Date: November 8, 2016
Date: 08 November 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Attn: Board of Directors: Mr Gary Loh Hock Chuan (Executive Chairman) Dr. Tan Eng Liang Mr Chee Wai Pong Mr Michael John Martin Mrs Jessie Peh8 November 2016Dear Members of the Board, Minority shareholders of SunMoon Food Company have approached SIAS to address issues concerning their investment in SunMoon. The issues raised by minority shareholders are highlighted below for the Board to address to shareholders. The issues are as follows: GENERAL OFFER On 18 March 2013, SunMoon announced the restructuring of the existing convertible loan and the circular to shareholders containing the terms of the restructuring were despatched to shareholders in August 2013. A group of creditors (“Lenders”) executed a Settlement Agreement with SunMoon to settle the amounts (principal of $24.4m plus interest of some $12m) owing by SunMoon to the Lenders. The Lenders and SunMoon agreed as follows:
In 2014, Gary Loh sold a substantial portion of his shares to a group of investors, making a substantial profit. At the end of one year, FACL and Gary Loh failed to perform their obligations to the Lenders. Gary Loh did not pay the $6m nor deliver the 60 million shares. As a result, a Writ of Summons was filed by the Lenders against FACL and Gary Loh (the “Suit”). On 17 June 2015, SunMoon announced it had entered into an agreement to acquire 51% interest in Harvest Season Singapore Pte Ltd (“Harvest Season”) (“51% Acquisition”). Harvest Season operates 6 fruit stalls in China. As purchase consideration, SunMoon was to issue 60,000,000 new shares (18.82% of issued capital) to the vendor, resulting in the vendor becoming the single largest shareholder of SunMoon. The 51% Acquisition valued Harvest Season at about S$6.2 million. The 51% Acquisition, if completed would be dilutive to existing shareholders. The Directors and Controlling Shareholders also declared they have no interest in the 51% Acquisition. Coincidently, the purchase consideration, being 60,000,000 new shares, was the same number of shares Gary Loh needed to deliver to the Lenders. On 31 July 2015, after a lengthy delay, FACL transferred the 60 million shares to the Lenders and the transfer was announced on 31 Jul 2015 via SGXNet. On 6 August 2015, certain Lenders who held shares in SunMoon sent a Requisition Notice to SunMoon to convene an EGM for the removal of Gary Loh as director and for the appointment of 4 new directors. On 14 September 2015, SunMoon announced the expiry of Long Stop Date in respect of the 51% Acquisition. FACL and Gary Loh offered to settle the Suit brought by the Lenders. FACL, Gary Loh and the Lenders entered into a Settlement Agreement. The Settlement Agreement involved FACL acquiring 60 million shares from the Lenders. On 21 September 2015, FACL announced:
On 10 November 2015, SunMoon announced that as a result of consultations between FACL and the Securities Industry Council (“SIC”), FACL will be effecting the sale of 14,000,000 shares. Questions:
On 17 June 2015, SunMoon announced it had entered into an agreement to acquire 51% interest in Harvest Season Singapore Pte Ltd (“Harvest Season”) (“51% Acquisition”). Harvest Season operates 6 fruit stalls in China. As purchase consideration, SunMoon was to issue 60,000,000 new shares (18.82% of issued capital) to the vendor, resulting in the vendor becoming the single largest shareholder of SunMoon. The 51% Acquisition valued Harvest Season at about S$6.2 million. The 51% Acquisition, if completed would be dilutive to existing shareholders. The Directors and Controlling Shareholders also declared they have no interest in the 51% Acquisition. On 14 September 2015, SunMoon announced expiry of Long Stop Date in respect of the 51% Acquisition. On 10 February 2016, SunMoon announced an agreement to acquire 12% interest in Harvest Season (“12% Acquisition”) from the vendor of Harvest Season, valuing Harvest Season at about S$11.6m. The purchase consideration is to be paid by the discharge of 2 China customers who owe US$1.03m to SunMoon. The vendor is also granted a call option to re-purchase the 12% Acquisition shares at 10% premium. If the 12% Acquisition is completed, SunMoon may stand to lose US$1.03m and gain up to 10% of US$1.03m. On 19 February 2016, Gary Loh informs that he and his wife are interested in the 12% Acquisition. They both are indirect owners of SLS Atelier and GLOH Fresh which have dealings with the Harvest Season vendor. On 2 June 2016, SunMoon announced extension of Long Stop Date to 29 January 2017. Questions: The 2 China Customers
On 19 February 2016, Gary Loh informs that he and his wife are interested in the transaction. They both are indirect owners of SLS Atelier and GLOH Fresh which have dealings with the Harvest Season vendor. SLS Atelier is owned by First Alverstone Partners, whose owners are Gary Loh and his wife. SLS is an intellectual property manager. They designed a cartoon called “SazzyPets”. On 15 May 2014, a subsidiary of SunMoon, SunMoon Retail & Franchise, entered into a licensee agreement with SLS. In exchange for the right to use SazzyPets on SunMoon’s products, SunMoon pays SLS S$2,000 a month for 3 years, with an option to renew for another 3 years. GLOH Fresh is owned by First Alverstone Partners. It is an online e-commerce platform for fruits. On 15th May 2014, a SunMoon subsidiary, SunMoon Distribution and Trading Company, granted GLOH Fresh a master global license. The license permits GLOH Fresh:
Under the license agreement, SunMoon will provide support to GLOH Fresh Design, Corporation Services and Equipment leases. GLOH Fresh will pay S$2,000 per month licensing fee for 3 years, with an option to renew for another 3 years. Questions:
On 14 August 2015, SunMoon disclosed in their 2Q2015 results announcement that they have since in July 2015 shifted its focus from dehydrated business by leasing out its dehydrated factory in order to concentrate staffing and financial resources on the trading of fresh fruits and the development of processed fruits in order to achieve a stronger market share in these sectors. On 29 February 2016, SunMoon released their 4Q2015 results. On their balance sheet, they classified S$3.5m of Property, Plant & Equipment (“PPE”) under operating lease. The lessee was disclosed as Taian Fei Hui Tong Kai. SunMoon also disclosed that it had entered into an agreement with the lessee to sell inventories worth S$5.9m, payable in 5 monthly instalments from 1 November 2015 to 1 March 2016. Questions:
Based on the announcements, the profit and loss and the adjusted profit and loss after excluding non-recurring income/expenses and write-backs are summarized below:
The annual reports also state Gary Loh’s remuneration as follows:
These questions will also published on the SIAS website. We ask that you make your answers to the above questions public by publishing the answers to the questions on SGX Net and also advise SIAS of your announcement, so that we too can highlight the answers to shareholders through a link on our website. We look forward to receiving your kind responses. |
Dear Members of the Board,
Minority shareholders of SunMoon Food Company have approached SIAS to address issues concerning their investment in SunMoon. The issues raised by minority shareholders are highlighted below for the Board to address to shareholders.