim of approximately RMB241,000 was filed by Gan Wenyong against Wuxi Phoenix for liquidated damages. In August 2012, the Jiangsu Wuxi Intermediate Peoples Court affirmed the judgement of the lower court which ruled that the Wuxi Hospital shall compensate Gan Wenyong a sum of approximately RMB78,000. Wuxi Phoenix shall also bear the legal costs and expenses amounting to approximately RMB3,000. MANAGEMENT AND PLACEMENT ARRANGEMENTS 16. Pursuant to the Management Agreement dated 1 July 2013 entered into between our Company and PPCF as the Manager and Sponsor, our Company appointed PPCF to sponsor and manage the Listing. PPCF will receive a management fee for such services rendered. 17. Pursuant to the Placement Agreement dated 1 July 2013 entered into between our Company, the Vendors and PPCF, DMG and SAC Capital as the Joint Placement Agents, the Joint Placement Agents have agreed to procure subscribers and purchasers for the Placement Shares for a placement commission of 3.75% of the aggregate Issue Price for the total number of Placement Shares successfully subscribed for and/or purchased, payable by our Company and the Vendors in the Agreed Proportion. Subject to any applicable laws and regulations, our Company and the Vendor agrees that the Joint Placement Agents shall be at liberty at its own expense to sub-place its placement obligations under the Placement Agreements upon such terms and conditions as the Joint Placement Agents may deem fit. 18. Other than pursuant to the Placement Agreement, there are no contracts, agreements or understandings between the Company, the Vendors and any person or entity that would give rise to any claim for brokerage commission, finders fees or other payments in connection with the offer and subscription of the Placement Shares.
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19. Subject to the consent of the SGX-ST being obtained, the Management Agreement may be terminated by PPCF at any time before the close of the Application List on the occurrence of certain events including: (a) PPCF becoming aware of any breach by our Company and/or its agent(s) of any warranties, representations, covenants or undertakings given by our Company to PPCF in the Management Agreement; there shall have been, since the date of the Management Agreement, any change or prospective change in or any introduction or prospective introduction of any legislation, regulation, policy, directive, guideline, rule or bye-law by any relevant government or regulatory body, whether or not having the force of law, or any other occurrence of similar nature that would materially change the scope of work, responsibility or liability required of PPCF; or in the case of a conflict of interest for PPCF, or any dispute, conflict or disagreement with our Company or where our Company wilfully fails to comply with any advice from or recommendation of PPCF.
(b)
(c)
20. The Placement Agreement and the obligations of the Joint Placement Agents under the Placement Agreement are conditional upon: (a) the Offer Document having been registered by the SGX-ST, acting as agent on behalf of the Authority by the issue date in accordance with the Catalist Rules and the SFA; the Registration Notice being issued or granted by the SGX-ST acting as agent on behalf of the Authority and such Registration Notice not being revoked or withdrawn on or prior to the Closing Date; the compliance by the Company and the Vendors to the satisfaction of the SGX-ST with all the conditions imposed by the SGX-ST in granting the Registration Notice (if any), where such conditions are required to be complied with by the Closing Date; the SGX-ST not having withdrawn or changed the terms and conditions of its letter of eligibility for admission of our Company on the Official List of the SGX-ST and the Company having complied with any conditions contained therein required to be complied with prior to the admission of our Company on the Official List of the SGX-ST; such approvals as may be required for the transactions described in the Placement Agreement and in the Offer Document in relation to the admission to the Official List of the SGX-ST and the Placement being obtained, and not withdrawn or amended, on or before the date on which the Company is admitted to the Official List of the SGX-ST (or such other date as the Company, the Vendors and the Joint Placement Agents may agree in writing); there having been, in the reasonable opinion of the Joint Placement Agents, no material adverse change or any development likely to result in a material adverse change in the financial or other condition of our Group between the date of the Placement Agreement and Closing Date nor the occurrence of any event nor the discovery of any fact rendering untrue or incorrect in any respect, as at the Closing Date, any of the warranties or representations contained in Clause 6 of the Placement Agreement nor any breach by our Company and the Vendors of any of our obligations thereunder; 230
(b)
(c)
(d)
(e)
(f)

(g) the compliance by our Company and the Vendors with all applicable laws and regulations concerning the Placement, the listing of the Shares on the Official List of the SGX-ST and the transactions contemplated in the Placement Agreement and the Offer Document and no new laws, regulations and directives having been promulgated, published and/or issued and/or having taken effect or any other similar matter having occurred which, in the reasonable opinion of the Joint Placement Agents, has or may have an adverse effect on the Placement and the listing of the Shares on the Official List of the SGX-ST; the delivery by our Company and the Vendors to the Joint Placement Agents on the Closing Date of a certificate, in the form set out in the Placement Agreement, signed by the authorised signatories of our Company and the Vendors respectively; the letters of undertaking referred to in the Offer Document under the section entitled Moratorium being delivered to the Sponsor and the Joint Placement Agents before the date of registration of the Offer Document; and the Management Agreement and the Placement Agreement not being terminated or rescinded pursuant to the provisions of the Management Agreement; and extending a copy of the legal due diligence reports prepared by Shook Lin & Bok LLP in relation to the admission for our Company on the Official List of the SGX-ST to the Joint Placement Agents for their record purposes only.
(h)
(i)
(j)
(k)
In the case of the non-fulfilment of any of the conditions contained in Clause 7 of the Management Agreement or the release or discharge of the Sponsor from its respective obligations under or pursuant to the Management Agreement for any reason whatsoever, the Placement Agreement shall be terminated and the parties thereto shall be released from their respective obligations under the Placement Agreement except that our Company and the Vendors shall continue to be bound by our obligations under Clauses 5 and 10 of the Placement Agreement which shall continue in full force and effect. 21. In the reasonable opinion of our Directors, PPCF, DMG and SAC Capital do not have a material relationship with our Company, save as disclosed below: (a) (b) PPCF is the Manager, Sponsor and Joint Placement Agent in relation to the Listing; Pursuant to the Management Agreement and as part of PPCFs management fees as the Manager and Sponsor, our Company issued and allotted to PPCF 3,125,000 new Shares, representing 0.20% of the issued share capital of our Company prior to the Placement, at the Issue Price for each Share. Upon the completion of the relevant moratorium period as set out in the section entitled Shareholders Moratorium of this Offer Document, PPCF will be disposing of its relevant shareholding interests in our Company at its discretion; and DMG and SAC Capital are the Joint Placement Agents of the Placement.
(c)
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MISCELLANEOUS 22. The nature of the business of our Company is stated in the section entitled General Information on our Company and our Group Business Overview of this Offer Document. The corporations which by virtue of Section 6 of the Companies Act are deemed to be related to our Company are set out in the section entitled Group Structure of this Offer Document. 23. There has been no previous issue of Shares by our Company or offer for sale of our Shares to the public within the two (2) years preceding the date of this Offer Document. 24. 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 the end of FY2012 and the Latest Practicable Date. 25. No expert is employed on a contingent basis by our Company or our subsidiaries, or has a material interest, whether direct or indirect, in the shares of our Company or our subsidiaries, or has a material economic interest, whether direct or indirect, in our Company, including an interest in the success of the Placement. 26. No amount of cash or securities or benefit has been paid or given to any Promoter within the two (2) years preceding the Latest Practicable Date or is proposed or intended to be paid or given to any Promoter at any time. 27. Save as disclosed in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document, no commission, discount or brokerage has been paid or other special terms granted within the two (2) years preceding the Latest Practicable Date 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 and/or purchases of any shares in, or debentures of, our Company or our subsidiaries. 28. Application monies received by our Company in respect of successful applications (including successful applications which are subsequently rejected) will be placed in a separate non-interest bearing account with the Receiving Banker. In the ordinary course of business, the Receiving Banker will deploy these monies in the inter-bank money market. All profits derived from the deployment of such monies will accrue to the Receiving Bank. Any refund of all or part of the application monies to unsuccessful or partially successful applicants will be made without any interest or any share of revenue or any other benefit arising therefrom. 29. Save as disclosed in this Offer Document, our Directors are not aware of any relevant material information including trading factors or risks which are unlikely to be known or anticipated by the general public and which could materially affect the profits of our Company and our subsidiaries. 30. Save as disclosed in this Offer Document, the financial condition and operations of our Group are not likely to be affected by any of the following: (i) known trends or demands, commitments, events or uncertainties that will result in or are reasonably likely to result in our Groups liquidity increasing or decreasing in any material way; material commitments for capital expenditure; 232
(ii)

(iii) unusual or infrequent events or transactions or any significant economic changes that will materially affect the amount of reported income from operations; and (iv) known trends or uncertainties that have had or that we reasonably expect will have a material and favourable or unfavourable impact on revenues or operating income. 31. Save as disclosed in this Offer Document, our Directors are not aware of any event which has occurred since the end of FY2012 to the Latest Practicable Date which may have a material effect on the financial position and results of our Group or the financial information provided in this Offer Document. CONSENTS 32. The Independent and Reporting Auditor, PricewaterhouseCoopers LLP, has given and has not withdrawn its written consent to the issue of this Offer Document with the inclusion herein of the Independent and Reporting Auditors Report on the Combined Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011, the Independent and Reporting Auditors Report on the Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial years ended 31 December 2012 and 31 December 2011 as set out in Appendices A and B of this Offer Document respectively and all references thereto in the form and context in which they are respectively included and references to its 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. 33. The Manager, Sponsor and Joint Placement Agent 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 they respectively appear in this Offer Document and to act in such respective capacities in relation to this Offer Document. 34. The Joint Placement Agents have given and have not withdrawn their written consent to the issue of this Offer Document with the inclusion herein of their names and references thereto in the form and context in which they respectively appear in this Offer Document and to act in such capacity in relation to this Offer Document. 35. The Solicitors to the Placement and Legal Adviser to our Company on Singapore Law, the Legal Adviser to our Company on BVI Law, the Legal Adviser to our Company on Hong Kong Law, the Legal Adviser to our Company on Japanese Law, the Legal Adviser to our Company on Malaysia Law, the Legal Adviser to our Company on PRC Law and the Legal Adviser to DMG have given and have not withdrawn their written consents to the issue of this Offer Document with the inclusion herein of their name and references thereto in the form and context in which they respectively appear in this Offer Document and to act in such respective capacities in relation to this Offer Document. 36. The Independent Valuers have each given and have not withdrawn their written consents to the issue of this Offer Document with the inclusion therein of their valuation reports relating to the independent valuation of the relevant properties as set out in Appendices C, D and E of this Offer Document respectively and all references thereto in the form and context in which they are included in this Offer Document, and to act in such capacity in relation to this Offer Document.
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37. The Independent Market Researcher has given and has not withdrawn its written consent to the issue of this Offer Document with the inclusion herein of the Market Research Report on the Healthcare Services Industry in China, Japan and Malaysia as set out in Appendix F of this Offer Document and all references to its 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. 38. Each of the Joint Placement Agents (save for PPCF), the Solicitors to the Placement and Legal Adviser to our Company on Singapore Law, the Legal Adviser to our Company on BVI Law, the Legal Adviser to our Company on Hong Kong Law, the Legal Adviser to our Company on Japanese Law, the Legal Adviser to our Company on Malaysia Law, the Legal Adviser to our Company on PRC Law, the Legal Adviser to DMG, the Singapore 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 disclaims 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. RESPONSIBILITY STATEMENT BY OUR DIRECTORS 39. This Offer Document has been seen and approved by our Directors and they collectively and individually accept full responsibility for the accuracy of the information given in this Offer Document and confirm, after making all reasonable enquiries, that to the best of their knowledge and belief, this Offer Document constitutes full and true disclosure of all material facts about the Placement, our Company and its subsidiaries, and our Directors are not aware of any facts the omission of which would make any statement in this Offer Document misleading. Where information in this Offer Document has been extracted from published or otherwise publicly available source or obtained from a named source, the sole responsibility of our Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this Offer Document in its proper form and context. RESPONSIBILITY STATEMENT BY THE VENDORS 40. This Offer Document has been seen and approved by the Vendors and each of the Vendors individually accepts full responsibility for the accuracy of the information given in this Offer Document and confirms after making all reasonable enquiries, that to the best of their knowledge and belief, this Offer Document constitutes full and true disclosure of all material facts about the Placement, our Company and its subsidiaries, and the Vendors are not aware of any facts the omission of which would make any statement in this Offer Document misleading. Where information in this Offer Document has been extracted from published or otherwise publicly available source or obtained from a named source, the sole responsibility of the Vendors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this Offer Document in its proper form and context.
234

DOCUMENTS FOR INSPECTION 41. The following documents or copies thereof may be inspected at our registered office during normal business hours for a period of six (6) months from the date of registration of this Offer Document with the SGX-ST (acting as agent on behalf of the Authority): (i) (ii) the Memorandum and Articles of Association of our Company; the Independent and Reporting Auditors Report on the Combined Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 as set out in Appendix A of this Offer Document;
(iii) the Independent and Reporting Auditors Report on the Examination of the Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited and its subsidiaries for the financial years ended 31 December 2012 and 31 December 2011 as set out in Appendix B of this Offer Document; (iv) the material contracts referred to in this Offer Document; (v) the letters of consent referred to in this Offer Document;
(vi) the Independent Valuation Reports as set out in Appendices C, D and E of this Offer Document; and (vii) the Market Research Report on the Healthcare Services Industry in China, Japan and Malaysia as set out in Appendix F of this Offer Document.
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APPENDIX A INDEPENDENT AND REPORTING AUDITORS REPORT ON THE COMBINED FINANCIAL STATEMENTS OF INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 AND THE FINANCIAL PERIOD FROM 3 FEBRUARY 2011 TO 31 DECEMBER 2011
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) (Incorporated in Singapore. Registration Number: 201304341E) AND ITS SUBSIDIARIES COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011
A-1
INDEPENDENT AND REPORTING AUDITORS REPORT ON THE COMBINED FINANCIAL STATEMENTS OF INTERNATIONAL HEALTHWAY CORPORATION LIMITED (FORMERLY KNOWN AS INTERNATIONAL HEALTHWAY CORPORATION PRIVATE LIMITED) AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 AND THE FINANCIAL PERIOD FROM 3 FEBRUARY 2011 TO 31 DECEMBER 2011 (THE REPORT) The Board of Directors International Healthway Corporation Limited 2 Leng Kee Road #04-10A, Thye Hong Centre Singapore 159086 1 July 2013 Report on the Combined Financial Statements We have audited the accompanying combined financial statements of International Healthway Corporation Limited (the Company) and its subsidiaries (the Group) set out on pages A-4 to A-51, which comprise the combined balance sheets as at 31 December 2012 and 31 December 2011, the combined statements of comprehensive income, statements of changes in equity and statements of cash flows for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011, and a summary of significant accounting policies and other explanatory information. Managements Responsibility for the Combined Financial Statements Management is responsible for the preparation of the combined financial statements that give a true and fair view in accordance with 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. Auditors Responsibility Our responsibility is to express an opinion on these combined 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 combined financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation of combined 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 entitys 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 combined financial statements. A-2
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the combined financial statements of the Group are properly drawn up in accordance with the Singapore Financial Reporting Standards so as to present fairly, in all material respects, the combined state of affairs of the Group as at 31 December 2012 and 31 December 2011 and the combined results, changes in equity and cash flows of the Group for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011. Other matter This Report has been prepared for the inclusion in the Offer Document of International Healthway Corporation Limited in connection with the invitation in respect of the initial offering of shares and listing on the Singapore Exchange Securities Trading Limited.
PricewaterhouseCoopers LLP Public Accountants and Certified Public Accountants Singapore Partner-in-Charge: Tham Tuck Seng
A-3
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES COMBINED STATEMENTS OF COMPREHENSIVE INCOME For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 Financial period from 3 February 2011 to 31 December 2011 S$000
Note Other operating income Expenses Administrative Finance Profit/(Loss) before tax Income tax expense Profit/(Loss) after tax Other comprehensive loss: Currency translation loss arising from consolidation Other comprehensive loss, net of tax Total comprehensive income/(loss) Earnings/(Loss) per share attributable to equity holders of the Company (expressed in cents per share) Basic and diluted earnings/(loss) per share (cents) 9 8 6 7 5
Financial year ended 31 December 2012 S$000 6,592
(82) (313) 6,197 6,197
(18) (18) (18)
(11) (11) 6,186
(26) (26) (44)
0.436
(0.001)
The accompanying notes form an integral part of these Combined Financial Statements. A-4
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES COMBINED BALANCE SHEETS As at 31 December 2012 and 31 December 2011 Note ASSETS Current assets Cash and cash equivalents Other receivables Other current asset 10 11 12 69 11,563 2,456 14,088 Non-current assets Investment property under development Other assets 13 14 46,000 441 46,441 Total assets LIABILITIES Current liability Trade and other payables Non-current liability Borrowings Total liabilities NET ASSETS EQUITY Share capital Currency translation reserve Retained earnings/(Accumulated losses) Total equity 17 5,001 (37) 6,179 11,143 5,001 (26) (18) 4,957 16 36,800 49,386 11,143 2,750 2,770 4,957 15 12,586 20 60,529 7,716 7,716 7,727 8 3 11 2012 S$000 2011 S$000
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES COMBINED STATEMENTS OF CHANGES IN EQUITY For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 Currency translation reserve S$000
Share capital S$000 2012 At 1 January 2012 Total comprehensive (loss)/income At 31 December 2012 5,001 5,001
Retained earnings S$000
Total equity S$000
(26) (11) (37)
(18) 6,197 6,179
4,957 6,186 11,143
Note 2011 At 3 February 2011 Capital contribution Total comprehensive loss At 31 December 2011 17
Share capital S$000
Currency translation reserve S$000
Accumulated losses S$000
Total equity S$000
5,001 5,001
(26) (26)
(18) (18)
5,001 (44) 4,957
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES COMBINED STATEMENTS OF CASH FLOWS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011
Financial period from 3 February 2011 to 31 December 2011 S$000 (18) (26) (44) (3) 5 (42) (42) (7,716) (7,716) 15 2,750 5,001 7,766 8 8
Note Cash flows from operating activities Profit/(Loss) after tax Adjustments for: Fair value gain on investment property under development Interest income Interest expense Foreign currency translation differences Changes in working capital Other receivables Trade and other payables Cash generated from/(used in) operations Interest paid Net cash provided by/(used) in operating activities Cash flows from investing activities Acquisition of investment property under development Additions to other assets Refundable tender deposit placed for purchase of asset Net cash used in investing activities Cash flows from financing activities Advances from related parties Advances to related parties Proceeds from borrowings Capital contribution Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year/period Cash and cash equivalents at end of financial year/period 10
Financial year ended 31 December 2012 S$000 6,197 (6,554) (313) 313 159 (198) 3 766 571 (449) 122 (31,900) (441) (2,456) (34,797) 11,936 (11,250) 34,050 34,736 61 8 69
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General information International Healthway Corporation Limited (the Company) was incorporated in the Republic of Singapore on 18 February 2013 under the Singapore Companies Act, Cap. 50 as a private company limited by shares under the name of International Healthway Corporation Private Limited. On 30 May 2013, the Company converted to a public limited company and changed its name to International Healthway Corporation Limited. The Company is domiciled in the Republic of Singapore. The address of its registered office and principal place of business is 2 Leng Kee Road, #04-10A, Thye Hong Centre, Singapore 159086. The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are as disclosed in Note 2 to the financial statements. 2. 2.1 Acquisition and Restructuring Exercise Establishment of Healthway Medical Development (Private) Limited and its subsidiaries Healthway Medical Development (Private) Limited (HMD) was incorporated in the Republic of Singapore on 26 September 2010. Subsequent to the incorporation, HMD and its subsidiaries incorporated various subsidiaries for the purpose of acquiring and developing its operations. As at 31 December 2012, HMD had the following subsidiaries:
Principal activities Country of incorporation Effective interest held 2012 2011 % % 100 100
Name of subsidiaries
Held by HMD IHC KLCC Investment Pte. Ltd. (Formerly known as Healthway Medical Centre (KLCC) Pte. Ltd.) (a) IHC Shanghai Medical Village Pte. Ltd. (Formerly known as Healthway Shanghai Medical Village Pte. Ltd.)(a)
Investment holding
Singapore
Investment holding
Singapore
100
100
A-8
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 2. 2.1 Acquisition and Restructuring Exercise (continued) Establishment of Healthway Medical Development (Private) Limited and its subsidiaries (continued)
IHC Chengdu Medical Resorts Private Limited (Formerly known as Neuglow Medical Resorts (Chengdu) Private Limited) (a) IHC Wuxi Hospital Pte. Ltd. (Formerly known as Golden Summit Development Pte. Ltd.) (a) IHC Chengdu Women and Child Hospital Pte. Ltd. (Formerly known as SBCC Women and Child Hospital Pte. Ltd.)(a) IHC Medical Assets Pte. Ltd. (Formerly known as Healthway Medical Assets Pte. Ltd.)(a) Held by subsidiaries IHC Seasons Residences Sdn. Bhd. (Formerly known as Seasons Residences Sdn. Bhd.)(b) IHC Apex Limited (Formerly known as HMD Apex Limited)(c) IHC Ace Limited (Formerly known as HMD Ace Limited)(c) IHC Star Limited (Formerly known as HMD Star Limited)(c) IHC Peak Limited (Formerly known as HMD Peak Limited)(c) IHC Summit Limited (Formerly known as HMD Summit Limited)(c)
Investment holding
Singapore
Investment holding
Singapore
100
100
Investment holding
Singapore
100
Investment holding
Singapore
100
Development of and investment in properties Investment holding
Malaysia
100
100
British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands
100
Investment holding
100
Investment holding
100
Investment holding
100
Investment holding
100
A-9
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 2. 2.1 Acquisition and Restructuring Exercise (continued) Establishment of Healthway Medical Development (Private) Limited and its subsidiaries (continued)
Principal activities Country of incorporation Effective interest held 2012 2011 % % 100
IHC Medical Holdings (HK) Limited (Formerly known as Healthway Medical Holdings (HK) Limited) (d) IHC Medical Enterprises (HK) Limited (Formerly known as Healthway Medical Enterprises (HK) Limited)(d) IHC Medical Facilities (HK) Limited (Formerly known as Healthway Medical Facilities (HK) Limited)(d) IHC Medical Services (HK) Limited (Formerly known as Healthway Medical Services (HK) Limited) (d) IHC Medical Assets (HK) Limited (Formerly known as Healthway Medical Assets (HK) Limited)(d) Kang Hui Maternity Center Services (Shanghai) Co., Ltd.(e) Kang Hui (Chengdu) Assets Co., Ltd.(e)
Investment holding
Hong Kong
Investment holding
Hong Kong
100
Investment holding
Hong Kong
100
Investment holding
Hong Kong
100
Investment holding
Hong Kong
100
Development of and investment in properties Development of and investment in properties
Peoples Republic of China Peoples Republic of China
100
100
(a) (b) (c) (d) (e)
Audited by PricewaterhouseCoopers LLP, Singapore Audited by Roger Yue, Tan & Associates, Malaysia Not required to be audited under the laws of the country of incorporation Audited by Jimmy C H Cheung & Co, Hong Kong Incorporated during the financial year end and auditor had yet to be appointed
A-10
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 2. 2.1 Acquisition and Restructuring Exercise (continued) Establishment of Healthway Medical Development (Private) Limited and its subsidiaries (continued) As at 31 December 2012, HMD had the following property that is held by a subsidiary:
Entity in the Group directly holding the asset Groups effective interest in the asset %
Asset acquired Land bank Pajakan Negeri (WP) 46289, Lot 84, Section 63, Town and District of Kuala Lumpur, Wilayah Persekutuan KL, Malaysia KLCC Land
Country of operation
Usage of the asset
Malaysia
IHC Seasons Integrated Residences mixed-use development Sdn. Bhd. (Formerly known as Seasons Residences Sdn. Bhd.)
100
Subsequent to 31 December 2012, additional subsidiaries were incorporated by HMD and its subsidiaries for the purpose of the expansion of its operations as follows: On 3 January 2013, HMD incorporated two wholly-owned subsidiaries, namely IHC Iskandar Development Pte. Ltd. and IHC Japan Medical Facilities Pte. Ltd. in Singapore. The issued and paid-up share capital of each of the two subsidiaries upon incorporation is SGD 1. The principal activity of each of the two subsidiaries is investment holding. On 16 January 2013, HMD, through IHC Iskandar Development Pte. Ltd. incorporated a wholly-owned subsidiary in Malaysia, namely Seasons Harbour View Sdn. Bhd.. The issued and paid-up share capital of the subsidiary upon incorporation is Malaysian Ringgit (MYR) 2. The principal activity of the subsidiary is development of and investment in properties. On 6 March 2013, Seasons Harbour View Sdn. Bhd. changed its name to IHC Seasons Harbour View Sdn. Bhd..
A-11
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 2. 2.1 Acquisition and Restructuring Exercise (continued) Establishment of Healthway Medical Development (Private) Limited and its subsidiaries (continued) On 22 February 2013, HMD, through IHC Japan Medical Facilities Pte. Ltd. and IHC Japan One ISH (refer to Note 2.2 below), incorporated a wholly owned subsidiary in Japan, namely IHC Japan First TMK. The shareholding of IHC Japan First TMK held by IHC Japan Medical Facilities Pte. Ltd. and IHC Japan One ISH are 25% and 75% respectively. The issued and paid-up share capital of the subsidiary upon incorporation is JPY40,000. The principal activity of the subsidiary is investment in properties. 2.2 Acquisition Exercise In 2013, HMD and its subsidiaries further acquired entities and assets in Japan, Hong Kong and the Peoples Republic of China. Details of the acquisitions are as set out below:
Groups effective interest in the entities/assets % Entities IHC Japan 1 GK IHC Japan One ISH Japan Japan Investment holding Investment holding IHC Japan Medical Facilities Pte. Ltd. IHC Japan Medical Facilities Pte. Ltd. IHC Star Limited (Formerly known as HMD Star Limited) Health Kind International Limited 100 50
Entities/assets acquired
Country of incorporation/ operation
Principal activities of entities/usage of the assets
Entity in the Group directly holding the entities/assets
(below three entities are collectively known as Wuxi Hospital) Health Kind Hong Kong Investment holding International Limited Health Kind International (Shanghai) Co., Ltd. Wuxi New District Phoenix Hospital Co., Ltd. Peoples Republic of China Peoples Republic of China Investment holding
76.5
74.97
Operation of a general hospital
Health Kind International (Shanghai) Co., Ltd.
74.97
A-12
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 2. 2.2 Acquisition and Restructuring Exercise (continued) Acquisition Exercise (continued)
Groups effective interest in the entities/assets % Assets Properties (Collectively known as Japan Properties) Hikari Heights Varus Japan Fujino Hikari Heights Varus Japan Ishiyama Hikari Heights Varus Japan Kotoni Hikari Heights Varus Japan Makomanai-Koen Varus Tsukisamu-Koen Japan Varus Cuore Yamanote Varus Cuore Sapporo Kita Elysion Gakuenmae Elysion Mamigaoka/Elysion Mamigaoka Annex Elysion Amanohashidate Elysion Kaichi North Elysion Kaichi West Japan Japan Japan Japan
Skilled facility Skilled facility Skilled facility Skilled facility Skilled facility Skilled facility Skilled facility Skilled facility Skilled facility
nursing nursing nursing nursing nursing nursing nursing nursing nursing
IHC Japan TMK IHC Japan TMK IHC Japan TMK IHC Japan TMK IHC Japan TMK IHC Japan TMK IHC Japan TMK IHC Japan TMK IHC Japan TMK
First First First First First First First First First
100 100 100 100 100 100 100 100 100
Japan Japan Japan
Skilled nursing facility Skilled nursing facility Skilled nursing facility
IHC Japan First TMK IHC Japan First TMK IHC Japan First TMK
100 100 100
A-13
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 2. 2.2 Acquisition and Restructuring Exercise (continued) Acquisition Exercise (continued)
Groups effective interest in the entities/assets %
Land bank Lot DJY27 (211/212/245): 2012-153 South bounded by Baolian Road, East bounded by Rainbow Avenue and West bounded by Dujiangyan Peoples Hospital, Lianmeng Village, Xinfu Town, Dujiangyan Chengdu City, the Peoples Republic of China Chengdu Land
Peoples Republic of China
Part hospital and part commercial
Kang Hui (Chengdu) Assets Co., Ltd.
100
2.3
Restructuring exercise On 18 February 2013, as part of the restructuring exercise, the Company was incorporated.
2.3.1 Entities of HMD transferred to the Company On 29 May 2013, as part of the restructuring exercise, HMD transferred all the issued and paid up share capital of the following subsidiaries (the Subsidiaries) to the Company at a consideration of S$89,021,000, which is entirely satisfied by issuance of shares of the Company (the Restructuring Exercise).
Effective interest held % 100
Name of subsidiaries IHC KLCC Investment Pte. Ltd. (Formerly known as Healthway Medical Centre (KLCC) Pte. Ltd.)
Principal activities Investment holding
Country of incorporation Singapore
A-14
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 2. 2.3 Acquisition and Restructuring Exercise (continued) Restructuring exercise (continued)
2.3.1 Entities of HMD transferred to the Company (continued)

Name of subsidiaries IHC Wuxi Hospital Pte. Ltd. (Formerly known as Golden Summit Development Pte. Ltd.) IHC Chengdu Women and Child Hospital Pte. Ltd. (Formerly known as SBCC Women and Child Hospital Pte. Ltd.) IHC Medical Assets Pte. Ltd. (Formerly known as Healthway Medical Assets Pte. Ltd.) IHC Japan Medical Facilities Pte. Ltd.(a) IHC Seasons Residences Sdn. Bhd. (Formerly known as Seasons Residences Sdn. Bhd.) IHC Star Limited (Formerly known as HMD Star Limited) IHC Peak Limited (Formerly known as HMD Peak Limited) IHC Summit Limited (Formerly known as HMD Summit Limited) IHC Medical Facilities (HK) Limited (Formerly known as Healthway Medical Facilities (HK) Limited) IHC Medical Services (HK) Limited (formerly known as Healthway Medical Services (HK) Limited) IHC Medical Assets (HK) Limited (Formerly known as Healthway Medical Assets (HK) Limited)
Investment holding
Singapore
100
Investment holding
Singapore
100
Investment holding Development of and investment in properties Investment holding
Singapore Malaysia
100 100
British Virgin Islands British Virgin Islands British Virgin Islands Hong Kong
100
Investment holding
100
Investment holding
100
Investment holding
100
Investment holding
Hong Kong
100
Investment holding
Hong Kong
100
A-15
2.3.1 Entities of HMD transferred to the Company (continued)

Name of subsidiaries Kang Hui (Chengdu) Assets Co., Ltd.
Principal activities Development of and investment in properties Investment holding Investment holding Investment in properties Investment holding Investment holding Operation of a general hospital
Country of incorporation Peoples Republic of China Japan Japan Japan Hong Kong Peoples Republic of China Peoples Republic of China
IHC Japan One ISH(a) IHC Japan 1 GK (a) IHC Japan First TMK(a) Health Kind International Limited (a) Health Kind International (Shanghai) Co., Ltd.(a) Wuxi New District Phoenix Hospital Co., Ltd.(a)
Notes:
(a)
50 100 62.50(b) 74.97 74.97 74.97
The following entities were not included as part of the Group for the purpose of the combined financial statements of the Group as their incorporation or acquisition were only completed in 2013. IHC Japan Medical Facilities Pte. Ltd. and IHC Japan One ISH as common shareholders of IHC Japan First TMK have waived their rights to receive the economic benefits of IHC Japan First TMK. Under Japanese laws, as the common shareholders have waived their rights to receive economic benefits of IHC Japan First TMK, the Group is entitled to the full economic benefit of IHC Japan First TMK via its direct and indirect ownership of 100% of the preferred shares in IHC Japan First TMK, not withstanding that IHC Japan Medical Facilities Pte. Ltd. does not have full beneficial ownership of IHC Japan First TMK.
(b)
2.3.2 Entities of HMD not transferred to the Company The following entities remain as subsidiaries of HMD and are not transferred to the Company.
A-16
2.3.2 Entities of HMD not transferred to the Company (continued)

Name of subsidiaries IHC Shanghai Medical Village Pte. Ltd. (Formerly known as Healthway Shanghai Medical Village Pte. Ltd.) IHC Chengdu Medical Resorts Private Limited (Formerly known as Neuglow Medical Resorts (Chengdu) Private Limited) IHC Iskandar Development Pte. Ltd. IHC Seasons Harbour View Sdn. Bhd. (Formerly known as Seasons Harbour View Sdn. Bhd.) IHC Apex Limited (Formerly known as HMD Apex Limited) IHC Ace Limited (Formerly known as HMD Ace Limited) IHC Medical Holdings (HK) Limited (Formerly known as Healthway Medical Holdings (HK) Limited) IHC Medical Enterprises (HK) Limited (Formerly known as Healthway Medical Enterprises (HK) Limited) Kang Hui Maternity Center Services (Shanghai) Co., Ltd.
Investment holding
Singapore
100
Investment holding Development of and investment in properties Investment holding
Singapore Malaysia
100 100
British Virgin Islands British Virgin Islands Hong Kong
100
Investment holding Investment holding
100 100
Investment holding
Hong Kong
100
Development of and investment in properties
100
Sale and purchase agreements were entered into with HMD allowing the Company to acquire these subsidiaries at a later date. See Note 22(c) for further details.
A-17
2.3.3 The Restructuring Exercise has been accounted for as a capital reorganisation as the entities transferred were managed as part of the existing group prior to the restructuring exercise. Accordingly, the combined financial statements of the Group are presented as follows: (i) The combined balance sheets of the Group as at 31 December 2012 and 31 December 2011; and the combined statements of comprehensive income, the combined statements of changes in equity and the combined cash flow statements of the Group for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 (the Relevant Periods and each, a Relevant Period) have been prepared as if the Company had been the holding company of the Group throughout the Relevant Periods rather than from the date on which the Restructuring Exercise was completed. The assets and liabilities of the Subsidiaries are brought into the Groups books based on their existing carrying values in their respective financial statements. No adjustments was made to the carrying values of those assets and liabilities as consistent accounting policies have been applied.
(ii)
(iii) The retained earnings/accumulated losses of the Group will be the combined retained earnings/accumulated losses of the Subsidiaries. The share capital of the Group would reflect the difference between the existing carrying values of the net assets acquired and the combined retained earnings/accumulated losses and other reserves of the Subsidiaries. (iv) All significant intra-group transactions and balances have been eliminated on combination. (v) The earnings/(loss) per share is computed based on the post-Restructuring Exercise number of ordinary shares of 1,420,000,000.
A-18
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. 3.1 Significant accounting policies Basis of preparation The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (FRS) under the historical cost convention, except as disclosed in the accounting policies below. The preparation of the financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Groups accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. 3.2 Revenue recognition Interest income is recognised using the effective interest method. 3.3 Group accounting Subsidiaries (i) Consolidation Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to a majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases. In preparing the combined financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
A-19
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. 3.3 Significant accounting policies (continued) Group accounting (continued) Subsidiaries (continued) (ii) Acquisition Other than the acquisition undertaken through the Restructuring Exercise as described in Note 2.3, the acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary or business comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the non-controlling interests proportionate share of the acquirees net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. (iii) Disposals When a change in the Groups ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific standard. A-20
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. 3.3 Significant accounting policies (continued) Group accounting (continued) Subsidiaries (continued) (iii) Disposals (continued) Any retained equity interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained investment at the date when control is lost and its fair value is recognised in profit or loss. 3.4 Borrowing costs Borrowing costs are recognised in profit or loss using the effective interest method except for those costs that are directly attributable to the construction or development of properties and assets under construction. This includes those costs on borrowings acquired specifically for the construction or development of properties and assets under construction, as well as those in relation to general borrowings used to finance the construction or development of properties and assets under construction. The actual borrowing costs incurred during the period up to the issuance of the temporary occupation permit less any investment income on temporary investment of these borrowings, are capitalised in the cost of the investment property under development and other assets. 3.5 Investment properties and investment properties under development Investment properties (including those under development) are properties held either to earn rental or for capital appreciation or both. Investment properties include land under operating leases that is held for long-term capital appreciation or for a currently indeterminate use and properties that are being constructed or developed for future use as investment properties. Investment properties are initially recognised at cost and subsequently carried at fair value, determined annually by independent professional valuers on the highest-and-best-use basis. Changes in fair values are recognised in profit or loss.
A-21
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. 3.5 Significant accounting policies (continued) Investment properties and investment properties under development (continued) Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations and improvements is capitalised and the carrying amounts of the replaced components are recognised in profit or loss. The cost of maintenance, repairs and minor improvements is recognised in profit or loss when incurred. On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is recognised in profit or loss. 3.6 Impairment of non-financial assets Other assets Other assets are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash inflows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the cashgenerating-unit (CGU) to which the asset belongs. If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profit or loss. An impairment loss for an asset other than goodwill is reversed only if, there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.
A-22
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. 3.6 Significant accounting policies (continued) Impairment of non-financial assets (continued) Other assets (continued) A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. 3.7 Financial assets loans and receivables Cash and cash equivalents Amount owing from a related party Other receivables Other current assets Cash and cash equivalents, amount owing from a related party, other receivables and other current assets are initially recognised at their fair value plus transaction costs and subsequently carried at amortised cost using the effective interest method, less accumulated impairment losses. The Group assesses at each balance sheet date whether there is objective evidence that these financial assets are impaired and recognises an allowance for impairment when such evidence exists. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. These assets are presented as current assets except for those that are expected to be realised later than 12 months after the balance sheet date, which are presented as non-current assets.
A-23
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. 3.8 Significant accounting policies (continued) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 3.9 Borrowings Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date, in which case they are presented as non-current liabilities. Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowings are derecognised when the obligation is discharged, cancelled or expired. The difference between the carrying amount and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. 3.10 Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities. Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method. 3.11 Income taxes Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
A-24
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. 3.11 Significant accounting policies (continued) Income taxes (continued) Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when 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 affects neither accounting nor taxable profit or loss at the time of the transaction. A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised. Deferred income tax is measured: (i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities except for investment properties. Investment properties measured at fair value is presumed to be recovered entirely through sale. Current and deferred income taxes are recognised as income or expense in profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.
(ii)
A-25
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 3. Significant accounting policies (continued)
3.12 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised in the statement of comprehensive income as finance expense. Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise. 3.13 Currency translation (a) 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 the entity operates (functional currency). The financial statements are presented in Singapore Dollars, which is the functional currency of the Company. (b) Transactions and balances Transactions in a currency other than the functional currency (foreign currency) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profit or loss. When a foreign operation is disposed of or any loan forming part of the net investment of the foreign operation is repaid, a proportionate share of the accumulated currency translation differences is reclassified to profit or loss, as part of the gain or loss on disposal.
A-26
3.13 Currency translation (continued) (b) Transactions and balances (continued) Foreign exchange gains and losses that relate to borrowings are presented in the income statement within finance cost. All other foreign exchange gains and losses impacting profit or loss are presented in the income statement within other operating income. 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. (c) 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 exchange rates at the reporting date; 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
(ii)
(iii) all resulting currency translation differences are recognised in other comprehensive income and accumulated in the currency translation reserve. These currency translation differences are reclassified to profit or loss on disposal or partial disposal of the entity giving rise to such reserve. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting date.
A-27
3.14 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the executive committee whose members are responsible for allocating resources and assessing performance of the operating segments. 3.15 Cash and cash equivalents For the purpose of presentation in the combined statement of cash flows, cash and cash equivalents include cash on hand and deposits with financial institutions which are subject to an insignificant risk of change in value. 3.16 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account. 4. Critical accounting estimates and assumptions Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Fair value estimation of investment property under development Investment property under development is stated at fair value based on valuation performed by an independent professional valuer. The fair value is based on open market value, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arms length transaction wherein the parties had each acted knowledgeably and without compulsion. The fair value of investment property under development as at 31 December 2012 was approximately S$46,000,000 (2011: S$Nil) using the direct comparison method.
A-28
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 5. Other operating income Financial period from 3 February 2011 to 31 December 2011 S$000
Financial year ended 31 December 2012 S$000 Fair value gain on investment property under development (Note 13) Interest income from a related party Currency translation loss net 6,554 313 (275) 6,592
6.
Expenses by nature Financial period from 3 February 2011 to 31 December 2011 S$000 4 10 4 18
Financial year ended 31 December 2012 S$000 Professional fees Secretarial fees Others Total administrative expenses 35 40 7 82
A-29
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 7. Finance expenses Financial period from 3 February 2011 to 31 December 2011 S$000
Financial year ended 31 December 2012 S$000 Interest expense Bank borrowings Borrowings from a shareholder Less: Amount capitalised in investment property under development (Note 13) Less: Amount capitalised in other assets (Note 14) Finance expense recognised in profit or loss 242 533 (462) 313
117 (117)
A-30
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 8. Income tax expense There is no income tax expense for the year/period presented as the Company and its subsidiaries are in tax loss positions. The income tax expense on the Groups profit/(loss) before tax differs from the theoretical amount that would arise using the Singapore standard rate of income tax as follows: Financial period from 3 February 2011 to 31 December 2011 S$000 (18) (3)
Financial year ended 31 December 2012 S$000 Profit/(Loss) before tax Tax calculated at a tax rate of 17% (2011: 17%) Effects of: different tax rates in other countries income not subject to tax operating losses not allowed to be carried forward Income tax expense 1 (1,114) 60 6,197 1,053
(1) 4
A-31
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 9. Earnings/(loss) per share Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year/period. Financial period from 3 February 2011 to 31 December 2011 (18)
Financial year ended 31 December 2012 Profit/(Loss) attributable to equity holders of the Company (S$000) Weighted average number of ordinary shares outstanding for basic earnings/(loss) per share (000) Basic earnings/(loss) per share (cents) 6,197
1,420,000 0.436
1,420,000 (0.001)
The basic and diluted earnings/(loss) per share are the same as there were no potential dilutive ordinary shares outstanding as at each balance sheet date. 10. Cash and cash equivalents 2012 S$000 Cash on hand and at bank 69 2011 S$000 8
A-32
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 11. Other receivables 2012 S$000 Amount owing from a related party Other receivables 11,563 11,563 2011 S$000 3 3
Amount owing from a related party is unsecured, charged at an interest of 8% per annum and repayable on demand. 12. Other current asset Other current asset relates to a refundable deposit that the Group placed for the tender of a piece of land located in the Peoples Republic of China. 13. Investment property under development 2012 S$000 Beginning of financial year/period Additions Transferred from other assets (Note 14) Fair value gain recognised in profit or loss (Note 5) Currency translation loss End of financial year/period 420 39,196 6,554 (170) 46,000 2011 S$000
Investment property under development is carried at fair value at the balance sheet date as determined by an independent professional valuer based on the property highest-and-bestuse using the Direct Comparison Method. The investment property under development is mortgaged to secure bank borrowings (Note 16(a)).
A-33
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 13. Investment property under development (continued) Included in the carrying amount of the investment property under development are capitalised borrowing costs of S$579,000 (2011: S$Nil) incurred to finance the acquisition of the property. 14. Other assets 2012 S$000 Beginning of financial year/period Additions Transferred to investment properties under development (Note 13) End of financial year/period 7,716 31,921 (39,196) 441 2011 S$000 7,716 7,716
Other assets consist mainly of progress payments made for the acquisition of properties and/or the capitalisation of the related costs incurred. Included in the costs capitalised are borrowing costs incurred to finance the acquisition of a property of S$Nil (2011: S$117,000). These amounts will be reclassified to investment properties under development upon completion of the acquisitions. During the financial year ended 31 December 2012, S$39,196,000 (2011: S$Nil) had been reclassified to investment property under development as the acquisition had been completed with the receipt of the legal title. 15. Trade and other payables 2012 S$000 Trade payables Other payables Amount owing to a related party 294 341 11,951 12,586 2011 S$000 5 15 20
The non-trade amount owing to a related party is unsecured, interest-free and repayable upon demand.
A-34
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 16. Borrowings 2012 S$000 Non-current Bank borrowings [Note (a)] Loan from a shareholder [Note (b)] 22,800 14,000 36,800 2,750 2,750 2011 S$000
The exposure of the bank borrowings of the Group to interest rate changes and the contractual repricing dates at the balance sheet date are as follows: 2012 S$000 6 months or less 6 12 months Over 1 year 22,800 22,800 2011 S$000
The loan from a shareholder is at a fixed rate and hence not exposed to interest rate changes. (a) Bank borrowings During the financial year ended 31 December 2012, a subsidiary of the Company accepted a bank loan facility amounting to MYR114,500,000 to part finance an acquisition of the KLCC Land and the working capital requirements with respect to the development of the KLCC Land (the KLCC Project). As at 31 December 2012, a total of MYR57,000,000 (S$22,800,000 equivalent) had been drawn down by the subsidiary. An interest of 2.25% per annum over the banks prevailing 1 month Effective Cost of Fund (Kuala Lumpur Inter Bank Offer Rate plus the banks cost to maintain reserve) on monthly rests will be charged on the utilised amount commencing from the date of utilisation. The loan is repayable in 24 monthly payments starting 30 months from the date of utilisation.
A-35
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 16. Borrowings (continued) (a) Bank borrowings (continued) The loan is secured against: (i) (ii) a charge over the KLCC Land; a deed of debenture over the assets and rights of the subsidiary pertaining to the KLCC Project;
(iii) a deed of assignment of the subsidiarys full and entire rights and entitlements pertaining to the KLCC Project; (iv) a corporate guarantee from a related party (limited to 25% of the total indebtedness to the bank); and (v) joint and several all-monies guarantee by a director of the Company and two related parties.
(b)
Loan from a shareholder non current During the financial period ended 31 December 2011, a subsidiary of the Company accepted a loan facility amounting to S$9,000,000 from a shareholder of the Company (the Lender) to part finance acquisition of the KLCC Land and the working capital requirements with respect to the development of the KLCC Land (the KLCC Project). As at 31 December 2011, a total amount of S$2,750,000 had been drawn down by the subsidiary. On 7 June 2012, a supplemental agreement was entered into between the subsidiary and the Lender to increase the total loan facility to S$15,000,000 and to permit the subsidiary to utilise the undrawn portion of the loan of S$12,250,000 for the acquisition of a property by a related party in Shanghai, PRC (the Shanghai Project). On 30 November 2012, a supplemental agreement was entered into between the subsidiary and the Lender to increase the total loan facility to S$20,000,000. As at 31 December 2012, a total amount of S$14,000,000 had been drawn down by the subsidiary.
A-36
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 16. Borrowings (continued) (b) Loan from a shareholder non current (continued) An interest of 8% per annum will be charged on the utilised amount commencing from the date of utilisation. In addition, the subsidiary agrees to pay the Lender a sum equivalent to 7.5% of the profit made in relation to the KLCC Project or the Shanghai Project, whichever is higher, subject to a minimum of MYR4,500,000 (the Lenders Share). The Lenders Share is computed by the taking the respective fair values as determined by independent professional valuers less the respective project expenditures. The loans repayment date is 13 June 2014, which is 3 years from the date of the first loan agreement. (i) Conversion The Lender is entitled to convert the loan into residential/office units (real estate units) under the KLCC Project and it may exercise the conversion rights by issuing the conversion notice on the following dates: a. First conversion date i.e. the launch date of the real estate units A sum of up to 50% of the total drawn debt shall be converted into real estate units at the launch price. b. Second conversion date i.e. on or after 13 June 2014 A sum of up to 50% of the total drawn debt shall be converted into real estate units at the valuation price. Any part of the loan which is converted to real estate units shall not be entitled to any Lenders Share and the Lenders Share payable shall be reduced accordingly in the event of a conversion.
A-37
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 16. Borrowings (continued) (b) Loan from a shareholder non current (continued) (ii) Securities granted The loan is secured against: a. a charge to be created over the KLCC Land upon the completion of the sale and purchase of the land; a corporate guarantee from a subsidiary of the Company; a corporate guarantee from a related party; and joint and several all-monies guarantee by a director of the Company and two related parties.
b. c. d.
(c)
Fair value of non-current borrowings 2012 S$000 Bank borrowings Loan from a shareholder 22,800 16,139 2011 S$000 2,902
The fair values above are determined from the cash flow analyses, discounted at market borrowing rates of an equivalent instrument at the balance sheet date which the Board of Directors expects to be available to the Group as follows: 2012 Bank borrowings Loan from a shareholder 5.54% 5.54% 2011 5.54% 5.54%
A-38
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 17. Share capital Number of ordinary shares Issued share capital 000 31 December 2012 Beginning and end of financial year 31 December 2011 Beginning and end of financial period 1,420,000 5,001 1,420,000 5,001
Amount Share capital S$000
All issued ordinary shares are fully paid with no par value. The holders of ordinary shares are entitled to receive dividends as and when declared. All ordinary shares carry one vote per share without restriction.
A-39
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 18. Commitments Capital commitments Capital expenditures contracted for at the balance sheet date but not recognised in the financial statements, are as follows: 2012 S$000 Acquisition of land bank 8,927 2011 S$000 29,948
19.
Financial risk management Financial risk factors The Groups activities expose it to market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Groups overall risk management strategy seeks to minimise any adverse effects from the unpredictability of financial markets on the Groups financial performance. The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group, as well as establishing and reviewing the detailed financial risk management policies for the Group. (a) Market risk (i) Currency risk The Group operates predominantly in Asia with operations in countries such as Singapore, Malaysia, the Peoples Republic of China and Japan. Entities in the Group transact in currencies other than their respective functional currencies (foreign currencies). Currency risk arises within entities in the Group when transactions are denominated in foreign currencies such as the Singapore Dollar (SGD), MYR, United States Dollar (USD) and Chinese Yuan Renminbi (RMB).
A-40
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 19. Financial risk management (continued) Financial risk factors (continued) (a) Market risk (continued) (i) Currency risk (continued)
SGD S$000 At 31 December 2012 Financial assets Cash and cash equivalents Amount due from related parties Receivables from fellow subsidiaries Other current asset 12 13,015 3,806 16,833 Financial liabilities Borrowings Payable by fellow subsidiaries Amount due to a related party Trade and other payables (14,000) (3,806) (13,403) (228) (31,437) Net financial (liabilities)/assets Add: Firm commitment (22,800) (315) (23,115) (92) (92) (36,800) (3,806) (13,403) (635) (54,644) 57 57 2,456 2,456 69 13,015 3,806 2,456 19,346 MYR S$000 USD S$000 RMB S$000 Total S$000
(14,604)
(23,058)
2,364
(8,927)
(35,298) (8,927)
A-41
SGD S$000 Currency profile Financial (assets)/liabilities denominated in the respective entities functional currencies Currency exposure of financial (liabilities)/assets net of those denominated in the respective entities functional currencies (14,604) MYR S$000 (23,058) USD S$000 2,364 RMB S$000 (8,927) Total S$000 (44,225)
(3,832)
23,098
8,927
28,153
(18,436)
2,364
(16,072)
SGD S$000 At 31 December 2011 Financial assets Cash and cash equivalents Other receivables Amount due a related party
MYR S$000
Total S$000
7 500 507
1 3 4
8 3 500 511
Financial liabilities Borrowings Amount due to a related party Other payables
(2,750) (515) (4) (3,269)
(1) (1)
(2,750) (515) (5) (3,270)
A-42
SGD S$000 Net financial (liabilities)/assets Add: Firm commitment Currency profile Financial (assets)/liabilities denominated in the respective entities functional currencies Currency exposure of financial assets/(liabilities) net of those denominated in the respective entities functional currencies (2,762) (2,762) MYR S$000 3 (29,948) (29,945) Total S$000 (2,759) (29,948) (32,707)
(500)
29,945
29,445
(3,262)
(3,262)
Sensitivity analysis With all other variables including tax rate being held constant, the effects arising from the net financial asset/liability position will be as follows:
31 December 2012 31 December 2011 Increase/(decrease) Profit after Profit after Change tax Change tax % S$000 % S$000 SGD against MYR Strengthened Weakened 2 2 (241) 241 2 2 (49) 49
A-43
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 19. Financial risk management (continued) Financial risk factors (continued) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. The Groups exposure to interest rate risk arises primarily from its borrowings. The Groups policy is to obtain the most favourable interest rates available without increasing its foreign currency exposure. The Group periodically reviews its liabilities and monitors interest rate fluctuations to ensure that the exposure to interest rate risk is within acceptable levels. If the interest rates had increased/decreased by 0.50% (2011: 0.50%) in absolute with all other variables including tax rate being held constant, the profit after tax would have been lower/higher by S$114,000 (2011: S$Nil) as a result of higher/lower interest expense on these borrowings. (b) 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 maximum exposure to credit risk for each class of financial assets is the carrying amount of that class of financial instruments presented on the balance sheet. The Groups main classes of financial assets are cash and cash equivalents, other receivables and other current asset. (i) Financial assets that are neither past due nor impaired For cash and cash equivalents, the Group adopts the policy of dealing only with major banks of high credit standing throughout the world. Other receivables and other current asset that are neither past due nor impaired are substantially companies with good collection track records with the Group.
A-44
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 19. Financial risk management (continued) Financial risk factors (continued) (b) Credit risk (continued) (ii) Financial assets that are past due and/or impaired There is no class of financial assets that is past due and/or impaired. (c) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Groups exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Groups objective is to maintain a balance between continuity of funding and flexibility through the use of loans and borrowings. In addition, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance its operations and mitigate the effect of fluctuations in cash flows. The tables below analyse non-derivative financial liabilities of the Group into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant. Within 1 year S$000 At 31 December 2012 Trade and other payables Borrowings At 31 December 2011 Trade and other payables Borrowings 20 220 3,069 12,586 2,383 40,419 Between 1 to 5 years S$000
A-45
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 19. Financial risk management (continued) Financial risk factors (continued) (d) Capital risk The primary objective of the Groups capital management is to maintain an adequate capital base so as to maintain investor, creditor and market confidence and to sustain future development of its business. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to its shareholders, return capital to its shareholders or issue new shares. There were no changes in the Groups approach to capital management during the period from 3 February 2011 (date of incorporation) to 31 December 2012. The Group is not subject to any externally imposed capital requirements. (e) Fair value measurements The carrying amount of cash and cash equivalents, other receivables, other current asset and trade and other payables approximate their fair values because these are mostly short term in nature. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value of borrowings is disclosed in Note 16(c). (f) Financial instruments by category The aggregate carrying amount of loans and receivables and financial liabilities at amortised cost are as follows: 2012 S$000 Loans and receivables Financial liabilities at amortised cost 14,088 49,386 2011 S$000 11 2,770
A-46
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 20. Segment information Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. Management considers the business from the operational perspective ie provision of healthcare services, integrated medical real estate and investment holding. The Groups business can be categorised into two segments as follows: (i) Provision of healthcare services (Healthcare Services) through: (ii) the management and operation of hospital, and investing in healthcare-related assets.
Development of medical real estate (such as hospital facilities), healthcare-related assets (such as nursing homes) and integrated mixed-use developments (such as developments with medical real estate/healthcare-related assets, retail space, office and/or service residences) (Integrated Medical Real Estate).
All other segment comprises head office function, including most senior management staff and functions. As at 31 December 2012, the Group has not completed the Acquisition and Restructuring Exercise as disclosed in Note 2 and has not commenced operations. Accordingly, no segment information is presented because it is not meaningful to the Management.
A-47
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 21. Related party transactions (a) In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties at terms agreed between the parties during the year/period: Financial period from 3 February 2011 to 31 December 2011 S$000
Financial year ended 31 December 2012 S$000 Management fee charged from related parties capitalised into other assets and investment property under development (Notes 13 and 14) Interest paid/payable to a shareholder (Note 16)
779 533
428 117
Balances with related parties and a shareholder at the balance sheet date are set out in Notes 11, 15 and 16. Related parties comprise mainly companies which are controlled or significantly influenced by the Companys shareholders. (b) Key management personnel compensation There is no key management personnel expense for the financial year. During the financial year ended 31 December 2012, key management personnel compensation amounting to S$370,000 (2011: S$27,000) incurred by HMD was recharged to certain subsidiaries as part of project management services and capitalised as project costs in investment property under development and/or other assets.
A-48
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 22. Events occurring after balance sheet date (a) (b) The restructuring exercise as set out in Note 2.3 occurs after the balance sheet date. As disclosed in Note 2.2, on 30 April 2013, HMD, through IHC Star Limited (formerly known as HMD Star Limited) acquired an effective 74.97% equity interest in Wuxi Hospital. The fair value of the Groups share of the identifiable net assets of these companies at the date of acquisition has been provisionally determined at S$12,873,000. Details of the assets acquired and liabilities assumed, non-controlling interest that will be recognised, revenue and profit contribution of Wuxi Hospital and the effect on the cash flows for the Group are not disclosed, as the accounting for this acquisition is still incomplete at the time the combined financial statements have been authorised for issue. On 31 May 2013, the Company entered into three sale and purchase agreements (the SPAs) with HMD to acquire certain of its subsidiaries (the Project Entities) which had entered or will enter into sale and purchase agreements for: (i) two blocks of multi-storey strata title developments in Iskandar, Malaysia for development into an integrated mixed-use development (IHC Iskandar Project); a land bank in Chengdu, the Peoples Republic of China for development into an integrated mixed-use development (IHC Chengdu Project); and
(c)
(ii)
(iii) three blocks of commercial development in Shanghai, the Peoples Republic of China for positioning into an integrated mixed-use development (IHC Shanghai Project). The total consideration for the above acquisitions is S$17,403,000 and is to be satisfied by the issuance and allotment of such number of new ordinary shares in the share capital of the Company at the issue price of the shares of the Company during its initial offering of shares and listing on the Singapore Exchange Securities Trading Limited. The completion of the above acquisitions is dependant on certain conditions precedent which include the following: IHC obtaining the acquisition financing; IHC obtaining and exercising the right to negotiate; The sale and purchase agreement for acquisition of IHC Iskandar Project and IHC Chengdu Project to be finalised and executed;
A-49
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 22. Events occurring after balance sheet date (continued) IHC and HMD obtaining relevant approval(s) from their respective shareholders in connection with the SPAs; HMD and/or the Project Entities obtaining relevant approvals and consent from the relevant government authorities or regulatory bodies in connection with the acquisition, if applicable; No material adverse change (as determined by IHC in its reasonable discretion) in the prospects, operations or financial conditions of the Project Entities; and All necessary third party, governmental and regulatory consents, approvals and waivers where required for the transactions contemplated hereunder having been obtained, and such consents, approvals and waivers not having been amended or revoked and if any such consents, approvals or waivers are subject to conditions, such conditions being acceptable to the parties to the SPAs.
(d)
In relation to the loan from a shareholder as disclosed in Note 16(b), a supplemental loan agreement was entered into between the shareholder of the Company and a related party on 28 May 2013. Pursuant to the loan agreement, loan amounting to S$11.25 million used for the acquisition of investment properties in the Peoples Republic of China is assumed by the related party. The corporate guarantees from a subsidiary of the Company and a related party and joint and several all-monies guarantee by a director of the Company and two related parties have been released and replaced by a corporate guarantee by the Company. In addition, the Lenders Share and the charge to be created on KLCC Land have been removed from the supplemental agreement.
23.
New or revised accounting standards and interpretations Below are the mandatory standards, amendments and interpretations to existing standards that have been published, and are relevant for the Groups accounting periods beginning on or after 1 January 2013 or later periods and which the Group has not early adopted: FRS 110 Consolidated Financial Statements (effective for annual periods beginning on or after 1 January 2014) FRS 110 replaces all of the guidance on control and consolidation in FRS 27 Consolidated and Separate Financial Statements and INT FRS 12 Consolidation Special Purpose Entities. The same criteria are now applied to all entities to determine control. Additional guidance is also provided to assist in the determination of control where this is difficult to assess. A-50
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES NOTES TO THE COMBINED FINANCIAL STATEMENTS For the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 23. New or revised accounting standards and interpretations (continued) FRS 111 Joint Arrangements (effective for annual periods beginning on or after 1 January 2014) FRS 111 introduces a number of changes. The types of joint arrangements have been reduced to two: joint operations and joint ventures. The existing policy choice of proportionate consolidation for jointly controlled entities has been eliminated and equity accounting is mandatory for participants in joint ventures. Entities that participate in joint operations will follow accounting much like that for joint assets or joint operations currently. FRS 112 Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2014) FRS 112 requires disclosure of information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entitys interests in (1) subsidiaries, (2) associates, (3) joint arrangements, and (4) unconsolidated structured entities. FRS 113 Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013) FRS 113 provides consistent guidance across IFRSs on how fair value should be determined and which disclosures should be made in the financial statements. The management anticipates that the adoption of the above FRSs in the future periods will not have a material impact on the financial statements of the Group in the period of their initial adoption apart from disclosure of interests in other entities and fair value measurement of investment properties (including those under development). 24. Authorisation of combined financial statements These combined financial statements were authorised for issue in accordance with a resolution of the Board of Directors of International Healthway Corporation Limited (formerly known as International Healthway Corporation Private Limited) on 1 July 2013.
A-51
APPENDIX B INDEPENDENT AND REPORTING AUDITORS REPORT ON THE EXAMINATION OF THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2012 AND 31 DECEMBER 2011
INTERNATIONAL HEALTHWAY CORPORATION LIMITED (Formerly known as International Healthway Corporation Private Limited) AND ITS SUBSIDIARIES UNAUDITED PRO FORMA FINANCIAL STATEMENTS
B-1
INDEPENDENT AND REPORTING AUDITORS REPORT ON THE EXAMINATION OF THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF INTERNATIONAL HEALTHWAY CORPORATION LIMITED (FORMERLY KNOWN AS INTERNATIONAL HEALTHWAY CORPORATION PRIVATE LIMITED) AND ITS SUBSIDIARIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2012 AND 31 DECEMBER 2011 (THE REPORT) The Board of Directors International Healthway Corporation Limited 2 Leng Kee Road #04-10A, Thye Hong Centre Singapore 159086 1 July 2013 Dear Sirs, This Report has been prepared for the inclusion in the offer document (the Offer Document) of International Healthway Corporation Limited (the Company) in connection with the invitation in respect of the initial offering of shares and listing on the Singapore Exchange Securities Trading Limited. We report on the Unaudited Pro Forma Financial Statements of the Company and its subsidiaries (referred to collectively as the Group) set out on pages B-4 to B-72 of the Offer Document, which have been prepared for illustrative purposes only, in accordance with the provision set out in the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 and are based on certain assumptions after making certain adjustments to show what: (a) the financial results of the Group for the financial years ended 31 December 2012 and 31 December 2011 would have been if the Acquisition and Restructuring Exercise (as described in Note 2 to the Unaudited Pro Forma Financial Statements) had occurred on 1 January 2011; the financial position of the Group as at 31 December 2012 would have been if the Acquisition and Restructuring Exercise (as described in Note 2 to the Unaudited Pro Forma Financial Statements) had occurred on 31 December 2012; and the cash flows of the Group for the financial year ended 31 December 2012 would have been if the Acquisition and Restructuring Exercise (as described in Note 2 to the Unaudited Pro Forma Financial Statements) had occurred on 1 January 2012.
(b)
(c)
The Unaudited Pro Forma Financial Statements of the Group, because of their nature, may not give a true picture of the Groups actual financial results, financial position and cash flows. The Unaudited Pro Forma Financial Statements are the responsibility of the directors of International Healthway Corporation Limited (the Directors). Our responsibility is to express an opinion on the Unaudited Pro Forma Financial Statements based on our work.
B-2
We carried out procedures in accordance with Singapore Statement of Auditing Practice (SSAP) 24: Auditors and Public Offering Documents. Our work, which involved no independent examination of the underlying financial statements, consisted primarily of comparing the Unaudited Pro Forma Financial Statements to the financial statements (or where information is not available in the financial statements of the Company and its subsidiaries, to accounting records), considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Statements with the Directors. In our opinion: (a) the Unaudited Pro Forma Financial Statements have been properly prepared: (i) (ii) (b) in a manner consistent with the accounting policies of the Group; and on the basis set out in Note 3 to the Unaudited Pro Forma Financial Statements; and
each material adjustment made to the information used in the preparation of the Unaudited Pro Forma Financial Statements is appropriate for the purpose of preparing such financial statements.
Yours faithfully,
PricewaterhouseCoopers LLP Public Accountants and Certified Public Accountants Singapore Partner-in-charge: Tham Tuck Seng
B-3
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) UNAUDITED PRO FORMA INCOME STATEMENT For the financial years ended 31 December 2012 and 31 December 2011 Note Revenue Cost of sales Gross profit Other operating income Expenses Administrative Finance Profit before tax Income tax expense Profit after tax Profit attributable to: Equity holders of the Company Non-controlling interests 52,924 410 53,334 Earnings per share attributable to equity holders of the Company (expressed in cents per share) Basic and diluted earnings per share (cents) 13 3.42 0.87 13,461 362 13,823 12 8 11 (5,477) (12,881) 58,728 (5,394) 53,334 (5,428) (12,958) 14,530 (707) 13,823 10 7 8 2012 S$000 37,843 (13,984) 23,859 53,227 2011 S$000 35,324 (11,548) 23,776 9,140
The accompanying notes form an integral part of these Unaudited Pro Forma Financial Statements. B-4
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) UNAUDITED PRO FORMA STATEMENTS OF COMPREHENSIVE INCOME For the financial years ended 31 December 2012 and 31 December 2011 2012 S$000 Profit for the year Other comprehensive (loss)/income: Currency translation differences arising from consolidation Total comprehensive income Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests 45,187 204 45,391 15,702 584 16,286 (7,943) 45,391 2,463 16,286 53,334 2011 S$000 13,823
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) UNAUDITED PRO FORMA BALANCE SHEET As at 31 December 2012
31 December 2012 S$000 ASSETS Current assets Cash and cash equivalents Trade and other receivables Other current assets Inventories 14 15 16 17 14,851 4,067 17 771 19,706 Non-current assets Intangible assets Property, plant and equipment Investment properties Investment properties under development 18 19 20 21 55,378 5,214 250,545 75,640 386,777 Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Current income tax liabilities 22 23 3,795 10,518 908 15,221 Non-current liabilities Trade and other payables Borrowings Deferred income tax liabilities 22 23 24 8,396 230,225 4,322 242,943 Total liabilities NET ASSETS EQUITY Capital and reserves attributable to equity holders of the Company Non-controlling interests Total equity 144,021 4,298 148,319 258,164 148,319 406,483
Note
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) UNAUDITED PRO FORMA STATEMENT OF CASH FLOWS For the financial year ended 31 December 2012
2012 Note Cash flows from operating activities Profit after tax Adjustments for: Income tax expense Depreciation Amortisation Interest income Interest expense Fair value gain on investment properties Fair value gain on investment properties under development Foreign currency translation differences Changes in working capital Inventories Trade and other receivables Other current assets Trade and other payables Cash generated from operations Interest paid Income tax paid Net cash provided by operating activities Cash flows from investing activities Acquisition of investment property under development Interest received Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash inflow from acquisition of subsidiaries Net cash used in investing activities Cash flows from financing activities Advances from related parties, net Proceeds from borrowings Proceeds from issuance of share upon incorporation Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Pro forma effects(1) Cash and cash equivalents at end of financial year 14 S$000 53,334 5,394 519 281 (5) 12,881 (28,982) (20,009) 1,523 24,936 (33) 347 17 (1,419) 23,848 (449) (380) 23,019 (32,341) 5 (894) 12 1,902 (31,316) 1,504 34,050 1 35,555 27,258 4,860 (17,267) 14,851
29
Note: (1) The pro forma effects relate to the effects of the pro forma adjustments arising from the assumption that the Unaudited Pro Forma Balance Sheet is prepared as if the Acquisition and Restructuring Exercise had occurred on 31 December 2012 whereas the Unaudited Pro Forma Income Statement is prepared as if the Acquisition and Restructuring Exercise had occurred on 1 January 2011.
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General information The Unaudited Pro Forma Financial Statements of International Healthway Corporation Limited (formerly known as International Healthway Corporation Private Limited) (the Company or IHC) and its subsidiaries (collectively referred to as the Group) for the financial years ended 31 December 2012 and 31 December 2011 have been prepared for inclusion in the Offer Document of the Company in connection with the invitation in respect of the initial offering of shares and listing on the Singapore Exchange Securities Trading Limited (the Placement). 2. 2.1 Acquisition and Restructuring Exercise Establishment of Healthway Medical Development (Private) Limited and its subsidiaries Healthway Medical Development (Private) Limited (HMD) was incorporated in the Republic of Singapore on 22 September 2010. Subsequent to the incorporation, HMD and its subsidiaries incorporated various subsidiaries for the purpose of acquiring and developing its operations. As at 31 December 2012, HMD had the following subsidiaries:
Held by HMD IHC KLCC Investment Pte. Ltd. (Formerly known as Healthway Medical Centre (KLCC) Pte. Ltd.) IHC Shanghai Medical Village Pte. Ltd. (Formerly known as Healthway Shanghai Medical Village Pte. Ltd.) IHC Chengdu Medical Resorts Private Limited (Formerly known as Neuglow Medical Resorts (Chengdu) Private Limited) IHC Wuxi Hospital Pte. Ltd. (Formerly known as Golden Summit Development Pte. Ltd.)
Investment holding Singapore
100
100
100
100
100
100
B-8
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.1 Acquisition and Restructuring Exercise (continued) Establishment of Healthway Medical Development (Private) Limited and its subsidiaries (continued)
IHC Chengdu Women and Child Hospital Pte. Ltd. (Formerly known as SBCC Women and Child Hospital Pte. Ltd.) IHC Medical Assets Pte. Ltd. (Formerly known as Healthway Medical Assets Pte. Ltd.) Held by subsidiaries IHC Seasons Residences Sdn. Bhd. (Formerly known as Seasons Residences Sdn. Bhd.) IHC Apex Limited (Formerly known as HMD Apex Limited) IHC Ace Limited (Formerly known as HMD Ace Limited) IHC Star Limited (Formerly known as HMD Star Limited) IHC Peak Limited (Formerly known as HMD Peak Limited) IHC Summit Limited (Formerly known as HMD Summit Limited) IHC Medical Holdings (HK) Limited (Formerly known as Healthway Medical Holdings (HK) Limited) IHC Medical Enterprises (HK) Limited (Formerly known as Healthway Medical Enterprises (HK) Limited) IHC Medical Facilities (HK) Limited (Formerly known as Healthway Medical Facilities (HK) Limited) IHC Medical Services (HK) Limited (Formerly known as Healthway Medical Services (HK) Limited)
100
Development of Malaysia and investment in properties Investment holding British Virgin Islands Investment holding British Virgin Islands Investment holding British Virgin Islands Investment holding British Virgin Islands Investment holding British Virgin Islands Investment holding Hong Kong
100
100
100 100 100 100 100 100
Investment holding Hong Kong
100
100
100
B-9
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.1 Acquisition and Restructuring Exercise (continued) Establishment of Healthway Medical Development (Private) Limited and its subsidiaries (continued)
IHC Medical Assets (HK) Limited (Formerly known as Healthway Medical Assets (HK) Limited) Kang Hui Maternity Center Services (Shanghai) Co., Ltd. Kang Hui (Chengdu) Assets Co., Ltd.
Development of and investment in properties Development of and investment in properties
Peoples Republic of China Peoples Republic of China
100
100
As at 31 December 2012, HMD had the following property that is held by a subsidiary:
Entity in the Group directly holding the asset IHC Seasons Residences Sdn. Bhd. (Formerly known as Seasons Residences Sdn. Bhd.) Groups effective interest in the asset % 100
Asset acquired Pajakan Negeri (WP) 46289, Lot 84, Section 63, Town and District of Kuala Lumpur, Wilayah Persekutuan KL, Malaysia KLCC Land
Country of operation Malaysia
Usage of the asset Integrated mixed-use development
B-10
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.1 Acquisition and Restructuring Exercise (continued) Establishment of Healthway Medical Development (Private) Limited and its subsidiaries (continued) Subsequent to 31 December 2012, additional subsidiaries were incorporated by HMD and its subsidiaries for the purpose of the expansion of its operations as follows: On 3 January 2013, HMD incorporated two wholly-owned subsidiaries, namely IHC Iskandar Development Pte. Ltd. and IHC Japan Medical Facilities Pte. Ltd. in Singapore. The issued and paid-up share capital of each of the two subsidiaries upon incorporation is SGD 1. The principal activity of each of the two subsidiaries is investment holding. On 16 January 2013, HMD, through IHC Iskandar Development Pte. Ltd. incorporated a wholly-owned subsidiary in Malaysia, namely Seasons Harbour View Sdn. Bhd.. The issued and paid-up share capital of the subsidiary upon incorporation is Malaysian Ringgit (MYR) 2. The principal activity of the subsidiary is development of and investment in properties. On 6 March 2013, Seasons Harbour View Sdn. Bhd. changed its name to IHC Seasons Harbour View Sdn. Bhd.. On 22 February 2013, HMD, through IHC Japan Medical Facilities Pte. Ltd. and IHC Japan One ISH (refer to Note 2.2 below), incorporated a wholly owned subsidiary in Japan, namely IHC Japan First TMK. The shareholding of IHC Japan First TMK held by IHC Japan Medical Facilities Pte. Ltd. and IHC Japan One ISH are 25% and 75% respectively. The issued and paid-up share capital of the subsidiary upon incorporation is JPY40,000. The principal activity of the subsidiary is investment in properties.
B-11
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.2 Acquisition and Restructuring Exercise (continued) Acquisition exercise In 2013, HMD and its subsidiaries further acquired entities and assets in Hong Kong, the Peoples Republic of China and Japan. Details of the acquisitions are as set out below:
Principal activities of entities/usage of the assets Entity in the Group directly holding the entities/assets Groups effective interest in the entities/assets %
Entities IHC Japan 1 GK Japan Investment holding IHC Japan Medical Facilities Pte. Ltd. Investment holding IHC Japan Medical Facilities Pte. Ltd. 100
IHC Japan One ISH
Japan
50
(below three entities are collectively known as Wuxi Hospital) Health Kind International Limited Hong Kong Investment holding IHC Star Limited (Formerly known as HMD Star Limited) Investment holding Health Kind International Limited 76.5
Health Kind International (Shanghai) Co., Ltd. Wuxi New District Phoenix Hospital Co., Ltd.
74.97
Health Kind International (Shanghai) Co., Ltd.
74.97
B-12
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.2 Acquisition and Restructuring Exercise (continued) Acquisition exercise (continued)
Principal activities of entities/usage of the assets Entity in the Group directly holding the entities/assets Groups effective interest in the entities/assets %
Assets Properties (collectively known as Japan Properties) Hikari Heights Varus Fujino Hikari Heights Varus Ishiyama Hikari Heights Varus Kotoni Hikari Heights Varus MakomanaiKoen Hikari Heights Varus TsukisamuKoen Varus Cuore Yamanote Varus Cuore Sapporo Kita Elysion Gakuenmae Elysion Mamigaoka/ Elysion Mamigaoka Annex Japan Skilled nursing facility Skilled nursing facility Skilled nursing facility Skilled nursing facility IHC Japan First TMK IHC Japan First TMK IHC Japan First TMK IHC Japan First TMK 100
Japan
100
Japan
100
Japan
100
Japan
Skilled nursing facility
IHC Japan First TMK
100
Japan
Skilled nursing facility Skilled nursing facility Skilled nursing facility Skilled nursing facility
IHC Japan First TMK IHC Japan First TMK IHC Japan First TMK IHC Japan First TMK
100
Japan
100
Japan
100
Japan
100
B-13
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.2 Acquisition and Restructuring Exercise (continued) Acquisition exercise (continued)
Principal activities of entities/usage of the assets Entity in the Group directly holding the entities/assets Groups effective interest in the entities/assets % 100
Elysion Amanohashidate Elysion Kaichi North Elysion Kaichi West Land bank Lot DJY27 (211/212/245): 2012-153 South bounded by Baolian Road, East bounded by Rainbow Avenue and West bounded by Dujiangyan Peoples Hospital, Lianmeng Village, Xinfu Town, Dujiangyan, Chengdu City, the Peoples Republic of China Chengdu Land
Japan
Skilled nursing facility Skilled nursing facility Skilled nursing facility
IHC Japan First TMK IHC Japan First TMK IHC Japan First TMK
Japan
100
Japan
100
Part hospital and part commercial
Kang Hui (Chengdu) Assets Co., Ltd.
100
B-14
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.3 Acquisition and Restructuring Exercise (continued) Restructuring exercise On 18 February 2013, as part of the restructuring exercise, the Company was incorporated. On 29 May 2013, as part of the restructuring exercise, HMD transferred all the issued and paid up share capital of the following subsidiaries (the Subsidiaries) to the Company at a consideration of S$89,021,000, which is entirely satisfied by the issuance of shares of the Company (the Restructuring Exercise).
Name of subsidiaries IHC KLCC Investment Pte. Ltd. (Formerly known as Healthway Medical Centre (KLCC) Pte. Ltd.) IHC Wuxi Hospital Pte. Ltd. (Formerly known as Golden Summit Development Pte. Ltd.) IHC Chengdu Women and Child Hospital Pte. Ltd. (Formerly known as SBCC Women and Child Hospital Pte. Ltd.) IHC Medical Assets Pte. Ltd. (Formerly known as Healthway Medical Assets Pte. Ltd.) IHC Japan Medical Facilities Pte. Ltd. IHC Seasons Residences Sdn. Bhd. (Formerly known as Seasons Residences Sdn. Bhd.) IHC Star Limited (Formerly known as HMD Star Limited) IHC Peak Limited (Formerly known as HMD Peak Limited) IHC Summit Limited (Formerly known as HMD Summit Limited) IHC Medical Facilities (HK) Limited (Formerly known as Healthway Medical Facilities (HK) Limited) IHC Medical Services (HK) Limited (Formerly known as Healthway Medical Services (HK) Limited)
Investment holding
Singapore
100
Investment holding
Singapore
100
Investment holding
Singapore
100
Investment holding Development of and investment in properties Investment holding Investment holding Investment holding Investment holding
Singapore Malaysia
100 100
British Virgin Islands British Virgin Islands British Virgin Islands Hong Kong
100 100 100 100
Investment holding
Hong Kong
100
B-15
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 2. 2.3 Acquisition and Restructuring Exercise (continued) Restructuring exercise (continued)
Name of subsidiaries IHC Medical Assets (HK) Limited (Formerly known as Healthway Medical Assets (HK) Limited) Kang Hui (Chengdu) Assets Co., Ltd.
Country of incorporation Hong Kong
IHC Japan One ISH IHC Japan 1 GK IHC Japan First TMK Health Kind International Limited Health Kind International (Shanghai) Co., Ltd.
Development of and investment in properties Investment holding Investment holding Investment in properties Investment holding Investment holding
Peoples Republic of China Japan Japan Japan Hong Kong Peoples Republic of China Peoples Republic of China
100
50 100 62.50 (a) 76.5 74.97
Wuxi New District Phoenix Hospital Co., Ltd.
74.97
Note:
(a)
IHC Japan Medical Facilities Pte. Ltd. and IHC Japan One ISH as common shareholders of IHC Japan First TMK have waived their rights to receive the economic benefits of IHC Japan First TMK. Under Japanese laws, as the common shareholders have waived their rights to receive economic benefits of IHC Japan First TMK, the Group is entitled to the full economic benefit of IHC Japan First TMK via its direct and indirect ownership of 100% of the preferred shares in IHC Japan First TMK, notwithstanding that IHC Japan Medical Facilities Pte. Ltd. does not have full beneficial ownership of IHC Japan First TMK.
3. 3.1
Basis of presentation of the Unaudited Pro Forma Financial Statements The Unaudited Pro Forma Financial Statements of the Group have been prepared for illustrative purposes only and are based on certain assumptions after making certain adjustments to show what: (a) the financial results of the Group for the financial years ended 31 December 2012 and 31 December 2011 would have been if the Acquisition and Restructuring Exercise (as described in Note 2 to the Unaudited Pro Forma Financial Statements) had occurred on 1 January 2011; B-16
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 3. 3.1 Basis of presentation of the Unaudited Pro Forma Financial Statements (continued) The Unaudited Pro Forma Financial Statements of the Group have been prepared for illustrative purposes only and are based on certain assumptions after making certain adjustments to show what: (continued) (b) the financial position of the Group as at 31 December 2012 would have been if the Acquisition and Restructuring Exercise (as described in Note 2 to the Unaudited Pro Forma Financial Statements) had occurred on 31 December 2012; and the cash flows of the Group for the financial year ended 31 December 2012 would have been if the Acquisition and Restructuring Exercise (as described in Note 2 to the Unaudited Pro Forma Financial Statements) had occurred on 1 January 2012.
(c)
3.2
The objective of the Unaudited Pro Forma Financial Statements is to show what the financial results, financial position and cash flows might have been, had the Acquisition and Restructuring Exercise as described in Note 2 to the Unaudited Pro Forma Financial Statements, occurred at an earlier date. However, the Unaudited Pro Forma Financial Statements is not necessarily indicative of the financial results, financial positions and cash flows of the operations that would have been attained had the Acquisition and Restructuring Exercise actually occurred earlier. The Unaudited Pro Forma Financial Statements have been prepared for illustrative purposes only, and because of their nature, may not give a true picture of the actual financial results, financial position and cash flows of the operations of the Group. The Unaudited Pro Forma Financial Statements of the Group for the financial years ended 31 December 2012 and 31 December 2011 have been compiled based on the following: (a) The audited combined financial statements of International Healthway Corporation Limited and its subsidiaries for the financial year ended 31 December 2012 and the financial period from 3 February 2011 to 31 December 2011 which were prepared in accordance with Singapore Financial Reporting Standards and audited by PricewaterhouseCoopers LLP, Public Accountants and Certified Public Accountants, in accordance with Singapore Standards on Auditing. The unaudited management accounts of Wuxi Hospital for the financial years ended 31 December 2012 and 31 December 2011. These financial information were re-stated to the Groups accounting policies which are based on Singapore Financial Reporting Standards.
3.3
(b)
B-17
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 3. 3.3 Basis of presentation of the Unaudited Pro Forma Financial Statements (continued) The Unaudited Pro Forma Financial Statements of the Group for the financial years ended 31 December 2012 and 31 December 2011 have been compiled based on the following: (continued) (c) Japan Properties a. Income Rental income from the leasing of the respective Japan Properties is based on the master lease agreement entered into between the Group and the lessees of the respective assets. b. Expenses Expenses comprised mainly of property taxes and asset management fees estimated to be charged by the asset manager. Property taxes are derived based on the applicable tax rate and asset management fees are derived based on the service agreement entered into between the Group and the asset managers. (d) Investment properties and investment properties under development The fair value of the investment properties and investment properties under development are based on independent valuations with valuation dates as follows: Independent valuer Aoyama Realty Advisors Inc. C H Williams Talhar & Wong Sdn Bhd DTZ Valuation date 2012 28 February 2013 28 February 2013 2011 31 December 2011 31 December 2011
Property/Land Japan Properties KLCC Land
Chengdu Land 3.4
28 February 2013
31 December 2011
The auditors reports on the respective audited financial statements used in compilation of the Unaudited Pro Forma Financial Statements for the periods presented were not subject to any qualification.
B-18
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 3. 3.5 Basis of presentation of the Unaudited Pro Forma Financial Statements (continued) The following key adjustments and assumptions were made for the preparation of the Unaudited Pro Forma Financial Statements: (a) The proceeds arising from the Placement, which will occur after the registration date of the Offer Document, have not been taken into consideration in the preparation of the Unaudited Pro Forma Financial Statements; In accounting for the acquisition of the Wuxi Hospital, identifiable assets acquired and liabilities assumed in the acquisition are measured at their fair values, which are based on their fair values as at 31 December 2012. The Group recognises any noncontrolling interests at the non-controlling interests proportionate share of the identifiable net assets. The excess of the purchase consideration of S$56,250,000 (United States Dollar (USD) 45,000,000) over the fair values of the net identifiable assets acquired is recorded as goodwill; In relation to the acquisition in Note 3.5(b), the allocation of the purchase price is preliminary. The final determination of the purchase price allocation will be based on the fair values of assets acquired, other identifiable intangibles and the fair values of liabilities assumed as of the date that the acquisition is completed. The final amounts could differ from the amounts presented in the Unaudited Pro Forma Financial Statements; The employees under the employment of HMD to be employed by IHC is assumed to have occurred on 1 January 2011 for the purpose of the unaudited pro forma income statement; The administrative expenses incurred by HMD are assumed to have been incurred by IHC from 1 January 2011 for the purpose of the unaudited pro forma income statement, except for expenses which were non-recurring in nature; The master lease agreements for the Japan Properties are assumed to have been effective from 1 January 2011 for the purpose of the unaudited pro forma income statement; The property taxes and asset management fees are assumed to have been applicable from 1 January 2011 for the purpose of the unaudited pro forma income statement; The refundable deposit of S$2,456,000 for the Chengdu Land is assumed to be collected after the receipt of the legal title and used to settle amount owing to HMD;
(b)
(c)
(d)
(e)
(f)
(g)
(h)
B-19
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 3. 3.5 Basis of presentation of the Unaudited Pro Forma Financial Statements (continued) The following key adjustments and assumptions were made for the preparation of the Unaudited Pro Forma Financial Statements: (continued) (i) A borrowing entered into by HMD with a third party amounting to S$10,000,000 was novated to IHC as it was obtained by HMD and used for the acquisition of certain investment properties under development. Following the novation, IHC will assume the borrowing payable to the third party and it is assumed that IHC will repay the borrowing using a loan facility obtained from a financial institution upon listing. The remaining balance of the borrowing payable to the third party is assumed to be settled in cash after the listing; Following a separate loan agreement entered into between a shareholder of the Company and a related party, a loan amounting to S$11,250,000 used for the acquisition of investment property in the Peoples Republic of China (the Shanghai Project) is assumed by the related party; The valuation of investment properties and investment properties under development as at 31 December 2011 are based on the independent valuers valuation as at 31 December 2011 and the valuation as at 31 December 2012 are assumed to be the valuation as at 28 February 2013; and Payables to IHC by HMD amounting to S$818,000 is settled by HMD prior to its listing date.
(j)
(k)
(l)
B-20
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited)
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011
4.
Statement of adjustments
(a)(i) Unaudited Pro Forma Income Statement for the financial year ended 31 December 2012
Per Audited Income Statement of the Group for the financial year ended 31 December 2012 Pro Forma Adjustments S$000 [i] 6,592 (82) (313) 6,197 6,197 6,197 6,197 (368) (368) (368) (368) (368) 10,368 10,368 10,368 10,368 10,368 3,087 3,087 3,087 3,087 3,087 [ii] [iii] S$000 S$000 S$000 S$000 [iv] 17,360 (11,888) 5,472 (152) (3,066) 2,254 (615) 1,639 1,229 410 1,639
Unaudited Pro Forma Income Statement of the Group for the financial year ended 31 December 2012 S$000 [v] 20,483 (2,096) 18,387 33,645 (1,961) (12,072) 37,999 (4,779) 33,220 33,220 33,220 S$000 [vi] (313) (496) (809) (809) (809) (809) 37,843 (13,984) 23,859 53,227 (5,477) (12,881) 58,728 (5,394) 53,334 52,924 410 53,334 S$000
B-21
Revenue Cost of sales
Gross profit Other operating income Expenses Administrative Finance
Profit/(Loss) before tax Income tax expense
Profit/(Loss) after tax
Attributable to: Equity holders of the Company Non-controlling interests
4.
Statement of adjustments (continued)
(a)(ii) Unaudited Pro Forma Statement of Comprehensive Income for the financial year ended 31 December 2012
Per Audited Statement of Comprehensive Income of the Group for the financial year ended 31 December 2012 Pro Forma Adjustments S$000 [i] 6,197 (368) 10,368 [ii] [iii] 3,087 S$000 S$000 S$000 S$000 [iv] 1,639
B-22
(11) 6,186 (368) (336) 10,032 (749) 2,338 6,186 6,186 (368) (368) 10,032 10,032 2,338 2,338
Unaudited Pro Forma Statement of Comprehensive Income of the Group for the financial year ended 31 December 2012 S$000 [v] 33,220 S$000 [vi] (809) 53,334 S$000
Profit/(Loss) for the year Other comprehensive loss: Currency translation differences arising from consolidation
(817) 822
(6,030) 27,190
(809)
(7,943) 45,391
Total comprehensive income/(loss)
Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests
618 204 822
27,190 27,190
(809) (809)
45,187 204 45,391
4.
Notes to the Unaudited Pro Forma Income Statement and Statement of Comprehensive Income:
[i]
Being adjustment made to reflect the employee compensation and administrative expenses incurred, as disclosed in Note 3.5(d) and Note 3.5(e).
[ii]
Being adjustment made to reflect the fair value gain of KLCC Land for the financial year ended 31 December 2012, as disclosed in Note 3.5(k).
B-23
[iii]
Being adjustment made to reflect the fair value gain of Chengdu Land for the financial year ended 31 December 2012, as disclosed in Note 3.5(k).
[iv]
Being adjustment made to reflect the unaudited financial results of Wuxi Hospital for the financial year ended 31 December 2012.
[v]
Being adjustment made to reflect the unaudited pro forma financial results of Japan Properties for the financial year ended 31 December 2012.
[vi]
Being adjustment made to reflect the interest expense and interest income due to the financial institution borrowing obtained and the novation of the loan from a third party and the loan from a shareholder of the Company, as disclosed in Note 3.5(i) and Note 3.5(j).
4.
(b)(i) Unaudited Pro Forma Income Statement for the financial year ended 31 December 2011
Per Audited Income Statement of the Group for the financial year ended 31 December 2011 Pro Forma Adjustments S$000 [i] (18) (18) (18) (18) (18) (340) (340) (340) (340) (340) 1,836 1,836 1,836 1,836 1,836 5,158 5,158 5,158 5,158 5,158 [ii] [iii] S$000 S$000 S$000 S$000 [iv] 14,711 (9,388) 5,323 (96) (3,072) 2,155 (707) 1,448 1,086 362 1,448
Unaudited Pro Forma Income Statement of the Group for the financial year ended 31 December 2011 S$000 [v] 20,613 (2,160) 18,453 2,242 (1,998) (12,149) 6,548 6,548 6,548 6,548 S$000 [vi] (809) (809) (809) (809) (809) 35,324 (11,548) 23,776 9,140 (5,428) (12,958) 14,530 (707) 13,823 13,461 362 13,823 S$000
B-24
Revenue Cost of sales
Gross profit Other operating income Expenses Administrative Finance
Profit/(Loss) before tax Income tax expense
Profit/(Loss) after tax
Attributable to: Equity holders of the Company Non-controlling interests
4.
(b)(ii) Unaudited Pro Forma Statement of Comprehensive Income for the financial year ended 31 December 2011
Per Audited Statement of Comprehensive Income of the Group for the financial year ended 31 December 2011 Pro Forma Adjustments S$000 [i] (18) (340) 1,836 [ii] [iii] 5,158 S$000 S$000 S$000 S$000 [iv] 1,448
B-25
(26) (44) (340) (620) 1,216 792 5,950 (44) (44) (340) (340) 1,216 1,216 5,950 5,950
Unaudited Pro Forma Statement of Comprehensive Income of the Group for the financial year ended 31 December 2011 S$000 [v] 6,548 S$000 [vi] (809) 13,823 S$000
Profit/(Loss) for the year Other comprehensive income/(loss): Currency translation differences arising from consolidation
887 2,335
1,430 7,978
(809)
2,463 16,286
Total comprehensive income/(loss)
Total comprehensive income/(loss) attributable to: Equity holders of the Company Non-controlling interests
1,751 584 2,335
7,978 7,978
(809) (809)
15,702 584 16,286
4.
Notes to the Unaudited Pro Forma Income Statement and Statement of Comprehensive Income:
[i]
Being adjustment made to reflect the employee compensation and administrative expenses incurred, as disclosed in Note 3.5(d) and Note 3.5(e).
[ii]
Being adjustment made to reflect the fair value gain of KLCC Land for the financial year ended 31 December 2011, as disclosed in Note 3.5(k).
B-26
[iii]
Being adjustment made to reflect the fair value gain of Chengdu Land for the financial year ended 31 December 2011, as disclosed in Note 3.5(k).
[iv]
Being adjustment made to reflect the unaudited financial results of Wuxi Hospital for the financial year ended 31 December 2011.
[v]
Being adjustment made to reflect the unaudited pro forma financial results of Japan Properties for the financial year ended 31 December 2011.
[vi]
Being adjustment made to reflect the interest expense due to the financial institution borrowing obtained as disclosed in Note 3.5(i).
4.
(c)
Per Audited Balance Sheet of the Group as at 31 December 2012 Pro Forma Adjustments S$000 [i] [ii] [iii] [iv] S$000 S$000 S$000 S$000 [v] S$000
Unaudited Pro Forma Balance Sheet as at 31 December 2012

Unaudited Pro Forma Balance Sheet of the Group as at 31 December 2012 S$000 [vi] S$000 [vii] S$000
B-27
69 11,563 2,456 14,088 46,000 441 46,441 60,529 1 12,000 12,000 12,000 1 (2,456) 17,640 (441) 17,199 14,743 1 (2,456) 1,902 1,334 17 771 4,024 55,378 5,214 60,592 64,616
ASSETS Current assets Cash and cash equivalents Trade and other receivables Other current assets Inventories
12,061 2,733 14,794 250,545 250,545 265,339
(11,563) (11,563) (11,563)
818 818 818
14,851 4,067 17 771 19,706 55,378 5,214 250,545 75,640 386,777 406,483
Total current assets
Non-current assets Intangible assets Property, plant and equipment Investment properties Investment properties under development Other assets
Total non-current assets
Total assets
4.
(c)
Unaudited Pro Forma Balance Sheet as at 31 December 2012 (continued)
Per Audited Balance Sheet of the Group as at 31 December 2012 S$000 [i] [ii] [iii] [iv] S$000 S$000 S$000 S$000
Pro Forma Adjustments S$000 [v] S$000 [vi] S$000 [vii]
Unaudited Pro Forma Balance Sheet of the Group as at 31 December 2012 S$000
B-28
12,586 12,586 36,800 36,800 49,386 11,143 1 12,000 (2,456) (2,456) (2,456) 17,199 3,160 908 4,068 4,068 60,548 11,143 11,143 1 1 12,000 12,000 17,199 17,199 56,250 4,298 60,548
LIABILITIES Current liabilities Trade and other payables Borrowings Current income tax liabilities
3,643 3,643 8,396 201,550 4,322 214,268 217,911 47,428
(10,313) 6,875 (3,438) (8,125) (8,125) (11,563)
818 818 818
3,795 10,518 908 15,221 8,396 230,225 4,322 242,943 258,164 148,319
Total current liabilities
Non-current liabilities Trade and other payables Borrowings Deferred income tax liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY Capital and reserves attributable to equity holders of the Company Non-controlling interests
47,428 47,428
144,021 4,298 148,319
Total equity
4.
(c)
Unaudited Pro Forma Balance Sheet as at 31 December 2012 (continued)
Notes:
[i]
Being adjustment made to reflect the incorporation of the Company.
B-29
[ii]
Being adjustment made to reflect the fair value of the KLCC Land, as disclosed in Note 3.5(k).
[iii]
Being adjustment made to reflect the acquisition and fair value of the Chengdu Land and the collection and use of the refundable deposit, as disclosed in Note 3.5(h) and Note 3.5(k).
[iv]
Being adjustment made to reflect the acquisition of Wuxi hospital and the revaluation of assets and liabilities based on their fair values, as disclosed in Note 3.5(b).
[v]
Being adjustment made to reflect the acquisition of the Japan Properties and the related deposits received, borrowings, deferred tax liabilities and consumption tax recoverable; and the fair value of the Japan Properties.
[vi]
Being adjustment made to reflect the financial institution borrowing obtained and the novation of the loan from a third party and the loan from a shareholder of the Company, as disclosed in Note 3.5(i) and Note 3.5(j).
[vii]
Being adjustment made to reflect the settlement of the amount owing by HMD to IHC, as disclosed in Note 3.5(l).
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.1 Significant accounting policies Basis of accounting The significant accounting policies adopted by the Group, which are consistent to the significant accounting policies adopted in preparing the Audited Combined Financial Statements, are as below. The Unaudited Pro Forma Financial Statements have been prepared in accordance with the basis set out in Note 3 and are drawn up in accordance with Singapore Financial Reporting Standards. The Unaudited Pro Forma Financial Statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. 5.2 Revenue recognition Sales comprise the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Groups activities. Sales are presented, net of value-added tax, rebates and discounts, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that the collectability of the related receivables is reasonably assured and when the specific criteria for each of the Groups activities are met as follows: (a) Rendering of services Revenue from hospital and other healthcare services is recognised in the period in which the services are rendered. (b) Rental income Rental income from operating leases (net of any incentives given to the lessees) is recognised on a straight-line basis over the lease term. (c) Interest income Interest income is recognised using the effective interest method. (d) Dividend income Dividend income is recognised when the right to receive payment is established.
B-30
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.3 Significant accounting policies (continued) Group accounting Subsidiaries (a) Consolidation Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to a majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases. In preparing the Unaudited Pro Forma Financial Statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Other than the acquisition undertaken through the Restructuring Exercise as described in Note 2.3, the acquisition method of accounting is used to account for business combinations by the Group. Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated income statement, statement of comprehensive income and balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary, even if this results in the non-controlling interests having a deficit balance. (b) Acquisitions The acquisition method of accounting is used to account for business combinations by the Group.
B-31
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.3 Significant accounting policies (continued) Group accounting (continued) Subsidiaries (continued) (b) Acquisitions (continued) The consideration transferred for the acquisition of a subsidiary or business comprises of the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the non-controlling interests proportionate share of the acquirees net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. (c) Disposals When a change in the Groups ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific standard. Any retained equity interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained investment at the date when control is lost and its fair value is recognised in profit or loss.
B-32
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.3 Significant accounting policies (continued) Group accounting (continued) Subsidiaries (continued) (d) Transactions with non-controlling interests Changes in the Groups ownership interest in a subsidiary that do not result in a loss of control over the subsidiary are accounted for as transactions with equity owners of the Group. Any difference between the change in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or received is recognised in a separate reserve within equity attributable to the equity holders of the Group. 5.4 Property, plant and equipment (a) Measurement Property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment initially recognised includes its purchase price, capitalised borrowing costs 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. (b) Depreciation Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows: Useful lives Buildings Office renovations, furniture, fixtures and equipment Medical equipment Motor vehicles 35 years 3 8 years 8 years 5 years
B-33
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.4 Significant accounting policies (continued) Property, plant and equipment (continued) (b) Depreciation (continued) The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise. (c) Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in profit or loss when incurred. (d) Disposal On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in profit or loss within Other operating income. Any amount in revaluation reserve relating to that asset is transferred to retained profits directly. 5.5 Intangible assets (a) Goodwill on acquisitions Goodwill on acquisitions of subsidiaries and businesses represents the excess of (i) the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over (ii) the fair value of the identifiable net assets acquired. Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated impairment losses. Gains and losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the entity sold.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.5 Significant accounting policies (continued) Intangible assets (continued) (b) Lease prepayments Lease prepayments represent prepaid operating lease payments for land less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the prepaid operating lease payments for land over a period of 50 years. 5.6 Borrowing costs Borrowing costs are recognised in profit or loss using the effective interest method except for those costs that are directly attributable to the construction or development of properties and assets under construction. This includes those costs on borrowings acquired specifically for the construction or development of properties and assets under construction, as well as those in relation to general borrowings used to finance the construction or development of properties and assets under construction. The actual borrowing costs incurred during the period up to the issuance of the temporary occupation permit less any investment income on temporary investment of these borrowings, are capitalised in the cost of the investment property under development. 5.7 Investment properties and investment properties under development Investment properties (including those under development) are properties held either to earn rental or for capital appreciation or both. Investment properties include land under operating leases that is held for long-term capital appreciation or for a currently indeterminate use and properties that are being constructed or developed for future use as investment properties. Investment properties are initially recognised at cost and subsequently carried at fair value, determined annually by independent professional valuers on the highest-and-best-use basis. Changes in fair values are recognised in profit or loss. Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations and improvements is capitalised and the carrying amounts of the replaced components are recognised in profit or loss. The cost of maintenance, repairs and minor improvements is recognised in profit or loss when incurred.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.7 Significant accounting policies (continued) Investment properties and investment properties under development (continued) On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is recognised in profit or loss. 5.8 Impairment of non-financial assets Intangible assets Property, plant and equipment Intangible assets and property, plant and equipment are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash inflows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the cashgenerating-unit (CGU) to which the asset belongs. If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profit or loss. An impairment loss for an asset other than goodwill is reversed only if, there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.9 Significant accounting policies (continued) Financial assets loans and receivables Cash and cash equivalents Trade and other receivables Cash and cash equivalents and trade and other receivables are initially recognised at their fair value plus transaction costs and subsequently carried at amortised cost using the effective interest method, less accumulated impairment losses. The Group assesses at each balance sheet date whether there is objective evidence that these financial assets are impaired and recognises an allowance for impairment when such evidence exists. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. These assets are presented as current assets except for those that are expected to be realised later than 12 months after the balance sheet date, which are presented as non-current assets. 5.10 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 5.11 Borrowings Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date, in which case they are presented as non-current liabilities. Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. 5.11 Significant accounting policies (continued) Borrowings (continued) Borrowings are derecognised when the obligation is discharged, cancelled or expired. The difference between the carrying amount and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. 5.12 Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities. Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method. 5.13 Leases (a) When the Group is the lessee: The Group leases office space under operating leases from non-related parties. Leases where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in profit or loss on a straight-line basis over the period of the lease. Contingent rents, if any, are recognised as an expense in profit or loss when incurred. (b) When the Group is the lessor: The Group leases investment properties under operating leases to non-related parties. Leases of investment properties where the Group retains substantially all risks and rewards incidental to ownership are classified as operating leases. Rental income from operating leases (net of any incentives given to the lessees) is recognised in profit or loss on a straight-line basis over the lease term.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 5. Significant accounting policies (continued)
5.13 Leases (continued) (b) When the Group is the lessor: (continued) Initial direct costs incurred by the Group in negotiating and arranging operating leases are added to the carrying amount of the leased assets and recognised as an expense in profit or loss over the lease term on the same basis as the lease income. Contingent rents, if any, are recognised as income in profit or loss when earned. 5.14 Inventories Inventories comprising pharmacy, medical and surgical supplies are carried at the lower of cost and net realisable value. Cost is determined using the weighted average method and comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and conditions. Allowance is made for all damaged, expired and slow moving items. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. 5.15 Income taxes Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when 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 affects neither accounting nor taxable profit or loss at the time of the transaction. A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
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5.15 Income taxes (continued) A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised. Deferred income tax is measured: (i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities except for investment properties. Investment properties measured at fair value is presumed to be recovered entirely through sale. Current and deferred income taxes are recognised as income or expense in profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition. 5.16 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised in the income statement as finance expense. Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise.
(ii)
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5.17 Employee compensation Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset. (a) 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 on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. (b) Short-term compensated absences Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date. 5.18 Currency translation (a) 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 the entity operates (functional currency). The financial statements are presented in Singapore Dollars, which is the functional currency of the Company. (b) Transactions and balances Transactions in a currency other than the functional currency (foreign currency) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profit or loss. When a foreign operation is disposed of or any loan forming part of the net investment of the foreign operation is repaid, a proportionate share of the accumulated currency translation differences is reclassified to profit or loss, as part of the gain or loss on disposal.
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5.18 Currency translation (continued) (b) Transactions and balances (continued) Foreign exchange gains and losses that relate to borrowings are presented in the income statement within finance cost. All other foreign exchange gains and losses impacting profit or loss are presented in the income statement within other operating income. 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. (c) 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 exchange rates at the reporting date; 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
(ii)
(iii) all resulting currency translation differences are recognised in other comprehensive income and accumulated in the currency translation reserve. These currency translation differences are reclassified to profit or loss on disposal or partial disposal of the entity giving rise to such reserve. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting date.
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5.19 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the executive committee whose members are responsible for allocating resources and assessing performance of the operating segments. 5.20 Cash and cash equivalents For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand and deposits with financial institutions which are subject to an insignificant risk of change in value. 5.21 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account. 5.22 Dividends to Companys shareholders Dividends to the Companys shareholders are recognised when the dividends are approved for payment. 6. Critical accounting estimates, assumptions and judgements Note 5, which includes a summary of the significant accounting policies used in the preparation of the Unaudited Pro Forma Financial Statements, often requires the use of judgements to select specific accounting methods and policies from several acceptable alternatives. Furthermore, significant estimates and assumptions concerning the future may be required in selecting and applying those methods and policies in the Unaudited Pro Forma Financial Statements. The Group bases its estimates and judgements on historical experience and various other assumptions that it believes are reasonable under the circumstances. Actual results may differ from these estimates and judgements under different assumptions or conditions. Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 6. Critical accounting estimates, assumptions and judgements (continued) The following is a review of the more significant assumptions and estimates as well as the accounting policies and methods used in the preparation of the Unaudited Pro Forma Financial Statements. (a) Fair value estimation of investment properties and investment properties under development Investment properties and investment properties under development are stated at fair value based on valuation performed by independent professional valuers. The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arms length transaction wherein the parties had each acted knowledgeably and without compulsion. The valuers have considered valuation techniques including the direct comparison method, capitalisation approach and/or discounted cash flows, where appropriate. As at 31 December 2012, the fair value of investment properties and investment properties under development amounts to S$250,545,000 and S$75,640,000 respectively. (b) Estimated impairment of non-financial assets Goodwill is tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Intangible assets and property, plant and equipment are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. The recoverable amounts of these assets and where applicable, CGU, have been determined based on value-in-use calculations. These calculations require the use of estimates such as expected cash flows resulting from operating margin and expenses, growth rate and discount rate (Note 18 (a)). The carrying amount of goodwill arising on consolidation as at 31 December 2012 was S$43,377,000. If the managements estimated operating margin used in the value-in-use calculation for this CGU at 31 December 2012 is decreased by 5%, the carrying value of goodwill for this CGU would have been decreased, requiring additional impairment of S$9,412,000. B-44
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 6. Critical accounting estimates, assumptions and judgements (continued) (b) Estimated impairment of non-financial assets (continued) If the managements estimated growth rate applied to the discounted cash flows at 31 December 2012 is decreased by 0.5%, the carrying value of goodwill for this CGU would have been decreased, requiring additional impairment of S$3,356,000. If the managements estimated pre-tax discount rate applied to the discounted cash flows at 31 December 2012 is increased by 1%, the carrying value of goodwill for this CGU would have been decreased, requiring additional impairment of S$2,150,140. 7. Revenue 2012 $000 Medical services Rental income 17,360 20,483 37,843 2011 S$000 14,711 20,613 35,324
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 8. Expenses by nature 2012 $000 Purchases of inventories Amortisation of intangible assets Depreciation of property, plant and equipment Total amortisation and depreciation Employee compensation (Note 9) Advertising expense Rental expense on operating lease Legal and professional fee Travelling expense Utility expense Repair and maintenance Property tax Asset management fee Insurance Other expenses Changes in inventories Total cost of sales and administrative expenses 6,712 281 519 800 4,698 101 84 455 114 444 343 1,852 1,108 79 2,735 (64) 19,461 2011 S$000 5,844 278 447 725 3,668 93 108 561 171 221 639 1,864 1,115 80 2,159 (272) 16,976
9.
Employee compensation 2012 S$000 Wages and salaries Employers contribution to pension funds Other benefits 3,719 804 175 4,698 2011 S$000 2,870 688 110 3,668
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 10. Other operating income 2012 S$000 Interest income Bank deposits Currency translation loss net Compensations and penalties Fair value gains on investment properties Fair value losses on investment properties Fair value gains on investment properties under development Guarantee fee Others 5 (282) (95) 28,982 20,009 4,663 (55) 53,227 1 (35) (62) 3,997 (6,448) 6,994 4,693 9,140 2011 S$000
11.
Finance expense 2012 S$000 Interest expense Borrowings Less: Amount capitalised in investment property under development (Note 21) Finance expense recognised in profit or loss 13,343 (462) 12,881 13,075 (117) 12,958 2011 S$000
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 12. Income tax expense 2012 $000 Tax expense attributable to the profit before tax is made up of: Current income tax Foreign Deferred income tax 615 4,779 5,394 707 707 2011 S$000
The income tax expense on the Groups profit before tax differs from the theoretical amount that would arise using the Singapore standard rate of income tax as follows: 2012 $000 Profit before tax Tax calculated at a tax rate of 17% Effects of: income not subject to tax deferred tax assets not recognised in respect of current years tax losses expenses not deductible for tax purposes different tax rates in other countries Income tax expense (3,402) 250 47 (1,485) 5,394 (1,189) 280 88 (942) 707 58,728 9,984 2011 S$000 14,530 2,470
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 13. Earnings per share Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. 2012 Profit attributable to equity holders of the Company (S$000) Weighted average number of ordinary shares outstanding for basic earnings per share (000) Basic earnings per share (cents) 52,924 2011 13,461
1,546,328 3.42
1,546,328 0.87
The basic and diluted earnings per share are the same as there were no potential dilutive ordinary shares outstanding as at each balance sheet date. The basic and diluted earnings per share are computed based on the pre-Placement share capital of 1,546,328,042 ordinary shares. 14. Cash and cash equivalents 2012 S$000 Cash on hand and at bank 14,851
15.
Trade and other receivables 2012 S$000 Trade receivables Other receivables 1,152 2,915 4,067
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 16. Other current assets 2012 S$000 Deposits 17
17.
Inventories 2012 S$000 Pharmacy supplies Medical and surgical supplies 721 50 771
The cost of inventories recognised as an expense and included in cost of sales amounts to S$6,648,000 (2011: S$5,572,000). 18. Intangible assets 2012 S$000 Goodwill arising on consolidation (Note (a)) Lease prepayments (Note (b)) 43,377 12,001 55,378
(a)
Goodwill arising on consolidation 2012 S$000 Cost, representing net book value Beginning of financial year Acquisition of subsidiary (Note 29(a)) End of financial year 43,377 43,377
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 18. Intangible assets (continued) (a) Goodwill arising on consolidation (continued) Impairment tests for goodwill As at 31 December 2012, goodwill was wholly allocated to the Wuxi Hospital cash-generating unit (CGU) identified (Note 29). The purchase price allocation to goodwill and other assets and liabilities is currently being assessed and is expected to be finalised within 12 months from the date of acquisition. The recoverable amount of a CGU was determined based on value-in-use. Cash flow projections used in the value-in-use calculations were based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period were extrapolated using the estimated growth rates stated below. The growth rate did not exceed the long-term average growth rate for the component parts business in which the CGU operates. Key assumptions used for value-in-use calculations: Peoples Republic of China % 38 3 15.59
2
2012 Gross margin1 Growth rate Discount rate 3

1 2 3 Budgeted gross margin
Weighted average growth rate used to extrapolate cash flows beyond the budget period Post-tax discount rate applied to the post-tax cash flow projections
These assumptions were used for the analysis of the Wuxi Hospital CGU. Management determined budgeted gross margin based on past performance and its expectations of market developments. The weighted average growth rate used was consistent with forecasts included in industry reports. The discount rate used was post-tax and reflected specific risks relating to the relevant segment.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 18. Intangible assets (continued) (b) Lease prepayments Lease prepayments represent the land use rights of a subsidiary which the Group acquired on 1 January 2011 (pro forma assumption). The land use rights expire in 2055. 19. Property, plant and equipment Office renovations, furniture, fixtures and Medical equipment equipment S$000 S$000
Buildings S$000 31 December 2012 Cost Acquisition of subsidiaries Accumulated depreciation Acquisition of subsidiaries Net book value 839 3,680 4,519
Motor vehicles S$000
Total S$000
625
3,170
230
8,544
338 287
2,020 1,150
133 97
3,330 5,214
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 20. Investment properties 2012 S$000 Balance at end of financial year 250,545
Investment properties are carried at fair values at the balance sheet date as determined by an independent professional valuer based on the properties highest-and-best-use using the Income Approach. Investment properties are leased to non-related parties under operating leases (Note 25(b)). The following amounts are recognised in profit and loss: 2012 S$000 Rental income (Note 7) Direct operating expenses arising from: Investment properties that generated rental income Investment properties that did not generate rental income (2,096) (2,160) 20,483 2011 S$000 20,613
The investment properties are mortgaged to secure the Senior TMK Bond and Junior TMK Bond (Note 23(a)).
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 21. Investment properties under development 2012 S$000 Balance at end of financial year 75,640
Investment properties under development are carried at fair values at the balance sheet date as determined by independent professional valuers based on the properties highestand-best-use using the Direct Comparison Approach. An investment property under development is mortgaged to secure bank borrowings (Note 23(a)). Included in the carrying amount of the investment properties under development are capitalised borrowing costs of S$579,000 incurred to finance the acquisition of a property. The Group has obtained the land use rights for one of its investment properties under development and is in the process of obtaining the land use right certificate. 22. Trade and other payables 2012 S$000 Current Trade payables to non-related parties Other payables Accrued operating expenses 2,973 482 340 3,795 Non-current Deposits received 8,396
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 23. Borrowings 2012 S$000 Current Loan from a third party Financial institution borrowing Senior TMK Bond Junior TMK Bond 3,750 3,125 2,670 973 10,518 Non-current Loan from a shareholder Bank borrowings Financial institution borrowing Loan from third parties Senior TMK Bond Junior TMK Bond Transaction costs 2,750 22,800 3,125 25,000 133,650 45,886 233,211 (2,986) 230,225 Total borrowings 240,743
The exposure of the bank borrowings, financial institution borrowing and Senior TMK Bond to interest rate changes and the contractual repricing dates at the balance sheet date are as follows: 2012 S$000 6 months or less 6 12 months Over 1 year 163,368 163,368
The current loan from a third party, the loan from a shareholder, the non-current loan from third parties and the Junior TMK Bond are at fixed rates and hence not exposed to interest rate changes.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 23. Borrowings (continued) (a) Securities granted Borrowings of the Group comprise wholly of secured borrowings as follows: The current loan from a third party is secured against: (i) a corporate guarantee from a related corporation (limited to 25% of the total indebtedness to the third party); joint and several all-monies guarantee by a director of the Company and two related parties; and
(ii)
(iii) shares in a related corporation owned by a director of the Company and two related parties with a carrying amount of S$18,750,000. The loan from a shareholder is secured against a corporate guarantee from the Company. Bank borrowings are secured against: (i) (ii) a charge created over the KLCC Land; a deed of debenture over the assets and rights of the subsidiary pertaining to the KLCC Project;
(iii) a deed of assignment of the subsidiarys full and entire rights and entitlements pertaining to the KLCC Project; (iv) a corporate guarantee from a related corporation (limited to 25% of the total indebtedness to the bank); and (v) joint and several all-monies guarantee by a director of the Company and two related parties.
The financial institution borrowing is secured against: (i) (ii) certain assets worth S$3,750,000; and joint and several guarantee by a director of the Company and a related party.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 23. Borrowings (continued) (a) Securities granted (continued) The non-current loan from third parties is secured against: (i) a first fixed charge created over the entire issued share capital of a subsidiary of the Company; a corporate guarantee from the Company; and
(ii)
(iii) joint and several all-monies guarantee by a director of the Company and two related parties. The Senior TMK Bond and Junior TMK Bond are secured against the investment properties of the Group. (b) Fair value of non-current borrowings 2012 S$000 2,843 22,800 3,125 23,615 134,317 45,876
Loan from a shareholder Bank borrowings Financial institution borrowing Loan from third parties Senior TMK Bond Junior TMK Bond
The fair values above are determined from the cash flow analyses, discounted at market borrowing rates of an equivalent instrument at the balance sheet date which the Board of Directors expects to be available to the Group as follows: 2012 Loan from a shareholder Bank borrowings Financial institution borrowing Loan from third parties Senior TMK Bond Junior TMK Bond 5.54% 5.54% 5.75% 5.75% 2.57% 13.70%
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 24. Deferred income tax liabilities Deferred income tax liabilities are shown on the balance sheet as follows: 2012 S$000 Deferred income tax liabilities To be settled within one year To be settled after one year 4,322 4,322
2012 S$000 Deferred income tax liabilities Fair value gains 4,322
25.
Commitments (a) Operating lease arrangements where the Group is a lessee The Group leases office space from non-related parties under non-cancellable operating leases agreements. The leases have varying terms, escalation clauses and renewal rights. The future aggregate minimum lease payments payable under non-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities are as follows: 2012 S$000 Not later than one year 79 Later than one year but not later than five years 77 156
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 25. Commitments (continued) (b) Operating lease commitments where the Group is a lessor The Group leases out healthcare-related facilities to non-related parties under non-cancellable operating leases. The future aggregate minimum lease receivables under non-cancellable operating leases contracted for at the balance sheet date but not recognised as receivables are as follows: 2012 S$000 Not later than one year 18,526 Between one and five years 74,103 Later than five years 42,337 134,966
26.
Financial risk management Financial risk factors The Groups activities expose it to market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Groups overall risk management strategy seeks to minimise any adverse effects from the unpredictability of financial markets on the Groups financial performance. The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group, as well as establishing and reviewing the detailed financial risk management policies for the Group. (a) Market risk (i) Currency risk The Group operates predominantly in Asia with operations in countries such as Singapore, Malaysia, the Peoples Republic of China and Japan. Entities in the Group regularly transact in currencies other than their respective functional currencies (foreign currencies). Currency risk arises within entities in the Group when transactions are denominated in foreign currencies such as the Singapore Dollar (SGD), MYR, Chinese Yuan Renminbi (RMB), Japanese Yen (JPY) and USD. B-59
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 26. Financial risk management (continued) Financial risk factors (continued) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. The Groups exposure to interest rate risk arises primarily from its borrowings. The Groups policy is to obtain the most favourable interest rates available without increasing its foreign currency exposure. The Group periodically reviews its liabilities and monitors interest rate fluctuations to ensure that the exposure to interest rate risk is within acceptable levels. (b) 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 maximum exposure to credit risk for each class of financial assets is the carrying amount of that class of financial instruments presented on the balance sheet. The Groups classes of financial assets are cash and cash equivalents, trade and other receivables and other current assets. (i) Financial assets that are neither past due nor impaired For cash and cash equivalents, the Group adopts the policy of dealing only with major banks of high credit standing throughout the world. Trade and other receivables and other current assets that are neither past due nor impaired are substantially companies with good collection track records with the Group. (ii) Financial assets that are past due and/or impaired There is no class of financial assets that is past due and/or impaired.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 26. Financial risk management (continued) Financial risk factors (continued) (c) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Groups exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Groups objectives is to maintain a balance between continuity of funding and flexibility through the use of loans and borrowings. In addition, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance its operations and mitigate the effect of fluctuations in cash flows. (d) Capital risk The primary objective of the Groups capital management is to maintain an adequate capital base so as to maintain investor, creditor and market confidence and to sustain future development of its business. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to its shareholders, return capital to its shareholders or issue new shares. There were no changes in the Groups approach to capital management for the financial years ended 31 December 2012 and 31 December 2011. The Group is not subject to any externally imposed capital requirements. (e) Fair value measurements The carrying amount of cash and cash equivalents, trade and other receivables, other current assets and trade and other payables approximate their fair values because these are mostly short term in nature. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value of deposits received under non-current trade and other payables is S$6,647,000. The fair value of borrowings is disclosed in Note 23(b).
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 27. Related party transactions (a) In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties at terms agreed between the parties during the financial year: 2012 S$000 Management fee charged from related parties capitalised into investment properties under development Interest paid/payable to a shareholder 2011 S$000
779 220
428 117
Balances with related parties at the balance sheet date are set out in Note 23. Related parties comprise mainly companies which are controlled or significantly influenced by the Companys shareholders. (b) Key management personnel compensation 2012 S$000 Wages and salaries Post-employment benefits contribution to Central Provident Fund 736 46 782 2011 S$000 710 46 756
Included in the above is total compensation to directors of the Company amounting to S$518,000 (2011: S$491,000).
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 28. Segment information Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. Management considers the business from the operational perspective ie provision of healthcare services, integrated medical real estate and investment holding. The Groups business can be categorised into two segments as follows: (i) Provision of healthcare services (Healthcare Services) through: (ii) the management and operation of hospital, and investing in healthcare-related assets.
Development of medical real estate (such as hospital facilities), healthcare-related assets (such as nursing homes) and integrated mixed-use developments (such as developments with medical real estate/healthcare-related assets, retail space and/or service residences) (Integrated Medical Real Estate).
All other segment comprises head office function, including most senior management staff and functions. The segment information provided for the reportable segments are as follows: Integrated Medical Real Estate S$000
Healthcare Services S$000 31 December 2012 Sales Total segment sales Inter-segment sales Sales to external parties 37,843 37,843
All other segment S$000
Total S$000
37,843 37,843
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 28. Segment information (continued) Integrated Medical Real Estate S$000
Healthcare Services S$000
Total S$000
Adjusted EBITDA Depreciation Amortisation Segment assets Segment liabilities
53,120 (519) (281) 329,955 3,160
19,697 76,528 9,031 Integrated Medical Real Estate S$000
(413)
72,404 (519) (281) 406,483 12,191
Healthcare Services S$000 31 December 2011 Sales Total segment sales Inter-segment sales Sales to external parties Adjusted EBITDA Depreciation Amortisation 35,324 35,324 21,576 (447) (278)
Total S$000
6,994
(358)
35,324 35,324 28,212 (447) (278)
The key management assesses the performance of the operating segments based on a measure of Earnings before interest, tax, depreciation and amortisation (adjusted EBITDA). This measurement basis excludes the effects of expenditure from the operating segments such as restructuring costs and goodwill impairment that are not expected to recur regularly in every period. Interest income and finance expenses are not allocated to segments, as this type of activity is driven by the Company, which manages the cash position of the Group. B-64
INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 28. Segment information (continued) (a) Reconciliations (i) Segment profits A reconciliation of adjusted EBITDA to profit before tax is as follows: 2012 S$000 Adjusted EBITDA for reportable segments Other segments EBITDA Depreciation Amortisation Finance expense Interest income Profit before tax 72,404 (519) (281) (12,881) 5 58,728 2011 S$000 28,212 (447) (278) (12,958) 1 14,530
(ii)
Segment assets The amounts provided to the key management with respect to total assets are measured in a manner consistent with that of the financial statements. For the purposes of monitoring segment performance and allocating resources between segments, the key management monitors the property, plant and equipment, intangible assets, inventories, receivables, operating cash and investment properties attributable to each segment. All assets are allocated to reportable segments. 31 December 2012 S$000 Segment assets for reportable segments Other segment assets 406,483 406,483
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 28. Segment information (continued) (a) Reconciliations (continued) (iii) Segment liabilities The amounts provided to the key management with respect to total liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. All liabilities are allocated to the reportable segments other than income tax liabilities and borrowings. Segment liabilities are reconciled to total liabilities as follows: 31 December 2012 S$000 Segment liabilities for reportable segments Other segment liabilities Unallocated: Current income tax liabilities Deferred income tax liabilities Borrowings 908 4,322 240,743 258,164 12,191
(b)
Revenue from products and services Revenue from external customers are derived from the provision of Healthcare Services.
(c)
Geographical information The Groups two business segments operate in four main geographical areas: Singapore the Company is headquartered in Singapore. The operations in this area are principally investment holding;
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 28. Segment information (continued) (c) Geographical information (continued) Peoples Republic of China the operations in this area consists of the provision of healthcare services through the management and operation of hospital and the development of medical real estate, healthcare-related assets and integrated mixed use developments; Japan the operations in this area are principally the provision of healthcare services through the rental of healthcare-related assets; Malaysia the operations in this area are principally the development of medical real estate, healthcare-related assets and integrated mixed-use developments; and Other countries the operations in these areas are principally investment holding. Revenue 2012 S$000 Peoples Republic of China Japan 17,360 20,483 37,843 2011 S$000 14,711 20,613 35,324
Non-current assets 31 December 2012 S$000 Peoples Republic of China Japan Malaysia 78,232 250,545 58,000 386,777
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 29. Business combinations Wuxi Hospital On 30 April 2013, HMD, through IHC Star Limited (formerly known as HMD Star Limited) acquired an effective 74.97% equity interest in Wuxi Hospital. The principal activity of Wuxi Hospital is that of operation of a general hospital. Details of the consideration paid, the assets acquired and liabilities assumed, the non-controlling interests recognised and the effects on the cash flows of the Group assumed to be acquired on 31 December 2012, are as follows: (a) Purchase consideration 2012 S$000 Consideration shares issued Fair value of identifiable net assets acquired Non-controlling interest 56,250 (17,171) 4,298 (12,873) Goodwill arising on consolidation (Note 18(a)) 43,377
(b)
Effect on cash flows of the Group 2012 S$000 Cash paid Less: Cash and cash equivalents acquired Net cash inflow on acquisition (1,902) 1,902
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 29. Business combinations (continued) Wuxi Hospital (continued) (c) Assets acquired and liabilities assumed The assets and liabilities arising from the acquisition are as follows: Fair value S$000 Cash and cash equivalents Trade and other receivables Other current assets Inventories Lease prepayments Property, plant and equipment Trade and other payables Current income tax liabilities Net identifiable assets acquired 1,902 1,334 17 771 12,001 5,214 (3,160) (908) 17,171
(d)
Revenue and profit contribution The acquired business contributed to the Group unaudited pro forma revenue of S$17,360,000 (2011: S$14,711,000) and unaudited pro forma net profit of S$1,639,000 (2011: S$1,448,000).
30.
Events occurring after balance sheet date On 31 May 2013, the Company entered into three sale and purchase agreements (the SPAs) with HMD to acquire certain of its subsidiaries (the Project Entities) which had entered or will enter into sale and purchase agreements for: (a) two blocks of multi-storey strata title developments in Iskandar, Malaysia for development into an integrated mixed-use development (IHC Iskandar Project); a land bank in Chengdu, the Peoples Republic of China for development into an integrated mixed-use development (IHC Chengdu Project); and
(b)
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 30. Events occurring after balance sheet date (continued) (c) three blocks of commercial development in Shanghai, the Peoples Republic of China for positioning into an integrated mixed-use development (IHC Shanghai Project).
The total consideration for the above acquisitions is S$17,403,000 and is to be satisfied by the issuance and allotment of such number of new ordinary shares in the share capital of the Company at the issue price of the shares of the Company during its initial offering of shares and listing on the Singapore Exchange Securities Trading Limited. The completion of the above acquisitions is dependant on certain conditions precedent which include the following: IHC obtaining the acquisition financing; IHC obtaining and exercising the right to negotiate; The sale and purchase agreement for acquisition of IHC Iskandar Project and IHC Chengdu Project to be finalised and executed; IHC and HMD obtaining relevant approval(s) from their respective shareholders in connection with the SPAs; HMD and/or the Project Entities obtaining relevant approvals and consent from the relevant government authorities or regulatory bodies in connection with the acquisition, if applicable; No material adverse change (as determined by IHC in its reasonable discretion) in the prospects, operations or financial conditions of the Project Entities; and All necessary third party, governmental and regulatory consents, approvals and waivers where required for the transactions contemplated hereunder having been obtained, and such consents, approvals and waivers not having been amended or revoked and if any such consents, approvals or waivers are subject to conditions, such conditions being acceptable to the parties to the SPAs.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 31. New or revised accounting standards and interpretations Below are the mandatory standards, amendments and interpretations to existing standards that have been published, and are relevant for the Groups accounting periods beginning on or after 1 January 2013 or later periods and which the Group has not early adopted: FRS 110 Consolidated Financial Statements (effective for annual periods beginning on or after 1 January 2014) FRS 110 replaces all of the guidance on control and consolidation in FRS 27 Consolidated and Separate Financial Statements and INT FRS 12 Consolidation Special Purpose Entities. The same criteria are now applied to all entities to determine control. Additional guidance is also provided to assist in the determination of control where this is difficult to assess. FRS 111 Joint Arrangements (effective for annual periods beginning on or after 1 January 2014) FRS 111 introduces a number of changes. The types of joint arrangements have been reduced to two: joint operations and joint ventures. The existing policy choice of proportionate consolidation for jointly controlled entities has been eliminated and equity accounting is mandatory for participants in joint ventures. Entities that participate in joint operations will follow accounting much like that for joint assets or joint operations currently. FRS 112 Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2014) FRS 112 requires disclosure of information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entitys interests in (1) subsidiaries, (2) associates, (3) joint arrangements and (4) unconsolidated structured entities. FRS 113 Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013) FRS 113 provides consistent guidance across IFRSs on how fair value should be determined and which disclosures should be made in the financial statements.
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INTERNATIONAL HEALTHWAY CORPORATION LIMITED AND ITS SUBSIDIARIES (Formerly known as International Healthway Corporation Private Limited) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS For the financial years ended 31 December 2012 and 31 December 2011 31. New or revised accounting standards and interpretations (continued) The management anticipates that the adoption of the above FRSs in the future periods will not have a material impact on the financial statements of the Group in the period of their initial adoption apart from disclosure of interests in other entities and fair value measurement of investment properties (including those under development). 32. Authorisation of Unaudited Pro Forma Financial Statements These Unaudited Pro Forma Financial Statements were authorised for issue in accordance with a resolution of the Board of Directors of International Healthway Corporation Limited (formerly known as International Healthway Corporation Private Limited) on 1 July 2013.
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APPENDIX C INDEPENDENT VALUATION REPORT ON THE PROPERTIES IN THE PRC
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APPENDIX D INDEPENDENT VALUATION REPORT ON THE PROPERTIES IN MALAYSIA
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APPENDIX E INDEPENDENT VALUATION REPORT ON THE PROPERTIES IN JAPAN
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APPENDIX F MARKET RESEARCH REPORT ON THE HEALTHCARE SERVICES INDUSTRY IN CHINA, JAPAN AND MALAYSIA
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APPENDIX G SELECTED EXTRACTS OF OUR ARTICLES OF ASSOCIATION

The discussion below provides information about certain provisions of our Memorandum and Articles of Association and the laws of Singapore. This description is only a summary and is qualified by reference to Singapore law and our Articles. The instruments that constitute and define our Company are the Memorandum and Articles of Association of the Company Memorandum of Association The registration number with which our Company was incorporated is Registration No. 201304341E. Our Memorandum of Association states, among others, that the liability of our Shareholders is limited. Summary of our Articles of Association Directors (a) Ability of interested directors to vote Article 104 A Director shall not vote in respect of any contract or arrangement or any other proposal whatsoever in which he has any personal material interest, directly or indirectly. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting. (b) Remuneration Article 77 The ordinary remuneration of the Directors, which shall from time to time be determined by an Ordinary Resolution of the Company, shall not be increased except pursuant to an Ordinary Resolution passed at a General Meeting where notice of the proposed increase shall have been given in the notice convening the General Meeting and shall (unless such resolution otherwise provides) be divisible among the Directors as they may agree, or failing agreement, equally, except that any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for a proportion of remuneration related to the period during which he has held office. The ordinary remuneration of an executive Director may not include a commission on or a percentage of turnover and the ordinary remuneration of a non-executive Director shall be a fixed sum, and not by a commission on or a percentage of profits or turnover. Article 78 Any Director who holds any executive office, or who serves on any committee of the Directors, or who otherwise performs services which in the opinion of the Directors are outside the scope of the ordinary duties of a Director, may be paid such extra remuneration by way of salary, commission or otherwise as the Directors may determine, Provided that such extra remuneration (in case of an executive Director) shall not be by way of commission on or a percentage of turnover and (in the case of a non-executive Director) shall be a fixed sum, and not by a commission on or a percentage of profits or turnover.
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Article 79 The Directors may repay to any Director all such reasonable expenses as he may incur in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise in or about the business of the Company. Article 80 The Directors shall have power to pay and agree to pay pensions or other retirement, superannuation, death or disability benefits to (or to any person in respect of) any Director for the time being holding any executive office and for the purpose of providing any such pensions or other benefits to contribute to any scheme or fund or to pay premiums. (c) Borrowing Article 112 Subject as hereinafter provided and to the provisions of the Statutes, the Directors may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. (d) Retirement Age Limit Article 93 At each Annual General Meeting, one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from office by rotation, Provided that no Director holding office as Managing Director shall be subject to retirement by rotation or be taken into account in determining the number of Directors to retire. For the avoidance of doubt, each Director (other than a Director holding office as Managing Director) shall retire at least once every three years. Article 94 The Directors to retire by rotation shall include (so far as necessary to obtain the number required) any Director who is due to retire at a General Meeting by reason of age or who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election or appointment and so that as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by ballot. A retiring Director shall be eligible for re-election. Article 95 The Company at a General Meeting at which a Director retires under any provision of these presents may by Ordinary Resolution fill the office being vacated by electing thereto the retiring Director or some other person eligible for appointment. In default, the retiring Director shall be deemed to have been re-elected except in any of the following cases: (a) where at such meeting it is expressly resolved not to fill such office or a resolution for the re-election of such Director is put to the meeting and lost; or G-2

(b) where such Director has given notice in writing to the Company that he is unwilling to be re-elected; or where the default is due to the moving of a resolution in contravention of the next following Article; or where such Director has attained any retiring age applicable to him as Director.
(c)
(d)
The retirement shall not have effect until the conclusion of the meeting except where a resolution is passed to elect some other person in the place of the retiring Director or a resolution for his re-election is put to the meeting and lost and accordingly a retiring Director who is re-elected or deemed to have been re-elected will continue in office without a break. Article 96 A resolution for the appointment of two or more persons as Directors by a single resolution shall not be moved at any General Meeting unless a resolution that it shall be so moved has first been agreed to by the meeting without any vote being given against it, and any resolution moved in contravention of this provision shall be void. (e) Shareholding Qualification Article 76 A Director shall not be required to hold any shares of the Company by way of qualification. A Director who is not a Member of the Company shall nevertheless be entitled to receive notice of and to attend and speak at General Meetings. Share Rights and Restrictions (a) Rights, preferences and restrictions attaching to each class of shares Article 3 (A) Subject to the Act and to these presents, no shares may be issued by the Directors without the prior approval of the Company in General Meeting pursuant to Section 161 of the Act, but subject thereto and the terms of such approval, and to Article 5, and to any special rights attached to any shares for the time being issued, the Directors may allot and issue shares or grant options over or otherwise dispose of the same to such persons on such terms and conditions and for such consideration and at such time and whether or not subject to the payment of any part of the amount thereof in cash or otherwise as the Directors may think fit, and any shares may, subject to compliance with Sections 70 and 75 of the Act, be issued with such preferential, deferred, qualified or special rights, privileges, conditions or restrictions, whether as regards Dividend, return of capital, participation in surplus, voting, conversion or otherwise, as the Directors may think fit, and preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors in accordance with the Act, Provided Always that no options shall be granted over unissued shares except in accordance with the Act and the Designated Stock Exchanges listing rules. The Directors may, at any time after the allotment of any share but before any person has been entered in the Register of Members as the holder, recognize a renunciation
(B)
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thereof by the allottee in favour of some other person and may accord to any allottee of a share a right to effect such renunciation upon and subject to such terms and conditions as the Directors may think fit to impose. (C) Except so far as otherwise provided by the conditions of issue or by these presents, all new shares shall be issued subject to the provisions of the Statutes and of these presents with reference to allotment, payment of calls, lien, transfer, transmission, forfeiture or otherwise. Article 7 (A) Preference shares may be issued subject to such limitation thereof as may be prescribed by any Designated Stock Exchange. Preference shareholders shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance-sheets and attending General Meetings of the Company, and preference shareholders shall also have the right to vote at any General Meeting convened for the purpose of reducing capital or winding-up or sanctioning a sale of the undertaking of the Company or where the proposal to be submitted to the General Meeting directly affects their rights and privileges or when the Dividend on the preference shares is more than six months in arrears. The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued.
(B)
Article 8 (A) Whenever the share capital of the Company is divided into different classes of shares, the variation or abrogation of the special rights attached to any class may, subject to the provisions of the Act, be made 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 (but not otherwise) and may be so made either whilst the Company is a going concern or during or in contemplation of a winding-up. To every such separate General Meeting all the provisions of these presents relating to General Meetings of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two or more persons holding at least one-third of the total number of the issued shares of the class present in person or by proxy or attorney and that any holder of shares of the class present in person or by proxy or attorney 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 where the class is a class of equity shares within the meaning of Section 64(1) of the Act or at least one vote for every share of the class where the class is a class of preference shares within the meaning of Section 180(2) of the Act, Provided Always that where the necessary majority for such a Special Resolution is not obtained at such General Meeting, the 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. The provisions in Article 8(A) shall mutatis mutandis apply to any repayment of preference capital (other than redeemable preference capital) and any variation or abrogation of the rights attached to preference shares or any class thereof.
(B)
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(C) The special rights attached to any class of shares having preferential rights shall not unless otherwise expressly provided by the terms of issue thereof be deemed to be varied by the creation or issue of further shares ranking as regards participation in the profits or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto. Article 13 Every person whose name is entered as a Member in the Register of Members shall be entitled, within ten market days (or such period as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) after the closing date of any application for shares or (as the case may be) after the date of lodgement of a registrable transfer to one certificate for all his shares of any one class or to several certificates in reasonable denominations each for a part of the shares so allotted or transferred. Article 40 A reference to a Member shall be a reference to a registered holder of shares in the Company, or where such registered holder is CDP, the Depositors on behalf of whom CDP holds the shares, Provided that: (a) a Depositor shall only be entitled to attend any General Meeting and to speak and vote thereat if his name appears on the Depository Register maintained by CDP forty-eight (48) hours before the General Meeting as a Depositor on whose behalf CDP holds shares in the Company, the Company being entitled to deem each such Depositor, or each proxy of a Depositor who is to represent the entire balance standing to the Securities Account of the Depositor, to represent such number of shares as is actually credited to the Securities Account of the Depositor as at such time, according to the records of CDP as supplied by CDP to the Company, and where a Depositor has apportioned the balance standing to his Securities Account between two proxies, to apportion the said number of shares between the two proxies in the same proportion as previously specified by the Depositor in appointing the proxies; and accordingly no instrument appointing a proxy of a Depositor shall be rendered invalid merely by reason of any discrepancy between the proportion of Depositors shareholding specified in the instrument of proxy, or where the balance standing to a Depositors Securities Account has been apportioned between two proxies the aggregate of the proportions of the Depositors shareholding they are specified to represent, and the true balance standing to the Securities Account of a Depositor as at the time of the General Meeting, if the instrument is dealt with in such manner as is provided above; the payment by the Company to CDP of any Dividend payable to a Depositor shall to the extent of the payment discharge the Company from any further liability in respect of the payment; the delivery by the Company to CDP of provisional allotments or share certificates in respect of the aggregate entitlements of Depositors to new shares offered by way of rights issue or other preferential offering or bonus issue shall to the extent of the delivery discharge the Company from any further liability to each such Depositor in respect of his individual entitlement; and the provisions in these presents relating to the transfers, transmissions or certification of shares shall not apply to the transfer of book-entry securities. G-5
(b)
(c)
(d)

Article 41 Except as required by the Statutes or law, no person shall be recognized by the Company as holding any share upon any trust, and the Company shall not be bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these presents or by the Statutes or law otherwise provided) any other right in respect of any share, except an absolute right to the entirety thereof in the registered holder and nothing in these presents contained relating to CDP or to Depositors or in any depository agreement made by the Company with any common depository for shares shall in any circumstances be deemed to limit, restrict or qualify the above. Article 63 In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members or, as the case may be, the order in which the names appear in the Depository Register in respect of the joint holding. Article 64 Where in Singapore or elsewhere a receiver or other person (by whatever name called) has been appointed by any court claiming jurisdiction in that behalf to exercise powers with respect to the property or affairs of any Member on the ground (however formulated) of mental disorder, the Directors may in their absolute discretion, upon or subject to production of such evidence of the appointment as the Directors may require, permit such receiver or other person on behalf of such Member, to vote in person or by proxy at any General Meeting, or to exercise any other right conferred by Membership in relation to General Meetings. Article 65 No Member shall be entitled in respect of shares held by him to vote at a General Meeting either personally or by proxy or to exercise any other right conferred by Membership in relation to General Meetings if any call or other sum payable by him to the Company in respect of such shares remains unpaid. (b) Change in Capital Article 9 The Company may by Ordinary Resolution: (a) (b) consolidate and divide all or any of its share capital; cancel the number of any shares which, at the date of the passing of the resolution in that behalf have not been taken or agreed to be taken by any person or which have been forfeited and diminish the amount of its share capital by the number of the shares so cancelled;
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(c) sub-divide its shares, or any of them, Provided Always that in such subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be same as it was in the case of the share from which the reduced share is derived; convert or exchange any class of shares into or for any other class of shares; and/or divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares attached thereto respectively any preferential, deferred, qualified or special rights, privileges, conditions or such restrictions which in the absence of any such determination by the Company in general meeting, as the Directors may determine provided always that where the Company issues shares which do not carry voting rights, the words non voting shall appear in the designation of such shares and where the equity capital includes shares with different voting rights, the designation of each class of shares, other than those with the most favourable voting rights, must include the words restricted voting or limited voting.
(d) (e)
Article 10 (A) The Company may reduce its share capital or any other undistributable reserve in any manner permitted, and with, and subject to, any incident authorized, and consent or confirmation required, by law. The Company may purchase or otherwise acquire its issued shares subject to and in accordance with the provisions of the Statutes and any applicable rules of the Designated Stock Exchange (hereafter, the Relevant Laws), on such terms and subject to such conditions as the Company may in General Meeting prescribe in accordance with the Relevant Laws. Any shares purchased or acquired by the Company as aforesaid shall, unless held in treasury in accordance with the Act, be deemed to be cancelled immediately on purchase or acquisition by the Company. On the cancellation of any share as aforesaid, the rights and privileges attached to that share shall expire. In any other instance, the Company may hold or deal with any such share which is so purchased or acquired by it in such manner as may be permitted by, and in accordance with the Relevant Laws. Without prejudice to the generality of the foregoing, upon cancellation of any share purchased or otherwise acquired by the Company pursuant to these presents and the Statutes, the number of issued shares of the Company shall be diminished by the number of shares so cancelled, and, where any such cancelled share was purchased or acquired out of the capital of the Company, the amount of share capital of the Company shall be reduced accordingly.
(B)
(c)
Change in the Respective Rights of the Various Classes of Shares Article 8 (A) Whenever the share capital of the Company is divided into different classes of shares, the variation or abrogation of the special rights attached to any class may, subject to the provisions of the Act, be made 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 (but not otherwise) and may be so made either whilst the Company is a going concern or during or in contemplation of a winding-up. To every such separate General Meeting all the provisions of these presents relating to General Meetings of the G-7

Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two or more persons holding at least one-third of the total number of the issued shares of the class present in person or by proxy or attorney and that any holder of shares of the class present in person or by proxy or attorney 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 where the class is a class of equity shares within the meaning of Section 64(1) of the Act or at least one vote for every share of the class where the class is a class of preference shares within the meaning of Section 180(2) of the Act, Provided Always that where the necessary majority for such a Special Resolution is not obtained at such General Meeting, the 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. (B) The provisions in Article 8(A) shall mutatis mutandis apply to any repayment of preference capital (other than redeemable preference capital) and any variation or abrogation of the rights attached to preference shares or any class thereof.
(C) The special rights attached to any class of shares having preferential rights shall not unless otherwise expressly provided by the terms of issue thereof be deemed to be varied by the creation or issue of further shares ranking as regards participation in the profits or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto. (d) Dividends and Distribution Article 127 The Company may by Ordinary Resolution declare Dividends but no such Dividend shall exceed the amount recommended by the Directors. Article 128 If and so far as in the opinion of the Directors, the profits of the Company justify such payments, the Directors may declare and pay the fixed Dividends on any class of shares carrying a fixed Dividend expressed to be payable on fixed dates on the half-yearly or other dates prescribed for the payment thereof and may also from time to time declare and pay interim Dividends on shares of any class of such amounts and on such dates and in respect of such periods as they think fit. Article 129 Subject to any rights or restrictions attached to any shares or class of shares and except as otherwise permitted under the Act: (a) all Dividends in respect of shares must be paid in proportion to the number of shares held by a Member, but where shares are partly paid, all Dividends must be apportioned and paid proportionately to the amounts paid or credited as paid on the partly paid shares; and all Dividends must be apportioned and paid proportionately to the amounts so paid or credited as paid during any portion or portions of the period in respect of which the Dividend is paid.
(b)
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For the purposes of this Article, an amount paid or credited as paid on a share in advance of a call is to be ignored. Article 130 (A) No Dividend shall be paid otherwise than out of profits available for distribution under the provisions of the Statutes. The payment by the Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. All Dividends remaining unclaimed after one year from having been first payable may be invested or otherwise made use of by the Directors for the benefit of the Company, and any Dividend or any such moneys unclaimed after six (6) years from having been first payable shall be forfeited and shall revert to the Company provided always that the Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the Dividend so forfeited to the person entitled thereto prior to the forfeiture. If CDP returns any such Dividend or moneys to the Company, the relevant Depositor shall not have any right or claim in respect of such Dividend or moneys against the Company if a period of six (6) years has elapsed from the date of the declaration of such Dividend or the date on which such other moneys are first payable. A payment by the Company to CDP of any Dividend or other moneys payable to a Depositor shall, to the extent of the payment made, discharge the Company from any liability to the Depositor in respect of that payment.
(B)
Article 131 No Dividend or other monies payable on or in respect of a share shall bear interest as against the Company. Article 132 (A) The Directors may retain any Dividend or other monies payable on or in respect of a share on which the 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. The Directors may retain the Dividends payable upon shares in respect of which any person is under the provisions as to the transmission of shares hereinbefore contained entitled to become a Member, or which any person is under those provisions entitled to transfer, until such person shall become a Member in respect of such shares or shall transfer the same.
(B)
Article 133 The waiver in whole or in part of any Dividend on any share by any document (whether or not under seal) shall be effective only if such document is signed by the Member (or the person entitled to the share in consequence of the death or bankruptcy of the holder) and delivered to the Company and if or to the extent that the same is accepted as such or acted upon by the Company. Article 134 The Company may upon the recommendation of the Directors by Ordinary Resolution direct payment of a Dividend in whole or in part by the distribution of specific assets (and in particular of paid-up shares or debentures of any other company) and the Directors shall give G-9

effect to such resolution. Where any difficulty arises with regard to such distribution, the Directors may settle the same as they think expedient and in particular, may issue fractional certificates, may fix the value for distribution of such specific assets or any part thereof, may determine that cash payments shall be made to any Member upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors. Article 135 Any Dividend or other moneys payable in cash on or in respect of a share may be paid by cheque or warrant sent through the post to the registered address appearing in the Register of Members or (as the case may be) the Depository Register of the Member or person entitled thereto (or, if two or more persons are registered in the Register of Members or (as the case may be) entered in the Depository Register as joint holders of the share or are entitled thereto in consequence of the death or bankruptcy of the holder, to any one of such persons) or to such person and such address as such Member or person or persons may by writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to such person as the holder or joint holders or person or persons entitled to the share in consequence of the death or bankruptcy of the holder may direct and payment of the cheque or warrant by the banker upon whom it is drawn shall be a good discharge to the Company. Every such cheque or warrant shall be sent at the risk of the person entitled to the money represented thereby. Article 136 If two or more persons are registered in the Register of Members or (as the case may be) the Depository Register as joint holders of any share, or are entitled jointly to a share in consequence of the death or bankruptcy of the holder, any one of them may give effectual receipts for any Dividend or other moneys payable or property distributable on or in respect of the share. (e) Limitation on the Right to Own Shares Article 5 (A) Subject to any direction to the contrary that may be given by the Company in General Meeting or except permitted by the rules of the Designated Stock Exchange, all new shares shall before issue be offered to such persons who as at the date (as determined by the Directors) of the offer are entitled to receive notices from the Company of General Meetings in proportion, as far as the circumstances admit, to the number of the existing shares to which they are entitled. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the Directors may dispose of those shares in such manner as they think most beneficial to the Company. The Directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the Directors, be conveniently offered under this Article 5(A).
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(B) Notwithstanding Article 5(A) above, the Company may by Ordinary Resolution in General Meeting give to the Directors a general authority, either unconditionally or subject to such conditions as may be specified in the Ordinary Resolution, to: (a) (i) issue shares in the capital of the Company (shares) whether by way of rights, bonus or otherwise; and/or 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) warrants, debentures or other instruments convertible into shares; and
(ii)
(b)
(notwithstanding the authority conferred by the Ordinary Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while the Ordinary Resolution was in force,
Provided that: (1) the aggregate number of shares to be issued pursuant to the Ordinary Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to the Ordinary Resolution) shall be subject to such limits and manner of calculation as may be prescribed by the Designated Stock Exchange; in exercising the authority conferred by the Ordinary Resolution, the Company shall comply with the provisions of the listing rules of the Designated Stock Exchange for the time being in force (unless such compliance is waived by the Designated Stock Exchange) and these presents; and (unless revoked or varied by the Company in General Meeting) the authority conferred by the Ordinary Resolution shall not continue in force beyond the conclusion of the Annual General Meeting of the Company next following the passing of the Ordinary Resolution, or the date by which such Annual General Meeting of the Company is required by law to be held, or the expiration of such other period as may be prescribed by the Act (whichever is the earliest).
(2)
(3)
(C) The Company may, notwithstanding Articles 5(A) and 5(B) above, authorize the Directors not to offer new shares to Members to whom by reason of foreign securities laws, such offers may not be made without registration of the shares or a prospectus or other document, but to sell the entitlements to the new shares on behalf of such Members on such terms and conditions as the Company may direct. Article 33 (A) There shall be no restriction on the transfer of fully paid up shares (except where required by law or by the rules, bye-laws or listing rules of the Designated Stock Exchange) but the Directors may in their discretion decline to register any transfer of shares upon which the Company has a lien, and in the case of shares not fully paid up, may refuse to register a transfer to a transferee of whom they do not approve, Provided Always that in the event of the Directors refusing to register a transfer of shares, the Company shall within ten market days (or such period as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) after the date on which the application for a transfer of shares was made, serve a notice in writing to the applicant stating the facts which are considered to justify the refusal as required by the Statutes. G-11

(B) The Directors may decline to register any instrument of transfer unless: (a) such fee not exceeding S$2.00 (or such other fee as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) as the Directors may from time to time require is paid to the Company in respect thereof; the amount of proper duty (if any) with which each instrument of transfer is chargeable under any law for the time being in force relating to stamps is paid; the instrument of transfer is deposited at the Office or at such other place (if any) as the Directors may appoint accompanied by a certificate of payment of stamp duty (if stamp duty is payable on such instrument of transfer in accordance with any law for the time being in force relating to stamp duty), the certificates of the shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do; and the instrument of transfer is in respect of only one class of shares.
(b)
(c)
(d) Article 41
Except as required by the Statutes or law, no person shall be recognized by the Company as holding any share upon any trust, and the Company shall not be bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these presents or by the Statutes or law otherwise provided) any other right in respect of any share, except an absolute right to the entirety thereof in the registered holder and nothing in these presents contained relating to CDP or to Depositors or in any depository agreement made by the Company with any common depository for shares shall in any circumstances be deemed to limit, restrict or qualify the above. (f) Approval for the Issue of New Ordinary Shares Article 5(B) (B) Notwithstanding Article 5(A) above, the Company may by Ordinary Resolution in General Meeting give to the Directors a general authority, either unconditionally or subject to such conditions as may be specified in the Ordinary Resolution, to: (a) (i) issue shares in the capital of the Company (shares) whether by way of rights, bonus or otherwise; and/or 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) warrants, debentures or other instruments convertible into shares; and
(ii)
Provided that: (1) the aggregate number of shares (including shares to be issued pursuant to the Instruments) and the Instruments that may be issued shall not be more than 100% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which the aggregate number of shares and Instruments to be G-12

issued other than on a pro rate basis to existing shareholders of the Company shall be not more than 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company; or (2) if the shareholders of the Company approve the mandate for the issue of new ordinary shares by Special Resolution, the limit on the aggregate number of shares and Instruments issued, whether on a pro rate or non pro rate basis, may be up to 100% of the total number of issued shares (excluding treasury shares) in the capital of the Company. Shareholder approval under this Article 5(B)(2) must not be deemed by way of subscription for shares. (subject to such calculation as may be prescribed by the Designated Stock Exchange) for the purpose of determining the aggregate number of shares and Instruments that may be issued under Articles 5(B)(1) and 5(B)(2), the percentage of the total number of issued shares (excluding treasury shares) in the capital of the Company is based on the Companys total number of issued shares (excluding treasury shares) at the time of the passing resolution approving the mandate for the issue of new ordinary shares, after adjusting for: (a) (b) new shares arising from the conversion or exercise of the Instruments; new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time of the passing of the resolution approving the mandate for the issue of new ordinary shares; and any subsequent bonus issue, consolidation or subdivision of shares;
(3)
(c) (4)
(unless revoked or varied by the Company in General Meeting) the authority conferred by the Ordinary Resolution shall not continue in force beyond the conclusion of the Annual General Meeting of the Company next following the passing of the Ordinary Resolution, or the date by which such Annual General Meeting of the Company is required by law to be held, or the expiration of such other period as may be prescribed by the Act (whichever is the earliest).
(g)
Registration and Recognition as Members of the Company Article 31 All transfers of shares shall be effected by written instruments of transfer in the form for the time being approved by the Directors and the Designated Stock Exchange. The instrument of transfer of any share shall be signed by or on behalf of both the transferor and the transferee and be witnessed, Provided Always that an instrument of transfer in respect of which the transferee is the CDP shall be effective although not signed or witnessed by or on behalf of the CDP. The transferor shall be deemed to remain the holder of the shares concerned until the name of the transferee is entered in the Register of Members in respect thereof. Article 32 The Registers of Members and of Transfers may be closed at such times and for such periods as the Directors may from time to time determine, Provided Always that such Registers shall not be closed for more than thirty days in any year, and that the Company shall give prior notice of each such closure, as may be required, to the Designated Stock Exchange, stating the period and purpose or purposes for which such closure is made. G-13

Article 41 Except as required by the Statutes or law, no person shall be recognized by the Company as holding any share upon any trust, and the Company shall not be bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these presents or by the Statutes or law otherwise provided) any other right in respect of any share, except an absolute right to the entirety thereof in the registered holder and nothing in these presents contained relating to CDP or to Depositors or in any depository agreement made by the Company with any common depository for shares shall in any circumstances be deemed to limit, restrict or qualify the above. Article 137 Any resolution declaring a Dividend on shares of any class, whether a resolution of the Company in General Meeting or a resolution of the Directors, may specify that the same shall be payable to the persons registered as the holders of such shares in the Register of Members or (as the case may be) the Depository Register at the close of business on a particular date and thereupon the Dividend shall be payable to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect of such Dividend of transferors and transferees of any such shares. (h) Transfer of Ordinary Shares and Replacement of Share Certificates Article 33 (A) There shall be no restriction on the transfer of fully paid up shares (except where required by law or by the rules, bye-laws or listing rules of the Designated Stock Exchange) but the Directors may in their discretion decline to register any transfer of shares upon which the Company has a lien, and in the case of shares not fully paid up, may refuse to register a transfer to a transferee of whom they do not approve, Provided Always that in the event of the Directors refusing to register a transfer of shares, the Company shall within ten market days (or such period as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) after the date on which the application for a transfer of shares was made, serve a notice in writing to the applicant stating the facts which are considered to justify the refusal as required by the Statutes. The Directors may decline to register any instrument of transfer unless: (a) such fee not exceeding S$2.00 (or such other fee as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) as the Directors may from time to time require is paid to the Company in respect thereof; the amount of proper duty (if any) with which each instrument of transfer is chargeable under any law for the time being in force relating to stamps is paid; the instrument of transfer is deposited at the Office or at such other place (if any) as the Directors may appoint accompanied by a certificate of payment of stamp duty (if stamp duty is payable on such instrument of transfer in accordance with any law for the time being in force relating to stamp duty), the certificates of the shares to which it relates, and such other evidence as the Directors may
(B)
(b)
(c)
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reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do; and (d) Article 15 Subject to the provisions of the Statutes, if any share certificate shall be defaced, worn out, destroyed, lost or stolen, it may be renewed on such evidence being produced and a written indemnity (if required) being given by the shareholder, transferee, person entitled, purchaser, member firm or member company of the Designated Stock Exchange or on behalf of its or their client or clients as the Directors shall require, and (in case of defacement or wearing out) on delivery up of the old certificate, and in any case on payment of such sum not exceeding S$2.00 (or such other fee as the Directors may determine having regard to any limitation thereon as may be prescribed by the Designated Stock Exchange from time to time) as the Directors may from time to time require. In the case of destruction, loss or theft, a shareholder or person entitled to, and to whom such renewed certificate is given shall also bear the loss and pay to the Company all expenses incidental to the investigations by the Company of the evidence of such destruction or loss. (i) General Meeting of Shareholders Article 45 An Annual General Meeting shall be held once in every year, at such time (within a period of not more than fifteen months after the holding of the last preceding Annual General Meeting) and place as may be determined by the Directors. All other General Meetings shall be called Extraordinary General Meetings. The interval between the close of a financial year of the Company and the date of the Companys annual general meeting Annual General Meeting shall not exceed such period as may be prescribed by the Designated Stock Exchange from time to time. Article 46 The Directors may whenever they think fit, and shall on requisition in accordance with the Statutes, proceed with proper expedition to convene an Extraordinary General Meeting. Article 48 (A) Every notice calling a General Meeting shall specify the place and the day and hour of the meeting, and there shall appear with reasonable prominence in every such notice a statement that a Member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him and that a proxy need not be a Member of the Company. In the case of an Annual General Meeting, the notice shall also specify the meeting as such. the instrument of transfer is in respect of only one class of shares.
(B)
(C) In the case of any General Meeting at which business other than routine business (special business) is to be transacted, the notice shall specify the general nature of such business, and if any resolution is to be proposed as a Special Resolution, the notice shall contain a statement to that effect.
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Article 68 (A) A Member shall not be entitled to appoint more than two proxies to attend and vote at the same General Meeting, provided that if a Member is a Depositor, the Company shall be entitled and bound: (a) to reject any instrument of proxy lodged if the Depositor, is not shown, to have any shares entered against his name in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by CDP to the Company; and to accept as the maximum number of votes which in aggregate the proxy or proxies appointed by the Depositor is or are able to cast on a poll a number which is the number of shares entered into against the name of that Depositor in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by CDP to the Company, whether that number is greater or smaller than the number specified in any instrument of proxy executed by or on behalf of that Depositor.
(b)
(B)
Where a Member appoints more than one proxy, the Member shall specify the proportion of his shares to be represented by each such proxy, failing which the nomination shall be deemed to be alternative.
(C) A proxy need not be a Member of the Company. Article 52 No business other than the appointment of a Chairman shall be transacted at any General Meeting unless a quorum is present at the time when the meeting proceeds to business. Save as herein otherwise provided, the quorum at any General Meeting shall be two Members, present in person or by proxy, provided that (i) a proxy representing more than one Member shall only count as one Member for purpose of determining if the quorum aforesaid is present; and (ii) where a Member is represented by more than one proxy, such proxies of such Member shall only count as one Member for purposes of determining if the quorum aforesaid is present. Article 57 At any General Meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by: (a) (b) (c) the chairman of the meeting; or not less than two Members present in person or by proxy and entitled to vote; or any Member present in person or by proxy, or where such a member has appointed two proxies any one of such proxies, or any number or combination of such Members or proxies, holding or representing as the case may be not less than one-tenth of the total voting rights of all the Members having the right to vote at the General Meeting; or any Member present in person or by proxy, or where such a Member has appointed two proxies any one of such proxies, or any number or combination of such Members or proxies, holding shares conferring a right to vote at the General Meeting, of which an aggregate sum has been paid up equal to not less than 10 per cent. of the total sum paid on all the shares conferring that right, G-16
(d)

Provided Always that no poll shall be demanded on the choice of the chairman of the meeting or on a question of adjournment. A demand for a poll may be withdrawn only with the approval of the meeting. Article 151 If the Company shall be wound up (whether the liquidation is voluntary, under supervision, or by the court) the Liquidator may, with the authority of a Special Resolution, divide among the Members in specie or in kind the whole or any part of the assets of the Company and whether or not the assets shall consist of property of one kind or shall consist of properties of different kinds, and may for such purpose set such value as he deems fair upon any one or more class or classes of property and may determine how such division shall be carried out as between the Members of different classes of Members. The Liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of Members as the Liquidator with the like authority shall think fit, and the liquidation of the Company may be closed and the Company dissolved, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability. Article 10 (A) The Company may reduce its share capital or any other undistributable reserve in any manner permitted, and with, and subject to, any incident authorized, and consent or confirmation required, by law. The Company may purchase or otherwise acquire its issued shares subject to and in accordance with the provisions of the Statutes and any applicable rules of the Designated Stock Exchange (hereafter, the Relevant Laws), on such terms and subject to such conditions as the Company may in General Meeting prescribe in accordance with the Relevant Laws. Any shares purchased or acquired by the Company as aforesaid shall, unless held in treasury in accordance with the Act, be deemed to be cancelled immediately on purchase or acquisition by the Company. On the cancellation of any share as aforesaid, the rights and privileges attached to that share shall expire. In any other instance, the Company may hold or deal with any such share which is so purchased or acquired by it in such manner as may be permitted by, and in accordance with the Relevant Laws. Without prejudice to the generality of the foregoing, upon cancellation of any share purchased or otherwise acquired by the Company pursuant to these presents and the Statutes, the number of issued shares of the Company shall be diminished by the number of shares so cancelled, and, where any such cancelled share was purchased or acquired out of the capital of the Company, the amount of share capital of the Company shall be reduced accordingly.
(B)
Article 47 Any Annual General Meeting and any Extraordinary General Meeting at which it is proposed to pass a Special Resolution or (save as provided by the Statutes) a resolution of which special notice has been given to the Company, shall be called by twenty-one days notice in writing at the least and an Annual General Meeting or any other Extraordinary General Meeting, by fourteen days notice in writing at the least. The period of notice shall in each case be exclusive of the day on which it is served or deemed to be served and of the day on which the General Meeting is to be held and shall be given in manner hereinafter mentioned to all Members other than such as are not under the provisions of these presents entitled to
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receive such notices from the Company, Provided that a General Meeting notwithstanding that it has been called by a shorter notice than that specified above shall be deemed to have been duly called if it is so agreed: (a) in the case of an Annual General Meeting by all the Members entitled to attend and vote thereat; and in the case of an Extraordinary General Meeting by a majority in number of the Members having a right to attend and vote thereat, being a majority together holding not less than 95 per cent. of the total voting rights of all the Members having a right to vote at thereat;
(b)
Provided also that the accidental omission to give notice to or the non-receipt of notice by any person entitled thereto shall not invalidate the proceedings at any General Meeting. At least fourteen days notice of any General Meeting shall be given by advertisement in the daily press and in writing to the Designated Stock Exchange, Provided Always that in the case of any Extraordinary General Meeting at which it is proposed to pass a Special Resolution, at least twenty-one days notice in writing of such Extraordinary General Meeting shall be given to the Designated Stock Exchange. (j) Voting Rights Article 61 Subject to any special rights or restrictions as to voting attached by or in accordance with these presents to any class of shares, and to Article 4, each Member entitled to vote may vote in person or by proxy. On a show of hands every Member who is present in person or by proxy shall have one vote (provided that in the case of a Member who is represented by two proxies, only one of the two proxies as determined by that Member or, failing such determination, by the Chairman of the General Meeting (or by a person authorised by him) in his sole discretion shall be entitled to vote on a show of hands) and on a poll every Member who is present in person or by proxy shall have one vote for every share of which he holds or represents. For the purposes of determining the number of votes which a Member, being a Depositor, or his proxy may cast at any General Meeting on a poll, the references to shares held or represented shall, in relation to shares of that Depositor, be the number of shares entered against his name in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by CDP to the Company. A Member who is bankrupt shall not, while his bankruptcy continues, be entitled to exercise his rights as a Member, or attend, vote or act at any General Meeting. Article 48 (A) Every notice calling a General Meeting shall specify the place and the day and hour of the meeting, and there shall appear with reasonable prominence in every such notice a statement that a Member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him and that a proxy need not be a Member of the Company. In the case of an Annual General Meeting, the notice shall also specify the meeting as such.
(B)
(C) In the case of any General Meeting at which business other than routine business (special business) is to be transacted, the notice shall specify the general nature of such business, and if any resolution is to be proposed as a Special Resolution, the notice shall contain a statement to that effect.
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Article 68 (A) A Member shall not be entitled to appoint more than two proxies to attend and vote at the same General Meeting, provided that if a Member is a Depositor, the Company shall be entitled and bound: (a) to reject any instrument of proxy lodged if the Depositor, is not shown, to have any shares entered against his name in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by CDP to the Company; and to accept as the maximum number of votes which in aggregate the proxy or proxies appointed by the Depositor is or are able to cast on a poll a number which is the number of shares entered into against the name of that Depositor in the Depository Register as at 48 hours before the time of the relevant General Meeting as certified by CDP to the Company, whether that number is greater or smaller than the number specified in any instrument of proxy executed by or on behalf of that Depositor.
(b)
(B)
Where a Member appoints more than one proxy, the Member shall specify the proportion of his shares to be represented by each such proxy, failing which the nomination shall be deemed to be alternative.
(C) A proxy need not be a Member of the Company. Article 52 No business other than the appointment of a Chairman shall be transacted at any General Meeting unless a quorum is present at the time when the meeting proceeds to business. Save as herein otherwise provided, the quorum at any General Meeting shall be two Members, present in person or by proxy, provided that (i) a proxy representing more than one Member shall only count as one Member for purpose of determining if the quorum aforesaid is present; and (ii) where a Member is represented by more than one proxy, such proxies of such Member shall only count as one Member for purposes of determining if the quorum aforesaid is present. Article 58 Unless a poll is required, a declaration by the chairman of the General Meeting that a resolution has been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the minute book, shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded for or against such resolution. If a poll is required, it shall be taken in such manner (including the use of ballot or voting papers or tickets) as the chairman of the General Meeting may direct, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The chairman of the meeting may (and if so directed by the General Meeting shall) appoint scrutineers and may adjourn the meeting to some place and time fixed by him for the purpose of declaring the result of the poll. Article 59 In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the General Meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a casting vote.
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(k) Capitalisation and Rights Issue Article 139 (A) The Directors may, with the sanction of an Ordinary Resolution of the Company (including any Ordinary Resolution passed pursuant to Article 5(B)): (a) issue bonus shares for which no consideration is payable to the Company to the persons registered as holders of shares in the Register of Members or (as the case may be) the Depository Register at the close of business on: (i) the date of the Ordinary Resolution (or such other date as may be specified therein or determined as therein provided); or (in the case of an Ordinary Resolution passed pursuant to Article 5(B)) such other date as may be determined by the Directors, in proportion to their then holdings of shares; and/or
(ii)
(b)
capitalise any sum standing to the credit of any of the Companys reserve accounts or other undistributable reserve or any sum standing to the credit of profit and loss account by appropriating such sum to the persons registered as holders of shares in the Register of Members or (as the case may be) in the Depository Register at the close of business on: (i) the date of the Ordinary Resolution (or such other date as may be specified therein or determined as therein provided); or (in the case of an Ordinary Resolution passed pursuant to Article 5(B)) such other date as may be determined by the Directors, in proportion to their then holdings of shares and applying such sum on their behalf in paying up in full unissued shares (or, subject to any special rights previously conferred on any shares or class of shares for the time being issued, unissued shares of any other class not being redeemable shares) for allotment and distribution credited as fully paid up to and amongst them as bonus shares in the proportion aforesaid.
(ii)
(B)
The Directors may do all acts and things considered necessary or expedient to give effect to any such bonus issue or capitalisation under this Article 139, with full power to the Directors to make such provisions as they think fit for any fractional entitlements which would arise on the basis aforesaid (including provisions whereby fractional entitlements are disregarded or the benefit thereof accrues to the Company rather than to the Members concerned). The Directors may authorize any person to enter on behalf of all the Members interested into an agreement with the Company providing for any such bonus issue or capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.
(C) In addition and without prejudice to the powers provided for by this Article 139, the Directors shall have power to issue shares for which no consideration is payable and to capitalise any undivided profits or other moneys of the Company not required for the payment or provision of any Dividend on any shares entitled to cumulative or non-cumulative preferential Dividends (including profits or other moneys carried and standing to any reserve or reserves) and to apply such profits or other moneys in paying up in full, in each case on terms that such shares shall, upon issue, be held by or for
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the benefit of participants of any share incentive or option scheme or plan implemented by the Company and approved by Members in General Meeting and on such terms as the Directors shall think fit. (l) Indemnity Article 153 Subject to the provisions of and so far as may be permitted by the Statutes, every Director, Auditor, Secretary or other officer of the Company shall be entitled to be indemnified by the Company against all costs, charges, losses, expenses and liabilities incurred by him in the execution and discharge of his duties or in relation thereto including any liability by him in defending any proceedings, civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by him as an officer or employee of the Company and in which judgment is given in his favour (or the proceedings otherwise disposed of without any finding or admission of any material breach of duty on his part) or in which he is acquitted or in connection with any application under any statute for relief from liability in respect of any such act or omission in which relief is granted to him by the court. Without prejudice to the generality of the foregoing, no Director, Manager, Secretary or other officer of the Company shall be liable for the acts, receipts, neglect or defaults of any other Director or officer or for joining in any receipt or other act for conformity or for any loss or expense happening to the Company through the insufficiency or deficiency of title to any property acquired by order of the Directors for or on behalf of the Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatsoever which shall happen in the execution of the duties of his office or in relation thereto unless the same shall happen through his own negligence, wilful default, breach of duty or breach of trust.
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APPENDIX H DESCRIPTION OF RELEVANT LAWS AND REGULATIONS

I. SUMMARY OF HEALTHCARE AND OTHER REGULATIONS IN MALAYSIA, THE PRC AND JAPAN RELATING TO OUR BUSINESS Malaysia Private hospitals Private hospitals in Malaysia are closely regulated by the Director General of Health ( Director General ) under the purview of the MOH Malaysia in accordance with the Private Healthcare Facilities and Services Act 1998 (the PHFS Act ) and its relevant regulations. The PHFS Act requires that approval from the Director General be obtained for the establishment and maintenance of any private hospital. Thereafter a licence is required for the operation and provision of the same. In deciding whether or not to grant approval to establish and maintain the private healthcare facility the Director General shall have regard to the following: (a) (b) if the applicant is capable of providing adequate healthcare facilities or services; if the applicant is capable of providing adequate and efficient management and administration for the proper conduct of the private healthcare facility or service; where the applicant is a sole proprietor, if he has not been convicted of an offence involving fraud or dishonesty or is not an undischarged bankrupt; no one who has been convicted of an offence involving fraud or dishonesty or who is an undischarged bankrupt (i) is a member of the board of directors, or is a person responsible for the body corporate, if the application is made by a body corporate; or is a partner, if the application is made by a partnership; or
(c)
(d)
(ii)
(iii) is an office bearer of a society, if the application is made by a society. The operative licence may be issued to a sole proprietor who is a medical practitioner, a partnership which consists of at least one partner who is a registered medical practitioner or a body corporate whose board of directors consists of at least one person who is a registered medical practitioner. The duration of the licence to operate and provide a private healthcare facility or service other than a private medical clinic or a private dental clinic will be for a period of two years from the date of issuance. Any person who fails to register will be liable to a fine or imprisonment, and any person who fails to renew the licence within six months before its expiration will be subject to a fine. The licence may also be suspended or revoked if there is a breach of any of the provisions of the PHFS Act or the terms and conditions imposed on the licence. According to the PHFS Act, the approval to establish and maintain the licence to operate and provide private hospitals shall not be transferred without prior written approval of the Director General. Prior written consent from the Director General is required for any structural or functional extension or alteration of a private hospital. Structural or functional extension or alteration includes the expansion of hospital premises, the increase of capacity of beds, and the addition of any new related healthcare services. In addition, the licensee shall notify the H-1

Director General within 14 days from the occurrence of any change of the person in charge of the private healthcare facility or service to which his or its licence or certificate of registration relates to. Further, the Private Healthcare Facilities and Services (Private Hospitals and Other Private Healthcare Facilities) Regulations 2006 ( Private Hospital Regulations ) imposes a duty on the licensee or person in charge of a private hospital to have an appropriate patient medical records system comprising facilities and procedures for maintaining such patient medical records and be responsible for safeguarding the information on the patients medical records against loss, tampering or use by unauthorised persons. Any infringement of this obligation would render the person committing the offence liable on conviction to a fine or imprisonment. The Private Hospital Regulations also provides a fee schedule on the maximum chargeable fees for medical examination, medical procedures and consultation fees in a private hospital. Other services and administrative charges such as bed charges, food and medical supplies are unregulated and vary for each private hospital. In Malaysia, the Malaysian Society for Quality in Health ( MSQH ) governs the national accreditation process for healthcare facilities and services. MSQH grants accreditation to hospitals which meet the standards and safety aspects in healthcare provision and quality assurance. Though the accreditation of a hospital is not mandatory in Malaysia, it promotes high standards and professional practice of the same. It is also a standard practice in Malaysia for the Director General to inspect hospitals premises from time to time. Private medical clinics and private dental clinics It is mandatory to register private medical clinics and private dental clinics in Malaysia in accordance with the PHFS Act and the Private Healthcare Facilities and Services (Private Medical Clinics or Private Dental Clinics) Regulations 2006 (the Private Clinics Regulations ). The certificate of registration to operate a private medical clinic may only be issued to a registered medical practitioner whereas the certificate of registration to operate a private dental clinic may only be issued to registered dental practitioner or a body corporate described in Section 28 of the Dental Act 1971. Failure of the medical practitioner to register the clinic will subject him or her to fines or imprisonment. Any variation to the terms and conditions as well as to the particulars of the certificate of registration requires prior written approval from the Director General. The PHFS Act and Private Clinics Regulations cover all aspects of the running of a clinic including the charges and fees for medical services and the requirements of sufficient equipment and facilities. The Private Clinics Regulations also provides a fee schedule on the maximum charges for medical examination, medical procedures and consultation fees in a private medical clinic or private dental clinic. Any infringement of the provisions under the PHFS Act and Private Clinics Regulations and terms and conditions on the registration approval may potentially result in the revocation or suspension of the certificate of registration. Medical practitioners Medical practitioners are required to register with the Malaysian Medical Council ( MMC ) in order to practice medicine in Malaysia pursuant to the Medical Act 1971 (the Medical Act ). The Medical Act also mandates the medical practitioners to apply for an Annual Practicing Certificate. All medical practitioners are expected to abide by the Code of Professional Conduct issued by the MMC which sets out the minimum standards of conduct by medical H-2

practitioners. Infringement of the minimum standards may subject the practitioner to a disciplinary proceeding where he or she can be reprimanded, suspended, fined or struck off from the register. Ancillary laws and regulations Private healthcare operation in Malaysia is also subject to other ancillary laws and regulations which include, amongst others, the following: (a) the Medicines (Advertisement and Sale) Act 1956, the Medicine Advertisement and the Advertising Guidelines for Healthcare Facilities and Services (Private Hospitals, Clinics, Radiology Clinics and Medical Laboratories) that govern the advertisement or dissemination of information to the general public in relation to healthcare matters. Information in any advertisement must be accurate and able to be verified by the Medicine Advertisements Board. The public must not be misled with exaggerated, false or deceptive information on the services offered by healthcare operators; approvals, permits, and licences are also required for the premises, facilities and use of equipment of private hospitals which include, among others: (i) (ii) the certificate of fitness to occupy building by the local authority; fire certificate by the Fire Department in accordance with the Fire Services Act 1998 and Fire Services (Fire Certificate) Regulations 2001;
(b)
(iii) certificate of fitness for autoclaves, steam boilers, unfired pressure vessels and lifts by the Department of Occupational Safety and Health pursuant to the Factories and Machinery Act 1967; and (iv) the licence to store and use radio-ionising apparatus by the Atomic Energy Licensing Board issued under the Atomic Energy Licensing Act 1984; (c) the Poisons Act 1952 which requires pharmacist handling medicine in a private hospital to have a valid licence to import, store and deal with the permitted poisons; the Environmental Quality (Scheduled Wastes) Regulations 2005 administered by the Department of Environment as authorised under the Environmental Quality Act 1974 which controls clinical waste arising from medical, nursing, dental or similar practices; and the Prevention and Control of Infectious Diseases Act 1988, which regulates the surveillance and disease control and prevention activities.
(d)
(e)
The PRC General Regulatory Environment The healthcare industry in the PRC is regulated by various government agencies, including the Ministry of Health ( MOH ). The MOH has branch offices across the PRC that oversee the healthcare industry at the provincial and county levels, which branch offices, together with the MOH, are referred to as the healthcare administrative authorities. The healthcare administrative authorities and other government agencies, such as the National H-3

Development and Reform Commission, the State Food and Drug Administration, the Ministry of Environmental Protection, and the Ministry of Commerce ( MOFCOM ), have promulgated rules and regulations relating to the procurement of large medical equipment, the pricing of medical services, the operation of radiotherapy equipment, the licensing and operation of medical institutions and the licensing of medical staff. Laws and Regulations on Foreign Invested Medical Institutions When funding medical institutions in the PRC, foreign investors shall comply with the following laws and regulations: Law of the Peoples Republic of China on Sino-Foreign Equity Joint Ventures; Law of the Peoples Republic of China on Sino-Foreign Cooperative Joint Ventures; Law of the Peoples Republic of China on Administrative Permission; Law of the Peoples Republic of China on Practicing Physicians; Regulations on Medical Institution Administration; Implementation Rules of Provisions on Medical Institution Administration; Interim Measures for the Administration of Sino-Foreign Equity and Cooperative Joint Medical Institutions (Order No. 11 issued by Ministry of Health to Ministry of Foreign Trade and Economic Cooperation); and Basic Standard for Medical Institutions. The MOH and MOFCOM promulgated the Interim Measures for the Administration of Sino-Foreign Equity Joint and Cooperative Joint Medical Institutions (referred to as the JV Regulations ) which permit foreign investors to establish equity joint venture or cooperative joint venture medical institutions in PRC with local Chinese partners, subject to certain restrictions, inter alia : (i) (ii) a maximum foreign equity ownership of less than 70% (excluding Sichuan Province); a minimum RMB20.0 million capital requirement for each medical institution;
(iii) chain licensing is currently not available for foreign invested medical institutions. Each individual clinic or hospital must be established by qualified investor and a Sino-Foreign equity/cooperative joint venture medical institution is not permitted to establish a branch or subsidiary; and (iv) the joint venture and cooperation term shall not exceed 20 years. The 2011 Revision of the Catalogue of Industries for Guiding Foreign Investment in the PRC has removed healthcare from restricted industries category and it now falls within the category of permitted industries. In November of 2010, the PRC State Council, National Development and Reform Commission, and Ministry of Health and other PRC ministries jointly issued the Opinions on Encouraging and Guiding non-State-owned Capitals to Establish Medical Institutions ( Circular 58 ), which encourages foreign investment in the PRC healthcare industry and intends to relieve foreign investment shareholding restriction. Although Circular 58 is in place, relevant implementation rules have not been promulgated in the municipals. Nevertheless, in Sichuan Province, pursuant to the Measures of Administration on SinoForeign Equity Joint and Cooperative Joint Medical Institutions in Sichuan Province , foreign investors are permitted to hold more than 90% equity interests in such institutions.
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Both parties applying to set up a Sino-Foreign Equity Joint and Cooperative Joint Medical Institutions shall be legal persons capable of bearing civil liabilities independently. Both parties shall have experience in directly or indirectly participating in the investment and management of medical and health institutions, and satisfy one of the following requirements: (a) capable of providing internationally advanced management experience and mode as well as service mode for medical institutions; capable of providing internationally advanced medical technology and equipment; or Capable of compensating or improving the deficiency of local medical service ability, medical technology, funds and facilities.
(b) (c)
Classification of Medical Institutions Medical institutions in the PRC are classified into the following categories: (i) General Hospital, Hospital of Traditional Chinese Medicine ( TCM ), TCM-Western Medicine ( TCM-WM ) Integrated Hospital, Minority Hospital, Specialised Hospital, and Rehabilitation Hospital; Maternity and Child Health Hospital;
(ii)
(iii) Health Centre, Township Health Centre, and Sub-district Health Centre; (iv) Sanatorium; (v) General Outpatient Department, Specialised Out-patient Department, TCM Outpatient Department, TCM-WM Integrated Outpatient Department, Minority Hospital Outpatient Department;
(vi) Clinic, TCM Clinic, Minority Hospital Clinic, Health Clinic, Infirmary; (vii) Village Health Station; (viii) Emergency Centre, First-aid Station; (ix) Clinical Inspection Centre; (x) Specialised Disease Prevention & Treatment Hospital, Institution and Station;
(xi) Nursing Home or Nursing Station; and (xii) Other Medical Institutions. Practice Licence for Medical Institutions Before beginning operations, medical institutions have to obtain a practice licence and meet the following requirements: (a) obtain approval for setting up the medical institution; H-5

(b) (c) (d) meet the basic standard for medical institutions; have a suitable company name, organisation and place; have corresponding funds, facilities, equipment and professional medical personnel needed by business operation; comply with relevant rules and regulations; and be able to bear civil liabilities independently.
(e) (f)
Practicing Physicians Physicians practicing in the PRC have to acquire the relevant practicing physician qualifications through the system of physician qualification examinations. Physician examinations include practicing physician and practicing physician assistant qualification examinations. Practicing physician qualification examinations are organised and implemented by the Health Administrative Department of the Peoples Government above the provincial level. Anyone who meets one of the following conditions is qualified to take the examination: (a) a Bachelors degree or above in medical major of colleges and universities and one years probation in medical, preventive, health-care institution under the guidance of practicing physician; or after obtaining practicing physician assistant certificate if with associate degree in medical major of colleges and universities, two years working experience in medical, preventive, or health-care institution is needed; if with medical degree of secondary vocational school, five years working experience in the same institutions is needed.
(b)
Those with associate medical degree of colleges and universities or medical degree of secondary vocational school are qualified to take examination for practicing physician assistant qualification after a one (1) year probation in a medical, preventive or health-care institution under the guidance of a practicing physician. Those with three years medical learning experience by means of traditional teacherapprentice education, or with medical specialty after many years practice are qualified to take the examination for practicing physician or practicing physician assistant qualification after being assessed and recommended by a traditional medical organization or medical, preventive or health-care institution appointed by the Health Administrative Department of Peoples Government above county level. The corresponding examination content and method shall be otherwise stipulated by the Health Administrative Department of the State Council. Candidates who pass the above-mentioned examination shall be awarded practicing physician or practicing physician assistant qualification. The PRC adopts a registration system for practicing physician and practicing physician assistants. Those who have obtained the same qualification shall apply for registration in the Health Administrative Department of Peoples Government above county level. The Health Administrative Department shall give a permit for registration within 30 days after receiving H-6

the application and award a practicing physician certificate uniformly manufactured and printed by the Health Administrative Department of the State Council. Medical, preventive or health-care institutions may apply for registration for physicians working in their own institutions. After registration, physicians are permitted to engage in corresponding medical, preventive or health-care business according to their registered practicing place, classification and scope. There are further regulations on foreign physicians practicing in the PRC on a short term basis. The term for foreign physicians obtaining legal medical practicing qualification abroad and being invited or employed or applying for practicing diagnosis or treatment within the PRC shall not exceed one year. If an extension of the term is necessary, they shall register again as required. Foreign physicians are not permitted to practice medicine within the PRC until they are registered and have obtained a Permit for Foreign Physicians to practice medicine on a short term basis. Foreign physicians shall not practice medicine on a short term basis within the territory of the PRC without being invited or employed by a medical institution in the PRC, and they may entrust the inviting or employing institution within the PRC to fulfil registration procedures for them. If applying for practicing medicine on a short term basis within the PRC, foreign physicians shall sign contracts with the inviting or employing institution or with each institution respectively (if there is more than one employing institution). Any relevant civil liability shall be borne by the inviting or employing institution(s) in the event that no contract is entered into. Any contract for foreign physician practicing medicine on a short-term basis within the PRC must contain the following points: (i) purpose; (ii) specific project; (iii) place; (iv) time; and (v) assumption of liabilities. Before practicing medicine in the PRC, foreign physicians will also have to obtain an entrance visa and comply with the relevant regulations of the entrance visa. Maternity and Confinement Care Services In the PRC, according to the Industrial Classification for National Economic Activities, maternity and confinement care service belongs to home service industry; therefore, no explicit regulations on facilities and equipment standard of business operation, hygiene conditions, baby-sitters and nurses are stipulated. However, if hotel, catering, medical services are involved in business scope, relevant laws, rules and regulations stipulated by the state shall be strictly complied with, and approval by relevant government department shall be obtained. Japan Typical forms of privately-operated residences for the elderly in Japan are (i) fee-based homes for the elderly and (ii) serviced-residences for the elderly. Fee-Based Homes for the Elderly Fee-based homes for the elderly are regulated by the Public Aid for the Aged Act of Japan (the Public Aid Act ). Under the Public Aid Act, fee-based homes for the elderly are defined as any facilities for carrying out the business of housing the elderly and providing care for
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baths, toilets, or meals, meals, housework services, such as laundry and cleaning, or health care services (except for any day care centres and other certain forms of facilities as set forth in the Public Aid Act). Any person who intends to establish a fee-based home for the elderly must notify the competent prefectural governor of the place where such facilities are to be established, the name of the facilities, the name and location of the founder thereof, the articles of incorporation and other basic articles, the scheduled date for business commencement, the name and address of the manager of the facilities, the contents of care to be provided in the facilities, the fee to be received in exchange for providing the benefit, the revenue and expenditure plan, and the document to be delivered to prospective residents for explaining services, expenses and other important matters. If the business of a fee-based home for the elderly is to be carried out by leasing a building from a third party, the contractual period and other conditions must be established in line with the criteria separately specified by the prefectural government, in order to ensure that the residents will continue to reside therein during the period of the residential agreement. Such notification must be made by the person who intends to establish the fee-based home for the elderly, not by the owner of the building. Registered business operators are required to prepare and keep books, make notifications of amendment, abolishment or discontinuance, disclose explanatory documents concerning services, expenses and other important matters of the facilities, refrain from receiving key money other than compensation for services, and appropriately preserve and return advance payments. Any founders of fee-based homes for the elderly will be under the supervision of the competent prefectural governor, who has the authority to request a report from, conduct an on-site inspection of, and issue an order for improvement measures against such founder. Any facilities which have been notified as a fee-based home for the elderly may be additionally registered as a serviced-residence for the elderly, as stated below. If registered as such, the above mentioned obligation of notification as a fee-based home for elderly (including the obligation to make notification of amendment, abolishment and discontinuance) is not applicable to such additionally registered facilities, although the facilities will not be exempt from any other obligations applicable to fee-based homes for the elderly as stated above. A fee-based home for the elderly generally falls within Specified Facility as set forth in the Long-Term Care Insurance Act of Japan, and any business operator which provides certain services set forth in the Long-Term Care Insurance Act of Japan, such as providing care for baths, toilets, and meals, in such Specified Facility ( In-Home Service ) may be designated under the Long-Term Care Insurance Act of Japan, for each type of In-Home Service and for each place of business where In-Home Services are provided. If such designation is obtained, and any person who has been issued a certification of needed long-term care receives any In-Home Service from such business operator, the relevant municipality will pay a certain Allowance for In-Home Long-Term Care Service to such person who has been issued a certification of needed long-term care. Serviced-Residence for the Elderly Serviced-residences for the elderly are stipulated under the Act to Secure a Stable Supply of Elderly Persons Housing of Japan (the Stable Supply Act ).
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Any person who carries out the business of housing the elderly in rental residences for the elderly or the above-mentioned fee-based homes for the elderly including the portion occupied by the elderly as residents, and providing welfare services necessary for the daily life of the elderly, such as perception services (referring to perceiving the mental and physical conditions of residents, and providing temporary benefits according to their conditions) and life consulting services (referring to providing advice according to a request from any residents so that they can lead their daily lives without issue) (hereinafter, such business will be referred to as Serviced-Residence Business for the Elderly ) may obtain registration of each building that will provide such business as a serviced-residence for the elderly from the competent prefectural governor or any organization designated thereby. Any serviced-residence for the elderly which has been registered as above may enjoy the central governments supportive measures for subsidies, taxation and available institutional loans. For clarification, such registration is assumed to be obtained by business operators which will provide services, and this is not at the registration that would ordinarily be obtained by the owner of the building. To obtain such registration, it is necessary to satisfy certain criteria, including the following: (a) the floor area of each dwelling part of the serviced-residence for the elderly must meet or exceed a prescribed size; the structure and facilities of the serviced-residence for the elderly must comply with prescribed criteria as being unlikely to hinder the elderly from residing therein; the aging-supportive structure, etc. (referring to any structure and facilities which are supportive to the condition of a lower bodily function of the elderly) of the servicedresidence for the elderly must comply with prescribed criteria; only persons who reside therein and their spouses living with them shall be permitted to qualify as residents; residents must be provided with perception and life consulting services which comply with prescribed criteria; the residential agreement must be a written agreement which complies with prescribed criteria in terms of the description of dwelling part, rents and other advance payments, cancellation conditions (for example, the hospitalisation of a resident cannot by itself cause the agreement to terminate) and in certain other matters; with respect to rents and other advance payments, the acceptability and preservative measure thereof must comply with prescribed criteria; and such business is appropriate in light of the basic policy as specified by the national government and the plan to secure a stable supply of elderly persons housing as specified by the competent prefectural government, if any.
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Registered business operators must make notifications of amendment to its registered matters or discontinuance of business, refrain from making misleading advertisements, prepare and keep books, make public notice of its registered matters, explain the contents and expenses of services in writing before entering into a contract, and provide services pursuant to the contract. In order to ensure that the residents will continue to reside therein
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during the period of the residential agreement, some prefectural governments require that the contractual period and other conditions shall be established pursuant to the criteria separately determined by such prefectural government. Any such business operator will be under the supervision of the competent prefectural governor, who has the authority to request a report from, conduct an on-site inspection into, and give instructions for correction to such business operator. If any instructions for correction are violated or any criteria for registration are not complied with, such registration may be cancelled by that governor. II. SUMMARY OF LAWS AND REGULATIONS IN MALAYSIA, THE PRC AND JAPAN RELATING TO OUR BUSINESS Malaysia The Malaysian land system Land law in Malaysia is premised on the Torrens system of South Australia (also known as the System of Titles and Interests by Registration). However, the deed system still governs some lands in the States of Penang and Malacca. The National Land (Penang and Malacca Titles) Act 1963 was enacted to govern such lands and to convert the deed system in Penang and Malacca to the Torrens system used under the National Land Code 1965 ( NLC ). Land matters generally lie within the jurisdiction of state governments as provided for in the Federal Constitution but the Federal Constitution specifically provides for federal legislation in such matters for the purposes of ensuring uniformity of law and policy in various aspects of land matters. Such powers of the Federal Constitution are not exercisable with regard to the States of Sabah and Sarawak. There are currently four primary pieces of legislation governing land law in Malaysia, namely: (a) (b) (c) (d) the NLC; the National Land Code (Penang & Malacca Titles) 1963; Sarawak Land Code (Cap 81); and Sabah Land Ordinance (Cap 68).
The operation of these statutes is supplemented by the various subsidiary legislation such as the various State Land Rules in force in the respective States in Peninsular Malaysia, Sabah and Sarawak. The National Land Code (Penang & Malacca Titles) Act 1963 makes provisions for the conversion of the system of registration of deeds (as opposed to the Torrens system of registration) practiced prior to 1966 to the Torrens system as provided for in the NLC. The structure of land in Sabah and Sarawak is similar to that provided for in the NLC. Under the Sarawak Land Code, land is classified into: (a) (b) mixed zone land; native area land; H-10

(c) (d) (e) interior area land; native customary land; and reserved land.
Under the Sabah Land Ordinance, land is divided into: (a) (b) crown land (consisting of Town and Country lands); and native land.
The NLC provides that such Code shall not (except where it is expressly provided to the contrary) affect the provisions of more specific statutes such as: (a) (b) (c) (d) (e) any law relating to Malay reservations or Malay holdings; the Land (Group Settlement Areas) Act 1960; any law relating to mining; any law relating to sultanate lands; any law relating to wakaf (relating to the endowment of property for religious and/or other public purposes in accordance with Islamic teachings) or bait-ul-mal (an Islamic non-profit financial organisation providing benefits to community members and organisations); any law relating to customary tenure; the Terengganu Settlement Enactment 1356; the Padi Cultivators (Control Rent and Security of Tenure) Ordinance 1955; and the Kelantan Land Settlement Ordinance 1955.
(f) (g) (h) (i)
Powers of the State Authority The State Authority is vested with the entire property in all State lands. The State Authority refers to the Ruler or Governor of the State, as the case may be and State land refers to all land in the state other than land that has already been alienated or reserved (whether as forest or otherwise) or mining land. In relation to State land, the State has the power to: (a) (b) (c) alienate land; grant leases of reserve land for a specific purpose not exceeding 21 years; permit temporary occupation of land;
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(d) (e) (f) permit the extraction and removal of rock material from land; permit the use of air space on or above land; and dispose of underground land.
Of the various methods of disposal of land, the power to alienate is the most commonly exercised. According to the NLC, the State has power to alienate land for either: (a) (b) a term not exceeding 99 years (commonly referred to as leasehold); or in perpetuity (commonly referred to as freehold).
The alienation of land by the State is subject to certain payments such as: (a) (b) (c) (d) annual rent; premium (this is subject to exemption by the State Authority); category of land use; and restrictions in interest which may be imposed by the State Authority.
Alienated land that is subject to leasehold interests shall upon the expiry of the lease revert to the State. However, it is possible to extend the leasehold interest by applying for an extension of the leasehold period and paying a premium to the State. Land use Land use under the Malaysian Torrens system may be subject to restrictions and conditions imposed by the State Authority. These conditions serve as a means for control of land use. Specific conditions may relate to the categories of land use. Land in Malaysia is divided into three general categories of land use, namely agricultural, industrial and building. Each category of land use is subject to implied conditions. Failure to comply with express or implied conditions of land use may result in the forfeiture of land by the State. Where lands are alienated pursuant to the NLC, such category of land use shall be endorsed on the document of title when any land is alienated by the State Authority. However, the State Authority may, on approving the alienation of any land, direct that no category of land use be endorsed on the document of title if the State Authority is satisfied that the use thereof could be more appropriately controlled by imposition of express conditions. The proprietor of any alienated land may apply to the State Authority for the alteration of any category of land use to which the land is for the time being subject, or where it is not so subject, for the imposition of any category. In addition to general categories of land use, titles to land may also specify specific uses of the land. In the case of agricultural land, the land titles may specify that the land is to be cultivated with a particular crop. Non-compliance with conditions of title may result in the forfeiture of land.
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Dealings in land Lands alienated by the State may be transferred, leased and charged. Easements (commonly known as rights of way) may also be created on such lands. However, restrictions on transfers may be imposed, such as in cases where the transfer involves estate land to two or more persons without the prior approval of the Estate Land Board. The rationale for this is to discourage the fragmentation of estate lands. The NLC governs the dealings in land and interest in land (which in the context of the NLC includes a registered lease, charge or easement as well as a statutory lien or a tenancy exempt from registration created in respect thereof). Dealings under the NLC may be divided into: (a) dealings capable of registration which are transfers, charges, leases and easements; and dealings not capable of registration which are tenancies exempt from registration and statutory liens which are protected by way of an endorsement and the entry of a lien-holders caveat.
(b)
Under the NLC, no instrument effecting any dealing with respect to alienated lands and interests will be effective to transfer the title or interest to any person until it has been duly registered. Upon registration, the party in whose favour the registration has been effected will obtain an indefeasible title to or interest in the land (Section 340(1) of the NLC), that is, a title or interest which is free of all adverse claims or encumbrances not noted on the register. Indefeasibility is, however, not absolute, as under certain circumstances (e.g. fraud or forgery) a registered title or interest may be set aside or defeated by one with a superior claim. Leases and tenancies The NLC distinguishes tenancies from leases. Tenancies may be granted for terms not exceeding three years. There is no registration requirement for tenancies under the NLC. Interests of a tenant under a tenancy exempt from registration can be protected by way of an endorsement on the document of title to the land. The proprietor of any alienated land (whether freehold or leasehold) may grant leases of the whole or any part thereof. A lease granted must be more than three years and: (a) (b) up to 99 years if it relates to the whole of the land; or up to 30 years if it relates to a part only thereof.
The lease granted is required to be registered with the relevant Land Registry/Office in order to vest in the lessee the lease. Any lease which is not registered will not be able to vest in the lessee any interest in respect of the lease. Restraints on dealings There may be restraints on dealings where the land in question involves Malay reserved land, customary land or native land. The Malay Reservation Enactments of the various states seek to secure the Malays interest in such land by generally prohibiting the disposition of such land by the State and prohibiting private dealings in Malay reserved land. Any disposal, H-13

dealing or attempt to dispose of or deal in Malay reserved land in contravention of the respective enactments will be rendered null and void and no action for breach of contract shall be maintained in respect of such disposal or dealing. The prohibition imposed by the Malay Reserve Enactments of the respective states can be classified as a prohibition against disposition by the States and against private dealings. The present Malay Reservation legislation in the Malay states (namely, Kedah, Perlis, Kelantan, Terengganu and Johor) has adopted the policy of providing for exceptions to the prohibition by permitting alienation and dealings in favour of certain specified persons and bodies with the approval of the Ruler of the State in Council of the respective states. In the same manner, customary land (in the state of Malacca) shall only be transferred, charged, leased or transmitted to a Malay. With regard to native land in Sabah and Sarawak, dealings in respect of the same are prohibited except in the circumstances provided for in the Sabah Land Ordinance and the Sarawak Land Code. Restrictions in interest Restrictions in interest are limitations expressly endorsed on the document of title to the property which limits the powers of the property owner to deal with the property. An example of a restriction is such as the property owner may not being permitted to sell, transfer and charge the property in favour of any third party without consent of the State Authority of the relevant State. Restrictions in interest imposed on the title will run with the property. This means that the restrictions bind not only the present owner but also all future owners of the property. In the case of a strata title property, where the restriction in interest has been endorsed on the master title, the restrictions apply to the beneficial owner as well, even though the strata title may not have been issued. Private caveats Under the NLC, where a person has a claim to a title or any registrable interest in any alienated land, he may lodge a private caveat to protect his interest. Once a private caveat is lodged, the registered proprietor may not register or endorse any dealing on his title without first removing the private caveat or first obtaining the consent in writing of the person who lodged the caveat. A proprietor (or any aggrieved person or body) may apply to the Registrar of Titles/Land Administrator or the courts for the removal of the private caveat. A private caveat, if not earlier withdrawn or removed by the Registrar of Titles/Land Administrator or the court, will expire six years from the time of entry. A non-citizen or foreign company is required to obtain the prior approval of the State Authority before lodging a private caveat. However, the private caveat will not be able to prevent the registration or endorsement of a dealing by the registered proprietor if the application for registration/endorsement of the dealing was made before entry of the private caveat. Charge over land In Malaysia, it is common for financiers to take a security (such as a charge) over properties (including land) of the borrower for the financing provided. A charge over land takes effect upon registration so as to render the land or lease in question liable as security. A chargee is required to comply with the NLC when enforcing the charge. Where the chargee enforces the charge by way of sale of the land or lease, the chargee is required, amongst others, to serve a default notice in the form as prescribed by the NLC and apply to the court (for registry titles) or the Land Administrator (for land office titles) for an order for sale.
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Buying and selling of real property The practice and procedures of buying and selling of real estate properties in Malaysia have been shaped by legal concepts specific to dealings in real property in Malaysia. It has also been shaped by constraints of the original documents not yet in the physical possession of the relevant property owner. It is accepted in Malaysia that real property with or without individual documents of title issued is capable of sale and purchase. The transfer of property with individual title is effected by registration of an instrument of transfer in a format prescribed under the NLC at the relevant Land Registry/Office. In the case of property without individual documents of title, conveyance of the property is made by way of a legal assignment of all the rights, interest and title in respect of the property under the principal sale and purchase agreement (made between the original proprietor and/or the developer (as the seller) and the first purchaser) in favor of a new purchaser. Strata Property Sub-division of land The Strata Titles Act 1985 ( STA ) governs the sub-division of land and buildings into parcels and the disposition of titles in relation to the same. Under the STA, it is compulsory for an owner of a building which has sold or agreed to sell any parcel comprised in his building to any person, to apply for individual strata title to the parcel within the certain period stipulated in the STA. Management Corporation Under Section 39 of the STA, a management corporation is established upon issuance of the strata titles. The management corporation is an artificially created entity, consisting of all parcel owners. Upon its establishment, the management corporation is responsible for the maintenance and management of common areas such as open spaces, lifts, corridors and communities facilities other than the lot comprised in any parcels or units. A management corporation may only act or make decisions: (a) (b) (c) through its members at a general meeting; through its council members; or by appointing and delegating to an administrator the power to make decisions on various matters.
In the latter two cases, the decisions where properly made will be binding on the management corporation as if passed by valid resolution at a general meeting. The STA provides for meetings to be held periodically. There are three types of meeting provided under the STA, namely, the first annual general meeting, the annual general meetings and the extraordinary general meetings. The first annual general meeting is for the purpose of, among other things, to confirm or vary the amounts of contributions to the management fund, to determine the members of the council, to elect the council and to decide whether to amend the additional by-laws in force immediately before the holding of the meeting. Annual general meetings are required to be held by a management corporation annually for the consideration of accounts, election of council members and the transaction
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of such other business as may arise, whereas extraordinary meetings are held by the council of the management corporation upon request by the parcel owners or commissioner of buildings or when the council deems appropriate. At general meetings, each proprietor will have one vote on a show of hands and on a poll will have such number of votes as that corresponding with the number of share units attached to his parcel. A co-proprietor may vote by means of a jointly appointed proxy. Purchasers of parcels who have paid the full purchase price but whose titles to their respective parcels are still registered in the name of their vendors, have no voting rights. The STA provides that every parcel will have a share value approved by the relevant authority and expressed in whole numbers to be known as share units. Generally, the share units are allotted to the parcels based on the areas at the parcels. The share units of a proprietors parcel are of considerable importance as they determine, among others, the following: (a) (b) (c) voting rights of the proprietors on a poll; the quantum of the undivided share of each parcel owner in the common areas; the proportion of the contribution payable by each parcel owner to the management fund; and a parcel owners liability for the discharge of debts of the management corporation lawfully incurred in the exercise of it power or the carrying out of its duties or obligations.
(d)
By regulating the voting rights of a proprietor, the share units essentially determine the part played by a parcel in the administration of the strata scheme. The voting rights can be material in matters requiring a special resolution and where a poll is demanded. The fact that a parcel owners undivided share in the common areas is determined by the share units may not have much significance in relation to the use and enjoyment of the common areas but it will be highly relevant when profits resulting from transactions involving the common areas are distributed, such as where part of the common areas are leased. It will also determine a proprietors undivided share in the land or in the proceeds of a sale of the land as well as his share in any surplus funds of the management corporation on termination of the strata scheme. In practice, the most significant function of the share units is that it determines a parcel owners contribution to maintenance and administrative expenses and his proportional debts of the management corporation. Joint Management Body Prior to the establishment of the management corporation, a joint management body must be established under the Building and Common Property (Maintenance and Management) Act 2007 ( BCPA ) to maintain and manage the common areas. The joint management body, which consists of the developer and parcel purchasers, must be formed upon the convening of the first meeting no later than 12 months from the date of delivery of vacant possession of the parcels to the purchasers. The joint management body is required to elect a joint management committee at a general meeting to perform the duties of the joint management H-16

body and to exercise the powers of the joint management body under the BCPA. The joint management committee consists of one representative of the developer and not less than five (5) but not more than 12 purchasers. As in the case of the management corporation, there are three types of meetings namely, the first annual general meeting, the annual general meetings and the extraordinary general meetings. At the first general meeting, each purchaser of a parcel who has paid his maintenance charges to a building management account is entitled to vote by show of hands. The joint purchasers will only be entitled to vote by appointing a proxy. The BCPA does not provide for voting on poll. Therefore, each purchaser of a parcel is only entitled to one vote regardless of the share units allotted to his parcel. Except for the first general meeting, there is no provision in the BCPA which governs the manner in which the purchasers and developer exercise their voting rights in the subsequent annual general meetings and the extraordinary general meetings. As such, all the purchasers and the developer will have to mutually agree on their voting rights in the said meetings. Such uncertainty, in turn, may result in certain purchasers not being able to exercise control in respect of their contribution to maintenance and administrative expenses despite their parcels being allotted with higher share units. The joint management body will be deemed to be dissolved three (3) months from the date of the first meeting of the management corporation. Acquisition of property by a non-Malaysian citizen or a foreign company The NLC Under Section 433B of the NLC, a non-Malaysian citizen or foreign company is not allowed to acquire any land (other than industrial land) in Peninsular Malaysia unless prior approval of the state authority has been obtained. Under the NLC, a foreign company means: (a) a company, corporation, society, association, or other body incorporated outside Malaysia; an unincorporated society, association, or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia; a company incorporated under the Companies Act of Malaysia with 50.0% or more of its voting shares held by a non-Malaysian citizen, or by a foreign company referred to in paragraph (a), or by both, at the time of the proposed acquisition of any land or any interest in land or at the time of the execution of the instrument or deed in respect of any alienated land or any interest therein, as the case may be; a company incorporated under the Companies Act of Malaysia with 50.0% or more of its voting shares held by a company referred to in paragraph (b), or by a company referred to in paragraph (a), at the time of the proposed acquisition of any land or any interest in land or at the time of the execution of the instrument or deed in respect of any alienated land or any interest therein, as the case may be.
(b)
(c)
(d)
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Guidelines on acquisition of properties Before June 30, 2009, acquisition of real properties (e.g. land, land with building, commercial unit or residential unit) in Malaysia by a non-Malaysian citizen or foreign company is subject to the Guidelines on the Acquisition of Properties by Local and Foreign Interest issued by the Economic Planning Unit, Prime Ministers Department ( FIC Guideline ) and requires the approval of the Foreign Investment Committee of the Prime Ministers Department ( FIC ), although some exemptions may apply. Under the FIC Guideline, foreign persons and entities are allowed to acquire industrial property, e.g. industrial land, factory or factory lot, without any price limit but this must be registered under a locally incorporated company subject to equity conditions on the company. The usual condition imposed by the FIC is that the company must have at least 30% Bumiputera equity participation. The FIC Guideline has been repealed on June 30, 2009 following the announcement made by the Prime Minister of Malaysia. Following the repeal of the FIC Guideline, the 30% Bumiputera equity condition imposed in the FIC Guideline is no longer applicable. The condition imposed earlier on by FIC pursuant to any approval granted is deemed waived automatically upon the announcement by the Prime Minister. The abolishment of the 30% Bumiputra equity requirement involves equity ownership at firm level except for transactions involving dilution of properties by Bumiputera interests and/or Government agencies. The new policy of the Malaysian Government is now enshrined in the Guideline on Acquisition of Properties ( New Guideline ) issued by the Economic Planning Unit of the Prime Minister Department ( EPU ). Under the New Guideline, the following property acquisition transactions, except for residential units, shall require approval of EPU: (1) direct acquisition of property valued at MYR20 million and above, resulting in the dilution in the ownership of property held by Bumiputera interest and/or government agency; and indirect acquisition of property by other than Bumiputera interest through acquisition of shares, resulting in a change of control of the company owned by Bumiputera interest and/or government agency, having property more than 50 percent of its total assets, and the said property is valued more than MYR20 million.
(2)
The PRC Laws and Regulations on Foreign Investment in Real Estate When investing in real estate in the PRC, foreign investors shall comply with the following laws and regulations: Law of the Peoples Republic of China on the Administration of Urban Real Estate; Law of the Peoples Republic of China on Land Administration; Regulation on Qualification Administration of Real Estate Development Enterprises; Opinions on Standardising Foreign Capital Access and Management in Real Estate Market; Notice of further strengthening and standardising the examination, appraisal and regulation on foreign direct investment in real estate; and Notice of the Ministry of Commerce on doing a good job in filing for foreign investment in real estate (ShangZiHan [2008] No. 23). The above documents stipulate the conditions and procedures of foreign investment in real estate from the aspects of market access, examination, approval and filing, foreign debt registration and foreign exchange registration.
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Market Access Foreign investment in real estate enterprises (through newly establishing, capital increasing or equity merger) shall not be permitted until examined and approved by the examination and approval department of the local government and performing application for filing in the MOFCOM. The following conditions shall be met when setting up real estate development enterprises: (a) (b) (c) have their own company name and organisation; have fixed place for business operation; registered capital shall comply with relevant requirement stipulated by the State Council; sufficient professional technicians; and conditions otherwise stipulated by laws and administrative regulations.
(d) (e)
On the proportion of investment amount to registered capital, for investment amounts at or above US$10 million, the corresponding registered capital shall not be less than 50% of the total investment; for investment amount between US$3 million to US$10 million, corresponding registered capital shall not be less than 50% of the total investment; for investment amount at or below US$3 million, corresponding registered capital shall not be less than 70% of the total investment. Land Acquisition Pursuant to the relevant laws, state-owned land use in the PRC is compensable and terminable. The transfer of land use rights is via the auction, bidding, listing and contracting between transferor and transferee. When obtaining land use rights through auction, bidding, listing and contracting, the transferee shall sign a transfer contract with the Bureau of State Land and Resources. The land user shall pay the land transfer amount under the contract. In case of failure to pay the amount, land administrative department is entitled to terminate the contract and claim compensation from the transferee. Land users shall develop the land according to the usage and commencement time stipulated in the contract. In case of failing to commence one year after the stipulated time limit, government is entitled to levy idled land cost of less than 20% of the land use rights transfer amount. In case of failing to commence two years after the time limit, government is entitled to take back the land use rights without giving any compensation. However, this is not applicable to the delay caused by force majeure , relevant government department behaviour and preliminary work necessary for the development. Real Estate Development Qualification Real estate development enterprises shall apply for enterprise qualification ratings as required. Enterprises that do not obtain a real estate development qualification rating certificate (hereafter refer to as certificate) are not permitted to engage in the real estate development business. Qualification is classified as level 1, level 2, level 3, and level 4. Newly established real estate enterprises shall only apply for interim qualification.
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Real Estate Transfer The transfer of real estate with land use rights obtained via a land transfer shall meet the following conditions: (a) total amount for the land use rights transfer under the contract has been paid and land use right certificate has been obtained; and if the land use is for house building under transfer contract, the project occupying above 25% of the total investment amount shall be completed; if the land use is for comprehensive development, the condition for industrial use or other construction use shall be created.
(b)
When transferring real estate under the circumstance that the house has already been built, the transferor shall hold the house ownership certificate. However, if for the pre-sale of commercial house, the following conditions shall be met: (a) total amount for the land use rights transfer has been paid and land use rights certificate has been obtained; building permit shall be held; the input capital has already arrived at above 25% of the total investment amount for the whole pre-sale commercial house project and the construction progress and as-built delivery date has been determined; and registration for pre-sale in Real Estate Administration of Peoples Government above county level has been performed and certificate of pre-sale of commercial houses has been obtained. The pre-sale person shall report the pre-sale contract to Real Estate Administration and Land Administrative Department of Peoples Government above county level for filing in accordance with relevant regulations of the state.
(b) (c)
(d)
The land system The Provisional Regulations of China Concerning the Grant and Assignment of the Right to Use State-owned Land in Urban Areas ( Urban Land Regulations ) promulgated by the State Council in May 1990 and the Urban Real Estate Law promulgated by the Eighth Meeting of the Standing Committee of the Eighth National Peoples Congress in July 1994 (as amended in August 2007) permit transfer, leasing and mortgage of granted land use rights and properties constructed on the land. PRC law distinguishes between the ownership of land and the right to use land. According to the Constitution of China, unless specified by law, all land in the cities is owned by the State while land in the rural and suburban areas, unless otherwise specified by law, is owned by collectives. Residential sites, privately farmed crop land and hilly land are also owned by collectives. The State may expropriate or take over land and pay compensation in accordance with law if such land is required for public benefit. The Urban Land Regulations implemented a system for the grant and transfer of State land use rights in urban areas. Pursuant to this system, all local and foreign companies, enterprises and other organizations and individuals in the PRC are permitted to acquire land use rights and to develop and operate property in accordance with the laws and regulations. Pursuant to the Opinion on H-20

Regulating the Access and Management of Foreign Capital in the Real Estate Market promulgated jointly by the Ministry of Construction, Ministry of Commerce, National Development and Reform Commission, Peoples Bank of China, State Administration for Industry and Commerce and State Administration of Foreign Exchange on 11 July 2006, certain restrictions were implemented to regulate the acquisition and transfer of PRC real property or equity interests in property owning companies by foreigners. For example, foreign individuals are not allowed to acquire real property except for those who have worked or studied in the PRC for over one year and are acquiring such property for self use, and foreign companies without a branch or representative office in the PRC must apply to establish a foreign invested enterprise under PRC laws in order to own and develop real property. Under the Urban Land Regulations, the grant for use of State land refers to the grant of a land use rights by the State to a land user for a definite period subject to the payment of a land premium by the land user. The maximum term of the grant depends on the type of use of the land. Such terms is generally as follows: (a) (b) (c) (d) (e) up to 70 years for residential use; up to 50 years for industrial use; up to 50 years for education, science, culture, public health or physical education uses; up to 40 years for commercial, tourism and entertainment uses; and up to 50 years for comprehensive utilization or all other uses.
Upon expiration of the term of grant, it is possible for a land user to renew such term subject to the execution of a new land use rights grant contract and payment of a land use rights grant premium. If the term of the grant is not renewed, the land use rights of the land and ownership of any building thereon will revert to the State without compensation. Grant of land use rights Land use rights may be granted by agreement, public auction, tender or bidding. The Urban Real Estate Law provides that land use rights for commercial use, tourism, entertainment and construction of luxury flats shall be sold by public auction wherever it is feasible, and may be sold by mutual agreement if sale by public auction or competitive bidding is not feasible. On 30 April 2001, the State Council promulgated a Notice on Strengthening the Administration of State-owned Land which stipulates that the supply of State-owned construction land shall be announced to the public unless there are concerns regarding State security or confidentiality issues. If, after a scheduled supply of land for commercial development and other use is announced, there are two or more prospective investors who intend to develop the same land parcel, the relevant land parcel shall be made available to the market by the government at the municipal or county levels through competitive bidding or public auction. On 9 May 2002, the Ministry of Land and Resources of China promulgated the Regulations on the Grant of State-owned Land Use Rights through Competitive Bidding, Public Auction and Public Tender. Pursuant to these regulations, land for operational use (including commercial use, tourism, entertainment and commodity housing development) will be granted by competitive bidding, public auction or public tender. In the case of land for use H-21

other than commercial use, tourism, entertainment and commodity housing development, if there are two or more prospective purchasers after the announcement of the relevant land supply schedule, the grant of the land use rights shall be made by competitive bidding, public auction or public tender. On 11 June 2003, the Ministry of Land and Resources of China promulgated the Regulations on Granting of State-owned Land Use Rights by Agreement. According to these regulations, land use rights may be granted by way of agreement if it is not required under applicable laws and regulations that the land use rights be granted by public auction, tender or bidding. On 28 September 2007, the Ministry of Land Resources promulgated the Regulation on Bidding, Auction and Listing Required for Granting of State-owned Construction Land which came into force on 1 November 2007. This Regulation specifies that the grantee of State-owned construction land use rights shall pay in full the land grant premium in accordance with the land grant contract before it may proceed with the relevant procedures and apply for registration for the grant of the land use rights and a construction land use right certificate. Upon signing of the contract for the grant of land use rights, the grantee is required to pay the land grant premium in accordance with the terms of the contract. Once the land grant premium is paid in full, the contract may be submitted to the relevant local bureau for the issue of a land use right certificate evidencing the grant of land use rights. Transfer of land use right According to the Urban Real Estate Law and the Provisions on the Administration of the Transfer of Urban Real Property promulgated in August 1995 and revised in August 2001 by the Ministry of Construction, a property owner may sell, give or otherwise legally transfer a property to another person or legal entity. Where a building is transferred, the ownership of the building and land use rights relating to the site on which the building is situated shall be transferred simultaneously. The term of land use rights for the transferred land is the original term granted under the contract of grant of land use rights less the term which has already been enjoyed by the original grantee. A transfer of land use rights must be evidenced by a written contract. Upon such transfer, all rights and obligations contained in the original contract for the grant of land use rights by the State are deemed to be simultaneously transferred to the transferee, together with any buildings and other fixtures on the land. The transfer must be duly registered at the relevant local land bureau and a new certificate of land use rights will be issued and the original land use rights certificate of land use rights will be suspended. Under Article 38 of the Urban Real Estate Law, in relation to a transfer of the real estate for which land use rights have been acquired by way of grant, the following conditions must be met: (a) the land use rights grant premium for the grant of land use rights must have been paid in full in accordance with the land use rights grant contract and a certificate of land use rights must have been obtained; investment in or development of such land must have been made or carried out in accordance with the terms of the land use rights grant contract; if the investment or development involves the construction of building on the land, more than 25.0% of the total amount of investment or development must have been made or completed; and H-22
(b)
(c)

(d) where the investment or development involves a large tract of land, conditions for the use of the land for industrial or other construction purposes must have been met.
If the land use rights have been acquired by way of allocation, the transfer of real property shall be subject to the approval of the government vested with the necessary approval power as required under the regulations of the State Council. If the peoples government vested with the necessary power approves such a transfer, the transferee is required to complete the formalities for transfer of the land use rights, unless the relevant statues do not require any transfer formalities, and pay the transfer price according to the relevant statutes. Termination of land use right A land use right will terminate upon the expiration of the term of the grant specified in the relevant land use right grant contract. A land use right may also terminate upon withdrawal of the land use right by the State or by loss of the land etc. The State generally will not withdraw a land use right prior to the expiration of its term of grant under the land use rights grant contract. In exceptional circumstances, and if it is in the publics interest, the State has the right to assume the land use right in accordance with law and offer compensation to the land user, having regard to the period for which the land user has already enjoyed use in respect of the land and the actual circumstance relating to the use and development of the land. Upon expiry of the term of grant under the land use rights grant contract, the land use right of the land and ownership of the buildings and fixtures erected thereon will revert to the State without compensation unless an application to renew the land use right is granted. The land user is required to take steps to surrender the land use right certificate and cancel the registration of the certificate in accordance with relevant regulations. A land user may apply for renewal of the term of the land use rights and such application will be granted unless it is in the publics interest for the land to revert to the State. If the application to renew the land use rights is granted, the land user is required to enter into a new land use rights grant contract, pay a land use rights grant premium and effect the necessary registration of the renewed right. Documents of title There are two types of title registrations in the PRC, namely land registration and building registration. Land registration is effected by the issue of the land use rights certificate by the relevant authority to the land user evidencing that the land user has obtained a land use rights. Building registration entails the issue of a building ownership certificate to the owner of a building evidencing that he has obtained building ownership rights in respect of the building. According to the Land Registration Regulations promulgated by the State Land Administration Bureau on 18 November 1989 and amended on 18 December 1995 (the amendment became effective on 1 February 1996); the Administration Rules on Regulations of Urban Real Estate Property promulgated by the Ministry of Construction on 27 October 1997, implemented on 1 January 1998 and revised subsequently on August 15, 2001; the Land Registration Rules promulgated by the Ministry of State Land and Resources on 30 December 2007 and which became effective on 1 February 2008; and the Building Registration Rules promulgated by the Ministry of Construction on 15 February 2008 and which became effective on 1 July 2008, all land use rights and building ownership rights which are duly registered are protected by law. H-23

The two different systems are commonly maintained separately in many cities in the PRC. However, in Shenzhen, Guangzhou, Shanghai and some other major cities, the two systems have been consolidated and a single composite real estate and land use right certificate is issued to evidence the ownership of both land use right and the buildings erected thereon. Sale of commodity buildings The properties we develop in the PRC and which we may sell in order to realize our investment therein, may be considered as commodity buildings under the Urban Real Estate Law and the Measures for Administration of Presale of Commodity Buildings promulgated by the Ministry of Construction in November 1994, and revised in August 2001 and July 2004 respectively. Pursuant to these rules, a commodity building may only be pre-sold before completion if (a) the purchase price has been paid in full for the grant of the land use rights involved and a land use right certificate has been obtained; (b) a permit for construction works planning and a permit for commencement of works have been obtained; (c) the funds invested in the development of the commodity buildings put to pre-sale represent 25.0% or more of the total investment in the project and the progress of works and the completion and delivery dates have been ascertained; and (d) a permit for pre-sale of commodity buildings shall have been obtained through pre-sale registration. The proceeds of pre-sale of commodity buildings must be used to develop the relevant project so pre-sold. Under the Regulatory Measures on the Sale of Commodity Properties, commodity properties may be put to post-completion sale only when the following preconditions have been satisfied: (a) the property development enterprise offering to sell the post-completion properties shall have a enterprise legal person business licence and a qualification certificate of a property developer; (b) the enterprise has obtained a land use rights certificate or other approval documents of land use; (c) the enterprise has the permit for construction project planning and the permit for construction; (d) the commodity properties have been completed and been inspected and accepted as qualified; (e) the relocation of the original residents has been settled; (f) the ancillary infrastructure facilities for supplying water, electricity, heating, gas, communication, etc., and other ancillary essential facilities and public facilities are ready for use, or the schedule of construction and delivery date thereof has been specified; and (g) the property management plan has been completed. Before the post-completion sale of a commodity building, a developer shall submit the Property Development Project Manual and other documents showing that the preconditions for post-completion sale have been fulfilled to the property development authority for its record. Leasing of the property Leasing of urban real properties is also governed by the laws and regulations above as well as the Contract Law of China promulgated by the Second Meeting of the Standing Committee of the Ninth National Peoples Congress in March 1999 and the Measures for Administration of Leasing of Urban Buildings promulgated by the Ministry of Construction in April 1995. Under these laws and regulations, owners of buildings in the PRC are entitled to lease their buildings through a written lease. When a lease is signed, amended or terminated, the parties are required to file the details with the real property administrative authority at municipality or county level in which the building is located. The term of the lease may not exceed 20 years. The lessor is obliged to maintain the leased property, except as otherwise H-24

agreed upon by the parties. If the lessor intends to sell a leased property, it shall, within a reasonable time limit before the sale, notify the lessee and the lessee shall be given priority to acquire the leased property on the same terms and conditions as the lessor is proposing to sell the leased property. Mortgage of the property The grant of mortgages in the PRC is governed by the Security Law of China and Administrative Measures on Mortgage of Urban Real Estate issued by the Ministry of Construction in 1995 and revised in 2001. Under this law, all mortgage agreements must be in writing. When the debtor fails to pay his debt, the creditor has a right to obtain compensation in accordance with the stipulations of this law, by converting the mortgaged properties into money or seeking preferential payments from the proceeds from the auction or sale of the mortgaged properties. The secured debt may not exceed the value of the properties mortgaged. Once mortgaged, the balance of value of the properties that exceeds the secured debt can be mortgaged for a second time, but the total amount of secured on the property shall not exceed the value of the relevant property. When a mortgage is created on the ownership of a building legally obtained, a mortgage shall be simultaneously created on the land use rights of the land on which the building is situated. When the land use rights acquired by way of a grant is mortgaged, the buildings on the land shall also be mortgaged at the same time. The PRC has adopted a system to register mortgages of real estate. Within 30 days after a property mortgage contract has been signed, the parties to the mortgage shall register the mortgage with the property administration authority at the location where the property is situated. A property mortgage contract will become effective on the date of registration of the mortgage. If a mortgage is created on the property in respect of which a building ownership certificate has been obtained legally, the registration authority will, when registering the mortgage, make an entry under third party rights on the original building ownership certificate and then issue a Certificate of Third Party Rights to Property to the mortgagee. If a mortgage is created on a commodity building put to pre-completion sale or under construction, the registration authority will, when registering the mortgage, record the details on the mortgage contract. If construction of a real property is completed during the term of a mortgage, the parties involved shall re-register the mortgage of the real property after issuance of the certificates evidencing the ownership of the property. The Property Rights Law of the Peoples Republic of China which was adopted at the fifth session of the Tenth National Peoples Congress on 16 March 2007 and came into effect as of 1 October 2007, provides that the mortgage over buildings and other objects fixed to land, the right to use construction land, and a building under construction shall become effective at the date of registration. Buildings that are constructed on the land after the mortgage of the right to use construction land, and a building under construction, shall become effective at the date of registration. Buildings that are constructed on the land after the mortgage of the right to use construction land is effective will not be considered as property secured under the mortgage. Accordingly, such newly constructed buildings can be disposed of together with the disposal of the aforesaid right to use construction land so as to realize the mortgage right. However, the mortgagee has no right to seek preferred payments from the money generated from the disposal of these newly constructed buildings. The Ministry of Land and Resources ( MLR ), on 30 December 2007, issued the Administrative Measures on Land Registration which took effect on 1 February 2008. According to the measures, land registration refers to the recording of land-use rights or other rights on land registered for public review. The measures stipulate that the
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administrative department of land and resources are required to conclude land registrations within 20 days after receiving an application. If the case is complex, a ten (10) day extension may be granted by the principal of land and resources administrative department. On 15 February 2008, the Ministry of Construction ( MOC ) released Procedures for Property Registration (the Procedures ) which took effect on 1 July 2008. The Procedures stipulate that in property registrations, the principle that the owners of the building property rights correspond with those of the owners of the land use rights shall be complied with. The Procedures regulate the pre-registration, registration of mortgage rights for construction work in process, registration for maximum amount secured under the mortgage, registration of rectifications, registration for objections and registration for easements. Management of the property According to the Foreign Investment Industrial Guidance Catalogue (amended in 2007), property management falls within the Category of Permitted Foreign Investment Industries. According to the Foreign Investment Industrial Guidance Catalogue (amended in 2007) and the relevant requirements set out under the laws and the administrative regulations on foreign investment enterprises, a foreign-invested property management enterprise may be established in the form of a Sino-foreign equity joint venture, a Sino-foreign cooperative joint venture or a wholly foreign- owned enterprise. Before the Administration of Industry and Commerce registers a foreign investment enterprise as a foreign-invested property management enterprise, the foreign-invested property management enterprise must have obtained an approval from the relevant department of commerce and received a foreign investment enterprise approval certificate. The State council promulgated the Property Management Rules ( Property Management Rules ) on 8 June 2003, which came into effect on 1 September 2003. The Property Management Rules were amended on 26 August 2007 and the amended Property Management Rules became effective on 1 October 2007. The Property Management Rules stipulate that owners of common property are required to convene an owners meeting under the guidance of the relevant authorities and to form an owners commission through an election process. If there is only one owner or a few owners all of whom have agreed not to organize an owners commission, then all the owners will jointly perform the duties at an owners meeting and of the owners commission. The right to appoint and dismiss property management enterprises, to elect and replace commissioners of the owners commission, and to formulate and amend the management rules, among others, may be determined at an owners meeting. Pursuant to the Property Management Rules, the quorum for an owners meeting are such number of owners of the privately owned area representing more than half of the total area of the constructions and such number of the owners representing more than half of the total number of the owners in respect of the property. The following matters shall only be passed by the owners of the privately owned area representing more than two-thirds of the total area of the constructions and such number of the owners representing more than two-thirds of the total number of the owners: (a) (b) collecting and use of the exclusive maintenance fund; or rebuilding part or all of the construction and its ancillary facilities.
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All other resolutions may be passed by such number of owners of the privately owned area representing more than half of the total area of the constructions and the number of the owners representing more than half of the total number of the owners in respect of the property. Under the Measures for the Administration of Qualifications of Property Management Enterprises promulgated by the Ministry of Construction on 17 March 2004, which became effective on 1 May 2004, a property management enterprise shall apply for assessment of its qualification by the relevant qualification approval. A property management enterprise that has passed the assessment will be issued with a qualification certificate evidencing the qualification classification issued by the relevant authority. No enterprise may engage in property management without undertaking a qualification assessment conducted by the authority and obtaining a qualification certificate. The amount of property management fees payable to a property management enterprise may be agreed by the contracting parties by reference to two methods. According to the Rules on Property Management Service Fees jointly promulgated by the National Development and Reform Commission and the Ministry of Construction on 13 November 2003, the property management enterprise may charge a fixed management fee which is determined upfront, where any surplus or shortfall arising from the actual operating costs being in excess or below the amount of the management fee, will be for the account of the property management enterprises. Alternatively, the property management enterprise, may charge a fee which is a percentage of the total management fees collected in advance, where any surplus or shortfall arising from the actual operating costs being in excess of or below the amount of the management fee, will be for the account of the property owners. Company Law On 29 December 1993, the Standing Committee of the Eighth National Peoples Congress adopted the Company Law of China (the Company Law ), which came into effect on July 1, 1994 and was amended on 25 December 1999, 28 August 2004 and 27 October 2005 respectively. The Company Law governs two types of companies, namely companies incorporated in the PRC with limited liability and companies incorporated in the PRC as joint stock limited companies. Both types of companies have the status of an enterprise legal person. The liability of shareholders of a limited company is limited to the extent of the amount of capital contributed by them and the company is liable to its creditors to the full amount of the assets owned by it. The liability of shareholders of joint stock limited companies is limited to the extent of the amount of shares owned by them and the company is liable to its creditors to the full amount of the assets owned by it. Based on the relevant provisions in the Company Law, Sino-Foreign Equity Joint Venture ( EJV ) law and Wholly Foreign Investment Enterprise ( WFOE ) law: an EJV is required to first pay off its income tax and make provision for its reserve funds, employee awards, benefit and welfare funds and the enterprise development funds as provided under the articles of association of the EJV, before it makes an allocation to its shareholders of its gross profit. Any allocation of gross profit to shareholders shall be in proportion to the percentage of registered capital paid in by each shareholder or investor of the EJV. The percentage of gross profit which is set aside for reserve funds, employee awards, benefit and welfare funds and the enterprise developing fund is determined by the board of directors; and
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a WFOE is required to allocate 10.0% of profits a year to its statutory common reserve fund, until the aggregate amount in such reserve exceeds 50.0% of the WFOEs registered capital. If the WFOEs statutory common reserve is insufficient to make up its losses of the previous years, such losses shall be made up from the profit for the current year prior to making allocations to the statutory common reserve pursuant to the preceding sentence. The WFOE may, if so resolved by the shareholders meeting or the shareholders general meeting, make allocations to the discretionary common reserve from their after-tax profits after making allocations to the statutory common reserve from the after-tax profits. A WFOEs after-tax profits remaining after it has made up its losses and made allocations to its common reserve shall be distributed based on the percentages as agreed previously by shareholders or based on the percentage that shareholders have actually paid up.
Japan The land system The Civil Code of Japan governs real property rights. Japanese law recognizes a number of interests in land. In particular, Japanese law allows for separate ownership ( Shoyuuken ) of a piece of land and the building thereon. The Chijou-ken ( Superficiar ) is an interest in land that permits the holder to use all or a part of another persons land to build structures, underground installations, or plant trees. In general, the Chinshaku-ken ( Leasehold ) is a contractual interest that permits the holder to use the leased asset in return for payment of rent. A leasehold interest that qualifies for mandatory statutory protection under the Land and Building Lease Act, however, gains legal rights that are similar to in rem interests. By way of such statutory protection, a substantial part of the tenants of a leased building and the owners of a building on leased land may perfect leasehold interest against a third party. The Chieki-ken ( Easement ) is an in rem interest that permits the holder of the land to use another persons land for the benefit of the holder, such as a right to access the land. Documents of title Title to real estate in Japan, whether title to land, a building, or a unit interest in a condominium unit, is evidenced by registration in the real estate register maintained by the regional Legal Affairs Bureau, subordinate to the Ministry of Justice. The register is publicly available for inspection and includes the aforementioned interest in land. Registration is neither conclusive evidence of title, nor is it compulsory to possess and occupy the land, but registration is required to perfect the title to real estate against third parties. For each parcel of real estate, the public register sets out a description of the property and its ownership, including the name of the owner, the date acquired, the manner of acquisition and information on previous registered title owners. If any attachment or injunction has been issued regarding a parcel of real estate, such information can also be recorded. In practice, parties who plan to enter into real property transactions in Japan usually rely upon the register, which is generally the best indication of the legal owner of a real property or of a real property-related right. A party that purchases real property from a seller in reliance on the register, however, will have no recourse against anyone except the seller if the information contained in the register proves to be incorrect. The purchaser may claim damages against the seller pursuant to statutory or contractual warranties, but, in general, will be unable to obtain ownership of or title to the real property from the legal owner.
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Mortgage of properties Mortgages on land or buildings are governed by the Civil Code of Japan, and a mortgagor may execute a mortgage if a debtor defaults on his repayment of the loan. Mortgage registration operates in a manner similar to other real estate interests, in that the mortgage must be reflected on the real estate register maintained by the local Legal Affairs Bureau as a registered mortgage in order for the security interest to be asserted against third parties. Where a transaction is accomplished by way of an acquisition of real estate trust beneficiary interests instead of the underlying real property itself, a pledge is created over the real estate trust beneficiary interests for the benefit of secured lenders, and such pledge is perfected by way of written consent of the trustee (with a certified date stamp from a public notary) and such pledge is not registered on the real estate register. To secure TMK bonds, it will be necessary to satisfy the requirements of the Secure Bonds Trust Act of Japan; and due to this regulation, it is not common to create a mortgage on real estate or a pledge over real estate trust beneficiary interests to secure TMK bonds to avoid such procedure. A TMK bondholder generally enjoys the benefit of a general security interest ( ippan tanpo ) over the TMKs assets and the Secured Bond Trust Act of Japan is not applicable to a general security interest. On the other hand, the Secured Bonds Trust Act of Japan is not applicable to mortgages or pledges for specified loans, and it is common to create a mortgage or pledge on assets owned by TMK for specified loans. Liabilities Incurred by Owners of Real Property Under Japanese law, an owner of real property may be liable for any damage to the life, body or property of a third party that occurs in connection with its real property. In particular, Article 717 of Civil Code of Japan imposes strict liability as follows: If any damage has been caused to another person by reason of any defect in the construction or maintenance of a structure on land, the person in possession of the structure shall be liable to compensate the injured person for damages it suffers; provided, however, that if the person in possession has exercised due care in order to prevent the occurrence of such damage, compensation for damage shall be made by the owner of such structure. It is customary in Japan to obtain third-party liability insurance in respect of real property. In certain circumstances, however, such insurance may be unavailable, or even if obtained, may not cover a liability that has arisen in relation to the property (either because it is not included in the insurance coverage or the liability exceeds the maximum coverage amount). A purchaser of real property may in some instances seek reimbursement from the seller pursuant to statutory or contractual warranties for liability to a third party that was caused by a defect in the property existing at the time of the sale. These warranties, however, are sometimes limited or excluded or may prove inadequate because the seller lacks funds to compensate the purchaser for its loss or for other reasons. Boundary confirmation In Japan, boundary confirmations are generally made by obtaining written acknowledgment thereof, duly affixed with a signature seal, from neighbouring landowners who share boundaries with the subject property. There is no legal right or power by which a property owner can compel its neighbours to execute a boundary confirmation. The absence of a boundary confirmation may reduce a property owners leverage in a boundary dispute or a dispute over encroachment. H-29

Building lease Contract Period A building lease may have either a fixed or an indefinite term. A building lease providing for an indefinite term or a term of less than one year may be terminated by the lessee on three months notice or by the lessor on six months notice, unless the lease provides for a longer notice period. A building lease for a fixed term of one year or more, up to 20 years, may not be terminated unilaterally by either party prior to the end of that term, unless the lease specifically provides otherwise. In case of termination by the lessor, the lessors notice is subject to the conditions described below. Even in the case of a lease providing for a fixed term of one year or more, unless the lessor or the lessee gives notice of its intention not to extend the lease from one year to six months before the expiration of the term, the lease will be deemed to have been extended and converted into a lease without a fixed term. A lessor is prohibited from giving notice of termination of, or intention not to extend, a lease unless the lessor has a justifiable reason taking various factors into consideration, which may include: (a) (b) the comparative need of each of the lessor and the lessee to use the building; the history of interaction between the lessor and the lessee in connection with the relevant lease contract; the degree of importance to the lessee of its present use of the leased building; the current condition of the building; and any proposed compensatory payment from the lessor to the lessee.
(c) (d) (e)
Security Deposit and Guarantee Money Upon execution of a building lease, the lessee is usually required to pay a security deposit, or shiki-kin . The security deposit is paid by the lessee as security for rent and other obligations. The security deposit generally does not bear interest and any outstanding amount after deduction of any charges is usually refundable after the premises are vacated. Upon execution of a building lease, in some cases the lessee also pays guarantee money, or hoshou-kin , which essentially guarantees the lessees obligations and sometimes takes the form of a loan (sometimes bearing interest) by the lessee to the lessor. The guarantee money is fully or partially refundable either after a specified period of time has passed under the lease or at the end of the lease, depending on the terms of the lease. It should be noted that the amounts of security deposits and guarantee money vary from location to location and from case to case in Japan, and there is no single standard.
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Adjustment of Rent Generally, either party to a building lease may demand that the rent be increased or decreased in response to market conditions, even if a duly executed lease agreement exists. If the parties cannot come to an agreement, a court may order an adjustment after considering the following: (i) whether there have been any changes in tax or other liabilities imposed on the building and/or the underlying land, any increase or decrease in the value of the building and/or the underlying land, and any other relevant economic conditions; and (ii) the rent in comparable leases in neighbouring areas. If the court determines that rent should be decreased, the landlord will be ordered to return any excess rent collected and to pay interest at a rate of 10% per annum on the excess amount. If the court determines that rent should be increased, the lessee will be ordered to pay any shortfall, as well as interest at a rate of 10% per annum on such shortfall. Special Fixed-term Building Lease The Land and Building Lease Act of Japan provides for a special fixed-term building lease known as teiki tatemono chintaishaku , which is for a fixed term and to which the rules with respect to lease extension described above will not apply. Under a special fixed-term building lease, the lease may not be terminated prior to the expiration of its term, except in limited cases provide by law. Furthermore, the lessor and the lessee may contractually agree to opt out of the application of the rules for adjustment of rent described above. Vehicle for property ownership Tokutei Mokuteki Kaisha Overview Our operations in Japan rely on structures using TMKs, which are special-purpose securitization vehicles established under the Act on Securitization of Assets of Japan (the TMK Act ). All of the Japanese Properties will be acquired by IHC TMK (Japan) through direct ownership ( shoyu-ken ). Under the TMK Act, TMKs are authorised to procure funds by issuing asset-backed securities which are defined to include specified bonds ( TMK Bonds ) and preferred shares ( yuusen shusshi ). TMKs also issue common shares ( tokutei shusshi ), but those do not constitute asset- backed securities under the TMK Act. In our operations, each TMK applies its procured funds to the acquisition of direct ownership in one or more real property assets. Assets acquired by a TMK and used to back its asset-backed securities are defined as specified assets under the TMK Act. If the specified assets take the form of direct ownership interests in real property, the TMK will be required to outsource the management and operation of the specified assets to an asset manager. TMKs are prohibited under the TMK Act from engaging in any business other than so-called liquidation of assets and ancillary business in accordance with an asset liquidation plan ( shisan ryudoka keikaku , an ALP ). For this purpose liquidation of assets is defined in the TMK Act as a series of transactions involving: (i) acquisition of assets using funds procured through issuance of asset-backed securities or specified loans, as described below; and (ii)(a) performance of obligations under TMK Bonds or specified loans or certain other debts (if any) and (b) distribution of profits or residual assets to preferred shareholders or acquisition of preferred shares for cancellation, with all cash payments to be made using funds obtained through management and disposition of such assets. H-31

Notification Prior to commencement of business relating to liquidation of assets, i.e., prior to either purchase of specified assets or solicitation of offers to purchase asset backed securities, a TMK must file with the competent Local Finance Bureau of the Ministry of Finance of Japan a notification of commencement of business, together with certain attachments, including the ALP. Asset Liquidation Plan A TMK must conduct its operation in accordance with the ALP. As stated above, the ALP must be filed with the competent Local Finance Bureau of the Ministry of Finance of Japan before the TMK commences business relating to liquidation of assets. The ALP is required under the TMK Act to set forth, among others: (i) a scheduled term; (ii) details of any asset-backed securities to be issued and any specified loans to be extended to the TMK; (iii) details identifying the specified assets, the acquisition date and the name of the seller(s); (iv) details of the management company and the method of management and disposition of the specified assets; (v) details of loans other than specified loans (e.g., bridging loans) to be extended to the TMK; and (vi) other related items. In practice, any amendment to an ALP generally requires prior consent of all shareholders, holders of TMK Bonds (if TMK Bonds have been issued) and lenders of specified loans (if specified loans have been borrowed). In the case of any material amendment to the ALP, such amended ALP must also be filed with the competent Local Finance Bureau of the Ministry of Finance of Japan. Common Shares and Preferred Shares A TMK must issue common shares and may issue preferred shares, which may be of more than one class. Holders of preferred shares generally have priority over holders of common shares in terms of receiving distributions of profit and/or residual assets of the TMK, but the scope of their voting rights is substantially restricted, as described below. Although a TMK may not restrict transfer of preferred shares, transfer of common shares is always subject to approval of the TMK. A TMK may redeem (i.e., buy back and cancel) its preferred shares, with a consequent reduction of capital in the amount raised through issuance of preferred shares, subject to compliance with certain requirements under the TMK Act intended among others for protection of creditors of the TMK while reduction of capital in respect of amounts raised through issuance of common shares is permitted only in order to compensate for losses. TMK Bonds and Specified Loan A TMK may issue TMK Bonds, which due to certain tax reasons are generally issued to qualified institutional investors. The TMK Act grants to holders of TMK Bonds the right to receive all payments due in relation to such TMK Bonds out of the assets of the TMK prior to any payments to other unsecured creditors. This statutory right is generally referred to as a general security interest, or ippan tanpo . Unless otherwise provided in the ALP, such general security interest is automatically created by operation of law.
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In addition to funds procured through the issuance of TMK Bonds, the TMK may borrow funds (i) from a bank or other qualified institutional investor, with any such borrowing referred to as a specified loan and (ii) from any lender for limited purposes, with any such borrowing referred to as an other loan. Organisation and Management General meeting of shareholders A TMK holds its ordinary general meeting of shareholders within three months after the end of each fiscal year. In addition, a TMK may hold an extraordinary general meeting of shareholders whenever necessary. A general meeting of shareholders has the power and authority to resolve any matters provided for in the TMK Act, as well as matters concerning its organization, operations, administration and any other matters relating to the TMK. Holders of common shares have voting rights in respect of all matters which may be resolved at the general meeting of shareholders, while holders of preferred shares have voting rights only in respect of certain limited matters, as specified under the TMK Act and the articles of incorporation of the TMK. A shareholder in a TMK is generally entitled to one vote per one share on any matter on which such holder is entitled to vote. Except as otherwise provided by the TMK Act or the articles of incorporation of the TMK, general meetings of shareholders adopt resolutions upon approval by a majority of the voting rights represented at the meeting and entitled to vote, with a quorum consisting of a majority of total voting rights entitled to vote. Directors, Statutory Auditors and Accounting Auditors A TMK must have at least one director, and each director of the TMK has authority to conduct the operations of the TMK. Further, each director has authority to represent the TMK, unless a representative director or other person who represents the TMK is otherwise designated. If there are two or more directors, determinations with respect to the TMKs operations are made by a majority of directors. A TMK must also appoint at least one statutory auditor who audits the conduct of their duties by the directors. If the statutory auditors find that any director has or is likely to engage in misconduct, or find any violation of law or regulation, the ALP or the articles of incorporation or any grossly improper facts, they are required to report the same to the other directors (or if there are no other directors, to the general meeting of shareholders) without delay. Additionally, if the TMK issues preferred shares or there are certain other circumstances, the TMK must appoint an accounting auditor who audits the financial statements of the TMK and the supplementary schedules thereto. The accounting auditor must be a certified public accountant or an accounting firm. If the accounting auditor in the course of performance of its duties detects in connection with the execution of the duties of the directors any misconduct or any material facts in violation of law or regulation, the ALP or the articles of incorporation, the accounting auditor must report the same to the statutory auditors without delay. Directors, statutory auditors and accounting auditor are appointed, and may be dismissed at any time, by the general meeting of shareholders. Unless provided in the articles of incorporation, the term of office for directors and statutory auditors is indefinite. The term of office for the accounting auditor is one year but the accounting auditor shall be deemed re-elected unless otherwise resolved at the ordinary general meeting of shareholders.
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Mandatory Outsourcing of Operations Under the TMK Act, a TMK is generally required to outsource the management and disposition of its specified assets to a trust company, which may be a financial institution engaged in trust business. If a specified asset consists of real property, in lieu of outsourcing to such trust company, the TMK may outsource the management of the specified asset to a corporate entity having financial and personnel resources sufficient to appropriately manage and dispose of the real property, provided that such entity is duly licensed in Japan to engage in the business of land and building transactions. Distribution of Profits Following shareholders approval, year-end dividends are distributed in cash to shareholders of record as at the end of each fiscal year in proportion to the shares held by each shareholder, but subject to the provisions in the ALP regarding preferential treatment of holders of preferred shares. Additionally, if it is prescribed in the article of corporation, a TMK may make interim dividend payments in cash once during each fiscal year, by determination of its directors. A TMK may distribute profits by way of a year-end dividend out of the excess of its assets over the aggregate of (x) its liabilities, (y) its stated capital and (z) certain other amounts provided in an ordinance of the Cabinet Office of Japan. A TMK may pay interim dividends out of the excess of its assets as at the last day of the immediately preceding fiscal year over of the aggregate of (i) its liabilities as at the last day of the immediately preceding fiscal year, (ii) its stated capital as at the last day of the immediately preceding fiscal year, (iii) the amount of profits distributed or to be distributed which is resolved at the annual general meeting of shareholders with respect to the immediately preceding fiscal year and (iv) certain other amounts provided in an ordinance of the Cabinet Office of Japan. Interim dividends may not be paid if there is a risk that at the end of the fiscal year, assets might be less than the aggregate of the amounts referred to in (x) through (z) above. Distribution of Residual Assets In the event of the liquidation of the TMK, the assets remaining after payment of all debts (including debts under TMK Bonds and specified loans), liquidation expenses and taxes will be distributed among shareholders generally in proportion to the respective number of shares which they hold, but subject to the provisions in the ALP regarding preferential treatment of holders of preferred shares. Regulatory issues Real Estate Brokerage Business Act The mere leasing of real properties by itself will not trigger any licensing requirements. However, sales or purchases of real properties, or brokerages of sales, purchases or leases of real properties, as a business, will trigger licensing requirements under the Real Estate Brokerage Business Act of Japan. After TMK files a notification of commencement of business relating to liquidation of assets, the Real Estate Brokerage Business Act is not applicable to such a TMK. However, if a specified asset consists of real property and the TMK does not outsource the management and disposition of its specified assets to a trust company, the TMK will be required to outsource the management and disposition of the specified asset to a corporate entity having financial and personnel resources sufficient to appropriately manage and dispose of the real property, provided that such entity is duly licensed in Japan to engage in the business of land and building transactions. H-34
APPENDIX I TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE

You are invited to apply and subscribe for and/or purchase the Placement Shares at the Issue Price, subject to the following terms and conditions: 1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 PLACEMENT SHARES AND INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF SHARES WILL BE REJECTED. Your application for Placement Shares may only be made by way of the printed Placement Shares Application Form. YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE PLACEMENT SHARES. 3. You are allowed to submit only one (1) application in your own name for the Placement Shares. If you, being other than an approved nominee company, have submitted an application for Placement Shares in your own name, you should not submit any other application for Placement Shares for any other person. Such separate applications shall be deemed to be multiple applications and may be rejected at the discretion of our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents. Joint and multiple applications for the Placement Shares shall be rejected. If you submit or procure submissions of multiple share applications for the Placement Shares, 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 may be rejected at the discretion of our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents. 4. We will not accept applications from any person under the age of 18 years, undischarged bankrupts, sole proprietorships, partnerships, 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 deceaseds name at the time of application. 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 companies after complying with paragraph 6 below. WE WILL NOT ACCEPT APPLICATIONS FROM NOMINEES EXCEPT THOSE MADE BY APPROVED NOMINEE COMPANIES ONLY. Approved nominee companies are defined as banks, merchant banks, finance companies, insurance companies and licensed securities dealers in Singapore and nominee companies controlled by them. Applications made by nominees other than approved nominee companies shall be rejected.
2.
5.
6.
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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 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 possess more than one individual direct Securities Account with CDP, your application shall be rejected. 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/or allocation and other correspondence from CDP will be sent to your address last registered with CDP. Our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents reserve 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 which is illegible, incomplete, incorrectly completed, or which is accompanied by an improperly drawn remittance or improper form of remittance or remittances which are not honoured upon their first presentation.
8.
9.
10. Our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents further reserve the right to treat as valid any applications 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. 11. Our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents reserve the right to reject or to 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 the decision with regards hereto will be entertained. In deciding the basis of allotment and/or allocation which shall be at the discretion of our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents, due consideration will be given to the desirability of allotting and/or allocating the Placement Shares to a reasonable number of applicants with a view to establishing an adequate market for our Shares.
12. 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 Placement Shares allotted and/or allocated to you, if your application is successful. This will be the only acknowledgement of application monies received and is not an acknowledgement by our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents. You irrevocably authorise CDP to complete
I-2

and sign on your behalf, as transferee or renouncee, any instrument of transfer and/or other documents required for the issue or transfer of the Placement Shares allotted and/or allocated to you. 13. In the event that we lodge a supplementary or replacement offer document ( Relevant Document ) pursuant to the SFA or any applicable legislation in force from time to time prior to the close of the Placement, and the Placement Shares have not been issued and/or transferred, we (and on behalf of the Vendors) will (as required by law), and subject to the SFA, at our sole and absolute discretion either: (a) within seven (7) days from the date of lodgement of the Relevant Document give you a copy of the Relevant Document and provide you with an option to withdraw; or deem your application as withdrawn and cancelled and refund your application monies (without interest or any share of revenue or other benefit arising therefrom) to you within seven (7) days from the lodgement of the Relevant Document.
(b)
Where you have notified us within 14 days from the date of lodgement of the Relevant Document if you wish to exercise your option under paragraph 13(a) above to withdraw your application, we (and on behalf of the Vendors) shall pay to you all monies paid by you on account of your application for the Placement Shares without interest or any share of revenue or other benefit arising therefrom and at your own risk, within seven (7) days from the receipt of such notification. In the event that at any time at the time of the lodgement of the Relevant Document, the Placement Shares have already been issued and/or transferred but trading has not commenced, we (and on behalf of the Vendors) will (as required by law), and subject to the SFA, either: (c) within seven (7) days from the date of lodgement of the Relevant Document give you a copy of the Relevant Document and provide you with an option to return the Placement Shares; or deem the issue and/or transfer of the Placement Shares as void and refund your payment for the Placement Shares (without interest or any share of revenue or other benefit arising therefrom) within seven (7) days from the lodgement of the Relevant Document.
(d)
Where you have notified us within 14 days from the date of lodgement of the Relevant Document if you wish to exercise your option under paragraph 13(c) above to return the Placement Shares and return all documents, if any, purporting to be evidence of title of those Placement Shares, we (and on behalf of the Vendors) shall, subject to the SFA, pay to you all monies paid by you for the Placement Shares without interest or any share of revenue or other benefit arising therefrom and at your own risk, and the Placement Shares issued and/or transferred to you shall be void, within seven (7) days from the receipt of such notification and documents. Additional terms and instructions applicable upon the lodgement of the Relevant Document, including instructions on how you can exercise the option to withdraw, may be found in such Relevant Document.
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14. You irrevocably authorise CDP to disclose the outcome of your application, including the number of Placement Shares allotted and/or allocated to you pursuant to your application, to us, the Vendors, the Manager and Sponsor, the Joint Placement Agents and, any other parties so authorised by the foregoing persons. 15. 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 Placement Shares through the Joint Placement Agents or their designated sub-placement agent(s). 16. 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 and/or purchase the number of Placement Shares specified in your application (or such smaller number for which the application is accepted) at the Issue Price and agree that you will accept such Placement Shares as may be allotted and/or allocated 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; agree that the aggregate Issue Price for the Placement Shares applied for is due and payable to our Company and the Vendors upon application; 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, the Vendors, the Manager and Sponsor and the Joint Placement Agents in determining whether to accept your application and/or whether to allot and/or allocate any Placement Shares to you; and 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 Vendors, the Manager and Sponsor and/or the Joint Placement Agents will infringe any such laws as a result of the acceptance of your application.
(b)
(c)
(d)
17. Our acceptance of applications will be conditional upon, inter alia , our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents being satisfied that: (a) permission has been granted by the SGX-ST to deal in and for quotation of all our existing Shares (including the Vendor Shares), the New Shares and the SPA Shares on Catalist; the Management Agreement and the Placement Agreement referred to in the section entitled General and Statutory Information Management and Placement Arrangements of this Offer Document have become unconditional and have not been terminated or cancelled prior to such date as our Company may determine; and the Authority or other competent authority has not served a stop order ( Stop Order ) which directs that no or no further shares to which this Offer Document relates be allotted and/or allocated.
(b)
(c)
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18. In the event that a Stop Order in respect of the Placement Shares is served by the Authority or other competent authority, and: (a) the Placement Shares have not been issued and/or transferred, we will (as required by law), and subject to the SFA, deem all applications withdrawn and cancelled and we shall refund (at your own risk) all monies paid on account of your application for the Placement Shares (without interest or any share of revenue or other benefit arising therefrom) to you within 14 days of the date of the Stop Order; or if the Placement Shares have already been issued and/or transferred but trading has not commenced, the issue of the Placement Shares (as required by law) shall be deemed void and our Company (and on behalf or the Vendors) shall, within 14 days from the date of the Stop Order, refund (at your own risk) all monies paid on account of your application for the Placement Shares (without interest or any share of revenue or other benefits arising therefrom).
(b)
This shall not apply where only an interim Stop Order has been served. 19. In the event that an interim Stop Order in respect of the Placement Shares is served by the Authority or other competent authority, no Placement Shares shall be issued during the time when the interim Stop Order is in force. 20. The Authority or other competent authority is not able to serve a Stop Order in respect of the Placement Shares if the Placement Shares have been issued and listed on a securities exchange and trading in the Placement Shares has commenced. 21. 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 through a SGXNET announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com and through a paid advertisement in a local newspaper. 22. We will not hold any application in reserve. 23. We will not allot and/or allocate shares on the basis of this Offer Document later than six (6) months after the date of registration of this Offer Document by the SGX-ST, acting as an agent on behalf of the Authority. 24. Additional terms and conditions for applications by way of Application Form are set out on pages I-5 to I-8 of this Offer Document.
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ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS Applications by way of an Application Form shall be made on, and subject to, the terms and conditions of this Offer Document including, but not limited to, the terms and conditions appearing below as well as those set out in the section entitled Terms, Conditions and Procedures for Application and Acceptance of this Offer Document as well as the Memorandum and Articles of Association of our Company. 1. Your application for the Placement Shares must be made using the BLUE Application Form accompanying and forming part of this Offer Document. ONLY ONE APPLICATION should be enclosed in each envelope. 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, the Vendors, the Manager and Sponsor and the Joint Placement Agents reserve 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 Application Form which are illegible, incomplete, incorrectly completed or which are accompanied by improperly drawn remittances or improper form of remittances which are not honoured upon their first presentation. 2. Your Application Form must be completed in English. Please type or write clearly in ink using BLOCK LETTERS . 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. Individuals, corporations, approved nominee companies and trustees must give their names in full. If you are an individual, you must make your application using your full names as they appear in your identity cards (if you have such identification document) or in your passports and, in the case of corporation, in your full name 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 of the corporation. 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 Companys Share Registrar and Share Transfer Office. Our Company, the Vendors, the Manager and Sponsor and the Joint Placement Agents reserve the right to require you to produce documentary proof of identification for verification purposes. (a) (b) You must complete Sections A and B and sign on page 1 of the Application Form. 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).
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5.
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(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 you are 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 having an interest in the aggregate of more than 50.0 per cent. 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 Placement 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 50.0 per cent. of the issued share capital of or interests in such corporation. The completed and signed BLUE Placement Form and the correct remittance in full in respect of the number of Placement 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. You must affix adequate postage on the envelope (if despatching by ordinary post) and therefore 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 4 July 2013 or such other time as our Company and the Vendors may, in consultation with the Manager and Sponsor and the Joint Placement Agents, decide. Local Urgent Mail or Registered Post must NOT be used. Your application must be accompanied by a remittance in Singapore currency for the full amount payable, in respect of the number of Placement Shares applied for, in the form of a BANKERS DRAFT or CASHIERS ORDER drawn on a bank in Singapore, made out in favour of IHC SHARE ISSUE ACCOUNT crossed A/C PAYEE ONLY , with your name, CDP Securities Account Number and address written clearly on the reverse side. Applications not accompanied by any payment or accompanied by any other form of payment will not be accepted. We will reject remittances bearing NOT TRANSFERABLE or NON TRANSFERABLE crossings. No acknowledgement or receipt will be issued by us, the Vendors, the Manager and Sponsor and the Joint Placement Agents for applications and application monies or remittance received. 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 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 the Placement Agreement or the Placement does not proceed for any reason, 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 at your own risk within five (5) Market Days from the termination of the Placement. In the event that the Placement is cancelled by us following the issuance of a Stop Order by the Authority or
7.
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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 Market Days from the date of the Stop Order. 9. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or improper form of remittance or which are not honoured upon their first presentation are liable to be rejected.
10. Capitalised terms used in the Application Form and defined in this Offer Document shall bear the meanings assigned to them in this Offer Document. 11. You irrevocably agree and acknowledge that your application is subject to risks of fire, acts of God and other events beyond the control of our Company, our Directors, the Vendors, the Manager and Sponsor, the Joint Placement Agents and/or any other party involved in the Placement and if, in any such event, our Company and/or the Manager and Sponsor and/or the Joint Placement Agents do not receive your Application Form, you shall have no claim whatsoever against our Company, the Manager and Sponsor and/or the Joint Placement Agents and/or any other party involved in the Placement for the Placement Shares applied for or for any compensation, loss or damage.
12. By completing and delivering the Application Form, you agree that: (a) in consideration of our Company and the Vendors having distributed the Application Form to you and agreeing to close the Application List at 12.00 noon on 4 July 2013 or such other time or date as our Directors and the Vendors may, in consultation with the Manager and Sponsor and the Joint Placement Agents, decide and by completing and delivering the Application Form, you agree that: (i) (ii) your application is irrevocable; and your remittance will be honoured on first presentation and that any monies returnable may be held pending clearance of your payment without interest or any share of revenue or other benefit arising therefrom;
(b)
neither our Company, the Manager and Sponsor, the Joint Placement Agents nor any other party involved in the Placement shall be liable for any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery of data relating to your application to us or CDP due to breakdowns or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 11 above or to any cause beyond their respective controls; 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; in respect of the Placement 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;
(c)
(d)
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(e) you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; in making your application, reliance is placed solely on the information contained in this Offer Document and that none of our Company, the Vendors, the Manager and Sponsor, the Joint Placement Agents or any other person involved in the Placement shall have any liability for any information not so contained; you consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent resident status, CDP Securities Account number, and share application amount to our Share Registrar, CDP, SGX-ST, our Company, the Vendors, the Manager and Sponsor, the Joint Placement Agents or other authorised operators; and you irrevocably agree and undertake to subscribe for and/or purchase the number of Placement Shares applied for as stated in the Application Form or any lesser number of such Placement 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 lesser number of Placement Shares or not to allot and/or allocate any Placement Shares to you, you agree to accept such decision as final.
(f)
(g)
(h)
I-9
INTERNATIONAL HEALTHWAY CORPORATION LIMITED

An Integrated Healthcare Services and Facilities Provider (Company Registration No.: 201304341E) (Incorporated in the Republic of Singapore on 18 February 2013) REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS 2 Leng Kee Road | #04-10A Thye Hong Centre | Singapore 159086

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INTERNATIONAL HEALTHWAY CORPORATION LIMITED An Integrated Healthcare Services and Facilities Provider

Manager, Sponsor and Joint Placement Agent

Joint Placement Agents

AN INTEGRATED HEALTHCARE SERVICES AND FACILITIES PROVIDER

OUR BUSINESS SEGMENTS

INTEGRATED MEDICAL REAL ESTATE

STRATEGIC PORTFOLIO OF 22 ASSETS ACROSS THE PRC, JAPAN AND MALAYSIA

OUR INVESTMENT MERITS

facilities, to highly attractive and rapid

CLEAR GROWTH STRATEGIES

Total Gross Floor Area 1

Total Number of Nursing & Maternity Rooms 2

Total Number of Hospital Beds 3

ASSET VALUE BY GEOGRAPHY^

POSITIVE INDUSTRY OUTLOOK*

THE PRC: Rising income and expanding middle class

THE PRC 21.18%

FY2011 35.3 23.8 67.3 9.1 13.8

FY2012 37.8 23.9 63.0 53.2 53.3

VARIANCE 7.1% 0.4% (4.3)ppt 484.6% 286.2%

JAPAN: The rapidly ageing population demands specic

MALAYSIA: Thriving medical tourism market

F-1 G-1 H-1

MANAGER, SPONSOR AND JOINT PLACEMENT AGENT

JOINT PLACEMENT AGENTS

Appleby 2206-19 Jardine House 1 Connaught Place Central Hong Kong

LEGAL ADVISER TO OUR COMPANY ON JAPANESE LAW

LEGAL ADVISER TO OUR COMPANY ON MALAYSIA LAW

LEGAL ADVISER TO OUR COMPANY ON PRC LAW

LEGAL ADVISER TO DMG

Group or Group Companies

Group Subsidiaries Health Kind (Hong Kong)

Health Kind (Shanghai)

IHC Assets (Hong Kong)

IHC Facilities (Hong Kong)

IHC ISH (Japan)

IHC Services (Hong Kong)

IHC TMK (Japan)

Kang Hui (Chengdu)

IHC KLCC Project

IHC Wuxi Project Wuxi Hospital

IHC Medical Resort

IHC Shanghai Project

HMC Group HMD

IHC Holdings (Hong Kong)

SAC Capital SGX-ST Share Registrar TMF

Board or Board of Directors Books Closure Date

BVI Capbridge Framework Agreement

Catalist Catalist Rule or Catalist Rules Companies Act

Convertible Loan Investors

EPS Exchangeable Loan

Exchangeable Loan Investors

Extension to Marriott MOU

First Enterprise Loan

GFA GST HMC Shareholders Hong Kong Subsidiaries

an Associate of any such Director, chief executive officer or Controlling Shareholder

Market Day Marriott MOU

Master Lease Agreements

Medical Development Business

NTA Offer Document

PRC or China Pre-IPO Investors

Primary Geographical Markets Promoters