P R O S P E C T U S
Registration No.: 199401034915 (320598-X) (Incorporated in Malaysia and registered under the Companies Act 1965 and deemed registered under the Companies Act 2016)
THE SC HAS APPROVED THE ISSUE, OFFER OR INVITATION IN RESPECT OF OUR INITIAL PUBLIC OFFERING (“IPO”). THIS PROSPECTUS HAS BEEN REGISTERED BY THE SC. THE APPROVAL, AND REGISTRATION OF THIS PROSPECTUS, SHOULD NOT BE TAKEN TO INDICATE THAT THE SC RECOMMENDS OUR IPO OR ASSUMES RESPONSIBILITY FOR THE CORRECTNESS OF ANY STATEMENT MADE, OPINION EXPRESSED OR REPORT CONTAINED IN THIS PROSPECTUS. THE In SC HAS NOT, IN ANY WAY, CONSIDERED THE MERITS OF THE SECURITIES BEING OFFERED IN RESPECT OF OUR IPO
N FOR INVESTMENT. ature Berhad THE SC IS NOT LIABLE FOR ANY NON-DISCLOSURE ON THE PART OF OUR COMPANY AND TAKES NO RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS, MAKES NO REPRESENTATION AS TO ITS ACCURACY OR COMPLETENESS AND EXPRESSLY DISCLAIMS ANY LIABILITY FOR ANY LOSS YOU MAY SUFFER ARISING FROM OR IN RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS PROSPECTUS.
INITIAL PUBLIC OFFERING OF 177,274,000 ORDINARY SHARES IN innature BERHAD (“innature”) (“IPO SHARES”) IN CONJUNCTION WITH THE LISTING OF AND QUOTATION FOR THE ENTIRE 705,881,488 innature SHARES ON THE MAIN MARKET OF BURSA MALAYSIA SECURITIES BERHAD COMPRISING a public issue of 74,074,000 new ordinary shares in innature (“shares”) (“ISSUE SHARES”) AND an offer for sale of 103,200,000 existing shares (“Offer shares”) involving:
(I) The institutional offering of 161,142,500 IPO SHARES to Malaysian and Foreign institutional and selected investors, including Bumiputera Investors approved by the Ministry of International Trade and Industry AT THE Institutional price to be determined by way of bookbuilding (“INSTITUTIONAL PROSPECTUS PRICE”); and (II) The retail offering of 16,131,500 issue Shares to the Malaysian Public, THE DIRECTORs AND ELIGIBLE EMPLOYEES OF innature and its subsidiaries (“innature Group”) at the Retail Price of RM0.68 per share (“Retail Price”), payable in full upon application and subject to refund of the difference between the retail price and the final retail price in the event that the final retail price is less than the retail price, SUBJECT TO THE CLAWBACK AND REALLOCATION PROVISIONS. THE FINAL RETAIL PRICE WILL BE EQUAL TO THE LOWER OF (I) THE RETAIL PRICE AND (II) THE Institutional price.
Principal Adviser, Managing Underwriter, Joint Underwriter, Joint Underwriter and Sole Bookrunner
CIMB Investment Bank Berhad MIDF Amanah Investment Bank Berhad Registration No. 197401001266 (18417-M) Registration No. 197501002077 (23878-X) (A Participating Organisation of Bursa Malaysia Securities Berhad)
INVESTORS ARE ADVISED TO READ AND UNDERSTAND THE CONTENTS OF THIS PROSPECTUS. IF IN DOUBT, PLEASE CONSULT A PROFESSIONAL ADVISER. FOR INFORMATION CONCERNING RISK FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, PLEASE SEE “RISK FACTORS” COMMENCING ON PAGE 177. NO SECURITIES WILL BE ALLOTTED OR ISSUED BASED ON THIS PROSPECTUS AFTER 6 MONTHS FROM THE DATE OF THIS PROSPECTUS. LISTING SOUGHT: MAIN MARKET OF BURSA MALAYSIA SECURITIES BERHAD.
THIS PROSPECTUS IS DATED 29 JANUARY 2020 Registration No.: 199401034915 (32059B-X)
RESPONSIBILITY STATEMENTS
OUR DIRECTORS, PROMOTERS AND SELLING SHAREHOLDER (AS DEFINED HEREIN) HAVE SEEN AND APPROVED THIS PROSPECTUS. THEY COLLECTIVELY AND INDIVIDUALLY ACCEPT FULL RESPONSIBILITY FOR THE ACCURACY OF THE INFORMATION CONTAINED IN THIS PROSPECTUS. HAVING MADE ALL REASONABLE ENQUIRIES, AND TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THEY CONFIRM THAT THERE IS NO FALSE OR MISLEADING STATEMENT OR OTHER FACTS, WHICH IF OMITTED, WOULD MAKE ANY STATEMENT IN THIS PROSPECTUS FALSE OR MISLEADING.
CIMB INVESTMENT BANK BERHAD ("CIMB") , BEING THE PRINCIPAL ADVISER, MANAGING UNDERWRITER, JOINT UNDERWRITER, AND SOLE BOOKRUNNER ACKNOWLEDGES THAT, BASED ON ALL AVAILABLE INFORMATION, AND TO THE BEST OF ITS KNOWLEDGE AND BELIEF, THIS PROSPECTUS CONSTITUTES A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS CONCERNING OUR IPO (AS DEFINED HEREIN). IT IS TO BE NOTED THAT THE ROLE OF MIDF AMANAH INVESTMENT BANK BERHAD ("MIDF") IN OUR IPO IS LIMITED TO BEING A JOINT UNDERWRITER FOR THE RETAIL OFFERING.
STATEMENTS OF DISCLAIMER
OUR COMPANY HAS OBTAINED THE APPROVAL FROM BURSA MALAYSIA SECURITIES BERHAD ("BURSA SECURITIES") FOR THE LISTING OF AND QUOTATION FOR THE ENTIRE ENLARGED ISSUED SHARE CAPITAL IN OUR COMPANY ("SHARES"). OUR ADMISSION TO THE OFFICIAL LIST OF BURSA SECURITIES IS NOTTO BE TAKEN AS AN INDICATION OF THE MERITS OF OUR IPO, OUR COMPANY OR OUR SHARES.
THIS PROSPECTUS, TOGETHER WITH THE APPLICATION FORMS (AS DEFINED HEREIN), HAS ALSO BEEN LODGED WITH THE REGISTRAR OF COMPANIES MALAYSIA, WHO TAKES NO RESPONSIBILITY FOR ITS CONTENTS.
OTHER STATEMENTS
YOU SHOULD NOTE THAT YOU MAY SEEK RECOURSE UNDER SECTIONS 248, 249 AND 357 OF THE CAPITAL MARKETS AND SERVICES ACT 2007 ("CMSA") FOR BREACHES OF SECURITIES LAWS INCLUDING ANY STATEMENT IN THIS PROSPECTUS THAT IS FALSE, MISLEADING, OR FROM WHICH THERE IS A MATERIAL OMISSION, OR FOR ANY MISLEADING OR DECEPTIVE ACT IN RELATION TO OUR PROSPECTUS OR THE CONDUCT OF ANY OTHER PERSON IN RELATION TO OUR COMPANY.
SHARES LISTED ON BURSA SECURITIES ARE OFFERED TO THE PUBLIC ON THE PREMISE OF FULL AND ACCURATE DISCLOSURE OF ALL MATERIAL INFORMATION CONCERNING OUR IPO , FOR WHICH ANY PERSON SET OUT IN SECTION 236 OF THE CMSA, IS RESPONSIBLE.
THE SHARES OF OUR COMPANY ARE CLASSIFIED AS SHARIAH COMPLIANT BY THE SHARIAH ADVISORY COUNCIL OF THE SC. THIS CLASSIFICATION REMAINS VALID FROM THE DATE OF ISSUE OF THIS PROSPECTUS UNTIL THE NEXT SHARIAH COMPLIANCE REVIEW UNDERTAKEN BY THE SHARIAH ADVISORY COUNCIL OF THE SC. THE NEW STATUS IS RELEASED IN THE UPDATED LIST OF SHARIAH COMPLIANT SECURITIES, ON THE LAST FRIDAY OF MAY AND NOVEMBER.
YOU SHOULD NOT TAKE THE AGREEMENT BY THE MANAGING UNDERWRITER AND THE JOINT UNDERWRITERS NAMED IN THIS PROSPECTUS TO UNDERWRITE OUR IPO SHARES (AS DEFINED HEREIN) AS AN INDICATION OF THE MERITS OF OUR SHARES BEING OFFERED.
THIS PROSPECTUS HAS BEEN PREPARED IN THE CONTEXT OF OUR IPO UNDER THE LAWS OF MALAYSIA. THIS PROSPECTUS DOES NOT COMPLYWITH THE LAWS OF ANY JURISDICTION OTHER THAN MALAYSIA, AND HAS NOT BEEN AND WILL NOT BE LODGED, REGISTERED OR APPROVED PURSUANT TO OR UNDER ANY APPLICABLE SECURITIES OR EQUIVALENT LEGISLATION OR WITH OR BY ANY REGULATORY AUTHORITY OF ANY JURISDICTION OTHER THAN MALAYSIA.
THIS PROSPECTUS IS PUBLISHED SOLELY IN CONNECTION WITH OUR IPO. OUR SHARES BEING OFFERED IN OUR IPO ARE OFFERED SOLELY ON THE BASIS OF THE INFORMATION CONTAINED AND REPRESENTATIONS MADE IN THIS PROSPECTUS. OUR COMPANY, THE PROMOTERS, SELLING SHAREHOLDER, PRINCIPAL ADVISER, MANAGING UNDERWRITER, JOINT UNDERWRITERS AND SOLE BOOKRUNNER HAVE NOT AUTHORISED ANYONE TO PROVIDE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS. ANY INFORMATION OR REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORISED BY OUR COMPANY, THE PROMOTERS, THE SELLING SHAREHOLDER, PRINCIPAL ADVISER, MANAGING UNDERWRITER, JOINT UNDERWRITERS AND SOLE BOOKRUNNER OR ANY OF THEIR RESPECTIVE DIRECTORS, OR ANY OTHER PERSONS INVOLVED IN OUR IPO. Registration No.: 199401034915 (320598-X)
THE DISTRIBUTION OF THIS PROSPECTUS AND OUR IPO ARE SUB WE WILL NOT, PRIOR TO ACTING ON ANY ACCEPTANCE IN RESPECT OF OUR IPO, MAKE OR BE BOUND TO MAKE ANY ENQUIRY AS TO WHETHER YOU HAVE A REGISTERED ADDRESS IN MALAYSIA AND WILL NOT ACCEPT OR BE DEEMED TO ACCEPT ANY LIABILITY IN RELATION THERETO WHETHER OR NOT ANY ENQUIRY OR INVESTIGATION IS MADE IN CONNECTION THEREWITH. IT SHALL BE YOUR SOLE RESPONSIBILITY TO ENSURE THAT YOUR APPLICATION FOR OUR IPO WOULD BE IN COMPLIANCE WITH THE TERMS OF OUR IPO AND WOULD NOT BE IN CONTRAVENTION OF ANY LAWS OF COUNTRIES OR JURISDICTIONS TO WHICH YOU MAY BE SUBJECTED. WE WILL FURTHER ASSUME THAT YOU HAD ACCEPTED OUR IPO IN MALAYSIA AND WILL AT ALL APPLICABLE TIMES BE SUBJECTED ONLY TO THE LAWS OF MALAYSIA IN CONNECTION THEREWITH. HOWEVER, WE RESERVE THE RIGHT, IN OUR ABSOLUTE DISCRETION TO TREAT ANY ACCEPTANCE AS INVALID IF WE BELIEVE THAT SUCH ACCEPTANCE MAY VIOLATE ANY LAW OR APPLICABLE LEGAL OR REGULATORY REQUIREMENTS. IT SHALL BE YOUR SOLE RESPONSIBILITY TO CONSULT YOUR LEGAL AND/OR OTHER PROFESSIONAL ADVISERS ON THE LAWS TO WHICH OUR IPO OR YOU ARE OR MIGHT BE SUBJECTED TO. NEITHER WE NOR THE PROMOTERS, SELLING SHAREHOLDER, PRINCIPAL ADVISER, MANAGING UNDERWRITER, JOINT UNDERWRITERS AND SOLE BOOKRUNNER AND THEIR RESPECTIVE ADVISERS SHALL ACCEPT ANY RESPONSIBILITY OR LIABILITY IF ANY APPLICATION MADE BY YOU SHALL BECOME ILLEGAL, UNENFORCEABLE OR VOID IN ANY COUNTRY OR JURISDICTION. ELECTRONIC PROSPECTUS THIS PROSPECTUS CAN BE VIEWED OR DOWNLOADED FROM BURSA SECURITIES' WEBSITE AT www.bursamalaysia.com. THE CONTENTS OF THE ELECTRONIC PROSPECTUS AND THE COPY OF THIS PROSPECTUS REGISTERED WITH THE SC ARE THE SAME. THE INTERNET IS NOT A FULLY SECURE MEDIUM. YOUR INTERNET SHARE APPLICATION (AS DEFINED HEREIN) MAY BE SUBJECT TO RISKS IN DATA TRANSMISSION, COMPUTER SECURITY THREATS SUCH AS VIRUSES, HACKERS AND CRACKERS, FAULTS WITH COMPUTER SOFTWARE AND OTHER EVENTS BEYOND THE CONTROL OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS (AS DEFINED HEREIN). THESE RISKS CANNOT BE BORNE BY THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS. IF YOU DOUBT THE VALIDITY OR INTEGRITY OF THE ELECTRONIC PROSPECTUS, YOU SHOULD IMMEDIATELY REQUEST FROM OUR COMPANY OR THE ISSUING HOUSE, A PAPER / PRINTED COPY OF THIS PROSPECTUS. IF THERE IS ANY DISCREPANCY BETWEEN THE CONTENTS OF THE ELECTRONIC PROSPECTUS AND THE PAPER/PRINTED COPY OF THE PROSPECTUS, THE CONTENTS OF THE PAPER/PRINTED COPY OF THIS PROSPECTUS WHICH ARE IDENTICAL TO THE COpy OF THE PROSPECTUS REGISTERED WITH THE SC SHALL PREVAIL. IN RELATION TO ANY REFERENCE IN THIS PROSPECTUS TO THIRD PARTY INTERNET SITES (REFERRED TO AS "THIRD PARTY INTERNET SITES"), WHETHER BY WAY OF HYPERLINKS OR BY WAY OF DESCRIPTION OF THE THIRD PARTY INTERNET SITES, YOU ACKNOWLEDGE AND AGREE THAT: (I) WE DO NOT ENDORSE AND ARE NOT AFFILIATED IN ANY WAY TO THE THIRD PARTY INTERNET SITES. ACCORDINGLY, WE ARE NOT RESPONSIBLE FOR THE AVAILABILITY OF OR THE CONTENT OR ANY DATA, FILES OR OTHER MATERIAL PROVIDED IN THE THIRD PARTY INTERNET SITES. YOU BEAR ALL RISKS ASSOCIATED WITH THE ACCESS TO OR USE OF THE THIRD PARTY INTERNET SITES; ii Registration No.: 199401034915 (320598-X) (II) WE ARE NOT RESPONSIBLE FOR THE QUALITY OF PRODUCTS OR SERVICES IN THE THIRD PARTY INTERNET SITES, PARTICULARLY IN FULFILLING ANY OF THE TERMS OF ANY AGREEMENTS WITH THE THIRD PARTY INTERNET SITES. WE ARE ALSO NOT RESPONSIBLE FOR ANY LOSS OR DAMAGE OR COST THAT YOU MAY SUFFER OR INCUR IN CONNECTION WITH OR AS A RESULT OF DEALING WITH THE THIRD PARTY INTERNET SITES OR THE USE OR RELIANCE ON ANY DATA, FILE OR OTHER MATERIAL PROVIDED BY SUCH PARTIES; AND (III) ANY DATA, FILE OR OTHER MATERIAL DOWNLOADED FROM THE THIRD PARTY INTERNET SITES IS DONE AT YOUR OWN DISCRETION AND RISK. WE ARE NOT RESPONSIBLE, LIABLE OR UNDER OBLIGATION FOR ANY DAMAGE TO YOUR COMPUTER SYSTEM OR LOSS OF DATA RESULTING FROM THE DOWNLOADING OF ANY SUCH DATA, INFORMATION , FILES OR OTHER MATERIAL. WHERE AN ELECTRONIC PROSPECTUS IS HOSTED ON THE WEBSITE OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTION, YOU ARE ADVISED THAT: (I) THE INTERNET PARTICIPATING FINANCIAL INSTITUTION IS ONLY LIABLE IN RESPECT OF THE INTEGRITY OF THE CONTENTS OF AN ELECTRONIC PROSPECTUS, TO THE EXTENT OF THE CONTENTS OF THE ELECTRONIC PROSPECTUS ON THE WEB SERVER OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTION WHICH MAY BE VIEWED VIA YOUR WEB BROWSER OR OTHER RELEVANT SOFTWARE. THE INTERNET PARTICIPATING FINANCIAL INSTITUTION IS NOT RESPONSIBLE FOR THE INTEGRITY OF THE CONTENTS OF AN ELECTRONIC PROSPECTUS WHICH HAS BEEN OBTAINED FROM THE WEB SERVER OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTION AND SUBSEQUENTLY COMMUNICATED OR DISSEMINATED IN ANY MANNER TO YOU OR OTHER PARTIES; (II) WHILE ALL REASONABLE MEASURES HAVE BEEN TAKEN TO ENSURE THE ACCURACY AND RELIABILITY OF THE INFORMATION PROVIDED IN AN ELECTRONIC PROSPECTUS, THE ACCURACY AND RELIABILITY OF AN ELECTROt\IIC PROSPECTUS CANNOT BE GUARANTEED BECAUSE THE INTERNET IS NOT A FULLY SECURE MEDIUM; AND (III) THE INTERNET PARTICIPATING FINANCIAL INSTITUTION IS NOT LIABLE (WHETHER IN TORT OR CONTRACT OR OTHERWISE) FOR ANY LOSS, DAMAGE OR COST, THAT YOU OR ANY OTHER PERSON MAY SUFFER OR INCUR DUE TO, AS A CONSEQUENCE OF OR IN CONNECTION WITH ANY INACCURACIES, CHANGES, ALTERATIONS, DELETIONS OR OMISSIONS IN RESPECT OF THE INFORMATION PROVIDED IN THE ELECTRONIC PROSPECTUS WHICH MAY ARISE IN CONNECTION WITH OR AS A RESULT OF ANY FAULT WITH THE WEB BROWSERS OR OTHER RELEVANT SOFTWARE, ANY FALIL T ON YOU OR ANY THIRD PARTY'S PERSONAL COMPUTER , OPERATING SYSTEM OR OTHER SOFTWARE, VIRUSES OR OTHER SECURITY THREATS, UNAUTHORISED ACCESS TO INFORMATION OR SYSTEMS IN RELATION TO THE WEBSITE OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTION, AND/OR PROBLEMS OCCURRING DURING DATA TRANSMISSION WHICH MAY RESULT IN INACCURATE OR INCOMPLETE COPIES OF INFORMATION BEING DOWNLOADED OR DISPLAYED ON YOUR PERSONAL COMPUTER. iii Registration No.: 199401034915 (320598-X) INDICATIVE TIMETABLE The following events are intended to take place on the following tentative dates: Events Dates Opening of the Institutional Offering 29 January 2020 Opening of the Retail Offering 10:00 a.m ., 29 January 2020 Closing of the Retail Offering 5:00 p.m., 6 February 2020 Closing of the Institutional Offering 7 February 2020 Price Determination Date 7 February 2020 Balloting of applications for our IPO Shares under the Retail Offering 10 February 2020 AliotmenUtransfer of our IPO Shares to successful Applicants 19 February 2020 Listing 20 February 2020 In the event there is any change to the timetable, we will advertise the notice of changes in a widely circulated Bahasa Malaysia and English daily newspaper within Malaysia. All terms used in this Prospectus are defined under "Definitions", "Glossary of Technical Terms" and "Presentation of Financial and Other Information" commencing on pages ix, xvi and xix, respectively. (The rest of this page has been intentionally left blank) iv Registration No.: 199401034915 (320598-X) TABLE OF CONTENTS PAGE DEFINITIONS ix GLOSSARY OF TECHNICAL TERMS xvi PRESENTATION OF FINANCIAL AND OTHER INFORMATION xix FORWARD-LOOKING STATEMENTS xxi CORPORATE DIRECTORY xxiii 1. PROSPECTUS SUMMARY 1.1 Overview of our business 1.2 Our competitive advantages and key strengths 3 1.3 Future plans and strategies 4 1.4 Salient information of our IPO 4 1.5 Risk factors 5 1.6 Directors, Key Senior Management, Promoters and Substantial Shareholders 6 1.7 Financial highlights 8 1.8 Utilisation of proceeds 10 1.9 Dividend policy 10 2. DETAILS OF OUR IPO 2.1 Opening and closing of applications 11 2.2 Indicative timetable 11 2.3 Details of our IPO 11 2.4 Selling Shareholder 16 2.5 Basis of arriving at the price of the IPO Shares 17 2.6 Objectives of our IPO 19 2.7 Dilution 19 2.8 Utilisation of proceeds 20 2.9 Brokerage, underwriting commission and placement fees 29 2.10 Details of the underwriting, placement and lock-up arrangements 30 2.11 Trading and settlement in the secondary market 35 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS, AND KEY SENIOR MANAGEMENT 3.1 Directors 37 3.2 Promoters and Substantial Shareholders 64 3.3 Key Senior Management 70 3.4 Management reporting structure 76 v Registration No.: 199401034915 (32059B-X) TABLE OF CONTENTS (cont'd) PAGE 3.5 Declarations by our Directors, Promoters and Key Senior Management 76 3.6 Relationships or associations between our Directors, Promoters, Substantial 77 Shareholders and Key Senior Management 3.7 Service agreements 77 4. INFORMATION ON OUR GROUP 4.1 Our Company 78 4.2 Group structure 82 4.3 Our Subsidiaries 84 5. BUSINESS OVERVIEW 5.1 Business overview 89 5.2 Awards 96 5.3 Our business 99 5.4 Our future plans and strategies 113 5.5 Operational process 116 5.6 Technologies 118 5.7 Cash management 118 5.8 Security and loss prevention 119 5.9 Insurance 119 5.10 Marketing and promotion activities 119 5.11 Seasonality 122 5.12 Pricing 122 5.13 Major customers 123 5.14 Major suppliers 123 5.15 Material dependency on commercial contracts, agreements and other 123 arrangements 5.16 Quality control procedure for TBS Products 140 5.17 Research and development 141 5.18 Interruptions to the business for the past 12 months 141 5.19 Employees 142 5.20 Approvals, major licences and permits obtained 144 5.21 Brand names, patents and trademarks 155 5.22 Property, plant and equipment 155 5.23 Regulatory requirements and environmental issues 160 6. INDUSTRY OVERVIEW 165 vi Registration No.: 199401034915 (32059B-X) TABLE OF CONTENTS (cant'd) PAGE 7. RISK FACTORS 7.1 Risks relating to our business and operations 177 7.2 Risks relating to the industry in which our Group operates 186 7.3 Risks relating to investment in our Shares 188 8. APPROVALS AND CONDITIONS 8.1 Approvals and conditions 192 8.2 Moratorium on our Shares 195 9. RELATED PARTY TRANSACTIONS 9.1 Related party transactions 196 9.2 Monitoring and oversight of related party transactions 208 10. CONFLICTS OF INTEREST 10.1 Conflict of interest 209 10.2 Declaration by advisers on conflicts of interest 209 11. FINANCIAL INFORMATION 11.1 Historical consolidated financial information 213 11.2 Capitalisation and indebtedness 218 11.3 Management's discussion and analysis of financial condition and results of 219 operations 11.4 Liquidity and capital resources 248 11.5 Key financial ratios 256 11.6 Order book 261 11.7 Trend information 261 11.8 Significant changes 262 11.9 Accounting standards issued that are not yet effective 262 11.10 Dividend history / policy 262 11.11 Reporting Accountants' report on the pro forma consolidated financial position 265 12. ACCOUNTANTS'REPORT 274 vii Registration No.: 199401034915 (320598-X) TABLE OF CONTENTS (cont'd) PAGE 13. ADDITIONAL INFORMATION 13.1 Share capital 361 13.2 Extracts of our Constitution 361 13.3 Limitation on the right to own securities and/or exercise voting rights 366 13.4 Repatriation of capital, remittance of profit and taxation 367 13.5 Material contracts 367 13.6 Material litigation 374 13.7 Public take-overs 375 13.8 Consents 375 13.9 Documents available for inspection 375 13.10 Responsibility statements 376 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE 14.1 Opening and closing of application 377 14.2 Methods of application 377 14.3 Eligibility 378 14.4 Applications by way of Application Forms 379 14.5 Applications by way of Electronic Share Applications 380 14.6 Applications by way of Internet Share Applications 380 14.7 Authority of our Board and the Issuing House 380 14.8 Over / Under-subscription 381 14.9 Unsuccessful/partially successful applicants 381 14.10 Successful applicants 382 14.11 Enquiries 383 (The rest of this page has been intentionally left blank) viii Registration No.: 199401034915 (320598-X) DEFINITIONS The following terms in this Prospectus bear the same meanings as set out below unless the term is defined otherwise or the context requires otherwise: Act Companies Act 2016 of Malaysia ADA Authorised Depository Agent Admission Admission of our Shares to the Official List of the Main Market Applicant(s) Applicant(s) for the subscription of our IPO Shares by way of Application Forms or by way of Electronic Share Application or by way of Internet Share Application Application Form(s) Printed application form(s) for the application for subscription of our IPO Shares accompanying this Prospectus ASEAN Association of South East Asian Nations ATM Automated teller machine Authorised Financial Authorised financial institution(s) participating in the Internet I nstitution(s) Share Application, with respect to payments for our IPO Shares made available for application under the Public Issue BluPlanet or Selling BluPlanet Sdn Bhd Shareholder BNM Bank Negara Malaysia Board The Board of Directors of our Company Bursa Depository Bursa Malaysia Depository Sdn Bhd Bursa Securities Bursa Malaysia Securities Berhad CAGR Compounded annual growth rate CCC Certificate of completion and compliance CCM Companies Commission of Malaysia CDS Central Depository System CDS Account An account established by Bursa Depository for a depositor for the recording of deposits or withdrawals of securities and for dealings in such securities by the depositor CEO Chief Executive Officer CF Certificate of fitness for occupation CIMB or Principal Adviser or CIMB Investment Bank Berhad Managing Underwriter or Joint Underwriter or Sole Bookrunner CMSA Capital Markets and Services Act 2007 of Malaysia ix Registration No.: 199401034915 (320598-X) DEFINITIONS (cont'd) Constitution The Constitution of our Company, as may be amended from time to time Daryl Foong Foong Chuen Hoe Datin Mina Datin Cheah Kim Choo Dato' Maznah Dato' Maznah Binti Abdul Jalil Dato'Simon Dato' Foong Choong Heng DC Central distribution centre and warehouse Dexter Foong Foong Chuen Hsien Director(s) Members of our Board EBITDA Earnings before interest, taxation, depreciation and amortisation EIS Employment Insurance System Electronic Prospectus A copy of this Prospectus that is issued, circulated or disseminated via the internet, and/or any electronic storage medium, including but not limited to CD-ROMs (compact disc read-only memory) Eligible Persons The Directors and other employees of our Group who are eligible to participate in the Pink Form Allocation EPF Employees Provident Fund EPS Earnings per share EPOS Electronic point-of-sale ERP Enterprise resource planning ERP System Our main enterprise resource planning system that integrates our EPOS system at all our TBS points-of-sale with our sales and inventory management system at the HQ, which in turn is connected to our e-commerce system, accounting and human resources systems ESA or Electronic Share Application for the subscription of our IPO Shares through an Internet Application Participating Financial Institution's ATM Etheco Etheco Sdn Bhd Executive Directors Executive directors of our Company, namely Datin Mina and Molly Fong Feliz Natur Feliz Natur Sdn Bhd (formerly known as TBS Franchise Sdn Bhd) Final Retail Price Final price per Share equivalent to the Retail Price or the Institutional Price, whichever is lower, to be determined on the Price Determination Date FPE Financial period ended 30 September Franchise Agreements Rampai-Niaga Franchise Agreement, TBS Vietnam Franchise Agreement and Green Cosmetics Franchise Agreement, collectively x Registration No.: 199401034915 (32059B-X) DEFINITIONS (cont'd) Franchise Framework Franchise framework agreement dated 19 June 2019 and side letter Agreement or FFA dated 19 June 2019 entered into between TBSI and Etheco, Dato' Simon and Datin Mina FYE Financial year ended or where the context requires, financial year ending 31 December GC Vietnam Green Cosmetic Company Limited, our retail agent in Vietnam . GC Vietnam is a company incorporated in Vietnam by a local third party and is not a subsidiary of our Group. Government The Government of Malaysia GP Gross profit Green Cosmetics The franchise agreement, addendum for software license and side Franchise Agreement letter, all dated 19 June 2019 entered into between our Franchisor and Green Cosmetics Group or InNature Group InNature and its Subsidiaries, collectively HCMC Ho Chi Minh City, Vietnam HQ Our head office in Subang Jaya, Malaysia, HCIVIC, or Phnom Penh, as the case may be IFRS International Financial Reporting Standards IMR Independent market research consultants, Frost & Sullivan GIC Malaysia Sdn Bhd IMR Report Independent Market Research on the Cosmetics and Personal Care (CPC) industry in Malaysia and Vietnam and brief oveNiew for Cambodia dated 10 January 2020 prepared by the IrviR Industria Natura Industria E Comercio De Cosmeticos Natura Uda., a subsidiary of Natura Cosmeticos SA InNature or Company InNature Berhad Institutional Offering Offering of 161,142,500 IPO Shares at the Institutional Price, subject to the clawback and reallocation provisions, to the following: (i) Malaysian institutional and selected investors, including Bumiputera investors approved by MITI; and (ii) foreign institutional and selected investors. Institutional Price Price per Offer Share and/or Issue Share to be paid by investors pursuant to the Institutional Offering which will be determined on the Price Determination Date by bookbuilding Internet Participating Participating financial institution for Internet Share Application, as Financiallnstitution(s) listed in Section 14 of this Prospectus Internet Share Application Application for the Public Issue through an Internet Participating Financial Institution xi Registration No.: 199401034915 (320598-X) DEFINITIONS (cont'd) IPO Initial public offering of the Shares comprising the Public Issue and the Offer for Sale IPO Shares The Issue Shares and the Offer Shares, collectively Issue Shares 74,074,000 new Shares to be issued pursuant to the Public Issue Issuing House Malaysian Issuing House Sdn Bhd IT Information technology Joint Underwriters Collectively, CIMB and MIDF Kejora Harta Kejora Harta Berhad Key Senior Management The key senior management team of our Company, as set out in Section 3.3 of this Prospectus KKIA Kota Kinabalu International Airport KL Federal Territory of Kuala Lumpur, Malaysia KLiA Kuala Lumpur International Airport klia2 Kuala Lumpur International Airport 2 KLCC Kuala Lumpur City Centre Labuan Federal Territory of Labuan, Malaysia LATAM Latin America Listing The listing of and quotation for our entire issued share capital, comprising 705,881,488 Shares on the Main Market Listing Requirements Main Market Listing Requirements of Bursa Securities Love Your BodyTM Our customer loyalty membership programme programme LPD 31 December 2019, the latest practicable date prior to the registration of this Prospectus with the SC Main Market Main Market of Bursa Securities Malaysian Public Malaysian citizens, companies, societies, co-operatives and institutions incorporated or organised under the laws of Malaysia Management Executive Directors and Key Senior Management of our Company Market Day A day on which Bursa Securities is open for trading in securities MDTCC Ministry of Domestic Trade and Consumer Affairs MFRS Malaysian Financial Reporting Standards MIA Malaysian Institute of Accountants xii Registration No.: 199401034915 (32059B·X) DEFINITIONS (cant'd) MIDF MIDF Amanah Investment Bank Berhad MITI Ministry of International Trade and Industry of Malaysia Molly Fong Fong Hui Sain Natura The Natura brand, further details as set out Section 5.3.2 of this Prospectus Natura MOU The memorandum of understanding dated 17 April 2019 entered into between Natura Cosmeticos S.A. and InNature and the supplemental amendments thereto dated 11 July 2019 and 11 December 2019 Natura Supply Agreement The supply agreement dated 28 November 2019 entered into between Industria Natura and Ola Beleza Natura Consent Letters The consent letters dated 19 June 2019 from TBSI granting consent to Rampai·Niaga under the Rampai·Niaga Franchise Agreement; and to Etheco, Dato' Simon and Datin Mina under the Franchise Framework Agreement; to operate the Natura business in Malaysia. N/A Not applicable NA l\Jet assets NBV Net book val ue Offer for Sale Offer for sale by the Selling Shareholder, namely BluPlanet, of the 103,200,000 Shares at the Institutional Price Offer Shares 103,200,000 existing Shares to be offered under the Offer for Sale Official List A list specifying all securities which have been admitted for listing and which have not been removed from the Main Market Participating Financial Participating financial institution(s) for the Electronic Share Application Institution(s) as listed in Section 14 of this Prospectus PAT Profit after taxation PBT Profit before taxation PDPA Personal Data Protection Act 2010 of Malaysia Pelagos Pelagos Sdn Bhd PER Price to earnings multiple Pink Form Allocation 2,000,000 Issue Shares under the Retail Offering which have been reserved and set aside for subscription by the Eligible Persons Placement Agreement Placement agreement to be entered into between our Company, the Selling Shareholder and the Sole Bookrunner in relation to the placement of 103,200,000 Offer Shares and 57,942,500 Issue Shares under the Institutional Offering Price Determination Date Date on which the Institutional Price and the Final Retail Price will be determined xiii Registration No.: 199401034915 (32059B-X) DEFINITIONS (cont'd) Primarium Primarium Sdn Bhd Promoters Datin Mina, Dato' Simon, Daryl Foong, Dexter Foong, Etheco, BluPlanet, Pelagos, and Primarium, collectively Prospectus This Prospectus dated 29 January 2020 in relation to the I PO Prospectus Guidelines Prospectus Guidelines issued by the SC Public All persons or members of the public but excluding our Group's directors, our Substantial Shareholders and persons associated with them (as defined in the Listing Requirements) Public Issue Public issue of 74,074,000 Issue Shares by our Company comprising the following: (i) the Institutional Offering of 57,942,500 Issue Shares; and (ii) the Retail Offering of 16,131,500 Issue Shares Rampai-Niaga Franchise The franchise agreement, addendum for software licence and side Agreement letters, all dated 19 June 2019 entered into between our Franchisor and Rampai-Niaga Retai I Offeri ng Offering of 16,131,500 Issue Shares at the Retail Price, subject to the clawback and reallocation provisions, to the Malaysian Public, the Directors and eligible employees of our Group payable in full upon application and subject to refund of the difference between the Retail Price and the Final Retail Price, in the event that the Final Retail Price is less than the Retail Price Retail Price Initial price of RMO.68 for each IPO Share to be fully paid by applicants pursuant to the Retail Offering subject to adjustments as set out in Section 2.5.1 of this Prospectus Retail Underwriting Retail underwriting agreement dated 10 January 2020 entered into Agreement between InNature and the Joint Underwriters in relation to the Retail Offering SC Securities Commission Malaysia SC Equity Guidelines Equity Guidelines issued by the SC Share(s) Ordinary share(s) in our Company SICDA Securities Industry (Central Depositories) Act 1991 of Malaysia SOCSO Social Security Organisation, Malaysia SKU Stock keeping unit sq. ft. Square feet SST Sales and services tax Subsidiaries Rampai-Niaga, TBS Vietnam and Green Cosmetics, Hello Natural, and Ola Beleza, collectively and each individually referred to as "Subsidiary" xiv Registration No.: 199401034915 (32059B-X) DEFINITIONS (cont'd) Substantial Shareholder(s) Etheco, BluPlanet, Dato' Simon and Datin Mina, being persons who respectively have an interest in one or more of voting Shares and the aggregate number of such shares is not less than 5% of the total number of all the voting shares of our Company TBS The Body Shop® TBS products TBS brand of products TBS Franchisees Rampai-Niaga, TBS Vietnam and Green Cosmetics, collectively and each individually referred to as "TBS Franchisee" TBS Vietnam Franchise The franchise agreement, addendum for software licence and side Agreement letter, all dated 19 June 2019 entered into between our Franchisor and TBSVietnam Tengku Zatashah Yang Amat Mulia Tengku Datin Paduka Setia Zatashah Binti Sultan Sharafuddin Idris Shah The Body Shop The Body Shop International Limited International or TBSI or Franchisor UK United Kingdom USA United States of America SUBSIDIARIES OF OUR COMPANY Green Cosmetics Green Cosmetics (Cambodia) Co., Ltd. Hello Natural Hello Natural Sdn Bhd (formerly known as Ola Natura Sdn Bhd) Ola Beleza Ola Beleza Sdn Bhd (formerly known as Natura Beauty Sdn Bhd) Rampai-Niaga Rampai-Niaga Sdn Bhd TBS Vietnam TBS Vietnam Company Limited CURRENCY GBP or£ Great Britain Pound KHR Cambodian riel R$ Brazilian real RM and sen Ringgit Malaysia and sen, respectively USD United States Dollar VND Vietnamese Dong Registration No.: 199401034915 (320598-X) GLOSSARY OF TECHNICAL TERMS Technical terms used in this Prospectus bear the same meanings as set out below unless the term is defined otherwise or the context requires otherwise: 100% vegetarian Product that is free of any animal-derived ingredients that are obtained as a result of animal slaughter. Products can include animal-derived ingredients that do not involve animal slaughter, such as honey, beeswax and lanolin. 100% vegan Formulated without any animal derived ingredients. above-the-line Denoting or relating to advertising in the mass media B2C e-commerce Commercial transactions conducted through website between a platform business entity and individual customers who are the end-users below-the-line Denoting or relating to advertising by means such as direct mail, email and promotional events Body Butter A body moisturiser that nourishes and replenishes skin with moisture. It protects skin from dryness to leave softer and smoother skin Body Yogurt Highly moisturising and instantly absorbing gel-cream for the body C2C Customer to customer Churn management The ability to identify valuable customers, who are likely to stop using a company's products or seNices and to execute proactive steps to retain them . "Churn" means the attrition or turnover of customers of a business CPC Cosmetics personal care CRM Customer relationship management Cross-category Campaigns to upsell and cross-sell products from different categories. campaigning Cruelty-free Product and its sources of ingredients that meet the Leaping Bunny Standard (an international gold standard for non-animal tested consumer products), operated by Cruelty Free International Digital marketing The marketing of products or seNices using digital channels to reach consumers xvi Registration No.: 199401034915 (320598-X) GLOSSARY OF TECHNICAL TERMS (cont'd) Drop-shipping A supply chain management method in which online marketplace retailers do not keep our goods in stock but instead transfers the customer orders and delivery details to us, after which we ship the goods directly to the customer e-commerce Commercial transactions conducted electronically on the Internet Hypertargeting The ability to deliver advertising content to specific interest-based segments in a network In-store marketing The various marketing methods employed within a retailer's point-of sale, for example, communications programmes encompassing leaflets to point-of-sale signage, sales promotions such as bundled offers and gifts with promotions, etc. Like-for-like Comparison in one period with the previous period, taking into account exactly, among others, the same number of stores, businesses and activities Mass epe products epe products which: • are sold at a low price; and • distributed via wide range of distribution channels including hypermarkets, supermarkets and drugstores Masstige or Masstige epe products which: epe products • are sold at a pricing category which is combination of the Mass epe products and Prestige epe products pricing categories; • sold directly to consumers via the retailer's own physical or online points-of sale (including third-party online websites); • distribution points are similar to Prestige epe products (such as via stand-alone stores, multi-brand beauty specialist retailers, beauty specialist service providers and department stores that have staff to assist consumers with their queries on the product), but are priced at a lower level compared to other Prestige epe products; and • carry higher value-added benefits (e.g. health benefits or efficacy and status (branding)) when compared to Mass epe products but are affordably priced compared to premium or luxury epe products Mono-brand beauty A beauty specialist retailer that exclusively sells epe products of one specialty retailer specific brand Multichannel The practice by which companies interact with customers via multiple channels, both direct and indirect, retail and online channel. Customers data are stored in silos and have very little or no connection to one another Omnichannel The multichannel sales approach that provides the customer with an integrated shopping experience. The customer can be shopping online from a desktop or mobile device, via phone, or in a brick-and-mortar store, and the experience will be seamless Organic search Search results or web page listings based on relevance to the search terms entered by the user, and excludes advertisements xvii Registration No.: 199401034915 (32059B-X) GLOSSARY OF TECHNICAL TERMS (cont'd) Out-of-store Marketing Marketing methods used to reach a retailer's customers outside of the store premises, such as promotional kiosks and events conducted in various venues where traffic is high or where there are likely to be a high concentration of potential customers Points-of-sale The place at which a retail transaction is carried out, excluding short term promotional kiosks Predictive segmentation The capability of automatically identifying and creating meaningful visitor segments characterised by a higher probability to react in a certain manner to specific content Prestige CPC products CPC products which: • are sold at a high price; • sold directly to consumers via the retailer's own physical or online points-of-sale (including third-party online websites); and • distributed at stand-alone stores, multi-brand beauty specialist retailers, beauty specialist seN ice providers and department stores that have staff to assist consumers with their queries on the product Same Store Sales An operational performance measure used to analyse sales Growth or SSSG performance. SSSG measures the growth of our revenue generated by our existing points-of-sale (including online e-stores) over a certain period, as compared with the preceding corresponding period Showrooming Displaying products in a shop for customers to test products physically Social commerce A form of electronic commerce which uses social networks to assist in the buying and selling of products. This type of commerce utilises user ratings, referrals, online communities and social advertising to facilitate online shopping User-generated content Any form of content, such as images, videos, text and audio, that have been posted by users of online platforms such as social media and wikis Web-influenced online Retail channel sales that are influenced by online marketing; for sales example, consumers do a lot of research and browsing online, and then buy at retail stores (The rest of this page has been intentionally left blank) xviii Registration No.: 199401034915 (320598-X) PRESENTATION OF FINANCIAL AND OTHER INFORMATION All references in this Prospectus to "our Company" and "lnNature" are to InNature Berhad. All references to "our Group" are to our Company and our Subsidiaries, collectively and all references to "we", "us", "our" and "ourselves" are to our Company, and save where the context otherwise requires, and our Subsidiaries. Unless the context otherwise requires, references to "Management" are to our Directors and Key Senior Management personnel as at the date of this Prospectus, and statements to our beliefs, expectations, estimates and opinions are those of our Management. Certain abbreviations and acronyms used herein are defined in the "Definitions" section in this Prospectus and the technical terms used herein are defined in the "Glossary of Technical Terms" section, Words denoting the singular shall, where applicable, include the plural and vice versa. Words denoting the masculine gender shall, where applicable, include the feminine and I or neuter genders, and vice versa. Any reference to persons shall include a company or a corporation, unless otherwise specified. Solely for your convenience, this Prospectus contains translation of certain GBP or £, VND, KHR and USD amounts into RM at specified rates. No representation is made that the GBP or £, VND, KHR and USD amounts referred to in this Prospectus could have been or could actually be converted into RM amounts, at the rates indicated or at all . The exchange rates as set out below are applied in this Prospectus unless specified otherwise: FYE FPE 2016 2017 2018 2018 2019 VND to RM 1 Average rate(1) 5,157 5,344 5,610 5,644 5,573 Closing rate(2) 5,076 5,611 5,608 5,639 5,537 As at the LPD BNM middle rate RM to GBP 1 (3) 5.3772 RM to USD 1(3) 4.0930 VND to RM 1(3) 5,661 KHR to RM 1(3) 997.40 Bloomberg rate RM to R$ 1 (4) 1.0176 Notes: (1 ) The average rate is used for the translation of income and expense items in the consolidated statements of financial positions of I nNature (2) The closing rate is used for the translation of assets and liabilities in the consolidated statements of profit or loss and other comprehensive income of InNature (3) Unless specified otherwise, the financial information disclosed in this Prospectus are translated at the middle rates of 5.00 p.m. on the LPD as published by BNM (4) The conversion of Brazilian real (R$) to Malaysian Ringgit (RM) is based on the closing rate published by Bloomberg on the LPD xix Registration No.: 199401034915 (32059B-X) PRESENTATION OF FINANCIAL AND OTHER INFORMATION (cant'd) Any reference in this Prospectus to any provisions of the statutes, rules, regulations, enactments or rules of stock exchange shall (where the context admits) be construed as a reference to provisions of such statutes, rules, regulations, enactments or rules of stock exchange (as the case may be) as modified by any written law or (if applicable) amendments or re-enactment to the statutes, rules, regulations, enactments or rules of stock exchange for the time being in force. Certain amounts and percentage figures included in this Prospectus have been subject to rounding adjustments. As a result, any discrepancies in the tables or charts between the amounts listed and the totals in this Prospectus are due to rounding . Where information is presented in thousands or millions of units, amounts may have been rounded up or down. All references to dates and times are references to dates and times in Malaysia, unless otherwise stated. This Prospectus includes statistical data provided by us and various third parties and cites third party projections regarding growth and performance of the industry in which we operate and our estimated market share in the industry in which we operate. This data is taken or derived from information published by industry sources, publicly available sources. In each such case, the source is stated in this Prospectus, provided that where no source is stated, it can be assumed that the information originates from us. In particular, certain information in this Prospectus is extracted or derived from the IMR Report. We believe that the statistical data and projections cited in this Prospectus are useful in helping you understand the major trends in the industry in which we operate. However, neither we nor our advisers have independently verified these data. We and our advisers do not make any representation as to the correctness, accuracy or completeness of such data. You should not place undue reliance on the statistical data. Similarly, third party projections, including the projections from the IMR Report, cited in this Prospectus are subject to uncertainties that could cause actual data to differ materially from the projected figures. We give no assurance that the projected figures will be achieved. The information on our website, or any website directly and indirectly linked to such website does not form part of this Prospectus and should not be relied upon. "EBITDA", as well as the related ratios presented in this Prospectus, are supplemental measures of our performance and liquidity that are not requ ired by or presented in accordance with the IFRS and MFRS. Furthermore, EBITDA is not a measure of our financial performance or liquidity under the IFRS and MFRS and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with the IFRS or MFRS or as an alternative to cash flows from operating activities or as a measure of liquidity. In add ition, EBITDA is not a standardised term, hence a direct comparison of EBITDA between companies may not be possible. Other companies may calculate EBITDA differently from us, limiting its usefulness as a comparative measure. We believe that EBITDA may facilitate comparisons of operating performance from period to period and company to company by eliminating potential differences caused by variations in capital structures (affecting interest expense and finance charges), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), the age and booked depreciation and amortisation of assets (affecting relative depreciation and amortisation expenses). EBITDA has been presented because we believe that it is frequently used by securities analysts, investors and other interested parties in evaluating similar companies, many of whom present such non-I FRS and non MFRS financial measures when reporting their results. Finally, EBITDA is presented as a supplemental measure of our ability to service debt. Nevertheless, EBITDA has limitations as an analytical tool, and prospective investors should not consider it in isolation from , or as a substitute for analysis of our financial condition or results of operations, as reported under the IFRS and MFRS. Due to these limitations, EBITDA should not be considered as a measure of discretionary cash available to invest in the growth of our business. xx Registration No.: 199401034915 (32059B-X) FORWARD-LOOKING STATEMENTS This Prospectus includes forward-looking statements. All statements other than statements of historical facts included in this Prospectus, including, without limitation, those regarding our financial position, business strategies, prospects, plans and objectives for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Such forward-looking statements reflect our Company's current view with respect to future events and are not a guarantee of future performance. Forward-looking statements can be identified by the use of forward-looking terminologies such as the words "may", "will", "would", "could", "believe", "expect", "anticipate", "intend", "estimate", "aim", "plan", "forecast" or similar expressions and include all statements that are not historical facts. Such forward-looking statements include, without limitation, statements relating to: (i) the general industry environment, including the demand and supply for our products and services; (ii) our business strategies, trends and competitive position; (iii) our plans and objectives for future operations; (iv) our financial performance and financing plans including future earnings, cash flows and liquidity; (v) the regulatory environment and the effects of future regulation; (vi) our ability to enter and continue to operate in certain foreign markets; and (vii) potential growth opportunities. Our actual results may differ materially from information contained in such forward-looking statements as a result of a number of factors beyond our control, including, without limitation: (i) the general economic, political and investment environment in Malaysia, Vietnam, Cambodia and globally; (ii) government policy, legislation or regulation; (iii) interest rates, tax rates and foreign exchange rates; (iv) competitive environment of the industry in which we operate; (v) rental rates of our stores; and (vi) fluctuations in demand and supply for the products that we provide. Additional factors that could cause our actual results, performance or achievements to differ materially include, but are not limited to, those discussed elsewhere in Section 7 of this Prospectus on Risk Factors and Section 11.3.2 of this Prospectus on "Significant factors affecting our Group's operating and financial results". We cannot give any assurance that the forward-looking statements made in this Prospectus will be realised . xxi Registration No.: 199401034915 (32059B-X) FORWARD-LOOKING STATEMENTS (cant/d) Such forward-looking statements are based on information available to us at the LPD and are made only as at the LPD. We will release publicly any update or revision to any forward-looking statement contained in this Prospectus to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based if required under the provisions of section 238 of the CMSA, any continuing obligations under law and the Listing Requirements. You are deemed to have read and understood the descriptions of the assumptions and uncertainties underlying the forward-looking statements that are contained herein. (The rest of this page has been intentionally left blank) xxii Registration No.: 199401034915 (32059B-X) CORPORATE DIRECTORY DIRECTORS Name I (Designation) Address Nationality Dato' Foong Choong Heng 2, Jalan Nusa Malaysian (Non-Independent Non Bukit Tunku Executive Chairman) 50480 Kuala Lumpur Malaysia Datin Cheah Kim Choo 2, Jalan Nusa Malaysian (Non-Independent Executive Bukit Tunku Director/Managing Director) 50480 Kuala Lumpur Malaysia Fong Hui Sain 25, Jalan Jalil Perkasa 11 Malaysian (Non-Independent Executive Taman Esplanad, Bukit Jalil Director/CEO) 57000 Kuala Lumpur Malaysia Dato' Maznah Binti Abdul Jalil Lot 2, Changkat Suria 1 Malaysian (Senior Independent Non The Residence Mont Kiara Executive Director) NO.6 Jalan Kiara 2 Mont Kiara 50480 Kuala Lumpur Malaysia Yang Amat Mulia Tengku Datin Paduka Apt 7-15-2, Kirana Residence Malaysian Setia Zatashah Binti Sultan Sharafuddin 7 Jalan Pi nang Idris Shah 50450 Kuala Lumpur (Independent Non-Executive Director) Malaysia Foong Chuen Hoe 2, Jalan Nusa Malaysian (Non-Independent Non Bukit Tunku Executive Director) 50480 Kuala Lumpur (Alternate to Dato' Foong Choong Heng) Malaysia AUDIT AND RISK MANAGEMENT COMMITTEE Name Designation Directorship Dato' Maznah Binti Abdul Jalil Chairperson Senior Independent Non-Executive Director Dato' Foong Choong Heng Member Non-I ndependent Non-Executive Chairman Yang Amat Mulia Tengku Datin Paduka Member Independent Non-Executive Director Setia Zatashah Binti Sultan Sharafuddin Idris Shah xxiii Registration No.: 199401034915 (320598-X) CORPORATE DIRECTORY (cont'd) NOMINATING AND REMUNERATION COMMITTEE Name Designation Directorship Dato' Maznah Binti Abdul Jalil Chairperson Senior Independent Non-Executive Director Yang Amat Mulia Tengku Datin Member Independent Non-Executive Director Paduka Setia Zatashah Binti Sultan Sharafuddin Idris Shah Dato' Foong Choong Heng Member Non-I ndependent Non-Executive Chairman COMPANY SECRETARIES Seow Fei San (MAICSA 7009732) CCM Practising Certificate 201908002299 A-17-16, Block A Kondominium Sterling No.3, Jalan SS7/19 47301 Petaling Jaya Selangor Darul Ehsan Malaysia (Chartered Secretary, Associate of the Institute of Chartered Secretaries and Administrators) Loh Lai Ling (MAICSA 7015412) CCM Practising Certificate 201908002445 No. J-2-14, PPR Taman Muhibbah Jalan 15/155, Taman M uhi bbah 58200 Kuala Lumpur Malaysia (Chartered Secretary, Associate of the Institute of Chartered Secretaries and Administrators) Tel No. +603 7803 1126 REGISTERED OFFICE 802, 8th Floor, Block C Kelana Square, 17 Jalan SS7/26 47301 Petaling Jaya Selangor Darul Ehsan Malaysia Tel No. +603 7803 1126 HEAD OFFICE I HQ NO.3 & 5, Jalan USJ 1011 C 47620 Subang Jaya Selangor Darul Ehsan Malaysia Tel No. +603 5632 4313 Email [email protected] Website www.innature.com.my xxiv Registration No.: 199401034915 (32059B-X) CORPORATE DIRECTORY (cont'd) AUDITORS AND REPORTING KPMG PL T (LLP001 0081-LCA & AF0758) ACCOUNTANTS 10th Floor, KPMG Tower No.8, First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan Malaysia Tel No. +603 7721 3388 Partner-in Foong Mun Kong charge Approval 02613/12/2020J No. (Chartered Accountant, Malaysian Institute of Accountants; Certified Public Accountant, The Malaysian Institute of Certified Public Accountants) SOLICITORS FOR OUR IPO To our Company as to Malaysian law Chooi & Company + Cheang & Ariff CCA @ BANGSAR Level 5, Menara BRDB 285, Jalan Maarof Bukit Bandaraya 59000 Kuala Lumpur Malaysia Tel No. +603 2055 3888 To our Company as to Vietnamese law RHTLaw Vietnam (formerly known as RHTLaw Taylor Wessing Vietnam) Unit 1101, 11th Floor Sofitel Central Plaza 17 Le Duan Boulevard, District 1 Ho Chi Minh City Vietnam Tel No. +84 28 3820 6448 To our Company as to Cambodian law R& T Sok & Heng Law Office Vattanac Capital Tower, Level 17 No. 66, Preah Monivong Boulevard Sangkat Wat Phnom, Phnom Penh Cambodia Tel No. +855 23 963 112/113 xxv Registration No.: 199401034915 (320598-X) CORPORATE DIRECTORY (cont'd) SOLICITORS FOR OUR IPO To the Managing Underwriter, Joint Underwriters, and Sole (cont'd) Bookrunner Zul Rafique & Partners D3-3-8 Solaris Dutamas No.1 Jalan Dutamas 1 50480 Kuala Lumpur Malaysia Tel No. +60362098221 PRINCIPAL ADVISER, CIMB Investment Bank Berhad MANAGING UNDERWRITER, 17th Floor Menara CIMB JOINT UNDERWRITER, AND Jalan Stesen Sentral 2 SOLE BOOKRUNNER Kuala Lum pur Sentral 50470 Kuala Lumpur Malaysia Tel No. +6032261 8888 JOINT UNDERWRITER MIDF Amanah Investment Bank Berhad Level 21 , Menara MIDF 82, Jalan Raja Chulan 50200 Kuala Lumpur Malaysia Tel No. +60321738888 ISSUING HOUSE Malaysian Issuing House Sdn Bhd 11th Floor, Menara Symphony No.5, Jalan Prof. Khoo Kay Kim Seksyen 13 46200 Petaling Jaya Selangor Darul Ehsan Malaysia Tel No. +60378904700 Fax No. +603 7890 4680 SHARE REGISTRAR Boardroom Share Registrars Sdn Bhd (formerly known as Symphony Share Registrars Sdn Bhd) 11th Floor, Menara Symphony No.5, Jalan Prof. Khoo Kay Kim Seksyen 13 46200 Petaling Jaya Selangor Darul Ehsan Malaysia Tel No. +60378904700 Fax No. +603 7890 4670 xxvi Registration No.: 199401034915 (320598-X) CORPORATE DIRECTORY (cant'd) INDEPENDENT MARKET Frost & Sullivan GIC Malaysia Sdn Bhd RESEARCH CONSULT ANTS Suite C-11-02, Block C, Plaza Mont' Kiara 2 Jalan Kiara, Mont' Kiara 50480 Kuala Lumpur Malaysia Tel No. +603 6204 5800 Name of IMR June Liang Pui San signee Country Head, Malaysia Qualification Bachelor of Laws (Hans) from University of Wales, Cardiff, UK; and Masters of Business Administration from Imperial College London, UK (See Section 6 of this Prospectus for the profile of the IMR and the lMR signee) LISTING SOUGHT Main Market of Bursa Securities SHARIAH STATUS Approved by the Shariah AdviSOry Council of the SC (The rest of this page has been intentionally left blank) xxvii Registration No.: 199401034915 (320598-X) 1. PROSPECTUS SUMMARY THIS PROSPECTUS SUMMARY ONLY HIGHLIGHTS THE KEY INFORMATION FROM OTHER PARTS OF THIS PROSPECTUS. IT DOES NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ AND UNDERSTAND THE CONTENTS OF THE WHOLE PROSPECTUS PRIOR TO DECIDING ON WHETHER TO INVEST IN OUR SHARES. 1.1 Overview of our business Our Company was incorporated in Malaysia under the Companies Act, 1965 on 21 October 1994 as a private limited company and deemed registered under the Act. We assumed our name InNature Sdn Bhd on 1 March 2018. On 25 July 2018, we became a public limited company to facilitate our Listing. The principal activity of our Company is investment holding. We are principally involved in the retailing and distribution of The Body Shop® ("TBS") products through our Subsidiaries, Rampai-Niaga, TBS Vietnam and Green Cosmetics who hold the TBS franchises in West Malaysia, Sabah and Labuan; Vietnam; and Cambodia respectively ("TBS Franchisees"). We were awarded with the franchise for TBS products in Cambodia in June 2019 and we opened our first point-of-sale in Cambodia in November 2019. The franchise rights under the Franchise Agreements, all dated 19 June 2019, are granted for a period of 10 years, commencing from 19 June 2019 with an option to renew the franchise for a further 5 years subject to the terms and conditions of the respective Franchise Agreements. In consideration of TBSI entering into the Franchise Agreements, TBSI and Etheco, Dato' Simon and Datin Mina had on the same date of 19 June 2019 entered into the FFA The FFAwili terminate when all the Franchise Agreements and future franchise agreements are terminated or have expired. Our Franchisor, The Body Shop International ("TBSI") is a global manufacturer and retailer of The Body Shop@ skin and bodycare products, founded in the UK in 1976 by Dame Anita Roddick. It is one of the first brands in the world to embrace environmental and social consciousness which has resulted in the TBS products enjoying a high brand awareness and trust from consumers worldwide. This is evidenced by the multiple awards received by TBS throughout the years as well as its presence in various countries globally. TBSI has around 3,000 stores globally, spanning across Europe, North and South America, the Middle East, South Africa and Asia. TBSI is owned by the Natura Cosmeticos SA which also owns the Natura and Aesop brands. In collaboration with Natura Cosmeticos SA, we have also recently introduced the Natura beauty brand into Malaysia. We have also entered into the Natura MOU in April 2019 and the Natura Supply Agreement in November 2019 to develop the Natura brand in Malaysia. As at the LPD, we have launched the Natura e-commerce website and opened a Natura pop-up store in Sunway Pyramid. We are also, as at the LPD, working with Natura Cosmeticos SA on finalising the terms of the definitive agreement(s) in relation to our new Natura business, which is expected to be signed after our Listing. when you car:e, ~ you create beauty noturo Registration No.: 199401034915 (320598-X) 1. PROSPECTUS SUMMARY (cont'd) Similar to our TBSI's values, our Group believes that business can be a force for good. Over the years, we have initiated and organised many campaigns for the conservation and protection of the environment and animals, as well as for human rights and women's rights, both in Malaysia and Vietnam. As at the LPD, our Group structure is as set out below: Group structure as at the LPD /' -- DiStribution 01- - ... ~ / ~ - R~tailing- ;nd -- .. \ I Natura products I: distribution of I Retailing and I Retailing and u:roug~ channels : I TBS products : distribution of : distribution of : Dormant Including direct I I . W MI' selling. e- I I In est a aysla, : TBS products TBS produ~ts in : , r commerce and :: Sebah and : in Vietnam Cambodia ''''------_____ --' " ____ r§'t]lu. ~~r~ ___ ' \ .... ____ ~a_b~,:n___ _ ... _----- ______1 One ot our flagship points-ot A point-ot-sale currently in Ho The first point-ot-sale in Phnom sale in Kuala Lumpur, Malaysia Chi Minh City, Vietnam Penh, Cambodia We have over 35 years of experience in the TBS franchise business since we opened our first store in 1984 at Plaza Yow Chuan in Ampang, Kuala Lumpur. Within the CPC industry in Malaysia, we are a leading mono-brand beauty retailer of this segment with a 11.0% market share based on total market sales of RM1.48 billion as at 2018. In this segment, we are also the largest in terms of number of points-of-sale as at the LPD. As at the LPD, we have 89 points-of-sale in West lVIalaysia, Sabah and Labuan, 34 points-of sale in Vietnam and 1 point-of-sale in Cambodia. We also have online presence through online platform such as TBS's website in Malaysia, Vietnam and Cambodia, as well as via selected third-party online stores such as Hermo in Malaysia, Tiki in Vietnam, and Lazada in both markets. Further details on the breakdown of our points-of-sale in Malaysia, Vietnam and Cambodia, and our online platform are as depicted below: 2 Registration No.: 199401034915 (320598-X) 1. PROSPECTUS SUMMARY (cont'd) - ____...... ,----.. - ,.. ..• .. 3<,>1", ...... ,.,.....-...~.",...... III .. JIIf!I~ Revenue Contribution by Geographical Segment As at the LPD, our principal markets are in Malaysia and Vietnam. The revenue contributed by our Malaysia and Vietnam operations for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 are as set out in the chart below: Revenue by geographical location c ------~ 0 200 172 i84 E ~ a:: 100 0 FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 • Malaysia Vietnam We have recently commenced operations in Cambodia by opening our first TBS point-of-sale in Cambodia in November 2019. Further details of our Group and business, including our future plan and strategies are set out in Sections 4 and 5 of this Prospectus. 1.2 Our competitive advantages and key strengths We believe our competitive advantages and key strengths are as follows: (i) we are a leading mono-brand beauty retailer in Malaysia via our TBS business; (ii) we have a strong track record and an established long-term work relationship with TBSI; (iii) The TBS brand is globally recognised and known for its sustainably sourced high quality products; (iv) our ethical stance resonates with the growing socially conscious consumer base; (v) we are well-positioned to leverage on the growth of the naturals sector of the beauty industry; (vi) we are well-positioned in the "masstige" market; 3 Registration No.: 199401034915 (32059B·X) 1. PROSPECTUS SUMMARY (cant'd) (vii) we have a strong base of loyal customers who we can directly access; (viii) TBS is one of the leading beauty brands on Facebook in Malaysia and Vietnam; and (ix) we have an experienced management team who has developed a strong base of resources and competencies in retail management. For further details of our competitive advantages and key strengths, please refer to Section 5.3.5 of this Prospectus. 1.3 Future plans and strategies Moving forward, we will continue to grow our revenue and strengthen our leadership in the mono-brand beauty industry as well as the naturals beauty market, through our future plans and strategies as follows: • TBS Malaysia: driving TBS Same Store Sales Growth, a performance measure used to analyse sales performance of our existing points-of-sale over a certain period, against the previous corresponding period, through an Omnichannel strategy. Through this strategy, we aim to provide our customers with an integrated shopping experience where both the online and offline shopping experience will be seamless; • TBS Vietnam: achieving growth through the expansion of our TBS retail store network and continuing to build TBS brand awareness; • TBS Cambodia: delivering new growth to our Group through the expansion of TBS in the Cambodian market; and • Expanding the brand portfolio of our Group by developing a new business with the Natura brand in Malaysia. The Natura brand is under Natura Cosmeticos SA, a global beauty company which also owns The Body Shop® and Aesop brands of personal care products worldwide. Please refer to Section 5.4 of this Prospectus for further information on our future plans and strategies. 1.4 Salient information of our IPO The IPO of 177,274,000 IPO Shares, representing 25.1% of the enlarged issued share capital of our Company comprising 74,074,000 Issue Shares and 103,200,000 Offer Shares are offered by our Company and the Selling Shareholder respectively in the following manner: 1.4.1 Institutional Offering Our Company and the Selling Shareholder are offering 161,142,500 IPO Shares, representing 22.8% of the enlarged issued share capital of our Company, at the Institutional Price, to be allocated in the following manner: (i) 103,200,000 Offer Shares, representing 14.6% of the enlarged issued share capital of our Company will be offered to Malaysian and foreign institutional and selected investors, including Bumiputera investors approved by MITI; and (ii) 57,942,500 Issue Shares, representing 8.2% of the enlarged issued share capital of our Company will be offered to Malaysian and foreign institutional and selected investors, including Bumiputera investors approved by MIT!. 4 Registration No.: 199401034915 (32059B-X) 1. PROSPECTUS SUMMARY (cont'd) 1.4.2 Retail Offering Our Company is offering 16,131,500 Issue Shares, representing 2.3% of the enlarged issued share capital of our Company, at the Retail Price, to be allocated in the following manner: (i) 14,131 ,500 Issue Shares, representing 2.0% of the enlarged issued share capital of our Company, are available for application by Malaysian Public, of which 7,065,800 Issue Shares, representing 1.0% of the enlarged issued share capital of our Company, are set aside for Bum iputera individuals, companies, co-operatives, societies and institutions. Any Issue Shares not subscribed for by such Bumiputera investors will be made available for application by other Malaysian investors under the Retail Offering; and (ii) 2,000,000 Issue Shares, representing 0.3% of the enlarged issued share capital of our Company have been reserved and set aside for the Eligible Persons. 1.4.3 Moratorium on our Shares In accordance with the Equity Guidelines, our Promoters will not be allowed to sell, transfer or assign its or their entire shareholdings of 528,607,488 Shares in our Company, representing 74.89% of the enlarged issued share capital as at the date of our Listing, within 6 months from the date of Listing of our Company on the Main Market ("Moratorium Period"), including all Shares, if any, issued to our Promoters during the Moratorium Period. For detailed information relating to our IPO and moratorium on our Shares, please refer to Section 2.3 and Section 8.2 of this Prospectus. 1.5 Risk factors YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS WHICH MAY HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS OPERATIONS, FINANCIAL POSITION AND THE FUTURE PERFORMANCE OF OUR GROUP, IN ADDITION TO OTHER INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, BEFORE INVESTING IN OUR COMPANY. 1.5.1 Risks relating to our business and operations Set out below are some of the key risks faced by us in our business operations: (i) We may not be able to renew or comply with the terms of our Franchise Agreements with TBSI. (ii) The continuity of our Franchise Agreements is dependent on the continued involvement of our Promoters, Datin Mina and Data' Simon. (iii) We depend on the supply of goods from TBSI for TBS products and Industria Natura for Natura products. (iv) Our success is closely linked to the value of the TBS brand which may be eroded by events beyond our control. (v) Our success depends on our ability to secure optimal locations and to renew the tenancies or leases of our present points-of-sale. (vi) We may not be able to successfully implement our future plans and strategies. 5 Registration No.: 199401034915 (32059B-X) 1. PROSPECTUS SUMMARY (cant'd) 1.5.2 Risks relating to the industry in which our Group operates Set out below are some of the key risks faced by our industry: (i) We operate in a competitive environment. (ii) Our performance is dependent on the performance of economy and consumer spending patterns in the countries we operate in. 1.5.3 Risks relating to the investment in our Shares Set out below are some of the key risks relating to your investment in our Shares: (i) There has been no prior market for our Shares and it is uncertain whether a sustainable market will ever develop. (ii) Our Shares are subject to capital market risks and share price volatility. (iii) The interest of our Promoters who control our Group may not be aligned with the interest of shareholders. (iv) The sale or the possible sale of a SUbstantial number of Shares in the public market following our IPO could adversely affect the price of our Shares. Please refer to Section 7 of this Prospectus for further details and the full list of our risk factors. 1.6 Directors, Key Senior Management, Promoters and Substantial Shareholders 1.6.1 Directors and Key Senior Management As at the LPD, our Directors and Key Senior Management are as follows: Name Designation Directors Dato'Simon Non-Independent Non-Executive Chairman Datin Mina Non-Independent Executive Director / Managing Director Molly Fong Non-Independent Executive Director / Chief Executive Officer Dato' Maznah Senior Independent Non-Executive Director Tengku Zatashah Independent Non-Executive Director Daryl Foong Non-Independent Non-Executive Director (Alternate to Data' Simon) Key Senior Management Datin Mina Managing Director Molly Fong Chief Executive Officer Siew Lai Leng Chief Operations Officer Chia Cang Yang Chief Financial Officer Chan Nian Mei Chief Revenue Officer Leong Meng Leong Head of Finance and Administration Nguyen Thi Ngoc Hue General Manager, TBS Vietnam Wong Sook Hing General Manager, Ola Beleza 6 Registration No.: 199401034915 (320598-X) 1. PROSPECTUS SUMMARY (cont'd) Due to the condition imposed by TBSI under the Franchise Framework Agreement that our Board must include Dato' Simon (and his alternate, Daryl Foong), Datin Mina, and executive directors nominated and appointed by Dato' Simon and Datin Mina ("Selected Directors"), and collectively, Dato' Simon (and his alternate, Daryl Foong), Datin Mina and the Selected Directors must comprise of a majority of the directors on our Board ("Board Condition"), our Company will not be able to adopt the recommendation of Paragraph 4.1 under Principle A of the Malaysian Code on Corporate Governance on the board composition for companies listed on Bursa Securities. Please refer to Section 3.1.1 of this Prospectus for further details of our Board . Notwithstanding the above, we have appointed Dato' Maznah as our Senior Independent Non-Executive Director to monitor and strengthen the governance of our Company. She is an experienced independent director who has sat on multiple listed company boards for over 2 decades. Please refer to Section 3.1.2 of this Prospectus for Dato' Maznah's profile. In 2011 , Dato' Simon had entered into a settlement with the SC in the sum of RM281 ,361, when Dato' Simon agreed without admission or denial of liability, to settle a claim that the SC was proposing to institute against him . Please refer to Section 3.5 of this Prospectus for the details of the settlement. For further information on our Directors and Key Senior Management, please refer to Sections 3.1 and 3.3 of this Prospectus, respectively. 1.6.2 Promoters and Substantial Shareholders Our Promoters and Substantial Shareholders and their respective share holdings in our Company as at the date of this Prospectus and after our IPO are as follows: As at the date of this Prospectus After our IPO Promoters Direct Indirect Direct Indirect and Nationality I Substantial Country of No. of No. of No. of No. of Shareholders incorporation Shares % Shares % Shares % Shares % Etheco Malaysia 360,000,000 56.98 360,000,000 51.00 BluPlanet Malaysia 229,449,600 36.32 126,249,600 17.89 Pelagos Malaysia 21 ,178,944 3.35 21 ,178,944 3.00 Primarium Malaysia 21,178,944 3.35 21,178,944 3.00 Dato'Simon Malaysian - 610,628,544(1) 96.65 507,428,544(1) 71 .89 Datin Mina Malaysian - 610,628,544(2) 96.65 507,428,544(2) 71 .89 Daryl Foong Malaysian - 21,178,944 (3) 3.35 21 ,178,944(3) 3.00 Dexter Foong Malaysian - 21,178,944 (4) 3.35 21 ,178,944(4) 3.00 Notes: (1 ) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Etheco, BluPlanet, and Primarium respectively. (2) Deemed interested by virtue of Section 8(4) of the Act, through her shareholdings of more than 20.00% in Etheco, BluPlanet, and Pelagos respectively. (3) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Pelagos. (4) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Primarium . For further information on our Promoters and SUbstantial Shareholders, please refer to Section 3.2 of this Prospectus. 7 Registration No.: 199401034915 (320598-X) 1. PROSPECTUS SUMMARY (cont'd) 1.7 Financial highlights 1.7.1 Historical Consolidated Financial Information The table below sets out the financial highlights based on the consolidated financial information for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019: FYE 31 December FPE 30 September 2016 2017 2018 2018 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Revenue 159,902 171,919 184,474 132,322 138,195 Gross profit(1) 106,304 115,495 121,986 88,308 93,229 Adjusted EBITDA(2) 60,118 63,685 69,912 50,284 49,790 Profit before taxation 36,773 34,284 58,550 34,393 30,141 Profit after taxation 26,813 24,100 45,625 25,859 22,241 Gross profit margin (%)(3) 66.5 67.2 66.1 66.7 67.5 Profit before tax margin (%)(4) 23.1 23.7 26.3 26.0 23.8 Profit after tax margin (%)(5) 16.9 17.8 19.6 19.5 18.0 Basic and diluted EPS (sen)(6) 4.24 3.81 7.22 4.09 3.52 Notes: (1) Computed based on revenue less changes in inventories (cost of goods sold) . (2) Represents earnings before interest, taxation, depreciation and amortisation, after excluding our non-core earnings, which comprise listing-related expenses, fair value loss on other investments, impairment loss on other investments and fair value gain arising from distribution of non-cash assets to owners ("Non-core Earnings"), in which amounts are as follows for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019: FYE 31 December FPE 30 September 2016 2017 2018 2018 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Listing-related expenses (2,683) Fair value loss on other investments (234) (4,230) Impairment loss on other investments (2,239) Fair value gain arising from distribution of non- cash assets to owners 10,030 Total Non-core Earnings (234) (6,469) 10,030 (2,683) (3) Computed based on gross profit divided by revenue. (4) Computed based on profit before taxation (after excluding our Non-core Earnings) divided by revenue. (5) Computed based on profit after taxation (after excluding our Non-core Earnings) divided by revenue. 8 Registration No.: 199401034915 (320598-X) 1. PROSPECTUS SUMMARY (cont'd) (6) Calculated by dividing the profit for the year/period attributable to the equity holders of our Company by 631,807,488 Shares being the number of shares after the completion of the pre-listing Internal Restructuring Exercise as set out in Section 4.1.2 of this Prospectus. 1.7.2 Pro forma Consolidated Financial Position Profonna As at As at As at As at After the FYE 2016 FYE 2017 FYE 2018 FPE 2019 IPO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO ASSETS Total non-current assets 106,851 94,399 87,680 95,122 129,622 Total cu rrent assets 146,208 164,701 56,527 53,431 51,074 Total Assets 253,059 259,100 144,207 148,553 180,696 EQUITY AND LIABILITIES Total equity 184,569 195,173 75,441 87,798 120,669 Total non-current liabilities 19,213 13,241 13,546 13,507 13,507 Total current liabilities 49,277 50,686 55,220 47,248 46,520 Total Equity and Liabilities 253,059 259,100 144,207 148,553 180,696 Total borrowings 12,062 10,000 20,505 5,703 5,703 Net assets 184,569 195,173 75,441 87,798 120,669 NA per Share 0.29(1) 0.31 (1) 0.12(1) 0.14(1) 0.17(2) Gearing ratio (times) (3) 0.07 0.05 0.27 0.06 0.05 Notes: (1 ) NA per share is calculated based on the pre-IPO issued share capital of 631,807,488 Shares. (2) NA per share after the IPO is calculated based on the enlarged share capital upon our Listing of 705,881 ,488 Shares. (3) Computed based on total borrowings divided by total equity. Please refer to Sections 11 and 12 of this Prospectus for detailed financial information relating to our Group. 9 Registration No.: 199401034915 (320598-X) 1. PROSPECTUS SUMMARY (cant'd) 1.8 Utilisation of proceeds The total gross proceeds from the Public Issue is approximately RMSOA million, of which RM6A million is allocated for the listing expense. The remaining RM44.0 million will be utilised to cover both the existing TBS business and new Natura business as detailed out in the table below: TBS New existing Natura Total amount of Estimated timeframe business business proceeds(1) Details of the for utilisation from the utilisation of proceeds RM'OOO RM'OOO RM'OOO % date of Listing Capital (i) 27,300 7,200 34,500 68.5 Within 48 months expenditure (ii) Working capital 1,600 2,200 3,800 7.5 Within 36 months New business (iii) 5,700 5,700 11 .3 Within 48 months development (iv) Listing expenses 6,370 12.7 Within 3 months Total 50,370 100.0 Note: (1) We have assumed that the Institutional Price and the Retaij Price will be equal to the Retail Price of RMO.68 per IPO Share. Our Company will not receive any proceeds from the Offer for Sale. The Offer for Sale is anticipated to raise gross proceeds of RM70.2 million which will accrue entirely to BluPlanet as the Selling Shareholder. Please refer to Section 2.8 of this Prospectus for further details on the use of proceeds from our IPO. 1.9 Dividend policy It is the intention of our Board to recommend and distribute dividend of at least 30.0% of our annual audited PAT attributable to the shareholders of our Company. This will allow our shareholders to participate in our Group's profit. Any dividend declared will be subject to the approval of our Board. Notwithstanding our intentions above, as a holding company, our income, and therefore our ability to pay dividends, is dependent upon the dividends and other distributions we receive from our Subsidiaries. Furthermore, our Group's ability to distribute dividends or make other distribution to our shareholders is subject to various factors such as our results of operations and cash flow, our expected financial performance and working capital needs, and other factors. Under the Franchise Framework Agreement, in determining the dividend policies of InNature and the TBS Franchisees, our Board shall take into account InNature's and the TBS Franchisees' annual business plan in respect of each of the TBS Franchisees and the anticipated funding needs of each entity for the purposes of meeting the agreed targets set out within the relevant Franchise Agreements. The dividend policies of InNature and the TBS Franchisees should be provided to TBSI and TBSI should be notified of any changes to the dividend policies. Please see Section S.1S.2(m) of this Prospectus for the relevant provision under the Franchise Framework Agreement. Any declaration and payment of dividends in the future will be at the discretion of our Board. No inference should or can be made from any of the statements above as to our actual future profitability or our ability to pay dividends in future. 10 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO 2.1 Opening and closing of applications Application for our IPO Shares will open at 10:00 a.m. on 29 January 2020 and will remain open until 5:00 p.m. on 6 February 2020. 2.2 Indicative timetable The indicative timetable of events leading up to our Listing is as follows: Events Dates Opening of the Institutional Offering 29 January 2020 Opening of the Retail Offering 10:00 a.m., 29 January 2020 Closing of the Retail Offering 5:00 p.m., 6 February 2020 Closing of the Institutional Offering 7 February 2020 Price Determination Date 7 February 2020 Balloting of applications for our IPO Shares under the Retail 10 February 2020 Offering Allotment/transfer of our IPO Shares to successful applicants 19 February 2020 Listing 20 February 2020 In the event there is any change to the timetable, we will advertise the notice of changes in a widely circulated Bahasa Malaysia and English daily newspaper within Malaysia. 2.3 Details of our IPO Our IPO is subject to the terms and conditions of this Prospectus and upon acceptance, our IPO Shares are expected to be allocated in the manner described below, subject to the clawback and reallocation provisions as set out in Section 2.3.3 of this Prospectus. Our IPO of 177,274,000 IPO Shares, representing 25.1% of the enlarged issued share capital of our Company comprising 74,074,000 Issue Shares and 103,200,000 Offer Shares are offered by our Company and the Selling Shareholder respectively in the following manner: 2.3.1 Institutional Offering Our Company and the Selling Shareholder are offering 161,142,500 IPO Shares, representing 22.8% of the enlarged issued share capital of our Company, to be allocated in the following manner: (i) 103,200,000 Offer Shares, representing 14.6% of the enlarged issued share capital of our Company will be offered to Malaysian and foreign institutional and selected investors, including Bumiputera investors approved by MITI; and (ii) 57,942,500 Issue Shares, representing 8.2% of the enlarged issued share capital of our Company will be offered to Malaysian and foreign institutional and selected investors, including Bumiputera investors approved by MIT!. With respect to the IPO Shares offered to Bumiputera investors approved by MITI as referred to above, 81,600,000 IPO Shares representing 11 .5% of the enlarged issued share capital of our Company will be offered subject to the clawback and reallocation provisions as set out in Section 2.3.3 of this Prospectus. 11 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cant'd) 2.3.2 Retail Offering Our Company is offering 16,131,500 Issue Shares, representing 2.3% of the enlarged issued share capital of our Company, to be allocated in the following manner: (i) 14,131,500 Issue Shares, representing 2.0% of the enlarged issued share capital of our Company, are available for application by Malaysian Public, of which 7,065,800 Issue Shares, representing 1.0% of the enlarged issued share capital of our Company, are set aside for Bumiputera individuals, companies, co-operatives, societies and institutions. Any Issue Shares not subscribed for by such Bumiputera investors will be made available for application by other Malaysian investors under the Retail Offering; and (ii) 2,000,000 Issue Shares, representing 0.3% of the enlarged issued share capital of our Company ("Pink Form Shares") have been reserved and set aside for the Eligible Persons under the Pink Form Allocation . The details of the number of Issue Shares set aside for the Eligible Persons are as follows. Aggregate Number of number of Issue Eligible Persons Eligible Persons Shares allocated Directors of our Group(1) 3 650,000 Eligible employees of our Group(2) 452 1,350,000 Total 455 2,000,000 Notes: (1) The criteria for allocation to our Directors (save for our Directors who are also our Promoters) are based on, among others, their respective roles and responsibilities in, and contribution to our Group. The number of Pink Form Shares to be allocated to our Directors are as follows: No. of Issue Shares to be Name Designation allocated Molly Fong Executive Director I CEO 150,000 Dato' Maznah Senior Independent Non-Executive Director 400,000 Tengku Zatashah Independent Non-Executive Director 100,000 Total 650,000 (2) The basis and criteria for allocation of Issue Shares to our eligible employees of our Group (as approved by our Board) are based on the following factors: (i) the eligible employee must be a full time confirmed employee and be on the payroll of our Group; and (ii) the number of Issue Shares allocated to the eligible employees is based on their seniority and position as well as other factors considered relevant to our Board. Any Issue Shares not taken up by Eligible Persons under the Pink Form Allocation in Section 2.3.2(ii) will be made available for application by other investors under Section 2.3.2(i), with any remaining Issue Shares thereafter underwritten by our Joint Underwriters, subject to the clawback and reallocation provisions as set out in Section 2.3.3 of this Prospectus. 12 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cant'd) Additionally, applicants who apply for the Pink Form Shares under Section 2.3.2(ii) above may also apply for the Issue Shares available under Section 2.3.2(i) above. As at the LPD, we have yet to ascertain the specific allocation of Issue Shares to the eligible employees of our Group. In summary, our IPO Shares offered under our Retail Offering and Institutional Offering (subject to clawback and reallocation provisions) are as follows: Offer Shares Issue Shares Total %of % of % of enlarged enlarged enlarged No. of share No. of share No. of share Categories Shares capital Shares capital Shares capital Retail Offering Malaysian public (via balloting): - Bumiputera 7,065,800 1.0 7,065,800 1.0 - Non-Bumiputera 7,065,700 1.0 7,065,700 1.0 Directors and 2,000,000 0.3 2,000,000 0.3 eligible employees of the InNature Group 16,131,500 2.3 16,131,500 2.3 Institutional Offering Bumiputera 52,623,200 7.4 28,976,800 4.1 81,600,000 11.5 investors approved by MITI Other Malaysian 50,576,800 7.2 28,965,700 4.1 79,542,500 11 .3 and foreign institutional and selected investors 103,200,000 14.6 57,942,500 8.2 161,142,500 22 .8 Total 103,200,000 14.6 74,074,000 10.5 177,274,000 25.1 The completion of the Retail Offering and the Institutional Offering are inter-conditional and are subject to our IPO meeting the minimum subscription level as set out in Section 2.3.6 of this Prospectus. 13 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) 2.3.3 Clawback and reallocation The Institutional Offering and Retail Offering are subject to the following clawback and reallocation provisions: (i) if our IPO Shares allocated to Bumiputera investors approved by MITI ("MITI Tranche") are not fully taken up by such Bumiputera investors under the Institutional Offering, our IPO Shares which are not taken up will be allocated to other institutional investors under the Institutional Offering. If after the above reallocation, the MITI Tranche is still not fully taken up under the Institutional Offering, and there is a corresponding over-application for Issue Shares by the public investors under the Retail Offering, the IPO Shares will be clawed back from the MITI Tranche and allocated first, to the Bumiputera public investors under the Retail Offering, and thereafter to the other public investors under the Retail Offering ; (ii) subject to Section 2.3.3(i) above, if there is an over-application in the Retail Offering and an under-application in the Institutional Offering, the IPO Shares may be clawed back from the Institutional Offering and allocated to the Retail Offering; and (iii) if there is an under-application in the Retail Offering and an over-application in the Institutional Offering, the Issue Shares may be clawed back from the Retail Offering and allocated to the Institutional Offering. However, if there is an under-application in the Retail Offering but no over-application in the Institutional Offering, the remaining Issue Shares will be underwritten by the Joint Underwriters. There will be no clawback and reallocation if there is an under-application in both the Institutional Offering and Retail Offering. Save for the allocations made available for application by the Eligible Persons under the Pink Form Allocation as disclosed in Section 2.3.2(ii) above, it is not known to our Company as to whether any of our Substantial Shareholders, Directors, or our Key Senior Management have the intention to subscribe for the Issue Shares allocated under Section 2.3.2(i) above for the Malaysian Public. To the best of our knowledge and belief, there is no person who intends to subscribe for more than 5.00% of our IPO Shares. 2.3.4 Share capital Upon completion of our IPO, our share capital will be as follows: No. of Shares RM After the Internal Restructuring Exercise(1) 631,807,488 4,387,552 To be issued under the Public Issue 74,074,000 50,370,320 (2) Enlarged number of issued shares and share 705,881,488 54,757,872 (3) capital upon Listing Notes: (1) As defined and discussed in further detail in Section 4.1.2 of this Prospectus. (2) Calculated based on the Retail Price of RMO .68 per IPO Share. 14 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cant'd) (3) The enlarged issued share capital upon Listing excludes the adjustment for listing expenses amounting to approximately RM1 .6 million directly attributable to the Public Issue which is debited against the share capital of the Company under the pro forma financial position. 2.3.5 Classes of shares and ranking There is currently and upon completion of our IPO, only one class of shares in our Company, namely ordinary shares. Our Issue Shares will, upon allotment and issue, rank equally in all respects with our existing Shares, including voting rights, and will be entitled to all rights, dividends and distributions that may be declared subsequent to the date of allotment of the Issue Shares, subject to any applicable rules of Bursa Depository. Our Offer Shares rank equally in all respects with our other existing Shares including voting rights, and will be entitled to all rights, dividends and distributions that may be declared subsequent to the date of transfer of the Offer Shares, subject to any applicable rules of Bursa Depository. Subject to any special rights (among others, taking priority over the Shares of our Company in terms of the distribution of dividends or other profits) attaching to any Shares which we may issue in the future, our shareholders are, in proportion to the amount paid on the Shares held by them, be entitled to share in the profits paid out by us in the form of dividends or other distributions. Similarly, if our Company is liquidated, our shareholders are entitled to the surplus (if any), in accordance with our Constitution after the satisfaction of any preferential payments in accordance with the Act and our liabilities. The issuance of any Shares with such special rights is SUbject to the relevant provisions of the Act, our Constitution as well as the restrictions under the Franchise Framework Agreement. Please refer to Sections 5.15.2(i) and 13.2(iv) of this Prospectus for the relevant provisions under the Franchise Framework Agreement and our Constitution respectively. At any general meeting of our Company, each shareholder is entitled to vote in person, by proxy, by attorney or by other duly authorised representative. Any resolution set out in the notice of any general meeting, or in any notice of resolution which may be moved and is intended to be moved at any general meeting, is to be voted by poll. On a poll, each shareholder present either in person, by proxy, by attorney or by other duly authorised representative shall have 1 vote for each Share held or represented. A proxy may but need not be a member of our Company. On a show of hands, each shareholder present either in person, by proxy, by attorney or by other duly authorised representative shall have one vote. 2.3.6 Minimum subscription level There is no minimum subscription level in terms of proceeds to be raised from the IPO. However, in order to comply with the public shareholding spread requirement under the Listing Requirements, the minimum subscription level in terms of the number of Shares will be the number of Shares required to be held by public shareholders for our Company to comply with the public shareholding spread requirement under the Listing Requirements or as approved by Bursa Securities. 15 Registration No.: 199401034915 (32059B -X) 2. DETAILS OF OUR IPO (cont'd) Under the Listing Requirements, we are required to have a minimum of 25.0% of our Shares held by at least 1,000 Public shareholders, each holding not less than 100 Shares at the point of our Listing . If the aforesaid public spread requirement is not met, our Company may not be permitted to proceed with the Listing . In such event, we will return in full all monies paid in respect of all applications (without interest or any share of revenue or benefits arising therefrom) within 14 days. 2.4 Selling Shareholder BluPlanet is the Selling Shareholder. It was incorporated in Malaysia under the Act on 5 March 2018 with its registered address at 802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor. The principal activity of BluPlanet is investment holding . BluPlanet is a company owned by Dato' Simon and Datin Mina, who are our Promoters and Substantial Shareholders, in equal proportion. Pursuant to the completion of the pre-listing Internal Restructuring Exercise further detailed in Section 4.1.2 of this Prospectus, as at the LPD, BluPlanet holds 229,449,600 Shares, representing 36 .32% of the issued share capital of our Company. BluPlanet will be offering for sale 103,200,000 Offer Shares under the IPO. Following the IPO, BluPlanet is expected to hold 126,249,600 Shares, representing 17.89% of the enlarged issued share capital of our Company. BluPlanet's shareholding in our Company before and after our IPO are set out below: After the Internal Restructuring Exercise and before the IPO/as at the LPD After the IPO Direct Indirect Direct Indirect No. of No. of No. of Selling Shares Shares No. of Shares Shareholder held %(1) held % Shares held %(1) held % BluPlanet 229,449,600 36.32 126,249,600 17.89 Notes: (1) Based on our issued share capital of 631 ,807,488 Shares after the Internal Restructuring Exercise and before the IPO/as at the LPD. (2) Based on our enlarged issued share capital of 705,881,488 Shares after the Public Issue. (The rest of this page has been intentionally left blank) 16 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cant'd) 2.5 Basis of arriving at the price of the IPO Shares 2.5.1 Retail Price The Retail Price of RMO.68 per IPO Share was determined and agreed upon between our Directors, the Selling Shareholder, the Principal Adviser/Sole Bookrunner and the Joint Underwriters, after taking into consideration the following factors: (i) our Group's EPS of 5.1 sen for the FYE 2018 based on our Group's Core PAT of RM36.1 million (excluding non-core items, please refer to Section 11.3.1 (c)(xiv) of this Prospectus) and our enlarged issued-share capital of 705,881,488 Shares, which translate into a PER multiple of 13.3 times for the FYE 2018; (ii) our financial performance and operating history as described in Sections 11 and 12 of this Prospectus; (iii) our competitive advantages and key strengths as outlined in Section 5.3 .5 of this Prospectus; (iv) our future plans and strategies as outlined in Section 5.4 of this Prospectus; (v) the overview and the future outlook of the CPC industry in Malaysia, Vietnam and Cambodia, as described in Section 6 of this Prospectus; and (vi) the prevailing market conditions including market performance of key global indices and companies which are in businesses similar to ours, as well as investors' sentiments. The Final Retail Price will be determined after the Institutional Price is determined by way of bookbuilding on the Price Determination Date and will be the lower of: (i) the Retail Price of RMO .68 per IPO Share; and (ii) the Institutional Price. In the event that the Final Retail Price is lower than the Retail Price, the difference between the Retail Price and the Final Retail Price will be refunded to successful Applicants, without any interest thereon. Further details on the refund mechanism are set out in Section 2.5.3 of this Prospectus. Prospective retail investors should be aware that the Final Retail Price will not, in any event, be higher than the Retail Price of RMO.68 per Share. The Final Retail Price and the Institutional Price are expected to be announced within 2 Market Days from the Price Determination Date via the Bursa Listing Information Network. In addition, all successful Applicants will be given written notice of the Final Retail Price and the I nstitutional Price, together with the notices of allotment for our IPO Shares. Applicants should also note that the vagaries of market forces and other uncertainties may affect the market price of our Shares after Listing . 17 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) 2.5.2 Institutional Price The Institutional Price will be determined by way of a bookbuilding process where prospective institutional and selected investors will be invited to bid for portions of the Institutional Offering by specifying the number of IPO Shares that they would be prepared to acquire and the price that they would be prepared to pay for such IPO Shares. This bookbuilding process will commence on 29 January 2020 and will end on 7 February 2020. Upon the completion of the bookbuilding process, the Institutional Price will be fixed by our Directors and the Selling Shareholder in conSUltation with the Sole Bookrunner on the Price Determination Date. 2.5.3 Refund mechanism In the event that the Final Retail Price is lower than the Retail Price, the difference between the Retail Price and the Final Retail Price will be refunded to successful Applicants without any interest thereon in the following man ner: (i) If you have provided bank account information to Bursa Depository for the purposes of cash dividendi distribution, the above refund will be credited into your bank account; (ii) If you have not provided such bank account information to Bursa Depository, the above refund will be despatched to you in the form of cheques and by ordinary post to your address as maintained with Bursa Depository; (iii) If you have made your applications via the Electronic Share Application, the above refund will be credited into your account with the Electronic Participating Financial Institutions; or (iv) If you have made your applications via the Internet Share Application, the above refund will be credited into your account with the Internet Participating Financial Institution. The above refund will be carried out within 10 Market Days from the date of final ballot of application at your own risk. Please refer to Section 14.10(v) of this Prospectus for further details of the refund mechanism. 2.5.4 Expected market capitalisation Based on the Retail Price of RMO.68 per IPO Share, the total market capitalisation of our Company upon the Listing will be approximately RM480.0 million. 18 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cont'd) 2.6 Objectives of our IPO The objectives of our IPO are as follows: (i) to enable our Group to raise funds for the purposes set out in Section 2.8 of this Prospectus; (ii) to enable our Group to gain access to the capital market to raise funds for future business growth opportunities; (iii) to provide an opportunity for the eligible Directors and employees of our Group as well as the Malaysian investing public and institutions to participate in the future performance of our Company by way of equity participation; (iv) to establish liquidity of our Shares; and (v) to enhance our Company's profile. 2.7 Dilution Dilution is the amount by which the price paid by the retail and institutional investors of our IPO Shares exceeds our pro forma consolidated NA per Share after our IPO. Our pro forma consolidated NA per Share was approximately RMO.14 per Share, based on the NA as at 30 September 2019 and the issued share capital of 631 ,807,488 Shares after our pre listing Internal Restructuring Exercise, as defined and set out in Section 4.1 .2 of this Prospectus, before adjusting for the gross proceeds from our IPO. Pursuant to the Public Issue of 74,074,000 Issue Shares at the Retail Price of RMO .68, our pro forma consolidated NA per Share (after adjusting for the gross proceeds and deducting the estimated listing expenses in relation to our IPO) based on the enlarged issued share capital upon our Listing of 705,881,488 Shares would be approximately RMO.17 per Share. This represents an immediate increase in the pro forma consolidated NA per Share of RMO.03 per Share to our existing shareholders and an immediate dilution in the pro forma consolidated NA per Share of RMO.51 per Share or approximately 74.9% to our new investors. The following table illustrates the dilution per Share as at 30 September 2019: RM Assumed Final Retail Pricellnstitutional Price 0.68 Pro forma consolidated NA per Share before our IPOP) 0.14 Increase in the pro forma consolidated NA per Share 0.03 Pro forma consolidated NA per Share after our IPO(2) 0.17 Dilution in the pro forma consolidated NA per Share to new investors(3) 0.51 Dilution in the pro forma consolidated NA per Share to new investors as a percentage 74.9% of our Retail Price Notes: (1) This is based on the NA as at 30 September 2019 and the issued share capital of 631,807,488 Shares after our pre-listing Internal Restructuring Exercise before adjusting for our IPO proceeds and the estimated listing expense. (2) This is based on the issued share capital of 705,881,488 Shares and the pro forma NA as at 30 September 2019 after our pre-listing Internal Restructuring Exercise, taking into considerations of our IPO proceeds and the estimated listing expense. 19 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) (3) The dilution in the pro forma consolidated NA per Share is arrived at based on the difference between the Retail Price and the pro forma consolidated NA per Share based on the enlarged issued share capital upon our Listing and is computed solely for illustrative purposes only. Other than the acquisition of Shares by Etheco, and the issuance of new Shares to BluPlanet, Pelagos and Primarium under the Internal Restructuring Exercise further detailed in Section 4.1.2 of this Prospectus, there has been no acquisition of any existing Shares by our Directors, Key Senior Management, Substantial Shareholders or persons connected to them, nor any transaction entered into by them which grants them the right to acquire any of our Shares, during the past 3 years prior to the date of this Prospectus. 2.8 Utilisation of proceeds The total gross proceeds of approximately RM50.4 million from the Public Issue will be utilised by our Group in the following manner: TBS New existing Natura Total amount of Estimated timeframe business business proceeds Details of the for utilisation from the utilisation of proceeds RM'OOO RM'OOO RM'OOO % date of Listing (i) Capital 27,300 7,200 34 ,500 68.5 Within 48 months expenditure (ii) Working capital 1,600 2,200 3,800 7.5 Within 36 months (iii) New bUSiness 5,700 5,700 11.3 Within 48 months development (iv) Listing expenses 6,370 12.7 Within 3 months Total 50,370 100.0 Details of our use of gross proceeds from our IPO are as follows: 2.8.1 Capital expenditure The capital expenditure of RM34.5 million covers both our existing TBS business as well as the new Natura business (see Section 5.4.4 of this Prospectus). The details of the capital expenditure for the TBS business and the new Natura business are as set out below: (i) An overview of the capital expenditure for TBS business My(1) VN(2) CM(3) Total Details of capital expenditure RM'OOO RM'OOO RM'OOO RM'OOO (a) Office facility 700 700 • Expansion and upgrading of HQ in HCMC (b) Renovation of the existing TBS points- 6,000 2,400 8,400 of-sale in Malaysia and Vietnam • 15 TBS points-ot-sale in Malaysia • 6 TBS points-ot-sale in Vietnam 20 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) CM(3) Total Details of capital expenditure RM'OOO RM'OOO RM'OOO RM'OOO (c) IT network, infrastructure and website 2,000 1,300 400 3,700 • Upgrading IT network and Omnichannel infrastructure for TBS business in Malaysia • Upgrading IT network and Omnichannel infrastructure for TBS business in Vietnam • Setting-up of website and IT infrastructure for TBS business in Cambodia (d) Expansion of the number of TBS points- 3,000 9,000 2,500 14,500 of-sale • 6 new TBS points-of-sale in Malaysia • 18 new TBS points-of-sale in Vietnam • 5 new TBS points-of-sale in Cambodia Total capital expenditure for TBS business 11,000 13,400 2,900 27,300 Notes: (1) Malaysia ("MY") (2) Vietnam ("VN" (3) Cambodia ("CM") (a) Office facility We plan to use approximately RM700,OOO from our IPO proceeds within 12 months from the date of our Listing in expanding and upgrading our HQ in HCMC to cater for the expansion of our business operations in Vietnam. This will increase the capacity of our existing office by about 45.0%. This includes, among others, the cost of: • setting-up training and conference facilities, audio and visual equipment as well as a tele-conferencing system; • increasing the capacity of our office space by upgrading, renovating and setting-up the new and additional space to be rented within the existing building which are not currently occupied by the Company; and • purchasing the required office furnitures and equipments. (b) Renovations of the existing TBS points-of-sale in Malaysia and Vietnam In the bricks and mortar retail space, customer shopping experience is essential in driving traffic to our points-of-sale and garnering customer loyalty. As part of our strategy to increase Same Store Sales Growth in Malaysia as well as to accelerate our growth in Vietnam, we plan to spend a total of RM8.4 million over the course of 36 months from the date of our Listing in renovating some of our existing points-of-sale in Malaysia and Vietnam. The breakdown of the capital expenditure allocated for the renovations are as shown below. 21 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) Renovation cost per point-of-sale Number of point-of- Total cost Country (RM'OOO) sale to be renovated (RM'OOO) Malaysia 400 15 6,000 Vietnam 400 6 2,400 Total 8,400 The renovation is expected to cost approximately RM400,OOO per point-of-sale based on our historical renovation cost. The historical average renovation cost is the best current estimation for the current cost. Should there be any material variances in the future with regards to the renovation costs as a result of inflation, the shortfalls will be covered by future internally generated funds by the Group. The estimated cost includes among others, the cost of: • purchasing and installing new fixtures, fittings, lighting and flooring; • renovation works which include structural constructions and renovations, and design fees; and • new merchandising and display tools. (c) IT network, infrastructure and website TBS business in Malaysia and Vietnam In line with our plan to drive Same Store Sales Growth in Malaysia and to open up to 18 new points-of-sale in Vietnam, we plan to utilise approximately RM2.0 million and RM1.3 million of our IPO proceeds respectively to improve our IT network and capabilities for our TBS business operations in Malaysia and Vietnam. This includes, among others: • the implementation of the Omnichannel strategy through the integration of a new mobile application, e-commerce platform, the ERP System and the business intelligence analytics software for our operations in Malaysia and Vietnam; • the acquisition of a new ERP System to support our future growth for our operations in Malaysia and Vietnam; • upgrading our HQ's IT equipment in Malaysia and Vietnam; • upgrading the existing EPOS system of our points-of-sale in Malaysia and Vietnam; • upgrading the network of our security systems in our points of-sale in Malaysia and Vietnam; and • installing digital screens, tablets and skincare consultation tools to enhance our customers' experience across our points-of-sale in Malaysia and Vietnam. The above IT infrastructure will be acquired, developed and installed within 36 months from the date of our Listing. 22 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) TBS business in Cambodia We have set up a TBS website in Cambodia in November 2019 to accelerate our growth in Cambodia. We have allocated RM400,000 to finance the development cost of our e-commerce site as well as the acquisition and installation of the required IT infrastructure. The allocation above also includes the cost of rolling out IT hardware and software for our HQ and the TBS stores in Cambodia. (d) Expansion of the number of TBS points-of-sale As at the LPD, we have 89 TBS points-of sale in Malaysia, 34 points of-sale in Vietnam and 1 point-of-sale in Cambodia. Over the course of 36 months after our Listing, we plan to spend approximately RM14.5 million from our IPO proceeds to open up to 29 new TBS points-of sale across 3 markets in tandem with our business development plan. The breakdown of the expansion of the number of TBS points-of-sale are as shown in the table below. Cost of opening a Number of new new TBS point-of- TBS point-of-sale Total cost Country sale (RM'OOO) to be opened (RM'OOO) Malaysia 500 6 3,000 Vietnam 500 18 9,000 Cambodia 500 5 2,500 Total 29 14,500 The historical average cost of setting-up a new TBS point-of-sale is approximately RM500,000. As such we have used this historical cost as a basis for the capital expenditure required to open up a new TBS point-of-sale. The historical average renovation cost is the best current estimation for the current cost. Should there be any material variances in the future with regards to the renovation costs as a result of inflation, the shortfalls will be covered by future internally generated funds by the Group. The capital expenditure of approximately RM500,OOO per store covers, among others, payment of lease deposits, renovation costs, fixtures and fittings, merchandising and display tools, IT equipment and related hardware. Please refer to Sections 5.4 .1 , 5.4.2, and 5.4.3 of this Prospectus for further details of our future plans and strategies in relation to the TBS business. (ii) The new Natura business As part of our continuing plan to diversify and expand our business portfolio, we have identified an opportunity to introduce the Natura beauty brand in Malaysia. The Natura brand is under Natura Cosmeticos SA, a global beauty company which also owns the The Body Shop® and Aesop brands of personal care products worldwide.The Natura brand was founded in 1969 in Brazil. Natura Cosmeticos SA is not only Brazil's leading beauty company, but is also present in 6 LATAM countries as well as the USA and France. Natura develops personal care products which combines Brazil's unique biodiversity with science and innovation, according to Natura's philosophy of "bem estar bem" ("well being weIr), which is a concept of the harmonious relationship of oneself with his/her body, with others, and with nature. 23 Registration No. : 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cant'd) Our new business venture for Natura is based on the Natura MOU and the Natura Supply Agreement. In collaboration with the Natura Cosmeticos SA management team, we have finalised a business plan and have entered into the Natura MOU which is non-binding, to enable both parties to negotiate and enter into a definitive agreement that will establish our commercial relationship for the purpose of implementing the distribution and commercialisation of certain Natura products in Malaysia . On 28 November 2019, we entered into the Natura Supply Agreement to formalise the terms and conditions for the supply and distribution of the Natura products. Prior to signing of the definitive agreement(s), our exclusivity to sell the Natura products in Malaysia through the approved channels are based on the agreed principles for our commercial relationship with Natura in the Natura MOU . Please refer to Sections 5.15.4, and 13.5 of this Prospectus for further details of the Natura MOU and the Natura Supply Agreement. We have launched the Natura e-commerce website In August 2019 and opened a pop-up store in Sunway Pyramid in October 2019 to introduce and promote the brand to the Malaysian market. We will be adopting an Omnichannel strategy heavily focused on Natura's business model of social commerce and e-commerce, which will be supported by a digital platform as well as physical stores for showrooming and raising awareness through customer experience. This will be the major point of differentiation for the introduction of this new brand into the beauty industry in Malaysia, and we believe that this venture will further cement our market share and leadership in the "naturals" segment. As such, we have allocated a total of RM7.2 million from the IPO proceeds as capital expenditure to develop the new Natura business in Malaysia. The details of the capital expenditure allocated to the new Natura business are as shown below. Details of Natura capital expenditure RM 'OOO (a) Office facility 900 • Expanding and upgrading of our HQ in Subang Jaya, Malaysia for the new Natura business (b) IT network, infrastructure and website 1,500 • Setting-up of a new IT infrastructure for the new Natura business in Malaysia (c) Expansion of the number of points-of-sale 4,800 • 6 new Natura points-of-sale in Malaysia Total capital expenditure for the new Natura business 7,200 24 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cant'd) (a) Office facility We plan to use approximately RMO.9 million from our IPO proceeds within 48 months from the date of our Listing in expanding and upgrading our HQ in Subang Jaya, Malaysia for the purpose of developing the new Natura business in Malaysia. The capital expenditure required includes, among others, the cost of: • setting-up training and conference facilities, audio and visual equipment as well as a tele-conferencing system; • further expanding the office space in our eXisting HQ to cater for the further expansion of our HQ team in Malaysia for the new Natura business. The Natura business will have a designated office space within the same HQ building and address; and • purchasing additional office furnitures and equipments. (b) IT network, infrastructure and website As part of our plan to develop the Natura brand in Malaysia, we plan to use RM1.5 million of the IPO proceeds to set-up the IT infrastructure for this new business which is targeted to complete by December 2020. This includes the cost of integrating the ERP with Natura's sales and commercial platform for e-commerce and social selling via a website and mobile application. We have installed an EPOS system for all the offline stores which will be integrated with the main ERP. In line with our business strategy to ensure quality customer experience, we plan to invest in a customer service solution to manage customer enquiries and feedbacks. Additionally, we will be purchasing a business intelligence analytics software to enable us to process big data and identify trends and customer preferences which will assist us in forming the right strategies for the new Natura business. (c) Expansion of the number of points-of-sale For the new Natura business in Malaysia, we plan to spend approximately RM4.8 million from our IPO proceeds to open up an average of 2 new points-of-sale per year, totalling up to 6 new points of-sale in Malaysia within 36 months from the date of our Listing. As at the LPD, our Group has opened the first pop-up store in Sunway Pyramid in October 2019. The Group has also identified and is finalising other locations for the Natura points-of-sales. The capital expenditure of approximately RM800,000 per store covers, among others, payment of lease deposits, renovation costs, fixtures and fittings, merchandising and display tools, IT equipment and related hardware. As the Natura points-of-sale are intended for product showcasing and retail sales, they require a bigger space which contribute to a higher capital expenditure. 25 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) 2.8.2 Working capital The working capital of RM3.8 million covers both the existing TBS business as well as the new Natura business. The details of the working capital for the TBS business and the new Natura business are as set out below: (i) Working capital for the TBS business My(l) VN(2) Total Details of working capital RM'OOO RM'OOO RM'OOO RM'OOO (a) Initial inventory financing 1,000 1,000 • 5 new TSS points-of-sale in Cambodia (b) Warehousing and logistic facilities 600 600 • Upgrading the current TSS warehousing and logistic facilities in Vietnam Total working capital for TBS business 600 1,000 1,600 Notes: (1) Malaysia ("MY") (2) Vietnam ("VN") (3) Cambodia ("CM") (a) Initial inventory financing We have set aside a total of RM1 .0 million of our IPO proceeds as working capital to finance the initial inventory required for the new TBS points-of-sale in Cambodia within 36 months from the date of our Listing. The breakdown of the expenditure allocated for the initial inventory required are as shown below. Initial inventory Number of Businessl cost per store new point- Total cost Country (RM'OOO) of-sale (RM'OOO) TSS Cambodia 200 5 1,000 Total 5 1,000 (b) Warehousing and logistic facilities Vietnam In line with our expansion plan for the TBS business in Vietnam, we will need to expand our current warehousing and logistic facilities to cope with the future business as the existing facilities are currently working at full capacity and need to be upgraded to meet future growth in demand. The outsourcing of the additional warehousing and logistic facilities for the TBS business in Vietnam is estimated to cost RMO.6 million and it is expected to be operational within 36 months. We will procure the services of an experienced supply chain and logistics solution provider, through a request for proposal exercise. 26 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cont'd) (ii) Working capital for the new Natura business in Malaysia Details of working capital RM'OOO (a) Initial inventory financing 1,200 • 6 new Natura points-of-sale in Malaysia (b) Warehousing and logistic facilities 1,000 • Outsourcing of new warehousing and logistic facilities for the new Natura business in Malaysia Total working capital for the new Natura business 2,200 (a) Initial inventory financing In setting up the new Natura business in Malaysia, we plan to allocate RM1 .2 million to finance the initial inventory required for the 6 new Natura points-of-sale and the warehousing facility which will be set-up within 36 months from the date of our Listing. (b) Warehousing and logistic facilities To cater for the long-term expansion of the Natura business, we will need to expand our current warehousing and logistic facilities through the outsourcing of the additional warehousing and logistics facilities for Natura. This is estimated to cost RM1.0 million and it is expected to be a continuous upgrading exercise within 36 months from the date of our Listing, in tandem with the growth of the business. We will engage the warehousing and distribution service provider for our TBS business under a separate contract to cater for the expansion of the Natura business. This integrated end-to-end distribution centre will provide support for the entire supply chain from management of inbound logistics which includes shipment receiving, breakbulk, labelling and bundling, to outbound logistics including processing of replenishment and on demand orders for both online and retail stores, and transportation to all points-of-sale as well as door-to-door delivery to our customers in Malaysia. Deliveries will be traced by a web-enabled tracking system, and the warehouse management system will be integrated with our ERP System and e-commerce as well as social commerce platforms to ensure the visibility of stock location at all time. In addition to improving inventory control, we also aim to enhance our supply chain efficiency with the new facilities. 27 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cant'd) 2.8.3 New business development for Natura in Malaysia Details of new business developments RM'OOO Business development costs for Natura in Malaysia • Marketing and launch events 5,700 Total 5,700 We intend to allocate approximately RM5 .7 million from the IPO proceeds to develop the new Natura business in Malaysia within 36 months from the date of our Listing. The costs related to the development of the New Natura business are mainly in relation to the marketing expenses budgeted for the launch and introduction of the brand to the market. These include the cost of organising launch events, cost of printing catalogues and other promotional materials, cost of distributing the catalogues and samples and the cost of digital marketing. Any proceeds earmarked for the new Natura business in Malaysia, if not utilised for any reason Whatsoever, will be reallocated for the development of our TBS business in Malaysia, Vietnam and Cambodia. This includes the implementation of initiatives that can further grow the eXisting TBS business, for example, marketing investments to further augment the brand presence in these markets and training investments to further increase the skills and competencies of our employees. 2.8.4 Estimated Listing expenses The estimated expenses and fees incidental to our Listing amounting to approximately RM6.4 million shall be bome by our Company, the details of which are as follows: Expenses RM'OOO Professional fees 4,081 Brokerage, placement fees and underwriting commission 908 Printing of Prospectus and advertising fees 480 Issuing house 81 Fees to the authorities 595 Miscellaneous expenses and contingencies 225 Total 6,370 If the actual listing expenses are higher than the estimated amount as set out above, the deficit will be funded out of the portion from the IPO proceeds allocated for working capital. Conversely, if the actual listing expenses are lower than the estimated amount, the excess will be utilised for working capital purposes. The financial impact of the use of our Listing proceeds from the Public Issue on our pro forma consolidated financial information is as set out in Section 11.11 of this Prospectus. The proceeds of our IPO will be denominated in RM whilst the use of proceeds for our expansion and business development plans in both Vietnam and Cambodia are in VND and KHR and/or USD respectively. In the event the actual RM payment amount required as at the payment date is higher than the RM amount set out above due to movements in exchange rate, the deficit will be funded out of the amount allocated for working capital. However, if the actual RM amount required as at the payment date is lower than the RM amount set out above due to movements in exchange rate, the excess will be utilised for working capital. 28 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) The actual proceeds accruing to our Group will depend on the Institutional Price and the Final Retail Price. If the actual proceeds are lower than budgeted above, the proceeds allocated for working capital will be reduced accordingly. Pending the use of proceeds from the Public Issue, we intend to place the proceeds (including accrued interest, if any) or the balance thereof in interest-bearing accounts, money market instruments and/or deposits. The Offer for Sale is anticipated to raise gross proceeds of RM70.2 million which will accrue entirely to BluPlanet as the Selling Shareholder. All expenses such as placement and miscellaneous fees incurred pursuant to the Offer for Sale estimated at RM1.0 million shall be borne by BluPlanet. 2.9 Brokerage, underwriting commission and placement fees 2.9.1 Brokerage We will pay brokerage fees in respect of the Issue Shares at the rate of 1.0% on the Final Retail Price per Issue Share for successful applications which bear the stamps of participating organisations of Bursa Securities, members of the Association of Banks in Malaysia, members of the Malaysian Investment Banking Association or the Issuing House. The brokerage fees are subject to SST. elMB is entitled to charge brokerage commission to successful applicants under the Institutional Offering. For the avoidance of doubt, any brokerage fees payable under the Institutional Offering will not be borne by us nor the Selling Shareholder. 2.9.2 Underwriting commission As stipulated in the Retail Underwriting Agreement, we will pay the managing underwriting commission and underwriting commission at the rate of 0.50% and 1.75% respectively, of the amount equal to the Retail Price multiplied by the number of Issue Shares underwritten pursuant to the Retail Offering. The managing underwriting commission and underwriting commission are subject to SST. 2.9.3 Placement fee We will pay eIMB, our Sole Bookrunner a placement fee at the rate of 1.40% of the amount equal to the Institutional Price multiplied by the number of Issue Shares sold to Malaysian and foreign institutional and selected investors including Bumiputera investors approved by MITI pursuant to the Institutional Offering. The placement fees are subject to SST. The Selling Shareholder will pay elMB a placement fee and selling commission at the rate of 1.40% of the amount equal to the Institutional Price multiplied by the Offer Shares sold to Malaysian and foreign institutional and selected investors, including Bumiputera investors approved by MITI pursuant to the Institutional Offering. The placement fees are subject to SST. 29 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cont'd) 2.10 Details of the underwriting, placement and lock-up arrangements 2.10.1 Underwriting We have entered into the Retail Underwriting Agreement with the Joint Underwriters to underwrite 16,131,500 Issue Shares under the Retail Offering as set out in Sections 2.3.2(i) and 2.3.2(ii) of this Prospectus, subject to the clawback and reallocation provisions as set out in Section 2.3.3 of this Prospectus. The salient terms of the Retail Underwriting Agreement are as follows: (i) The obligations of the Managing Underwriter and Joint Underwriters under the Retail Underwriting Agreement are conditional on certain conditions precedent being satisfied or fulfilled; (ii) the Managing Underwriter (for and on behalf of the Joint Underwriters) may by notice to our Company given at any time before the date of Listing, terminate, cancel and withdraw the underwriting commitment if: (a) there is a breach by our Company of any of our obligations or any of the warranties or undertakings under the Retail Underwriting Agreement in any respect; (b) any of the Franchise Agreements or the Framework Franchise Agreement having been terminated or not being renewed or threatened to be terminated or not renewed; (c) our Company withholds any information from the Managing Underwriter and the Joint Underwriters, which, in the opinion of the Managing Underwriter and Joint Underwriters, would have or is likely to have any change, effect, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on: (aa) the condition (financial or otherwise), general affairs, business, assets, liquidity, liabilities, prospects, properties or results of operations of our Company and the Group, whether individually or taken as a whole, and whether or not arising in the ordinary course of business; (bb) the ability of our Company and/or the Selling Shareholder to perform in any respect its or their obligations under or with respect to, or to consummate the transactions contemplated by this Prospectus, the Placement Agreement or the Retail Underwriting Agreement; (cc) the ability of our Company or any of our Subsidiaries to conduct its businesses and to own or lease its assets and properties as described in this Prospectus; or (dd) the IPO. ("Material Adverse Effect"); 30 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) (d) there shall have occurred, happened or come into effect any event or series of events beyond the reasonable control of the Managing Underwriter and the Joint Underwriters by reason of Force Majeure (as defined below) which would have or can be expected to have a Material Adverse Effect on the success of the IPO orwhich would have or is likely to have the effect of making any material obligation under the Retail Underwriting Agreement incapable of performance in accordance with its terms. "Force Majeure" means causes which are unpredictable and beyond the reasonable control of the party claiming Force Majeure which could not have been avoided or prevented by reasonable foresight, planning and implementation including but not limited to: (aa) war, acts of warfare, sabotages, hostilities, invasion, incursion by armed force, act of hostile army, nation or enemy, civil war or commotion, hijacking, terrorism; (bb) riot, uprising against constituted authority, civil commotion, disorder, rebellion , organised armed resistance to the government, insurrection, revolt, military or usurped power; or (cc) natural catastrophe including but not limited to earthquakes, floods, fire, storm, lightning, tempest, explosions, accident, epidemics or other acts of God; (e) there shall have occurred any government requisition or other events whatsoever which would have or is likely to have a Material Adverse Effect on the business, operations, financial condition or prospects of our Group or the success of the IPO; (f) there shall have occurred any change in national or international monetary, financial and capital markets (including stock market conditions and interest rates) , political or economic conditions or exchange control or currency exchange rates which in the opinion of the Managing Underwriter would have or is likely to have a Material Adverse Effect (whether in the primary market or in respect of dealings in the secondary market). For the avoidance of doubt, if the FTSE Bursa Malaysia KLCI ("Index") is, at the close of normal trading on Bursa Securities, on any Market Day: (aa) on or after the date of the Retail Underwriting Agreement; and (bb) on or prior to the Settlement Date (being the latest date the Joint Underwriters apply for and remit subscription monies for the unsubscribed underwritten Issue Shares under the Retail Offering in accordance with the terms of the Retail Underwriting Agreement), lower than 85% of the level of Index at the last close of normal trading on the relevant exchange on the Market Day immediately prior to the date of the Retail Underwriting Agreement and remains at or below that level for at least 3 consecutive Market Days, it shall be deemed a material adverse change in the stock market condition; 31 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cont'd) (g) trading of all securities on Bursa Securities has been suspended or other form of general restriction in trading in securities is imposed for 3 consecutive Market Days or more; (h) there shall have announced or carried into force any new law or change in law in any jurisdiction which in the opinion of the Managing Underwriter and the Joint Underwriters may prejudice the success of the IPO or the Listing or which would have or is likely to have the effect of making it impracticable to enforce contracts to allot and/or transfer the Shares or making any obligation under the Retail Underwriting Agreement incapable of performance in accordance with its terms; (i) the Institutional Offering and/or the Retail Offering is stopped or delayed by our Company or any regulatory authorities for any reason whatsoever (unless such delay has been approved by the Managing Underwriter and the Joint Underwriters); U) the last date and time for applications and payment for the Issue Shares under the Retail Offering in accordance with this Prospectus and the Application Forms, including any extensions thereof in accordance with the Retail Underwriting Agreement ("Closing Date"), does not occur within 15 days from the issuance date of this Prospectus or such other extended date as may be agreed in writing by the Managing Underwriter (the agreement of which should not be unreasonably withheld); (k) the Listing does not take place by 25 February 2020 or such other extended date as may be agreed in writing by the Managing Underwriter (the agreement of which should not be unreasonably withheld); (I) any commencement of legal proceedings or action against any member of our Group or any of their directors which, in the opinion of the Managing Underwriter and the Joint Underwriters would have or is likely to have a Material Adverse Effect or make it impracticable to enforce contracts to allot and/or transfer the Shares; (m) the Placement Agreement shall have been terminated or rescinded in accordance with its terms; (n) any of the following approvals is revoked, suspended or ceases to have any effect whatsoever, or is varied or supplemented (unless such variation or supplement is minor or is made to ensure consistency with the scheme for our Listing, or is made with the approval of the Managing Underwriter acting on the Joint Underwriters' behalf): (aa) approvals of our Board and (where applicable) shareholders approving among others, the I PO and the Listing and the transactions contem plated by each of the same, the execution of the Retail Underwriting Agreement and authorising such person as the Board may resolve to execute the Retail Underwriting Agreement, the issue and allotment of the IPO Shares under the IPO, the issuance of this Prospectus, remaining in full force and effect as at the Closing Date and none having been rescinded, revoked or varied; or 32 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cont'd) (bb) all approvals required in relation to the IPO, the Admission and the Listing , including but not limited to approvals from the SC, Bursa Securities and MITI having been obtained on terms and conditions acceptable to the Joint Underwriters and remaining in full force and effect and none have been amended, withdrawn, revoked, suspended or terminated or lapsed, and a certified true copy of each of such approvals having been provided to the Managing Underwriter, on behalf of the Joint Underwriters and all conditions to such approvals (except for any conditions which can only be complied with on or after Closing Date) shall have been complied with; (0) any material statements contained in this Prospectus and the Application Forms has become or been discovered to be untrue, inaccurate or misleading in any respect; or (p) any other event in which a Material Adverse Effect has occurred or which in the opinion of the Managing Underwriter is reasonably likely to occur. 2.10.2 Placement Our Company and the Selling Shareholder expect to enter into the Placement Agreement with the Sole Bookrunner in relation to the placement of 103,200,000 Offer Shares and 57,942,500 Issues Shares under the Institutional Offering, subject to the clawback and reallocation provisions set out in Section 2.3.3 of this Prospectus. Our Company and the Selling Shareholder will be requested to give various representations, warranties and undertakings, and to indemnify the Sole Bookrunner against certain liabilities in relation to the IPO. 2.10.3 Lock-up arrangements Lock-up Jetter bv our Company In connection with the Placement Agreement, we expect to agree, subject to certain exceptions, that a lock-up letter will be issued to the Sole Bookrunner agreeing that, for a period beginning on the date of the lock-up letter and ending on, and including, the date that is 6 months after the date of the Admission, we will not, without the prior written consent of the Sole Bookrunner directly or indirectly: (a) issue, allot, sell, offer to sell, contract or agree to sell, grant any option or right to purchase or security over, or otherwise dispose of or agree to dispose of, directly or indirectly, conditionally or unconditionally any Shares or any other securities of our Company that are substantially similar to the Shares (or any interest therein or in respect thereof), or any securities convertible into or exchangeable or exercisable for the Shares, or any warrants or other rights to purchase or subscribe, the foregoing whether any such transaction is to be settled by delivery of Shares or such other securities, in cash or otherwise; (b) enter into any swap, hedge, derivative or other transaction or arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Shares or any other securities of our Company that are substantially similar to the Shares, or any securities convertible into or exchangeable or exercisable for the Shares, or any warrants or other rights to purchase, the foregoing , whether any such transaction is to be settled by delivery of Shares or such other securities, in cash or otherwise; 33 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cont'd) (c) deposit any Shares (or any securities convertible into or exchangeable for or which carry rights to subscribe or purchase or that represent the right to receive or are substantially similar to, the Shares) in any depository receipt facilities; or (d) publicly announce an intention to effect any transaction specified in paragraph (a), (b) or (c) above. except, in all cases, pursuant to the IPO. Lock-up letters bv the Promoters In connection with the Placement Agreement, the Selling Shareholder, together with Etheco, Primarium and Pelagos will issue a lock-up letter to the Sole Bookrunner agreeing that, for a period beginning on the date of the lock-up letter and ending on, and including, the date that is 6 months after the date of the Admission, each of them will not, without the prior written consent of the Sole Bookrunner directly or indirectly: (a) sell, offer to sell, contract or agree to sell, hypothecate, pledge, mortgage, charge, assign, grant any option or right to purchase or security over, or otherwise dispose of or agree to dispose of, directly or indirectly, conditionally or unconditionally any Shares or any other securities of our Company that are substantially similar to the Shares (or any interest therein or in respect thereof), or any securities convertible into or exchangeable or exercisable for the Shares, or any warrants or other rights to purchase or subscribe, the foregoing whether any such transaction is to be settled by delivery of Shares or such other securities, in cash or otherwise; (b) enter into any swap, hedge, derivative or other transaction or arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Shares or any other securities of our Company that are substantially similar to the Shares, or any securities convertible into or exchangeable or exercisable for the Shares, or any warrants or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of Shares or such other securities, in cash or otherwise; (c) deposit any Shares (or any securities convertible into or exchangeable for or which carry rights to subscribe or purchase or that represent the right to receive or are substantially similar to, the Shares) in any depository receipt facilities; or (d) publicly announce an intention to effect any transaction specified in (a) , (b) or (c) above, except, in all cases, pursuant to the IPO. 34 Registration No.: 199401034915 (320598-X) 2. DETAILS OF OUR IPO (cont'd) Our other Promoters, namely, Datin Mina, Dato' Simon, Dexter Foong and Daryl Foong will also issue similar lock-up letters to the Sole Bookrunner agreeing that, for a period beginning on the date of the lock-up letter and ending on, and including, the date that is 6 months after the date of the Admission, each of them will not, without the prior written consent of the Sole Bookrunner directly or indirectly: (a) sell, offer to sell, contract or agree to sell, grant any option or right to purchase or security over, or otherwise dispose of or agree to dispose of, directly or indirectly, conditionally or unconditionally any shares held by all or any of us in Etheco, BluPlanet, Pelagos and Primarium (collectively, the "Direct Shareholders") or any other securities of the Direct Shareholders that are substantially similar to such shares (or any interest therein or in respect thereof), or any securities convertible into or exchangeable or exercisable for such shares, or any warrants or other rights to purchase or subscribe, the foregoing whether any such transaction is to be settled by delivery of such shares or such other securities, in cash or otherwise; (b) enter into any swap, hedge, derivative or other transaction or arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the shares in the Direct Shareholders or any other securities of the Direct Shareholders that are substantially similar to such shares, or any securities convertible into or exchangeable or exercisable for such shares, or any warrants or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of such shares or such other securities, in cash or otherwise; (c) deposit any shares in the Direct Shareholders (or any securities convertible into or exchangeable for or which carry rights to subscribe or purchase or that represent the right to receive or are substantially similar to, such shares) in any depository receipt facilities; or (d) publicly announce an intention to effect any transaction specified in paragraph (a), (b) or (c) above, except, in all cases, pursuant to the IPO. 2.11 Trading and settlement in secondary market Upon our Listing, our Shares will be traded through Bursa Securities and settled by book-entry settlement through the CDS, which is operated by Bursa Depository. This will be effected in accordance with the rules of Bursa Depository and the provisions of the SICDA. Accordingly, our Company will not deliver share certificates to the subscribers or purchasers of our IPO Shares. Beneficial owners of our Shares are required under the rules of Bursa Depository to maintain our Shares in CDS accounts, either directly in their name or through authorised nominees. Persons whose names appear in the Record of Depositors maintained by Bursa Depository will be treated as the shareholders of our Company in respect of the number of Shares credited to their respective CDS accounts. Transactions in our Shares under the book-entry settlement system will be reflected by the seller's CDS account being debited with the number of Shares sold and the buyer's CDS account being credited with the number of Shares acquired. No transfer stamp duty is currently payable for our Shares that are settled on a book-entry basis, although there is a nominal transfer fee of RM 10 payable for each transfer not transacted on the market. 35 Registration No.: 199401034915 (32059B-X) 2. DETAILS OF OUR IPO (cont'd) Shares held in CDS accounts may not be withdrawn from the CDS except in the circumstances set out in the rules of Bursa Depository, which include the following : (i) to facilitate a share buy-back; (ii) to facilitate conversion of non-equity securities; (iii) to facilitate company restructuring process; (iv) where a body corporate is removed from the Official List; (v) to facilitate a rectification of any error; and (vi) in any other circumstances as determined by Bursa Depository from time to time, after consultation with the SC. Trading of shares of companies listed on Bursa Securities is normally done in "board lots" of 100 shares. Investors who desire to trade less than 100 shares shall trade under the odd lot market. Settlement and payment of trades done on a "ready" basis on Bursa Securities generally takes place 3 Market Days following the transaction date. It is expected that our Shares will commence trading on Bursa Securities about 10 Market Days after the close of the Retail Offering. Holders of our Shares will not be able to sell or otherwise deal in our Shares (except by way of a book-entry transfers to other CDS accounts in circumstances which do not involve a change in beneficial ownerShip) prior to the commencement of trading on Bursa Securities. (The rest of this page has been intentionally left blank) 36 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS, AND KEY SENIOR MANAGEMENT 3.1 Directors 3.1.1 Board Our Board has adopted the following responsibilities for effective discharge of its functions: (i) promoting good corporate governance culture within the Group which reinforces ethical, prudent and professional behaviour; (ii) reviewing, challenging and deciding on the management's proposals for the Company, which include its annual corporate plan (comprising among others our overall corporate strategy, marketing plans, financial plans and budgets) and monitoring its implementation by management; (iii) ensuring that the strategic plan of the Company supports long-term value creation including strategies on economic, environmental and social considerations underpinning sustainability; (iv) supervising and assessing management performance to determine whether the business is being properly managed; (v) reviewing the adequacy and effectiveness of the management of information and ensuring there is a sound framework for internal controls and risk management; (vi) identifying and understanding the principal risks of the Company's business and ensuring implementation of appropriate internal controls and mitigation measures to achieve a proper balance between risks incurred and potential returns to the shareholders; (vii) setting the risk appetite within which the Board expects management to operate and ensuring that there is an appropriate risk management framework to identify, analyse, evaluate, manage and monitor significant financial and non-financial risks; (viii) ensuring that senior management has the necessary skills and experience, and there are measures and appropriate policies for training, appointment and performance monitoring of management positions in place to provide for the orderly succession of Board and senior management; (ix) ensuring that the Company has in place policies and procedures to enable effective communication with stakeholders; and (x) ensuring the integrity of the Company's financial and non-financial reporting. TBSI has made it a term of the Franchise Framework Agreement that our Board must include Dato' Simon (and his alternate, Daryl Foong), Datin Mina, and executive directors nominated and appointed by Dato' Simon and Datin Mina ("Selected Directors"). Collectively, Dato' Simon (and his alternate, Daryl Foong), Datin Mina and the Selected Directors must comprise of a majority of the directors on our Board ("Board Condition"). This is to enable TBSI to ensure that our TBS business continues to be built on the same values and belief that we presently share with TBSI . Please see Section 5.1.2 of this Prospectus for more details of our values. 37 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) As such, unless this Board Condition is waived by our Franchisor, our Company will not be able to adopt the recommendation of Paragraph 4.1 under the Principle A of the Malaysian Code on Corporate Governance ("MCCG") which states that for companies listed on Bursa Securities with a market capitalisation below RM2.0 billion, at least half of the board should comprise independent directors and for listed companies with a market capitalisation of RM2.0 billion or more ("Large Company"), the board should comprise of a majority independent directors. Our Board will also provide a statement on the extent of compliance with the MCCG in our first annual report as a listed entity. Notwithstanding the above, we are in compliance with the Listing Requirements which requires that at least 1/3 of our Board or at least 2 of our Directors comprises independent directors. We have also appOinted Dato' Maznah, as our Senior Independent Non-Executive Director to monitor and strengthen the governance of our Company. She is an experienced independent director who has sat on multiple listed company boards for over 2 decades. Please refer to Section 3.1 .2 of this Prospectus for Dato' Maznah's profile. In addition, although we are not deemed as a Large Company under the MCCG, our Board comprises 80.0% women, which exceeds the recommendation for at least 30.0% women directors for a Large Company pursuant to Paragraph 4.5 of the Guidance under Principle A of the MCCG. Our Board is committed to achieving and sustaining high standards of corporate governance. Although currently the members of Nominating and Remuneration Committee and Audit and Risk Management Committee are the same, there are various assessment methods in place to ensure effective evaluation of the Audit and Risk Management Committee by the Nominating and Remuneration Committee, such as self-evaluation, peer evaluation, committee evaluation as a whole, and when necessary, the Nominating and Remuneration Committee may also escalate any matters to our Board . The details of our Directors and the date of expiration of the current term of office for each of our Directors and the period that each of them have served in that office as at the LPD are as follows: Date of No. of expiration years and Date of of the months in appoint- current office mentas term of (Approxi- Name Age Nationality Designation Director office mate) Dato' 65 Malaysian Non- 21.10.1994 Subject to 25 years Simon Independent retirement at and 2 Non- the AGM in months Executive year 2020 Chairman Datin Mina 59 Malaysian Non- 21.10.1994 Subject to 25 years Independent retirement at and 2 Executive the AGM in months Director I year 2020 Managing Director Molly 48 Malaysian Non- 27.02.2019 Not subject 10 months Fong Independent to retirement Executive at the AGM Director I in year 2020 CEO 38 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Date of No. of expiration years and Date of of the months in appoint- current office ment as term of (Approxi- Name Age Nationality Designation Director office mate) Dato' 66 Malaysian Senior 27.02.2019 Not subject 10 months Maznah Independent to retirement Non- at the AGM Executive in year 2020 Director Tengku 46 Malaysian Independent 27.02.2019 Not subject 10 months Zatashah Non- to retirement Executive at the AGM Director in year 2020 Daryl 33 Malaysian Non- 27.02.2019 Not subject 10 months Foong Independent to retirement (Alternate Non- at the AGM to Dato' Executive in year 2020 Simon) Director According to Clause 106(1) of our Constitution, an election of Directors shall take place each year at an annual general meeting. At each annual general meeting, any Director appointed during the year and 1/3 of the other Directors for the time being , or if the number is not a multiple of 3, then the number nearest to 1/3 with a minimum of 1 shall retire from office and an election of Directors shall take place provided always that each Director shall retire from office once at least in every 3 years. A retiring Director shall retain office until the close of the meeting at which he retires. All Directors who retire from office shall be eligible for re-election according to Clauses 99 and 107 of our Constitution. None of our Directors are representatives of any corporate shareholders. For details on the associations of family relationship between our Promoters, Directors and Key Senior Management, please refer to Section 3.6 of this Prospectus. 39 Registration No.: 199401034915 (32059S-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) 3.1.2 Our Directors' Profile Dato' Simon is our Non-Independent Non-Executive Chairman. He is also our Promoter and Substantial Shareholder. Dato' Simon holds a Bachelor of Arts (Honours) degree in Business Studies, from Ulster Polytechnic, now part of Ulster University, United Kingdom, obtained in 1981 . He also completed the Senior Management Development Program by Harvard Business School Alumni Club of Malaysia in 1994. Dato' Simon is an entrepreneur with more than 30 years of business experience in the telecommunications, personal computers, personal care and lifestyle, and tourism related businesses. Dato' Simon began his career with PMI Compex EDP (M) Sdn Bhd, a company involved in the distribution of Apple computers, where he was a Marketing Manager from 1982 to 1983. In 1984, he joined Jurudata Sdn Bhd as their Sales and Marketing Manager where he was responsible for the sales and marketing of computer equipment and other related services before leaving in 1991 to join Komtel Sdn Bhd ("Komtel") as its General Manager in charge of the management of business operations, dealership and expansion of its business. In 1994, he left Komtel and in 1995, he took on the role of director at Rampai-Niaga, where he was responsible for the overall direction of the franchise business, a position he held until 2003. After Rampai-Niaga was disposed to Kejora Harta, a company then involved in investment holding and property development, Dato' Simon served as an Executive Director of Kejora Harta where he provided the overall direction for the development and expansion of Rampai-Niaga's franchise business from January 2004 until September 2006. Dato' Simon was also re-appointed as a director of Rampai Niaga in November 2004. In November 2006 when Kejora Harta disposed its shares in Rampai-Niaga to our Company, Dato' Simon left his position at Kejora Harta and resumed his role as a director of Rampai-Niaga until to-date. In April 2004, Dato' Simon also joined Aquawalk Sdn BM ("Aquawalk"), a turnkey aquarium construction, operation and management specialist company as a director, before taking on the role as their Group Managing Director in October 2006. In 2016, he was appointed as the Chairman and CEO of Aquawalk, a position he still holds currently. Aquawalk currently owns and operates Aquaria Kuala Lumpur City Centre, and Aquaria Phuket, Thailand. From February 2017 to April 2019, Dato' Simon was appointed as President Commissioner of PT Jakarta Akuarium Indonesia, where he was responsible for the supervision and provision of strategic oversight and consultancy to the board of directors of the company. In 2010, Dato' Simon took on the role as the co-founder and Group Managing Director of the Senja Aman Holdings Sdn Bhd group of companies ("Senja Aman Group"), a position he still holds currently. The Senja Aman Group is principally involved in property development and is currently developing a lUXUry wellness resort and hotel complex in Penang. Dato' Simon served as a committee member for the Cosmetic, Toiletry and Fragrance Association of Malaysia from 1996 to 1997. He also served as the Vice Chairman and Trustee of the PT Foundation (previously known as Pink Triangle Sdn Bhd), a community-based, voluntary non-profit making organisation providing HIV/AIDS education, prevention, care and support programmes, sexual health awareness and empowerment programmes for vulnerable communities in Malaysia, from 2002 to 2014. He was elected as the President of the Malaysian Association of Amusement Themepark and Family Attractions in April 2015, an office he held till April 2019. 40 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) He also served on the Advisory Board of Kuala Lumpur Tourism Bureau from 2015 to 2018. Dato' Simon was awarded Tatler's Diamond of Excellence award by Malaysia Tatler in December 2018 to recognise the positive impact he made in the country's retail and tourism industry and his efforts in helping to elevating the industry standards over the years. He is also a director of various other private limited companies in Malaysia, details of which are as set out in Section 3.1.4 of this Prospectus. Datin Mina, is our Founder, Non-Independent Executive Director and Managing Director. She is also our Promoter and Substantial Shareholder. Datin Mina obtained her Bachelor of Science (Honours) degree in Computational Science and Management Studies from University of Leeds, UK in 1982. Datin Mina has more than 30 years of experience, both in retail as well as the cosmetics and toiletries industry. She is instrumental in providing strategic vision and growth strategies to our Group as well as ensuring the successful implementation of our Group's strategy and growth plans. Upon her return to Malaysia in 1982, she worked at Hewlett Packard from 1983 to 1984 as a Systems Engineer before starting the TBS franchise business in West Malaysia when she opened the first TBS point-of-sale in December 1984. Since then she has grown our Group from a single store to a multi million ringgit business with a total of 89 points-of-sale in Malaysia, 34 points-of-sale in Vietnam and 1 point-of-sale in Cambodia, as at the LPD. She will continue to actively shape the strategic direction and development of our Group's business and promote the Group's values on environment, human rights and women's rights. Datin Mina was a member of the Board of Trustees of the Malaysian AIDS Foundation from 2000 to 2012 and held the position of Honorary Secretary from 2006 until 2012. She was invited to participate in the Malaysian Government Transformation Programme in 2012 and became the Laboratory Leader who was instrumental in developing the National Key Economic Areas for Wholesale and Retail. As at the LPD, Datin Mina serves as Honorary Auditor for the Bukit Bintang Kuala Lumpur City Center Tourism Association, a position she has held since 2017, where she is responsible for overseeing the financial statements prepared by the auditors. Datin Mina accepted the Prime Minister's Corporate Social Responsibility Award on behalf of Rampai-Niaga in 2007 for its outstanding work in the small company category and again in 2009 for the contributions made towards the empowerment of women . In 2014, Forbes named Datin Mina as one of its 'Heroes of Philanthropy'. More recently, her contributions were again recognised when she was honoured with the Patron's award at the Malaysian AIDS Foundation Tun Dr Siti Hasmah Award 2018 for her dedicated long service with the Malaysian AIDS Foundation. Her corporate philosophy of active citizenship and community care is evident in the campaigns that our Group has initiated and it exemplifies her belief of "business as a force for good". In the last 10 years, Datin Mina has climbed to Base Camp Everest, summited Mount Kilimanjaro, trekked along the Kalahari Desert and rafted through 41 rapids on the Zambesi River. These achievements demonstrate Datin Mina's entrepreneurial character in taking up new challenges, and steadfast leadership of our Group. She is also a director of various other private limited companies in Malaysia, details of which are as set out in Section 3.1.4 of this Prospectus. 41 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Molly Fong, is our Non-Independent Executive Director and CEO . Molly Fong obtained her General Certificate of Education Advanced Level in 1990 and subsequently she pursued the Institute of Chartered Secretaries and Administrators ("ICSA") programme and was admitted to the ICSA in 1999. She also obtained a Master of Business Administration degree from The University of Nottingham, UK, in 2013 which she pursued on a part-time basis while acting as the CEO of Rampai-Niaga. She was named the University of Nottingham - Malaysia Campus 2013 "Alumnus of the Year" at the Alumni Laureate Award ceremony held in Kuala Lumpur in 2013. Molly Fong has been with our Group since 1995 and is responsible for the overall strategic direction and management of the business operations for Malaysia, Vietnam and Cambodia and other regions which the Group may operate in the future. She started her career with Prosell Sdn Bhd, a below-the-line advertising agency as an Administration Executive in 1992. She left Prosell Sdn Bhd in 1995 to join Rampai Niaga as a Communications Executive. From 1995 to 2003, she worked in various departments within Rampai-Niaga, from marketing and commercial, brand management, visual merchandising and store development, retail operations and sales management, to business development and was promoted as our General Manager in 2003. Molly Fong led the team in starting up operations in Vietnam in 2009. She was appointed as the CEO of Rampai-Niaga in 2011, and in January 2019, she was appointed in her current role as our CEO. Throughout her tenure with our Group, Molly Fong's passion for TBS brand values and her belief in "profits with principles" remain steadfast. She continues to ensure that positive social and environmental change remains high on the agenda of our Group. Dato' Maznah is our Senior Independent Non-Executive Director. Her role as the Senior Independent Non-Executive Director of InNature as stated in the Company's Board charter would include, acting as a sounding board for the Chairman as well as the point of contact between the Independent Directors and the Chairman on sensitive issues. She will also be the focal point for the Board members for any concerns regarding the Chairman or the relationship between the Chairman, the Managing Director and the Chief Executive Officer; and acting as a designated contact to whom shareholders' concerns or queries may be raised, as an alternative to the formal channel of communication with shareholders. She graduated with a Bachelor of Science in Business Administration from the Northern Illinois University, United States of America (USA) in 1977, and a Masters of Science in Business Administration (Finance) from the Central Michigan University, USA in 1979. Dato' Maznah began her career in Amanah Merchant Bank Berhad in October 1979 where she spent 13 years as an officer in corporate banking and project financing and later a manager in the corporate finance department. She left Amanah Merchant Bank Berhad in 1992 to join Master Carriage (Malaysia) Sdn Bhd ("Master Carriage"), an investment company holding subsidiaries which are involved in the distribution of motor vehicles, where she was employed as the Executive Director of Corporate Affairs from 1992 to 1995. In June 1992, she was also appointed as a director of Diversified Resources Berhad ("DRB") (now known as DRB-HICOM Berhad ("DRB-HICOM") and she held the directorship until July 2005. 42 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) In November 1996, Dato Maznah was appointed as the Senior Group Director of ORB, where amongst others, she was involved in the take-over of HICOM Holdings Bhd (UHICOM") by the shareholders of Master Carriage. Upon the completion of the take over, Dato' Maznah was transferred to HICOM as the Vice President in 1997 and later in 1998, she commenced her executive role as an Executive Director of DRB-HICOM, being the restructured entity, and was in charge of corporate finance and corporate advisory related activities until July 2005. She left DRB-HICOM to serve on the board of UOB Bank (Malaysia) Berhad from September 2006 to March 2007. Thereafter she joined Hong Leong Financial Group Berhad as the Head, Corporate Finance and Principal Investment from 2007 to 2008. She then moved to Kenanga Investment Bank Berhad in 2009 as the Executive Vice President, Corporate Finance Advisory. In 2011, she left Kenanga Investment Bank Berhad to join SCS Global Advisory (M) Sdn Bhd (formerly known as Moore Stephens AC Advisory Sdn Bhd) as the Chairman, a position she holds till to-date. In 2012, she joined Sona Petroleum Berhad (a special purpose acquisition company which is now dissolved) as the Executive Director and Chief Financial Officer up till dissolution of the company in April 2019. Dato' Maznah was formerly a Chairman of Uni. Asia General Insurance Berhad (now known as Liberty Insurance Berhad) group of companies and Uni. Asia Life Assurance Berhad (now known as Gibraltar BSN Life Berhad). In the past, Dato' Maznah had served on the boards of Edaran Otomobil Nasional Berhad, EON Capital Berhad (now known as Amity Bond Sdn Bhd), EON Bank Berhad (now Promino Sdn Bhd), Gadek (Malaysia) Berhad, HICOM Holdings Berhad, Horsedale Development Berhad, Labuan Reinsurance (L) Ltd and Malaysian International Merchant Bankers Berhad (now Hong Leong Investment Bank Berhad). She was also formerly a Director of Universiti Teknologi Mara from 1996 to 2016. From 2012, she was appointed as an Independent Non-Executive Director and retired as Independent Non-Executive Chairman of Prestariang Berhad in November 2019. She was also a member of the Board of Governors of University Malaysia of Computer Science & Engineering, a wholly-owned SUbsidiary of Prestariang Berhad from May 2017 until November 2019. Dato' Maznah was a member of the Board of Trustees and Honorary Treasurer of the Malaysian AIDS Foundation from 1996 to 2018. In 2018, she received the patron's long service award at the Malaysian AIDS Foundation Tun Dr Siti Hasmah Award for her contributions. Dato' Maznah is also a member of the Asian Strategy & Leadership Institute ("ASLI") since 1993, and a member of the Corporate Malaysian Roundtable, ASLI. In December 2019, Dato' Maznah was also appointed as a director of Yayasan Felcra, which is a foundation set up by Felcra Berhad to carry out welfare and educational activities for benefit of Felcra Berhad employees. As at the LPD, Dato' Maznah is a non-executive board member of Felcra Berhad, Lembaga Tabung Angkatan Tentera and an Independent Non-Executive Director of Opus Asset Management Sdn Bhd. She is also currently an Independent Non Executive Director of Pavilion Real Estate Investment Trust, Non-Independent Non Executive Director of Boustead Heavy Industries Corporation Berhad, and Independent Non-Executive Director of Malayan Flour Mills Berhad. Dato' Maznah also chairs the board of several Felcra Berhad private limited subsidiaries and is a director of various other private limited companies in Malaysia, details of which are as set out in Section 3.1.4 of this Prospectus. 43 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Tengku Zatashah, is our Independent Non-Executive Director. Tengku Zatashah graduated with a Bachelor of Arts (Honours) degree in Spanish with French Studies from Middlesex University, UK in June 1997, and subsequently she obtained the Certificate of Language and French Civilisation from Sorbonne University, Paris, France in December 2001. Tengku Zatashah then obtained a Master's degree in International Relations and Diplomacy and graduated Magna Cum Laude from the American Graduate School in Paris, France in 2007. She completed the Women Directorship Programme organised by the NAM Institute for the Empowerment of Women Malaysia, an institution under the purview of the Ministry of Women, Family and Community Development of Malaysia in 2013. In March 2014, she completed the Finance for Executives Programme from INSEAD Business School in Singapore. Tengku Zatashah started her career as an Accounts Executive Trainee in BDDP Barcelona, an advertising agency in Barcelona, Spain in 1995. In 1996, she moved to the United Kingdom to join Ascott Hotel in London for a Front Desk Management role until 1997. After leaving Ascott Hotel in 1997, she took a career break until 2001 . In 2001, she returned to Malaysia and joined the New Straits Times, Malaysia, as a feature journalist from 2001 to 2003. Tengku Zatashah subsequently moved to Paris, France in 2004 and served until 2009 as the International Corporate Communications Manager of L'Oreal SA at its headquarters in Paris, France. In 2009, she left L'Oreal SA and co-founded Originalo Sdn Bhd, a leisure travel gift box company with partners in leisure, hospitality and food and beverages in Malaysia and served as the Managing Director until 2014. From 2009 to May 2014, she was also a contributing columnist for The Edge, Malaysia in its "Princess @work" column, as well as The Peak Malaysia in its "Jetsetter" and "Design Diary" columns. She has been the Chairperson of Light Cibles Sdn Bhd, an international lighting design consultancy firm since November 2012 and a Senior Advisor of Klareco Communications (formerly Bell Pottinger Malaysia), a regional communications agency since 2015, both positions of which she holds till to-date. She is presently the President of Alliance Francaise de Kuala Lumpur, a position she has held since June 2012. She has also been the Royal Patron to Make-A-Wish Malaysia, a not-for-profit charity that grants wishes to children with critical illnesses, since 2015. She is a member of Board of Trustee for the Selangor Youth Community (SAY) since 2017, a non-governmental organisation created by the Crown Prince of Selangor (Raja Muda Selangor) to foster interest and increase participation of Selangor youth through community-based initiatives, cultivate youth leadership, and create a sustainable ecosystem for the youth; a member of Board of Trustee for Yayasan Raja Muda Selangor since 2018, a non-governmental organisation set up to facilitate and encourage youth development (between 18 to 29 years of age) via cou nselling services, basic financial aid, training and mentoring; as well as a member of Board of Trustee for Yayasan Food Bank Malaysia since its formation in 2019, a foundation launched by the Government of Malaysia with the aim to catalyze the Government's efforts to reduce food waste and channel aid to the needy groups as well as addressing issues of rising cost of living of the people. In addition, she is also serving as the founding member of the Foundation Board of The Alice Smith School Foundation from 2019. 44 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) In 2017, Tengku Zatashah was awarded France's highest award Legion d'Honneur, as Chavalier Legion d'Honneur (Knight of the Legion of Honour) signifying recognition from the French government for her important role played as the President of Alliance Francaise de Kuala Lumpur. In Malaysia, she was awarded Ikon Wanita (Woman Icon) in the Year of Women Empowerment 2018 campaign launched by the Ministry of Women, Family and Community Development, Malaysia. She also holds directorships in various other private limited companies in Malaysia, details of which are as set out in Section 3.1.4 of this Prospectus. Daryl Foong is our Non-Executive Non-Independent Director and alternate director to Dato' Simon. Daryl Foong holds a Bachelor's degree in Marketing from RMIT University, Australia, awarded in December 2009. He began his career as a Public Relations Executive in RAPR Mileage Communications Sdn Bhd in November 2009 where he was responsible for public and media relations client servicing. Subsequently, he left to join L'Oreal Malaysia Sdn Bhd ("L'Oreal Malaysia") as Product Executive in 2010. During his tenure in L'Oreal Malaysia, he assisted in the overall management of the L'Oreal Paris Men Expert brand skincare line, and was responsible for the above-the-line and below-the-line production, marketing, advertising and promotion setting, business analysis and strategic planning, public and media relations as well as customer presentations of the L'Oreal Paris Men Expert brand. In 2012, he left L'Oreal Malaysia to join Rampai-Niaga as Marketing Manager. In January 2015, he was promoted as the Digital and Loyalty Manager. In this role, he was involved in implementing and managing our CRM loyalty programme, online store, our brand social media activities, public relations, and advertising campaigns across all platforms. He was subsequently re-designated as Rampai Niaga's Business Development Manager in September 2015 and his portfolio expanded to include identifying and establishing new profitable business locations, managing the company's exit from unprofitable locations, managing rental renewals, maintaining a working relationship with the landlords and mall management, maintaining and managing the leasing process, and overseeing leasing budget and store profitability. In 2016, Daryl Foong left Rampai-Niaga to join Aquawalk as the Head of Sales and Marketing Department overseeing the company's Education, Visual, and Creative departments. He was promoted as the General Manager in April 2018 and in April 2019, he was appointed to his current position as an Executive Director of Aquawalk. He is responsible for overseeing Aquawalk's overall business activities and financial performances. Daryl Foong has approximately 10 years of experience working in the fast-moving consumer goods, retail and entertainment industries. He is also a director of various other private limited companies in Malaysia, details of which are as set out in Section 3.1.4 of this Prospectus. 45 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) 3.1.3 Shareholdings of our Directors in our Company The shareholdings of our Directors in our Company as at the date of this Prospectus and after our IPO are as follows: As at the date of this Prospectus After our IPO Direct Indirect Direct Indirect No. of No. of No. of No. of Name Shares % Shares % Shares % Shares % Dato'Simon 610,628,544(2) 96.65 507,428,544(2) 71.89 Datin Mina 631,807,488(3) 100.00 528,607,488(3) 74.89 Molly Fong 150,000(1) 0.02 Dato' Maznah 400,000(1) 0.06 Tengku 100,000(1) 0.01 Zatashah Daryl Foong 21,178,944(4) 3.35 21,178,944(4) 3.00 Notes: (1) Assuming that she fully subscribes for the Pink Form Shares allocated to her. Notwithstanding the subscription for the Issue Shares under the IPO for our Directors, our Directors may subscribe for Issue Shares under the Retail Offering. (2) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.0% in Etheco, BluPlanet, and Primarium respectively; and by virtue of Section 59(11)(c) of the Act, through his son Dexter Foong's indirect shareholdings in InNature via Primarium. (3) Deemed interested by virtue of Section 8(4) of the Act, through her shareholdings of more than 20.0% in Etheco, BluPlanet, and Pelagos respectively; and by virtue of Section 59(11)(c) of the Act, through her son Dexter Foong's indirect shareholdings in InNature via Primarium. (4) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.0% in Pelagos. 3.1.4 Principal business activities performed outside of our Group The principal business activities outside of our Group performed by our Directors as at the LPD and the principal directorships in companies outside of our Group held by our Directors within the past 5 years up to the LPD are as follows: Involvement in business activities Name of other than as a Director Directorships Principal activities Director Dato' Simon Directorships as at the LPD: • BluPlanet • Activities of holding • Shareholder holding (Appointed on 5 March companies direct interest of 2018) 50.00% indirect interest of 50.00%(1 ) 46 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Dato' Simon • Etheco • Activities of holding • Shareholder holding (cont'd) (Appointed on 5 March companies direct interest of 2018) 50.00% indirect interest of 50.00%(1 ) • Primarium • Investment holding • Shareholder holding (Appointed on 14 in shares direct interest of January 2019) 70.00% (2) • Feliz Natur • Consultancy • Shareholder holding (Appointed on 13 July services and letting direct interest of 1995) of real properties 50.00% indirect interest of 50.00%(1) • Vestmap (M) Sdn Bhd • Investment holding • Shareholder holding (Appointed on 12 company in shares indirect interest of September 2006) and providing 53.15%(3) management services to Aquawalk Sdn Bhd • Aquawalk Sdn Bhd • Managing and • Shareholder holding (Appointed on 8 April operating indirect interest of 2004) AQUARIA@KLCC 74.48%(4) • Aquablu Technologies • Design services to • Shareholder holding Sdn Bhd construction of indirect interest of (Appointed on 24 June aquarium, supply 70.00%(5) 2009) fishes and aquatic accessories • Aquawalk Technology • Dormant since • Shareholder holding Sdn Bhd 2011 indirect interest of (Appointed on 7 (previously 100.00%(5) January 2005) engaged in the provision of Information and Communication (lCT) services) • Adventuria Sdn Bhd • Digital and physical • Shareholder holding (Appointed on 1 June adventure hub with indirect interest of 2017) virtual reality and 100.00%(6) augmented reality experiences e- sports and recreation activity • Steady Property • Letting of real • Shareholder holding Management Sdn Bhd properties direct interest of (Appointed on 7 50.00% August 2008) indirect interest of 50.00%(1) 47 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Data' Simon • Senja Aman Holdings • Investment holding • Shareholder holding (cont'd) Sdn Bhd company in shares, indirect interest of (Appointed on 30 July resorts, and 80.00%(B} 2010) properties • SA Hotels & Resorts • Properties for hotel • Shareholder holding Sdn Bhd operations and a" indirect interest of (Appointed on 14 May kind of leisure 100.00%(9} 2013) facilities • Senja Aman • Property • Shareholder holding Development Sdn Bhd development indirect interest of (Appointed on 27 June 100.00%(9} 2011) • SA Wellness Sdn Bhd • Wellness center • Shareholder holding (Appointed on 21 June ownership and indirect interest of 2013) operation 100.00%(9} • Aquascape Ventures • Dormant since • Shareholder holding Sdn 8hd incorporation direct interest of (Appointed on 12 (intended principal 50.00% March 2013) activity was aquarium construction) • Versatrad Agencies • Investment holding • Shareholder holding Sdn Bhd in shares direct interest of (Appointed on 30 70.00% October 1985) indirect interest of 30.00%(1} • Aquawalk Singapore • Amusement theme • Shareholder holding Pte Ltd parks indirect interest of (Appointed on 27 June management and 75.00%(5} 2016) operation of aquarium-themed attractions in South East Asia • Other amusement and recreation activities not elsewhere classified (including recreation parks/beaches and recreational fishing) 48 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Dato'Simon • Aquawalk (Thailand) • To engage in public • Shareholder holding (cont'd) Company Limited zoo, aquarium, to direct interest * (Appointed on 18 exhibit aquatic indirect interest August 2015) animals, plants and of 99.99%(5) other marine animals • To operate other business related to the zoo and museum including sale of souvenirs, food and beverage Other business involvement as a shareholder only: • Nil • Manufacturing of • Shareholder of bitumen emulsion, Atlas Industries Sdn solutions, Bhd holding direct compound and interest of 4.20% allied bituminous products • Nil • Investment in • Shareholder of shares and property Francis Tin Mining trading Sdn Bhd holding direct interest of 14.29% • Nil • Property and share • Shareholder of investment holding Kwong Hup Cheong (Kampar) Foundry Sdn Bhd holding direct interest of 8.92% • Nil • Investment holding • Shareholder of (in shares) Xzilaria Sdn Bhd holding direct interest of 50.00% indirect interest of 50.00%(1) 49 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Dato'Simon Previous directorships in (cont'd) the past 5 years up to the LPD: • Havson Group Berhad • The holding • Shareholder holding (Appointed on 10 April company of indirect interest of 2018 and resigned on technology 14.95%(7) 8 January 2019) development businesses, virtual reality, computer software or game, mobile application or game, art and design, business development • Dutajaya Media Sdn • Project consultant • Shareholder holding Bhd in the provision of indirect interest of (Appointed on 8 May organising event 30.00%(7) 2018 and resigned on and campaign 30 January 2019) activities • l\t1ediasoft • Production of game • Shareholder holding Entertainment Sdn development, indirect interest of Bhd educational and 30.00%(7) (Appointed on 8 May entertainment 2018 and resigned on multimedia content, 30 January 2019) developing digital content for digital platforms, animation in 3D graphics • Exa Global Sdn Bhd • Management • Shareholder holding (Appointed on 8 May services and indirect interest of 2018 and resigned on consultancy 5.63%(7) 30 January 2019) services for virtual reality park • PT Jakarta Akuarium • Operates in the • Shareholder holding Indonesia tourism industry indirect interest of (Appointed as that organises 40.00%(10) President conservation Commissioner on 27 activities, February 2017 and recreational resigned on 1 April facilities and show 2019) performances or other attractions 50 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Datin Mina Directorships as at the Shareholder in: LPD: • BluPlanet • Activities of holding • Shareholder holding (Appointed on 5 March companies direct interest of 2018) 50.00% indirect interest of 50.00%(1) • Etheco • Activities of holding • Shareholder holding (Appointed on 5 March companies direct interest of 2018) 50.00% indirect interest of 50.00%(1) • Pelagos • Investment holding • Shareholder holding (Appointed on 14 in shares direct interest of January 2019) 70.00% • Feliz Natur • Consultancy • Shareholder holding (Appointed on services and letting direct interest of 1 September 1993) of real properties 50.00% indirect interest of 50.00%(1) • Vestmap (M) Sdn Bhd • Investment holding • Shareholder holding (Appointed on 12 companies in indirect interest of September 2006) shares and 53.15%(3) providing management services to Aquawalk Sdn Bhd • Aquawalk Sdn Bhd • Managing and • Shareholder holding (Appointed on 20 operating indirect interest of October 2006) AQUARIA@KLCC 74.48%(4) • Adventuria Sdn Bhd • Digital and physical • Shareholder holding (Appointed on 13 adventure hub with indirect interest of September 2017) virtual reality and 100.00%(6) augmented reality experiences e- sports and recreation activity • Steady Property • Letting of real • Shareholder holding Management Sdn Bhd properties direct interest of (Appointed on 7 50.00% August 2008) indirect interest of 50.00%(1) • Versatrad Agencies • Investment holding Shareholder holding Sdn Bhd in shares direct interest of (Appointed on 19 30.00% November 1990) indirect interest of 70.00%(1) 51 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Datin Mina Other business (cont'd) involvement outside our Group as a shareholder only: • Nil • Investment holding • Shareholder of in shares Xzilaria Sdn Bhd holding direct interest of 50.00% indirect interest of 50.00%(1) • Nil • Amusement theme • Shareholder of parks Aquawalk Singapore management and Pte Ltd holding operation of indirect interest of aquarium-themed 75.00% (5) attractions in South East Asia • Other amusement and recreation activities not elsewhere classified (including recreation parks/beaches and recreational fishing) • Nil • To engage in public • Shareholder of zoo, aquarium, to Aquawalk (Thailand) exhibit aquatic Company Limited animals, plants and holding other marine direct interest * animals indirect interest of 99.99%(5) • To operate other business related to the zoo and museum including sale of souvenirs, food and beverage • Nil • Operates in the • Shareholder of PT tourism industry Jakarta Aquarium that organises Indonesia holding conservation indirect interest of activities, 40 .00%(10) recreational facilities and show performances or other attractions 52 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Datin Mina • Nil • Design services to • Shareholder of (cont'd) construction of Aquablu aquarium, supply Technologies Sdn fishes and aquatic Bhd holding indirect accessories interest of 70.00%(5) • Nil • Dormant since • Shareholder of 2011 Aquawalk (previously Technology Sdn Bhd engaged in the holding indirect provision of interest of 100.00%(5) Information and Communication (ICT) services) • Nil • The holding • Shareholder of company of Havson Group technology Berhad holding development indirect interest of businesses, virtual 14.95%(7) reality, computer software or game, mobile app or game, art and design, business development • Nil • Project consultant • Shareholder of in the provision of Dutajaya Media Sdn organising event Bhd holding indirect and campaign interest of 30.00%(7) activities • Nil • Production of game • Shareholder of development, Mediasoft educational and Entertainment Sdn entertainment Bhd holding indirect multimedia content, interest of 30.00%(7) developing digital content for digital platforms, animation in 3D graphics • Nil • Management • Shareholder of Exa services and Global Sdn Bhd consultancy holding indirect services for virtual interest of 5.63%(7) reality park • Nil • Investment holding • Shareholder of Senja company in shares, Aman Holdings Sdn resorts, and Bhd holding indirect properties interest of 80.00%(8) 53 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Datin Mina • Nil • Properties for hotel • Shareholder of SA (cont'd) operations and all Hotels & Resorts Sdn kind of leisure Bhd holding indirect facilities interest of 100.00%(9) • Nil • Property • Shareholder of Senja development Aman Development Sdn Bhd holding indirect interest of 100.00%(9) • Nil • Well ness center • Shareholder of SA ownership and Well ness Sdn Bhd operation holding indirect interest of 100.00%(9) Molly Fong Directorships as at the Shareholder in: LPD: • Versatrad Agencies • Investment holding • Nil Sdn Bhd in shares (Appointed on 20 June 2005) Dato' Maznah Directorships as at the LPD: • Felcra Berhad • Rehabilitation and • Nil (Appointed on 1 development of November 2018) land • Cultivation of commodities crop • Processing and marketing commodities product • Keris Maju Sdn Bhd • Investment holding • Shareholder holding (Appointed on 24 June company (holding direct interest of 2003) shares) (in the 99.99% process of striking off) • Opus Asset • Fund management • Nil Management Sdn Bhd and the provision of (Appointed on 20 financial advisory November 2017) services 54 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Dato' Maznah • Pavilion Reit To manage and • Nil (cont'd) Management Sdn Bhd administer Pavilion (Appointed on 29 July Real Estate 2011) Investment Trust ("Pavilion Reit") activities • SCS Global Advisory • Provision of • Shareholder holding (M) Sdn Bhd professional direct interest of (Appointed on 23 advisory services 12.50% March 2011) • Felcra Education. Educational • Nil. Services Sdn. Bhd courses services (Appointed on 23 April 2019) • Felcra Niaga Sdn Bhd • Supplier of • Nil. (Appointed on 13 May agriculture 2019) products, plantation equipment, provision of contract management services and others • Boustead Heavy • Investment holding • Nil. Industries Corporation Bhd (11) (Appointed on 10 July 2019) • Landston Property • Investment holding • Shareholder holding Sdn Bhd in property direct interest of (Appointed on 20 June 5.00% 2019) • Felcra Daya Khas • Joint venture estate • Nil. Plantation Sdn Bhd (Appointed on 20 August 2019) • Malayan Flour Mills • Business of milling • Nil. Berhad (11) and selling wheat fI (Appointed on 10 our and trading in December 2019) grains and other allied products 55 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Dato' Maznah Other business (cont'd) involvement outside our Group as a shareholder only: • Nil. • Investment holding • Shareholder of Eng Kah Corporation Berhad(11) holding direct interest of 0.42% • Nil. • Investment holding • Shareholder of (in the process of Kumpulan winding up) Peniagawati Berhad holding direct interest of 0.10% Previous directorships in the past 5 years up to the LPD: • Starhill Season Sdn • Investment of • Nil Bhd properties (Appointed on 9 June 2011 and resigned on 26 July 2017) • UITM Art & Design • Art gallery, art • Nil Sdn Bhd collectors and (Appointed on 1 showroom March 2012 and operators resigned on 2 May 2017) • Prestariang • Investment holding • Shareholder with Berhad(11) company direct interest of (Appointed on 2 July 0.50% 2012 and resigned on 27 November 2019) 56 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Tengku Directorships as at the Shareholder in: Zatashah LPD: • Templer Powell Sdn • Investment holding • Shareholder holding Bhd (in shares) direct interest of (Appointed on 20 20.00% March 2015) • Jugra Automobile Sdn • Sale of industrial, • Shareholder holding Bhd commercial and direct interest of (Appointed on 19 agriculture vehicles 6.67% November 2015) - new stock, share and bond brokers, investment advisory services. • Jugra Publication Sdn • Publisher of books • Shareholder holding Bhd direct interest of (Appointed on 1 March 0.01% 2016) • Pioneer Highland Sdn • Activities of holding • Shareholder holding Bhd companies indirect interest of (Appointed on 29 (investment holding 75.00%(12) March 2016) in shares) • Export and import of a variety of goods without any particular specialization not elsewhere classified • Other service activities not elsewhere classified • SP VIE Sdn Bhd • Market research • Shareholder holding (Appointed on 18 consultant and - direct interest of September 2017) general 40.00% consultancy (In the indirect interest: process of striking 35.00%(12) off) • Highlake Park Sdn • Dormant • Nil Bhd (Appointed on 1 July 2015) • Idris Zarina and Sons • Investment holding • Shareholder holding Realty Sdn Bhd in real properties direct interest of (Appointed on 3 15.00% December 2003) 57 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Involvement in business activities Name of other than as a Director Directorships Principal activities Director Tengku • Light Cibles Sdn Bhd • Lighting design • Shareholder holding Zatashah (Appointed on 25 consultancy direct interest of (cont'd) November 2011) 80.00% Previous directorships in the past 5 years up to the LPD: • Kim Teck Cheong • Investment holding • Nil Consolidated Berhad(13) (Appointed as Independent Non- Executive Director on 2 December 2014 and resigned on 26 October 2018) Other business involvement outside our Group as a shareholder only: • Nil • Investment holding • Shareholder in company in Trappers Sdn Bhd properties holding direct interest of 10.00% Daryl Foong Directorships as at the Shareholder in: LPD: • Pelagos • Investment holding • Shareholder holding (Appointed on 14 in shares direct interest of January 2019) 30.00% • Two Tigers Sdn Bhd • Activities of holding • Shareholder holding (Appointed on 15 companies direct interest of February 2019) (investment holding 50.00% in properties) • Xzilaria Sdn Bhd • Investment holding • Nil (Appointed on 6 July in shares 2017) • Aquawalk Sdn Bhd • Managing and • Nil (Appointed on 25 April operating 2019) AQUARIA@KLCC 58 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Notes: Negligible. (1) Deemed interested by virtue of his/her spouse's direct shareholdings in the company. (2) Pursuant to Section 8(4) of the Act, as Dexter Foong holds the shares in Primarium in his own right and capacity and does not take instructions from Dato' Simon in relation to his shareholdings in Primarium, his interest will not be treated as Dato' Simon's interest in Primarium. (3) Deemed interested by virtue of his/her direct shareholdings and indirect shareholdings in Feliz Natur pursuant to section 8(4) of the Act. (4) Deemed interested by virtue of his/her direct shareholdings and indirect shareholdings in Feliz Natur and Versatrad Agencies Sdn Bhd, and indirect shareholdings in Vestmap (M) Sdn Bhd, pursuant to section 8(4) of the Act. (5) Deemed interested by virtue of his/her indirect shareholdings in Aquawalk Sdn Bhd pursuant to section 8(4) of the Act. (6) Deemed interested by virtue of his/her direct shareholdings and indirect shareholdings in Xzilaria Sdn Bhd and indirect shareholdings in Aquawalk Sdn Bhd pursuant to section 8(4) of the Act. (7) Deemed interested by virtue of his/her indirect shareholdings in Adventuria Sdn Bhd pursuant to section 8(4) of the Act. (8) Deemed interested by virtue of his/her direct shareholdings and indirect shareholdings in Steady Property Management Sdn Bhd pursuant to section 8(4) of the Act. (9) Deemed interested by virtue of his/her indirect shareholdings in Senja Aman Holdings Sdn Bhd pursuant to section 8(4) of the Act. (10) Deemed interested by virtue of his/her indirect shareholdings in Aquawalk Singapore Pte Ltd pursuant to section 8(4) of the Act. (11) Listed on Main Market of Bursa Securities. (12) Deemed interested by virtue of her direct shareholdings in Templer Powell Sdn Bhd pursuant to section 8(4) of the Act. (13) Listed on ACE Market of Bursa Securities. Data' Maznah and Tengku Zatashah, being our Senior Independent Non-Executive Director and Independent Non-Executive Director respectively, and Data' Simon and Daryl Foong, being our Non-Independent Non-Executive Directors, are not involved in the day-to-day operations of our Group. Their involvement in other business activities outside our Company will not affect their contributions to our Group as the principal activities of these companies are not similar to our Group's business. The involvement of Datin Mina and Molly Fang in other business activities outside our Group will not affect their contributions to our Group and would not be expected to affect their ability to act as our Executive Directors as they do not hold any executive positions in such businesses or corporations. The day-to-day management and operations of these businesses or corporations are managed by the other shareholders or have their own independent management team. 59 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) 3.1.5 Interest of our Directors in other businesses or corporations which carry on a similar trade as that of our Group or which are our customers and/or suppliers As at the LPD, none of our Directors have any interest direct or indirect, in other businesses or corporations which are: (i) carrying on a similar trade as that of our Group; or (ii) our customer and/or suppliers. The investment holding companies in which our Directors have interests in do not hold investments which are involved in similar business as InNature. The Franchise Framework Agreement among others also contains provisions which restrict the Directors from acting or entering into any arrangements which will conflict with the interest of InNature and/or the TBS Franchisees. Please see section 5.15.2 of this Prospectus for more details of the Franchise Framework Agreement. 3.1.6 Directors' remuneration and material benefits-in-kind The aggregate remuneration and material benefits-in-kind (including any contingent or deferred remuneration) paid and proposed to be paid to our Directors for services rendered to us in all capacities to our Group for the FYE 2019 and FYE 2020 are as follows: Bonusesl Payments under Profit Statutory Fees and Sharing Contribut Benefits Name Allowances Salaries Award -ions(1) -in-kind Total RM'OOO FYE 2019(3) Dato'Simon 60 60 Datin Mina 526 96 622 Molly Fong 600 200(4) 97 897 Dato' Maznah 90(2) 90 Tengku 80(2) 80 Zatashah Daryl Foong _(2)(5) Pro~osed for the FYE 2020 Dato'Simon 60 60 Datin Mina 556 102 35 693 Molly Fong 636 106 89 35 866 Dato' Maznah 90 90 Tengku 80 80 Zatashah Daryl Foong(S) . (5) Notes: (1) Including contributions to EPF, SOCSO, EIS, and where relevant contributions to state plans required under Vietnamese laws. (2) Based on their respective appointment dates as our Directors on 27 February 2019 up to 31 December 2019. (3) As at the LPD, part of the remuneration for the FYE 2019 has yet to be paid to our Directors. 60 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) (4) This bonus sum is based on Molly Fong's performance as CEO of the Group. (5) There are no directors' fees or allowances proposed to be paid to Daryl Foong as he is an alternate Director to Dato' Simon. Save as disclosed above, there are no benefits-in-kind paid or proposed to be paid for services rendered/ to be rendered by our Directors in all capacities to our Group for the FYE 2019 and FYE 2020. The remuneration of our Directors must be considered and recommended by our Nominating and Remuneration Committee and subsequently be approved by our Board . Our Directors' fees are subject to shareholders' approval at a general meeting . 3.1.7 Benefits paid or intended to be paid or given to our Promoters, Directors or Substantial Shareholders Save as disclosed in Section 3.1.6 above, as well as dividends paid and dividends declared to be paid to Dato' Simon and Datin Mina, our Promoters and Directors, prior to the pre-listing I nternal Restructuring Exercise as set out in Section 4.1 .2 of this Prospectus, no other amounts or benefits were paid or intended to be paid or given to any Promoters, Directors or Substantial Shareholders by our Company within the 2 years preceding the date of this Prospectus. 3.1.8 Audit and Risk Management Committee Our Audit and Risk Management Committee was formed by our Board on 6 March 2019. The members of our Audit and Risk Management Committee consist of the following : Name Designation Directorship Dato' Maznah Chairperson Senior Independent Non-Executive Director Dato'Simon Member Non-Independent Non-Executive Chairman Tengku Zatashah Member Independent Non-Executive Director Our Audit and Risk Management Committee's terms of reference include the following : (i) to recommend the appointment or re-appointment of the external auditors, the audit fee and consider any questions of resignation or dismissal including whether there is reason (supported by grounds) to believe that the external auditors are not suitable for re-appointment; (ii) to review with the external auditors, the audit plan, the nature and scope of audit including any changes to the planned scope of the audit plan before the audit commences and the audit report; (iii) to review the evaluation of the system of internal control with the external auditors, including any suggestions for improvement and management's responses; (iv) to review the provision of non-audit services by external auditors; (v) to assess the objectivity and independence of the external auditors where the external auditors also provide non-audit services to the Group; (vi) to discuss problems and reservations arising from the audits and any matters the external auditors may wish to discuss (in the absence of management where necessary), including assistance given by the employees of the Group to the external auditors; 61 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) (vii) to review the quarterly results and annual financial statements before the approval by the Board, focusing particularly on, inter-alia, changes in or implementation of major accounting policy and practices, significant adjustments arising from the audit, significant adjustments made by management, significant and unusual events or transactions, and how these matters are addressed, compliance with accounting standards and other legal requirements; (viii) to assess the financial risk and matters relating to related party transactions and conflict of interests situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity; (ix) to ensure that the internal audit function is independent of the activities it audits, review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; (x) to review the overall performance of the internal audit function, including the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken, whether or not appropriate action is taken on the recommendations of the internal audit function and to ensure that the internal audit function reports directly to the Audit and Risk Management Committee; (xi) to assess the effectiveness of the risk management framework, review and monitor risk reporting; and (xii) to perform any other functions as may be requested by the Board . 3.1.9 Nominating and Remuneration Committee Our Nominating and Remuneration Committee was formed by our Board on 6 March 2019. The members of the Nominating and Remuneration Committee consist of the following: Name Designation Directorship Dato' Maznah Chairperson Senior Independent Non-Executive Director Dato' Simon Member Non-Independent Non-Executive Chairman Tengku Zatashah Member Independent Non-Executive Director Our Nominating and Remuneration Committee's terms of reference include the following : (i) to recommend to the Board the nomination of candidates for all directorships, whether they are proposed by the shareholders or the Board; (ii) to consider, in making its recommendations, candidates for directorships proposed by the Managing Director and, within the bounds of practicability, by any other senior executive or any Director or shareholder; (iii) to identify and/or recommend to the Board, eligible candidates to fill the seats on board committees when the need arises; (iv) to identify, evaluate and recommend candidates for appointment as company secretary; 62 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) (v) to review annually the performance of the Audit and Risk Management Committee and the term of office and performance of each of the Audit and Risk Management Committee members; (vi) to assess annually the effectiveness of the Board as a whole, the committees of the Board and the contribution of each existing individual director and board committee members and thereafter, recommend its findings to the Board; (vii) to review annually the structure, size, composition of the board committees, required mix of skills and experience and other qualities, including core competencies and ability of each Director in carrying out their obligations and duties as a director and thereafter, recommend its findings to the Board; (viii) to review the implementation of an appropriate programme framework and succession planning for the Board; and (ix) to review and recommend to the Board, the remuneration packages of executive directors in all its forms, drawing from advice from external bodies that may be engaged as and when necessary. (The rest of this page has been intentionally left blank) 63 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) 3.2 Promoters and Substantial Shareholders The Promoters of our IPO are as follows: (i) Etheco, BluPlanet, Dato' Simon, and Datin Mina , who are a/so our Substantial Shareholders (being a person who holds not less than 5.0% of our Shares); and (ii) Pelagos, Daryl Foong , Primarium, and Dexter Foong, who are our shareholders. 3.2.1 Promoters and Substantial Shareholders' shareholdings Our Promoters and Substantial Shareholders and their respective shareholdings in our Company as at the date of this Prospectus and after our IPO are as follows: As at the date of this Prospectus After our IPO Direct Indirect Direct Indirect Nationality I Country of No. of No. of Shareholders incorporation Shares % No. of Shares % Shares % No. of Shares % Etheco Malaysia 360,000,000 56.98 360,000,000 51 .00 BluPlanet Malaysia 229,449,600 36.32 126,249,600 17.89 Pelagos Malaysia 21 ,178,944 3.35 21,178,944 3.00 Primarium Malaysia 21 ,178,944 3.35 21,178,944 3.00 Dato' Simon Malaysian 610,628,544(1) 96.65 507,428,544(1) 71.89 Datin Mina Malaysian 610,628,544(2) 96.65 507,428,544(2) 71.89 Daryl Foong Malaysian 21 ,178,944(3) 3.35 21 ,178,944(3) 3.00 Dexter Foong Malaysian 21 ,178,944(4) 3.35 21,178,944(1) 3.00 64 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) Notes: (1) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Etheco, BluPlanet, and Primarium respectively. (2) Deemed interested by virtue of Section 8(4) of the Act, through her shareholdings of more than 20.00% in Etheco, BluPlanet, and Pelagos respectively. (3) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Pelagos. (4) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Primarium. Our Promoters and Substantial Shareholders do not have different voting rights from other shareholders of our Group. Save as disclosed above, we are not aware of any person who, directly or indirectly, joint or severally, exercise control over our Company. There is no arrangement between our Company and our shareholders with any third parties, the operation of which may result in the change in control of our Company. 3.2.2 Profiles of our Promoters and Substantial Shareholders (i) Etheco Etheco, a Promoter and Substantial Shareholder, was incorporated in Malaysia under the Act on 5 March 2018. The principal activity of Etheco is investment holding. As at the LPD, Etheco's issued share capital is RM75,803,002 comprising 2,500,002 ordinary shares. The directors of Etheco as at the LPD are Dato' Simon and Datin Mina. The particulars of Etheco's shareholders and their respective shareholdings are set out below: Direct Indirect No. of No. of Shareholders Nationality Shares % Shares % Dato' Simon Malaysian 1,250,001 50 .00 1,250,001 (1) 50.00 Datin Mina Malaysian 1,250,001 50.00 1,250,001 (1) 50.00 Note: (1) Deemed interested by virtue of his/her spouse's direct shareholdings in the company. 65 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) (ii) BluPlanet BluPlanet, a Promoter and Substantial Shareholder, was incorporated in Malaysia under the Act on 5 March 2018. The principal activity of BluPlanet is investment holding . As at the LPD, BluPlanet's issued share capital is RM2 comprising 2 ordinary shares. The directors of BluPlanet as at the LPD are Dato' Simon and Datin Mina. The particulars of BluPlanet's shareholders and their respective shareholdings are set out below: Direct Indirect No. of No. of Shareholders Nationality Shares % Shares % Dato' Simon Malaysian 50.00 1 (1) 50.00 Datin Mina Malaysian 50.00 1 (1) 50.00 Note: (1) Deemed interested by virtue of his/her spouse's direct shareholdings in the company. (iii) Pelagos Pelagos, a Promoter and shareholder, was incorporated in Malaysia under the Act on 14 January 2019. The principal activity of Pelagos is investment holding. As at the LPD, Pelagos's issued share capital is RM 10 comprising 10 ordinary shares. The directors of Pelagos as at the LPD are Datin Mina and Daryl Foong . The particulars of Pelagos's shareholders and their respective shareholdings are set out below: Direct Indirect No. of No. of Shareholders Nationality Shares % Shares % Datin Mina Malaysian 7 70.00 Daryl Foong Malaysian 3 30.00 66 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cant'd) (iv) Primarium Primarium, a Promoter and shareholder, was incorporated in Malaysia under the Act on 14 January 2019. The principal activity of Primarium is investment holding . As at the LPD, Primarium's issued share capital is RM 10 comprising 10 ordinary shares. The directors of Primarium as at the LPD are Dato' Simon and Dexter Foong. The particulars of Primarium's shareholders and their respective shareholdings are set out below: Direct Indirect No. of No. of Shareholders Nationality Shares % Shares % Dato'Simon Malaysian 7 70.00 Dexter Foong Malaysian 3 30.00 (v) Dato' Simon, Datin Mina and Daryl Foong The profiles of Dato' Simon, Datin Mina and Daryl Foong are set out in Section 3.1.2 of this Prospectus. (vi) Dexter Foong, Malaysian, aged 29, is our Promoter and shareholder. He graduated with a Bachelor of Laws (Honours) degree from the London School of Economics and Political Science ("LSE"), UK in 2012. He then completed the Bar Professional Training Course from BPP Law School in 2013. Subsequently in 2014, Dexter Foong obtained a Master of Science in Organisational Behaviour from LSE. Dexter Foong started his career in Rampai-Niaga in 2015 where he served as the Head of Digital and Loyalty. During his tenure in Rampai-Niaga, he was involved in the management of TBS's website in Malaysia and the TBS loyalty programme, as well as the development and implementation of the TBS loyalty mobile application. In 2017, he left Rampai-Niaga to join Adventuria Sdn Bhd, a developer and owner of virtual reality based attractions, as its Business Development Manager, a position he currently holds. His responsibilities include developing and executing project management for establishing virtual reality attractions, as well as providing overall strategic direction for the company. Currently, Dexter Foong also holds directorships in Havson Group Berhad and several private limited subsidiaries under the Havson group, which is principally involved in technology development businesses, virtual reality, computer software or game, mobile application or game, art and design, business development. 67 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) 3.2.3 Changes in Promoters and Substantial Shareholders' shareholdings in our Company The changes in our Promoters' and Substantial Shareholders' shareholdings in our Company for the past 3 years and as at the date of this Prospectus are as follows: As at 31 December 2016 and 31 December 2017 As at 31 December 2018(2) After the InNature Acquisition(S) Direct Indirect Direct Indirect Direct Indirect Promoters and No. of No. of No. of No. of No. of No. of Substantial Shares Shares Shares Shares Shares Shares Shareholders held % held % held % held % held % held % Etheco 2,500,000 100.00 BluPlanet Pelagos Primarium Dato'Simon 50.00 50.00(1) 1,250,000 50.00 1,250,000 50.00(1) 2,500,000 100.00(3) Datin Mina 50.00 50.00(1) 1,250,000 50.00 1,250,000 50.00(1) 2,500,000 100.00(3) Daryl Foong Dexter Foong 68 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON DIRECTORS, PROMOTERS, SUBSTANTIAL SHAREHOLDERS AND KEY SENIOR MANAGEMENT (cont'd) After the Subdivision of Shares(8) and as at the date of this After the Promoters Share Issuance(8) Prospectus Direct Indirect Direct Indirect Promoters and Substantial No. of No. of No. of Shares No. of Shares Shareholders Shares held % Shares held % held % held % Etheco 2,500,000 56.98 360,000,000 56.98 BluPlanet 1,593,400 36.32 229,449,600 36.32 Pelagos 147,076 3.35 21 ,178,944 3.35 Primarium 147,076 3.35 21 ,178,944 3.35 Dato'Simon 4,240,476 96.65(4) 610,628,544 96.65(4) Datin Mina 4,240,476 96 .65(5) 610,628,544 96.65(5) Daryl Foong 147,076 3.35(6) 21 ,178,944 3.35(6) Dexter Foong 147,076 3.35(7) 21 ,178,944 3.35(7) Notes: (1) Deemed interested by virtue of hislher spouse's direct shareholdings in the Company. (2) Subsequent to bonus issue of 1,249,999 Shares each to Dato' Simon and Datin Mina on 18 December 2018. (3) Deemed interested by virtue of Section 8(4) of the Act, through his/her shareholdings of more than 20.00% in Etheco. (4) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Etheco, BluPlanet, and Primarium respectively. (5) Deemed interested by virtue of Section 8(4) of the Act, through her shareholdings of more than 20.00% in Etheco, BluPlanet, and Pelagos respectively (6) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Pelagos. (7) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Primarium. (8) Please refer to Section 4.1.2 of this Prospectus for further details of the InNature Acquisition, Promoters Share Issuance, and Subdivision of Shares under the Internal Restructuring Exercise. 69 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cont'd) 3.2.4 Involvement of our Promoters and Substantial Shareholders in other businesses or corporations which carry on similar trade as that of our Group or which are our customers and/or suppliers As at the LPD, none of our Promoters and Substantial Shareholders have any interest direct or indirect, in other businesses or corporations which are: (i) carrying on a similar trade as that of our Group; or (ii) our customer and/or suppliers. 3.3 Key Senior Management 3.3.1 Key Senior Management team Our Key Senior Management led by our Executive Director and Managing Director, Datin Mina, is set out below: Name Age Nationality Designation/Function Datin Mina 59 Malaysian Managing Director Molly Fong 48 Malaysian Chief Executive Officer Siew Lai Leng 47 Malaysian Chief Operations Officer ("COO") Chan Nian Mei 48 Malaysian Chief Revenue Officer ("CRO") Chia Cang Yang 37 Malaysian Chief Financial Officer ("CFO") Leong Meng Leong 47 Malaysian Head of Finance and Administration Nguyen Thi Ngoc Hue 44 Vietnamese General Manager, TBS Vietnam Wong Sook Hing 43 Malaysian General Manager, Ola Beleza 3.3.2 Profiles of our Key Senior Management The profiles of Datin Mina and Molly Fong, our Managing Director and CEO respectively who are also our Directors are set out in Section 3.1.2 of this Prospectus. The profiles of our other Key Senior Management are set out below: Siew Lai Leng ("Jesse Siew") is our COO and is responsible for managing the digital marketing and directing the operations and management of the support departments of our Group, including the product and promotions, supply chain, logistics and information technology departments. Jesse Siew graduated from the National University of Malaysia, Malaysia in August 1996, with a Bachelor of Business Administration (First Class Honours) degree in marketing. While acting as our COO, Jesse also pursued on a part-time basis her Master of Business Administration degree from the University of Nottingham, UK, which was awarded to her in 2014. Jesse Siew started her career with Tung Pao Sdn Bhd, a local distributor for brands such as Shiseido, ZA, Wacoal, Zotos and Caritas, in November 1996 as an Advertising and Public Relations Executive responsible for public relations and branding events for the various brands distributed by the company. She left Tung Pao Sdn Bhd in 1998 to join Rampai-Niaga as our Public Relations and Communications Executive. She was later promoted to be the Marketing Communications Manager in 2001 and COO in 2011 in Rampai-Niaga. In January 2019, she took up her current position in the Group as our COO. 70 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cont'd) Jesse Siew has organised and led numerous brand and values campaigns for TBS contributing to Rampai-Niaga being awarded the Prime Minister's Corporate Social Responsibility Award in 2007 and 2009. Chan Nian Mei ("Mae Chan") is our CRO and is responsible for the overall growth and management of retail sales operations and business development of our Group. Mae Chan graduated with a Diploma in Professional Training and Development from the University of Malaya, Malaysia in 2001. She also obtained an Advanced Certificate in Marketing from Sunway College, Malaysia, in 1998. Mae Chan pursued the aforementioned education on a part-time basis while she was in our Learning and Development department. Mae Chan joined the workforce in 1990 as a Marketing Executive in KFC Holdings Malaysia Berhad, and was responsible for executing marketing and customer relationship events. She left KFC Holdings Malaysia Berhad in 1992 to join Rampai Niaga as an Assistant Shop Manager tasked to oversee store sales growth, achievement of key performance targets, store operations including service standards, store display and inventory control. She later progressed into our Learning and Development department in 1995. She was promoted to be our Learning and Development Manager in 2002 and subsequently as our Retail Manager in 2006. Her 27 years of experience working in our Group entailing shop operations and staff training, has given her immense experience and expertise in managing retail sales, store operations, talent development and customer service. Mae Chan was appointed as the CRO of Rampai-Niaga in 2011 and subsequently she took up her current position as our CRO in January 2019. Chia Cang Yang ("Cang Yang") is our CFO and is responsible for the overall finance function of our Group including corporate planning and governance. He is a member of CPA Australia since 2011 and a Chartered Accountant with the Malaysian Institute of Accountants ("MIA") since February 2012. Cang Yang graduated with a Bachelor's Degree in Accountancy from Universiti Utara Malaysia, awarded in September 2006. He has 12 years of experience in the field of finance and accounting. He started his career with Ernst & Young Malaysia as an Audit Associate in May 2006, and left as Audit Manager in November 2012 to begin his career in the retail industry as the Finance Manager of Parkson Corporation Sdn Bhd in November 2012. He was subsequently appointed as the Chief Financial Officer of Parkson Retail Asia Limited ("Parkson"), a Singapore listed department store operator with presence in Malaysia, Indonesia, and Vietnam from 2017 to 2018. Cang Yang joined Rampai-Niaga in November 2018 as the Director of Corporate Finance & Governance. In January 2019, Cang Yang was appointed as our Director of Corporate Finance & Governance and he was re-designated as our CFO in May 2019. Leong Meng Leong ("Meng Leong") is our Head of Finance and Administration and is responsible for managing the finance team and finance operations for our Group. He received his qualification from the Association of Chartered Certified Accountants in 1999 and was admitted to the MIA as a registered accountant in February 2001. He is also a Chartered Accountant with MIA since June 2001. Meng Leong has accumulated a total of 23 years of accounting and financial experience, comprising years spent in the fields of audit, banking, corporate accounting and finance. 71 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cant'd) Meng Leong joined Ernst & Young Malaysia as an Audit Semi Senior in 1996, and moved on to ABN AMRa Bank NV ("ABN AMRO") as an Assistant Manager, Finance in 2000. He left ABN AMRa in 2002 and spent 7 years with AMP Corporation (M) Sdn Bhd as a Finance and Administrative Manager from 2002 to 2008 before joining Naza Bikes Sales & Distribution Sdn Bhd as a Finance & Accounts Manager in September 2008. He left Naza Bikes Sales & Distribution Sdn Bhd to join Bata Malaysia (Malaysia) Sdn Bhd as Chief Accountant in February 2010 before leaving to join us in end 2010. As part of his role as our Head of Finance and Administration for the past 9 years, he is responsible for ensuring efficiency and effectiveness of financial processes, management accounting, treasury functions, taxation, financial reporting and budgeting, and financial controls to safeguard company assets and to ensure accuracy, completeness and integrity of financial records. Nguyen Thi Ngoc Hue ("Lily-Hue Nguyen") is our General Manager of TBS Vietnam and is responsible for the overall management and growth of TBS brand in Vietnam through building a team of professionals to drive the TBS brand's market penetration and grow market share profitably. Lily-Hue Nguyen graduated from the University of Economics, HCMC, Vietnam in 1997 with a Bachelor of Economics and Mathematics Department degree and she was also awarded a Chief Accountant Certificate by the same university in July 1997 after completing the chief accounting course in Vietnam. She holds a Master of Business Administration (Executive MBA) degree from the University of Hawaii, Hawaii, USA, which was awarded to her in 2010. She has considerable experience in brand and business management in the Vietnam beauty and fast-moving consumer goods industry having spent 8 years with the Estee Lauder Cosmetics Companies in Vietnam ("ELC") and 5 years with Unilever Vietnam ("Unilever"). She started her career with AC Nielsen Vietnam (now The Nielsen Company (Vietnam), Ltd.) in Vietnam, a global consumer study measurement and data analytics company, in September 1997 as an Account Executive in the Retail Audit Department before she left in January 2000 to become the Regional Brand Manager for the "Pond's" brand with Unilever from January 2000 to May 2005. She left Unilever to join ELC in June 2005 as Business Development Manager cum General Manager, a position she held until February 2013. In April 2013, she left ELC to join Viet Tinh Anh Joint Stock Company ("Viet Tinh"), a distributor of toys, as Business Director responsible for strategic planning and implementation of sales and marketing. In 2014, she left Viet Tinh to join Grassroots Joint Stock Company, a distributor of aesthetic pharmaceutical and cosmeceutical products, as Deputy Managing Director. In 2015, she left to join Central Group Vietnam, a company focused on the activity of retail and brands, where she was the Senior General Manager of Sports from 2015 to May 2016. She joined TBS Vietnam in July 2016 in her current role as General Manager. Wong Sook Hing ("Julie Wong") is our General Manager of ala Beleza, our subsidiary which operates the Natura business in Malaysia. Prior to this appointment, Julie Wong was the General Manager of Marketing of Rampai-Niaga, reporting to the COO. In that position, she was responsible for leading the marketing and digital division of Rampai Niaga, covering planning, developing and implementing overall marketing, e-commerce, social media and customer relationship management strategies. 72 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cant'd) Julie Wong holds a Bachelor of Business Administration degree majoring in marketing, from the Un iversity of Nottingham Trent, UK, awarded in 2002. Julie Wong also holds a Diploma in Professional Makeup by Robin Makeup Academy and an Advanced Professional Makeup certification from Yves Saint Laurent France, which were awarded in 2006 and 2004 respectively. She has 20 years of working experience with 16 years spent in marketing and promoting various cosmetics brands in Malaysia such as "Clinique", "Elianto" and "Aesop". Her retail career began soon after a 2 years work experience from 1998 to 2000 with City Link Express (M) Sdn Bhd as Customer Care Officer when she moved on to BagOfClubs.com Sdn Bhd , an online golf club company, in May 2000 as the Manager for Marketing and Promotions, responsible for, among others, the public relations, event management, and sales and marketing activities of the company. Subsequently, she left in 2001 to join Esplanade Avenue Sdn Bhd, a retailer of skincare, perfumes and cosmetics for brand names such as "Aesop", "T-LeClerc", "Annick Goutal" and "Laura Mercier", as its Sales and Marketing Manager, where her main job function included planning of sales target and ensuring achievement of targets at each counter, liaising with departmental stores on promotional planning and marketing mechanism and organising launches and public relations of new products. She then left Esplanade Avenue Sdn Bhd in 2002 to become the Sales Manager for YSL Beaute Malaysia from October 2002 to June 2004, and from July 2004 to February 2005, she became the Assistant Sales Manager for Redual Cosmetics Sdn Bhd which carries Clinique brand products in Malaysia, both of which required her to perform responsibilities for, among others, ach ieving the net sales growth objectives in the country, managing all aspects in the domestic beauty consultant teams and monitoring the brand's profit and loss. From March 2005 to March 2007, she was the Brand General Manager for Classic Bonita Sdn Bhd responsible for spearheading the entire strategic direction of the "Elianto" brand, and executing the local and international expansion . Julie Wong started her own company, Cosmo Charm Sdn Bhd in 2007, which was dissolved in December 2016, where she spent 3 years from April 2007 to April 2010 as the Managing Director of the company as well as the founder and creator of a masstige cosmetics brand, namely "Beautilicious". Subsequently, in May 2010, she took on the role as General Manager of Classic Bonita Sdn Bhd and was re-designated to Vice President for Research, Development and Academy from 2011 . Her job functions at Classic Bonita Sdn Bhd included the development of, among others skincare, makeup tools, non-merchandising items, workshops training, as well as preparing the merchandising and product launching calendar and related budget planning . In 2012, she left to join cava Cosmetics Sdn Bhd as General Manager and became the brand creator and marketer for "CaVa" cosmetics in Malaysia, responsible for the creation of brand name, overall brand's profit and loss, strategic expansion and managing a team of managers for sales and marketing as well as merchandising and training before leaving in February 2015. Prior to joining Rampai-Niaga as General Manager of Marketing in April 2016, Julie Wong was the Head of Beauty for HL Management Co Sdn Bhd from March 2015 to March 2016, a company which was involved in running Gemfive.com, a local online platform. She was mainly responsible for the entire portfolio of beauty category which included securing and managing the merchandising mix for the beauty category, and maximising revenue for the online platform. She was re-designated and assumed her current role in our Group on 1 April 2019. 73 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cant'd) 3.3.3 Shareholdings of the Key Senior Management in our Company The shareholdings of our Key Senior Management in our Company as at the date of this Prospectus and after our IPO are as follows: As at the date of this Prospectus After our IPO(1 ) Direct Indirect Direct Indirect No. of No. of No. of No. of Name Shares % Shares % Shares % Shares % Datin Mina 631 ,807,488 100.00 - 528,607,488 74.89 (2) (2) Molly Fang 150,000(1) 0.02 Jesse Siew 100,000(1) 0.01 Mae Chan 50,000 (1) * Cang Yang 100,000(1) 0.01 Meng Leong 20,000(1) Lily-Hue Nguyen Julie Wong 20,000(1) Notes: * Less than 0.01% (1) Assuming that he/she fully subscribes for the Pink Form Shares allocated to him/her. Our Key Senior Management may subscribe for Issue Shares under both the Pink Form Allocation and the Issue Shares under the Retail Offering in Section 2.3.2(i) of th is Prospectus. (2) Deemed interested by virtue of Section 8(4) of the Act, through her shareholdings of more than 20.00% in Etheco, BluPlanet, and Pelagos respectively ; and by virtue of Section 59(11 )(c) of the Act, through her son Dexter Foong's indirect shareholdings in InNature via Primarium. 3.3.4 Principal directorship of our Key Senior Management and principal business activities performed outside of our Group The principal directorships in companies outside of our Group held by our Key Senior Management within the past 5 years up to the LPD and business activities outside of our Group performed by our Key Senior Management as at the LPD, other than Datin Mina and Molly Fong which are set out in Section 3.1.4 of this Prospectus, are as follows: 74 Registration No.: 199401034915 (320598-X) 3. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cont'd) Involvement in business activities Name Directorships Principal activities other than as a Director Meng Directorships as at the Leong LPD: • Acro Data Sdn Bhd • Providing information Shareholder holding (Appointed on 12 technology solution direct interest of 60.00% September 2012) and services • Trading of generator sets • Greenview • Property investment Shareholder holding Management Sdn Bhd holding direct interest of 33.33% (Appointed on 27 March 2012) • Greenview Ventures • Food and beverage Shareholder holding Sdn Bhd outlet direct interest of 33.33% (Appointed on 11 May 2017) • Vone Systems Sdn • Export and import of Shareholder holding Bhd computer hardware, direct interest of 50.00% (Appointed on 1 March software and 2016) peripherals The involvement of Meng Leong in other business activities outside our Company will not affect his contributions to our Group and would not be expected to affect the operations of our Group as the day-to-day management and operations of these businesses or corporations are managed by the other shareholders or have their own independent management team. Meng Leong does not hold any executive positions in the companies set out above. 3.3.5 Key Senior Management's remuneration and material benefits-in-kind The aggregate remuneration and material benefits-in-kind (including any contingent or deferred remuneration) paid and proposed to be paid to our Key Senior Management for services rendered/to be rendered to our Group for the FYE 2019 and FYE 2020, save for Datin Mina and Molly Fong of which are set out in Section 3.1.6 of this Prospectus are as follows: In Bands of RM50,000 FYE 2019 FYE 2020 Name of Key Senior Management (Actual) (Proposed) RM '000 RM '000 Jesse Siew 450-500 500-550 Mae Chan 350-400 400-450 Cang Yang 300-350 400-450 Meng Leong 250-300 250-300 Lily-Hue Nguyen 750-800 800-850 Julie Wong 300-350 300-350 75 Registration No.: 199401034915 (32059B-X) 3, INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cont'd) 3,4 Management reporting structure The following chart illustrates the management reporting structure for our business operations: Board of Directors Exr·tutlve Dlrectorl Executive Olrectorl Non-fndependern N.c:n Semor Indepttnde-m Independent Non Non·lnd'e~de1'tt N~ln Man!llln2 Dueetor Chief £XeC1.l live OtffCflr e Jlewtfve~nnl" lIon_Olre_ oOa:ccutJve Olrector eX«uriY-e Olrectcr ('MD") ("CEO') Daryl Foon, Datin Mina MotlyFon, Dato'Slmon Oato' Maznah Tenvu lotashah (Alternate to D.ato' Simon) Key Senior Management Team Execut",e Director I MO INNATURE OetjnMinB MANAGEMENT Exftutlve DIrector I CEO MotlyFon, CltI~HI".n'LoI Officer CltI.1 Op.ration, Officer CancYane JesseSiew MaeCban ... I . Generl!lt M!ln.l:er~ Genen1Mln1 eer, Ella TBSVietnilm Oli Belen MengleoJ"g lilv-Hue Nguyen Julie Wong Respe<:tw. marker.s findRCP TBSVN!\oam _Rampa'-Nl>g9 Green Cosfnt;:rir..s MitMgimwntleam opetaliog tfams mana8emlmt team manasement team management tearn the Natura btlSiilesS Note: (1) TBA means to be appointed_During the start-up phase, our COO, Jesse Siew will be overseeing the TBS business operations in Cambodia under Green Cosmetics. 3.5 Declarations by our Directors, Promoters and Key Senior Management None of our Directors, Promoters and Key Senior Management is or has been involved in any of the following events (whether in or outside Malaysia): (i) in the last 10 years, a petition under any bankruptcy or insolvency laws was filed (and not struck out) against such person or any partnership in which he was a partner or any corporation of which he was a director or member of key senior management; (ii) disqualified from acting as a director of any corporation, or from taking part, directly or indirectly, in the management of any corporation; (iii) in the last 10 years, such person was charged or convicted in a criminal proceeding or is a named subject of a pending criminal proceeding; (iv) in the last 10 years, any judgment was entered against such person, or finding of fault, misrepresentation, dishonesty, incompetence or malpractice on his part, involving a breach of any law or regulatory requirement that relates to the capital market; (v) in the last 10 years, such person was the subject of any civil proceeding, involving an allegation of fraud, misrepresentation, dishonesty, incompetence or malpractice on his part that relates to the capital market; 76 Registration No.: 199401034915 (32059B-X) 3. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY SENIOR MANAGEMENT (cant'd) (vi) the subject of any order, judgment or ruling of any court, government, or regulatory authority or body temporarily enjoining him from engaging in any type of business practice or activity; (vii) the subject of any current investigation or disciplinary proceeding, or in the last 10 years has been reprimanded or issued any warning by any regulatory authority, securities or derivatives exchange, professional body or government agency; or (viii) any unsatisfied judgment against him. Notwithstanding the above, on 3 October 2011, the SC entered into a settlement with Dato' Simon in the sum of RM281,361 when Dato' Simon agreed without admission or denial of liability, to settle a claim that the SC was proposing to institute against him for insider trading in the shares of Crest Petroleum Berhad ("Crest") between 14 January 2003 and 21 January 2003 ("Alleged Trading"), contrary to section 89E of the Securities Industry Act 1983 ("SIA") ("Claim"). The settlement was reached following letters of demand sent by the SC pursuant to its civil enforcement powers under the securities laws, where the sum he was required to disgorge was equivalent to 3 times the gains he made from his trades in Crest shares. In accordance with the provisions of section 90A(7) of the SIA, the amount recovered from Dato' Simon was to be used first to reimburse the SC for all costs of investigations and proceed ings. The remaining amount was to be used to compensate the sellers who sold their shares to him before the information became generally available. The Alleged Trading took place more than 16 years ago in 2003 and to the best of the Company's and Dato' Simon's knowledge, no charge or any criminal proceeding has been instituted against Dato' Simon in any court of law in relation to the Alleged Trading and no other claims were made by the SC against Dato' Simon subsequent to the Claim. This matter did not involve our Company, our other Directors nor any of our Subsidiaries. 3.6 Relationships or associations between our Directors, Promoters, Substantial Shareholders and Key Senior Management There are no family relationships or associations between our Directors, Promoters, Substantial Shareholders and Key Senior Management, save for the following : (i) Dato' Simon and Datin Mina are husband and wife. Dato' Simon and Datin lVIina are our Directors, Promoters, and Substantial Shareholders through their shareholdings in Etheco and BluPlanet who are our Substantial Shareholders and Promoters, as well as Pelagos and Primarium who are our shareholders and Promoters. Dato' Simon is a director of Etheco, BluPlanet and Primarium; whilst Datin Mina is a director of Etheco, BluPlanet and Pelagos; and (ii) Dato' Simon and Datin Mina are the parents of Daryl Foong, our Promoter and our Non Independent Non-Executive Director, and Dexter Foong, our Promoter. Daryl Foong is a substantial shareholder and director of Pelagos; and Dexter Foong is a substantial shareholder and director of Primarium. 3.7 Service agreements As at the LPD, there are no existing or proposed service agreements between our Group and Directors or Key Senior Management, excluding contracts expiring or determinable by our Company without payments or compensation (other than statutory compensation), which are not terminable by notice without payment or compensation (other than statutory notice). 77 Registration No.: 199401034915 (32059B·X) 4. INFORMATION ON OUR GROUP 4.1 Our Company 4.1.1 History and background Our Company was incorporated in Malaysia under the Companies Act, 1965 on 21 October 1994 as a private limited company under the name of Home Blockbuster Video Sdn Bhd and deemed registered under the Act. On 11 November 1997, we changed our name to Rampai Teknologi Sdn Bhd and subsequently to InNature Sdn Bhd on 1 March 2018. On 25 July 2018, our Company was converted into a public limited company to facilitate our Listing . The prinCipal activity of our Company is investment holding. We are principally involved in the retailing and distribution of The Body Shop® ("IBS") products through our Subsidiaries Rampai-Niaga, TBS Vietnam and Green Cosmetics. Please refer to Section 4.3 of this Prospectus for more details of the principal activities of our Subsidiaries. On 9 April 1984, our Promoter, Datin Mina together with her then partner acquired the right to establish and operate TBS retail stores in West Malaysia. The first TBS retail store was opened in Plaza Yow Chuan in December 1984. On 14 July 1995, pursuant to a novation agreement, the rights, interests, liabilities and obligations of Datin Mina's then partner under the then existing franchise agreements were assigned, transferred and vested in Data' Simon with the consent of The Body Shop International. From 24 July 1995, the franchise for West Malaysia was granted by The Body Shop International to TBS Franchise Sdn Bhd (now known as Feliz Natur Sdn Bhd) ("Feliz Natur"), a company wholly owned by Datin Mina and Dato' Simon before it was transferred in 2002 to our Malaysian subsidiary, Rampai-Niaga, which was at the time, a company wholly owned by Datin Mina and Dato' Simon. In 2009, our wholly-owned Vietnam subsidiary, TBS Vietnam was awarded the franchise for Vietnam, being the first TBS franchise granted by TBSI in Vietnam. Subsequently in 2012, we became one of the first cosmetics brands in Malaysia to launch our online platform for the sale of TBS products in Malaysia, through TBS's website operated locally by us. Shortly thereafter, our online platform was launched in Vietnam in 2013. In 2015, Rampai-Niaga was also awarded the franchise for Sabah and Labuan, which was previously held by another franchisee of TBS!. Following the award, Rampai-Niaga holds the TBS franchise for Malaysia except for Sarawak, the franchise of which, is held by another franchisee of TBS!. In June 2019, The Body Shop International awarded the first TBS franchise for Cambodia to our Cambodian subsidiary, Green Cosmetics. (The rest of this page has been intentionally left blank) 78 Registration No.: 199401034915 (32059B-X) 4. INFORMATION ON OUR GROUP (cant'd) As at the LPD, our Group holds TBS franchises to establish and operate TBS points of-sale in the following territories: Subsidiary Territory Distribution channels Exclusivity Rampai- West Malaysia, • The retail points-of-sale and The Body Shop Niaga Sa bah and online channels mentioned in International will Labuan Section 5.3.4 of this Prospectus . not appoint any other third party Subject to T8SI's approval, we as franchisee in T8S Vietnam • the territories or Vietnam have the right to operate via the following reserved and non- grant equivalent exclusive distribution channels: rights to any third party in the (i) Mail order catalogues; territories under Green Cambodia the respective Cosmetics (ii) Direct selling in the home or Franchise at other non-retail locations; Agreements . and (iii) Hotel chains. For further details of the scope of our franchises and the terms of the Franchise Agreements entered into by Rampai-Niaga, TBS Vietnam and Green Cosmetics respectively, with TBSI, please refer to Section 5.15 of this Prospectus. As at the LPD, we have a wide network of 89 points-of-sale throughout West Malaysia, Sabah and Labuan, and 34 points-of-sale in Vietnam. We have also ventured into Cambodia and opened our first point-of-sale in Cambodia in November 2019. The Body Shop International does not have any equity interest in our Group as at the LPD. 4.1.2 Pre-listing internal restructuring exercise We carried out an internal restructuring exercise prior to our Listing which involved the following steps ("Internal Restructuring Exercise"): (a) on 24 September 2018, InNature had acquired the entire charter capital ofTBS Vietnam for a purchase consideration of USD350,OOO (equivalent to VND5.6 billion or RM1,447,OOO) from Feliz Natur ("TBS Vietnam Acquisition"). The purchase consideration for the TBS Vietnam Acquisition was arrived at based on the charter capital of TBS Vietnam i.e. capital contributed by the then shareholders of TBS Vietnam; namely Datin Mina and Dato' Simon. Subsequent to the TBS Vietnam Acquisition, TBS Vietnam had become a wholly-owned subsidiary of our Group; (b) on 31 December 2018, our subsidiary, Rampai-Niaga, had carried out a distribution of dividend for the FYE 2018 to InNature, its sole shareholder ("Rampai-Niaga 2018 Dividend") as follows: (i) payment of dividend in the total amount of RM 71,923,644, comprising RM18,000,000 in cash and RM 53,923,644 by intercompany settlement through offsetting the amount due from InNature to Rampai-Niaga; and 79 Registration No.: 199401034915 (320598-X) 4. INFORMATION ON OUR GROUP (cant'd) (ii) payment of dividend-in-specie comprising Rampai-Niaga's properties at fair value amounting to RM13,520,000 as detailed below ("Rampai Niaga Dividend-In-Specie"), resulting in a transfer of ownership of such properties from Rampai-Niaga to InNature: Consideration No. Particulars (RM'OOO) (1) Parcel No. Lot No. G41, Ground Floor, Mahkota 1,160 Parade, Melaka which is erected on the Master Title Plot Perdagangan 1, being part of PN 6528, Lot No.2 and Plot Perdagangan 5, being part of PN 6517 Lot No.4, both in Bandar XLII (42), Daerah Melaka Tengah , Negeri Melaka (2) Unit 44, Ground Floor, Central Square Complex. 360 Sungai Petani, Kedah held under Strata Title Hakmilik Strata G 145068/M1/1/0000044. No. Bangunan M1, No. Tingkat 1, No. Petak. 0000044, Lot 134 Seksyen 56, Bandar Sungai Petani, Daerah Kuala Muda, Negeri Kedah Darul Aman (3) No.3, USJ 1011 C, 47620 UEP Subang Jaya, 4,900 Selangor Darul Ehsan held under Geran 285215 Lot 37212, Pekan Subang Jaya, Daerah Petaling, Negeri Selangor Darul Ehsan (4) No.5. USJ 10/1C, 47620 UEP Subang Jaya, 4,900 Selangor Darul Ehsan held under Geran 285214 Lot 37211, Pekan Subang Jaya, Daerah Petaling, Negeri Selangor Darul Ehsan (5) Lot No. LG 20J, Lower Ground Floor, Subang 950 Parade which is erected on the Master Title HS(D) 2227 for Lot No. P.T. 9120, Lot 014193 in the Mukim Damansara, Daerah Petaling, Negeri Selangor Darul Ehsan (6) LG 03A, Summit City which is erected on all the 1,250 leasehold land held under Master Title HS(D) 59989 PT 12201 and HS(D) 59990 PT 12202, both in Mukim Damansara, Daerah Petaling, Negeri Selangor Darul Ehsan Total 13,520 (c) following the Rampai-Niaga 2018 Dividend, on 31 December 2018, our Company had carried out a distribution of dividend for the FYE 2018 for the total amount of RM138,884,000, comprising RM29,450,000 in cash and RM109,434,000 by offsetting amounts due from companies in which Dato' Simon and Datin Mina have interests in; and in specie of RM13,520,000 via distribution of the real properties under the Rampai-Niaga Dividend-In-Specie at fair value; to our Company's then shareholders, Dato' Simon and Datin Mina. Their entitlement to the said real properties were transferred to Steady Property Management Sdn Bhd ("Steady Property"), a company which is also owned by Dato' Simon and Datin Mina. Please refer to Section 13.5 of this Prospectus for further details of the sale and purchase agreements for the transfer of the real properties above; 80 Registration No.: 199401034915 (320598-X) 4. INFORMATION ON OUR GROUP (cant'd) (d) on 10 April 2019, our Company had declared a dividend amounting to RM10,000,000 for the FYE 2018 in cash and the dividends have been paid to the entitled shareholders of our Company on 30 August 2019; (e) on 15 May 2019, Etheco had entered into a share sale agreement with our Promoters, Dato' Simon and Datin Mina to acquire their entire shareholdings in InNature, which is in aggregate the entire issued share capital of InNature of RM2,500,000 comprising 2,500,000 Shares ("lnNature Acquisition"). The purchase consideration of RM75 ,803,000 for the InNature Acquisition was arrived at on a "willing-buyer-willing-seller" basis after taking into consideration the consolidated NA value of InNature as at 31 December 2018. The purchase consideration is to be satisfied entirely by the issuance of 2,500,000 ordinary shares in Etheco to Dato' Simon and Datin Mina in equal proportion . The InNature Acquisition shares were transferred to Etheco by share transfer forms dated 25 October 2019 which became effective on 13 December 2019 upon completion of stamping and registration of share transfers pursuant to the Act; (f) further to the InNature Acquisition, InNature had on 20 December 2019 issued new Shares to BluPlanet, Pelagos, and Primarium in the following proportions ("Promoters Share Issuance"): Consideration No. of Shares Shareholders (RM) issued %(1) BluPlanet 1,593,400(2) 1,593,400 36.32 Pelagos 147,076(2) 147,076 3.35 Primarium 147,076(2) 147,076 3.35 Notes: (1) Based on the issued share capital of 4,387,552 Shares before the IPO. (2) The new Shares were issued at a nominal price of RM1.00 per Share. (g) our Company had subsequently on 24 December 2019 carried out a subdivision of the entire issued share capital of RM4,387,552 comprising 4,387,552 Shares into RM4,387,552 comprising 631,807,488 Shares at a ratio of 1: 144 Shares ("Subdivision"); and (h) on 26 November 2019, our Company had declared a dividend amounting to RM10,000,000 for the FYE 2019 in cash and the dividends has been paid to the entitled shareholders of our Company on 27 December 2019. 4.1.3 Share capital As at the LPD, our issued share capital is RM4 ,387,552 comprising 631 ,807,488 Shares. The changes in our Company's issued share capital since incorporation up to the LPD are as follows: Cumulative issued share capital Date of No. of Shares Nature of allotment allotted transaction Consideration RM No. of Shares 21 .10.1994 2 Cash 2 2 (subscriber shares) 18.12.2018 2,499,998 Bonus issue 2,500,000 2,500,000 81 Registration No.: 199401034915 (32059B-X) 4. INFORMATION ON OUR GROUP (cant'd) Cumulative issued share capital Date of No. of Shares Nature of allotment allotted transaction Consideration RM No. of Shares 20.12.2019 1,887,552 New issuance Cash 4,387,552 4,387,552 of Shares 24.12.2019 631,807,488 Subdivision of 4,387,552 631,807,488 Shares There are no discounts, special terms or instalment payment terms applicable to the payment of consideration for the above allotments. Upon the completion of our IPO, our enlarged share capital will increase to RM53,208,000 comprising 705,881,488 Shares. As at the LPD, we do not have any outstanding warrants, options, convertible securities or uncalled capital in respect of the Shares in our Company. 4.2 Group structure Our group structure as at the LPD and after our IPO is as set out below: Group structure as at the LPD 100.00% , /" -- ~rsfi-j6UliOn clf- - .. ~ /" -- - R~~[iin; \1 I ;nd --" I: Natura products I I distribution of Retailing and Retailing and I I through channels I: d TB~ ts distribuuon of distribution of Dormant I including direct : I ~ pro uc I selling, e· I I in West Malaysia, TSS products TSS products in in Vietnam Cambodia I commerce and I I Sabah and I , I.. ____ r§t~il ~tq.r~ __ ... : ~ ... ____ ~a_b~~n___ ... ;' ,, ______... 1 82 Registration No.: 199401034915 (32059B-X) 4. INFORMATION ON OUR GROUP (cont'd) Group structure after our IPO 70 .00% -I 30.00% , ____---' " "" Di~irib ~ti~n ~f-Netu~a- .. \ , -- R~ta~j~g- ;nd -- ... 'r I products th rough distribution of I Retailing and Retailin g and channels including distribution of distribution of Dormant : . TB S pro d u c~ : direct selling, e J In Vvest Malaysia , : TBS products TBS produ cts commerce and I Sabah and I in Vietnam In Cambodia ' ------.- .. re tail storss I~ ,---- L------abuan -- J Note: 1 lh.s lftc ltldes the Pink Foml Sharcs alocaloo 10 ltJe DI(c-cIQffi of our Grollp amount109 to 650.000 Shares or 0 09% or rhe enla rgc- Our Group was formed when our Company acquired the entire issued and paid-up share capital of Rampai-Niaga on 23 November 2006. Subsequently our Company acquired TBS Vietnam on 24 September 2018. Thereafter, Green Cosmetics, Hello Natural and Ola Beleza were incorporated as our wholly-owned Subsidiaries on 4 October 2018, 15 February 2019 and 21 February 2019 respectively (collectively the "Incorporations"). These Subsidiaries collectively hold all our business operations. Rampai-Niaga and TBS Vietnam were acquired by InNature for cash, details of which are as follows: Total interests in Consideration Subsidiary subsidiary acquired ("!o) Vendors (RM 'OOO) Rampai-Niaga 100.0 Kejora Harta Berhad(1 ) 80,000 TBS Vietnam 100.0 Feliz Natur<2) 1,447(3) Notes: (1) Datin Mina and Dato' Simon originally held 50.0% shares each in Rampai-Niaga since 14 May 1986 and 15 July 1995 respectively. Their shares in Rampai-Niaga were sold to Kejora Harta Berhad, then a public listed company on 2 October 2003. Subsequently, InNature had on 23 November 2006 acquired the entire issued share capital of Rampai-Niaga from Kejora Harta Berhad for cash. (2) Datin Mina and Dato' Simon hold 50.0% shares each in Feliz Natur. (3) The Group acquired the entire charter capital of TBS Vietnam in September 2018 for a total consideration of USD350,OOO , which is equivalent to VND5.6 billion or RM1,447,000. Please refer to Section 4.1.2(a) of this Prospectus and Note 27 of the Accountants' Report in Section 12 of this Prospectus for further details. Following the completion of the acquisition of Rampai-Niaga and TBS Vietnam and the Incorporations, each Subsidiary became a wholly-owned subsidiary of InNature. 83 Registration No.: 199401034915 (32059B-X) 4. INFORMATION ON OUR GROUP (cant'd) 4.3 Our Subsidiaries Our Subsidiaries are as follows: Our Date and Company's Name and country of Issued share effective Principal activitiesl registration no. incorporation capital interest (%) Principal place of business Malaysia Rampai-Niaga 09.04.1984 RM1 .0 million 100.0 Retailing and distribution of (198401005193 Malaysia TBS products in West (117711-H)) Malaysia, Sabah and Labuan Ola Beleza 21.02.2019 RM2.6 million 100.0 Distribution of Natura (201901005911 Malaysia products through channels (1315238-V») including direct selling, e commerce and retail stores. Hello Natural 15.02.2019 RM1.00 100.0 Dormant (201901005135 Malaysia (1314462-V») Vietnam TBS Vietnam 15.01.2009 Charter 100.0 Retailing and distribution of (Certificate of Vietnam capital: TBS products in Vietnam Investment No. VND5.6 billion 411043000899) Cambodia Green Cosmetics 04.10.2018 KHR20.0 100.0 Retailing and distribution of (00036935) Cambodia million TBS products in Cambodia The details of our Subsidiaries are set out below: 4.3.1 Rampai-Niaga (i) History and business Rampai-Niaga was incorporated on 9 April 1984 in Malaysia under the Companies Act, 1965 as a private limited company under its present name and deemed registered under the Act. Rampai-Niaga's principal business activity is the retailing and distribution of TBS products in West Malaysia, Sabah and Labuan. Rampai-Niaga commenced operations on 9 April 1984. (ii) Share capital As at the LPD, the issued share capital of Rampai-Niaga is RM1,000,000 comprising 1,000,000 Rampai-Niaga ordinary shares. The changes in the issued share capital of Rampai-Niaga since its incorporation up to the LPD are as follows: 84 Registration No.: 199401034915 (32059B-X) 4. INFORMATION ON OUR GROUP (cant'd) Cumulative issued share capital No. of Rampai- Date of Niaga shares Nature of No. of allotment allotted transaction Consideration RM shares 09.04.1984 4 Cash 4 4 05.06.1984 20,000 Cash 20,004 20,004 06.09.1984 5,000 Cash 25,004 25,004 08 .01 .1985 25,000 Cash 50,004 50,004 01 .03.1985 25,000 Cash 75,004 75,004 25.05.1988 49,996 Cash 125,000 125,000 03.04.1993 125,000 Bonus issue 250,000 250,000 06.10.2015 750,000 Bonus issue 1,000,000 1,000,000 There are no discounts, special terms or instalment payment terms applicable to the payment of consideration for the above allotments. As at the LPD, Rampai-Niaga does not have any outstanding warrants, options, convertible securities or uncalled capital. (iii) Shareholder and directors Rampai-Niaga is a wholly-owned subsidiary of our Company. For the past 3 years up to the LPD, there were no changes to the shareholder of Rampai Niaga. The directors of Rampai-Niaga are Dato' Simon and Datin Mina. (iv) Subsidiary and associated company Rampai-Niaga does not have any subsidiary or associated company. 4.3.2 Ola Beleza (i) History and business Ola Beleza was incorporated on 21 February 2019 in Malaysia under the Act as a private limited company under the name of Natura Beauty Sdn Bhd, and subsequently changed to its present name on 5 April 2019. Ola Beleza's principal business activity is the distribution of Natura products through channels including direct selling, e-commerce and retail stores. Ola Beleza commenced its retail operations by launching the Natura e-commerce website in August 2019 and setting up a pop-up store in Sunway Pyramid in October 2019. (ii) Share capital As at the LPD, the issued share capital of Ola Beleza is RM2,600,OOO comprising 2,600,000 Ola Beleza ordinary shares. The changes in the issued share capital of Ola Beleza since its incorporation up to the LPD are as follows: 85 Registration No.: 199401034915 (32059B-X) 4. INFORMATION ON OUR GROUP (cont'd) Cumulative issued share capital NO. ofOla Date of Beleza shares Nature of No. of allotment allotted transaction Consideration RM shares 21 .02.2019 Cash 12.06.2019 2,599,999 Cash 2,599,999 2,600,000 There are no discounts, special terms or instalment payment terms applicable to the payment of consideration for the above allotments. As at the LPD, Ola Beleza does not have any outstanding warrants, options, convertible securities or uncalled capital. (iii) Shareholder and directors Ola Beleza is a wholly-owned subsidiary of our Company. From Ola Beleza's incorporation date of 21 February 2019 up to the LPD, there were no changes to the shareholder of Ola Beleza save for the transfer of the then entire issued share capital of RM1.00 comprising 1 ordinary share from Hello Natural to our Company on 9 April 2019. The sole director of Ola Beleza is Datin Mina. (iv) Subsidiary and associated company Ola Beleza does not have any subsidiary or associated company. 4.3.3 Hello Natural (i) History and business Hello Natural was incorporated on 15 February 2019 in Malaysia under the Act as a private limited company under the name of Ola Natura Sdn Bhd, and subsequently changed to its present name on 5 April 2019. As at the LPD, the Group does not have any plan for Hello Natural. Hello Natural was initially incorporated as an investment holding company with Ola Beleza as its wholly-owned subsidiary. On 9 April 2019, Ola Beleza became InNature's direct wholly-owned subsidiary and Hello Natural has since then became dormant. (ii) Share capital As at the LPD, the issued share capital of Hello Natural is RM1 .00 comprising 1 Hello Natural ordinary share. There are no changes in the issued share capital of Hello Natural since its incorporation up to the LPD . As at the LPD , Hello Natural does not have any outstanding warrants, options, convertible securities or uncalled capital. 86 Registration No.: 199401034915 (320598-X) 4. INFORMATION ON OUR GROUP (cant'd) (iii) Shareholder and directors Hello Natural is a wholly-owned subsidiary of our Company. From Hello Natural's incorporation date of 15 February 2019 up to the LPD, there were no changes to the shareholder of Hello Natural. The sole director of Hello Natural is Datin Mina. (iv) Subsidiary and associated company Hello Natural does not have any subsidiary or associated company. 4.3.4 TBS Vietnam (i) History and business TBS Vietnam was incorporated in Vietnam on 15 January 2009 under the laws of Socialist Republic of Vietnam as a limited liability company with one member under its present name. TBS Vietnam's principal business activity is the retailing and distribution of TBS products in Vietnam. TBS Vietnam commenced its operations on 8 December 2009. (ii) Share capital As at the LPD, the share capital of TBS Vietnam is VND5.6 billion (equivalent to RM1 ,026,000 as stated in InNature's consolidated accounting records). The share capital of TBS Vietnam has not changed since incorporation up to the LPD. As at the LPD, TBS Vietnam does not have any outstanding warrants, options, convertible securities or uncalled capital. (iii) Shareholder and directors TBS Vietnam is a wholly-owned subsidiary of our Company. The changes in the shareholders and their shareholdings in TBS Vietnam for the past 3 years up to the LPD are as follows: As at 24 September 2018 As at 2016 and 2017 and LPD Capital held Capital held Name (VND billion) % (VND billion) % Feliz Natur 5.6 100.0 InNature 5.6 100.0 The general director of TBS Vietnam is Datin Mina. She is the sole director of TBS Vietnam. (iv) Subsidiary and associated company TBS Vietnam does not have any subsidiary or associated company. 87 Registration No.: 199401034915 (32059B-X) 4. INFORMATION ON OUR GROUP (cont'd) 4.3.5 Green Cosmetics (i) History and business Green Cosmetics was incorporated in Cambodia on 4 October 2018 under the Law on Commercial Rules and Commercial Register, and Law on Commercial Enterprises as a single member private limited company under its present name. Green Cosmetics' principal business activity is the retailing and distribution of TSS products in Cambodia. Green Cosmetics commenced its retail operations and opened the first TSS point-of-sale in Cambodia in November 2019. (ii) Share capital As at the LPD, the issued share capital of Green Cosmetics is KHR20.0 million (equivalent to RM21,000 as stated in InNature's consolidated accounting records) comprising 1,000 Green Cosmetics ordinary shares. There has been no change to the issued share capital of Green Cosmetics since incorporation up to the LPD. As at the LPD, Green Cosmetics does not have any outstanding warrants, options, convertible securities or uncalled capital. (iii) Shareholder and directors Green Cosmetics is a wholly-owned subsidiary of our Company. From Green Cosmetic's incorporation date of 4 October 2018 up to the LPD, there were no changes to the shareholder of Green Cosmetics. The sole director of Green Cosmetics is Datin Mina. (iv) Subsidiary and associated company Green Cosmetics does not have any subsidiary or associated company. As at the LPD, neither our Company nor our Subsidiaries are involved in any bankruptcy, receivership or similar proceedings. (The rest of this page has been intentionally left blank) 88 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW 5.1 Business overview Our Group holds TBS franchises to establish and operate TBS points-of-sale in West Malaysia, Sabah and Labuan, Vietnam and Cambodia. Through our franchise with TBSI, our Subsidiaries, Rampai-Niaga, TBS Vietnam and Green Cosmetics are involved in the retailing and distribution of TBS brand of products (,TBS products") in West Malaysia, Sabah and Labuan, in Vietnam and in Cambodia. We are a leading mono-brand beauty retailer (beauty retailer that carries one brand at its points of-sale such as the TBS points-of-sale) in Malaysia with a market share of 11.0% based on total market sales of RM 1.48 billion as at 2018. We are also the largest in terms of number of points of-sale in the same segment as at the LPD. (Source: IMR Report) Our Group has recorded a revenue growth of 11 .2% and 16.9% in Vietnam for the FYE 2017 and FYE 2018, and 35.3% for the FPE 2019. Pegged on the expected growth of the CPC industry in Vietnam as detailed in Section 6 of this Prospectus, as well as the past performance of our Company in Vietnam, we are well-positioned to grow our market share in Vietnam and to make inroads into Cambodia. In collaboration with Natura Cosmeticos SA, we have also recently introduced the Natura beauty brand into Malaysia to expand our brand portfolio and strengthen our leadership in market share of the naturals sector of the beauty industry. We have launched the Natura e commerce website in August 2019 and opened a pop-up store in Sunway Pyramid in October 2019 to introduce and promote the brand to the Malaysian market. Background on our Franchisor Founded in 1976 in Brighton, England, by Dame Anita Roddick, TBSI, our Franchisor, is a global beauty brand and retailer of The Body Shop® products. The Body Shop® seeks to offer high-quality, naturally inspired skincare, body care, hair care and make-up produced ethically and sustainably. Having pioneered the philosophy that business can be a force for good, this ethos is still the brand's driving force. The Body Shop® spans around 3,000 retail locations in 70 countries. Along with Natura and Aesop, TBSI is part of Natura & Co, a global, multi-channel and multi-brand cosmetics group that is committed to generating positive economic, social and environmental impact. Our values: Business as a force for good Similar to our Franchisor's values, our Group believes that business can be a force for good. Over the years, we have initiated and organised many campaigns for the conseNation and protection of the environment and animals, as well as for human rights and women's rights, both in Malaysia and Vietnam. We regularly collaborate with non-governmental organisations to campaign for these environmental and social causes. Please refer to Section 5.1.2 below for details of our campaigns. Our networks and growth We have a wide network of 89 points-of-sale throughout West Malaysia, Sabah and Labuan, 34 points-of-sale in Vietnam and, 1 point-of-sale in Cambodia as at the LPD. The growth of our business is a reflection of our Group's efforts in building the brand equity of TBS over 30 years, with the support of our Franchisor, TBSI. 89 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) The number of our points-of-sale and our sales revenue in Malaysia have grown over the years in line with the growth of Malaysia's economy and the rise in the disposable income of Malaysian consumers. By selling through our own points-of-sale, we have more flexibility and better control over the marketing, retailing and distribution of TBS products and this has enabled us to continue to grow our business throughout the years. Our points-of-sale consist of retail stores located within shopping malls, retail stores located on high streets, airport stores and stores within department stores ("shop-in-shop" format) . In February 2012, we became one of the first CPC brands in Malaysia to launch our online platform for the sale of TBS products in West Malaysia through TBS's website which we operate. We launched our online sales in Vietnam in March 2013. As at the LPD, besides operating TBS's websites in Malaysia and Vietnam, we also retail TBS products via selected third-party online stores such as Hermo in Malaysia, Tiki in Vietnam , and Lazada in both markets. As at the LPD, the breakdown of our 89 points-of-sale in West Malaysia, Sabah and Labuan, and 34 points-of-sale in Vietnam as well as our online platform are depicted below: The Body Shop MalaYSia The Body Shop Vietnam J le()I) 'lfr pI rill Of /Vyt(](S .;fnpl rn',) I The BodV S!'op Cambodia f lloml', of 1i'/UUlll _ -mfr~"""'" ."",.,.",~ ..", IPD _ .... ___ ""_"" ... f1It-.a.J11 ....~_ ... . ___.. ~ ... Ihe_..,.oJIf>J.. t"""" . ., ._ --_... . We also have 1 TBS mall store in Cambodia which was opened in November 2019. Please refer to Section 5.3.4 of this Prospectus for more details of our distribution channels. Despite many new brand entrants into the highly competitive mono-brand beauty market, our revenue in Malaysia has sustained its growth and our audited revenue grew from RM143.3 million in the FYE 2016 to RM153.5 million in the FYE 2017, and to RM162.9 million in the FYE 2018. Our audited revenue in Malaysia for the FPE 2019 was RM117.8 million. In Vietnam, we have now garnered almost one decade of market penetration experience and our audited revenue grew from RM 16.6 million in the FYE 2016 to RM 18.4 million in the FYE 2017, and to RM21 .5 million in the FYE 2018. For the FPE 2019, the audited revenue for Vietnam was RM20.4 million. Based on the IMR Report, the market for CPC industry in Malaysia has been growing continuously during the period between 2013 and 2018, at a CAGR of 6.2%. The growth rate for the period between 2018 to 2023 is forecasted to accelerate to a CAGR of 8.0%, driven by growing disposable income, urbanisation and overall total population . 90 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) The market for CPC industry in Vietnam has been growing continuously during the period between 2013 to 2018, at a CAGR of 12.0%, from VND22.2 trillion (approximately RM3.9 billion) to VND39.2 trillion (approximately RM6.9 billion), while the growth rate is forecasted to slightly slow down to a CAGR of 11 .6%, from VND39.2 trillion (approximately RM6.9 billion) to VND68.0 trillion (approximately RM12.0 billion) for the period between 2018 to 2023. (Source: IMR Report) The market for CPC products in Cambodia grew fast during the period between 2013 and 2018, at a CAGR of 17.0%, driven by positive economic activity, which has given a boost to the disposable income of the population, thereby stimulating the growth of local commercial activities and attracting international brands to expand their presence in the country. A summary of our audited revenue for Malaysia and Vietnam for the past 3 financial years and FPE 2019 is set out below: Revenue for Malaysia and Vietnam FYE 2016 FYE 2017 FYE 2018 FPE 2019 (RM'OOO) (RM'OOO) (RM'OOO) (RM'OOO) Retail channel sales Malaysia 141,864 151,320 160,059 115,981 Vietnam 15,950 17,317 19,716 18,668 Online sales Malaysia 1,414 2,163 2,868 1,848 Vietnam 594 1,087 1,807 1,653 Total 159,822 171,887 184,450 138,150 5.1.1 Business milestones Our key milestones are set out below: Year ------Event ------ 1984 • Our Promoter, Datin Mina together with her then partner acquired the right to establish and operate TBS retail stores in West Malaysia and Rampai-Niaga opened its first store under the trade name of The Body Shop® in KL, Malaysia. 1998 • The TBS franchise for West Malaysia was renewed with Feliz Natur, a company wholly-owned by Datin Mina and Dato' Simon with retrospective effect from 24 July 1995. 2002 • The TBS franchise for West Malaysia was transferred to Rampai-Niaga. 2009 • We were awarded the TBS franchise for Vietnam and opened our first point-of- sale under the trade name of The Body Shop® in HCMC, Vietnam. 2010 • We launched TBS's website in Malaysia. 2011 • We launched TBS's website in Vietnam. 91 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) Year ------Event 2012 • We commenced our e-commerce transactions for TBS in Malaysia. 2013 • We commenced our e-commerce transactions for TBS in Vietnam. 2015 • We were awarded the TBS franchise for Sabah and Labuan, and acquired the then eXisting TBS points-of-sale in Sabah from the previous franchise-holder. 2019 • We were awarded the TBS franchise for Cambodia and opened our first point of-sale under the trade name of The Body Shop® in Phnom Penh, Cambodia. • We have launched the Natura website for Malaysia in August 2019 and opened a pop-up-store in Sunway Pyramid in October 2019 to introduce and promote the Natura brand to the Malaysian market. We commenced our e commerce transactions in Malaysia for the Natura brand in September 2019. 5.1.2 Our values The culture of our Group embodied in every aspect of our business processes and operations is that business can be a force for good. We share the same belief as our TBS Franchisor, that as corporate citizens, we possess the power to make a difference. From the communities which we trade with, to the colleagues we work with, to customers we engage with; each one represents an opportunity to change, to inform, and to inspire through education. And through education, we aspire to progress greater equality of rights and opportunities. Creating shared value through sustainable practices and using our position to campaign for social and environmental change, has always been our guiding principle. Over and above our ability to build our business, we stay true to the values and belief we share with Dame Anita Roddick that business can be a force for good. We have always believed that our Group has an active role to play in our society, because through our points-of-sale and our social media, we are able to reach out to consumers to create awareness on social and environmental issues and to speak out and effect social and environmental change. Our campaigns consist of local campaigns initiated and organised by our Group and global campaigns. Key campaigns initiated over the years include the following: Locally initiated campaigns Year Campaign Malaysia 1994 and ongoing Annual Coastal Clean-up We have organised annual Beach Clean-Ups in Malaysia since 1994 as the official partner of the International Coastal Clean-Up, raising awareness on the need to keep beaches and marine life safe from pollution. 2006 - 2010 Save Belum Temengor Forest We campaigned for the protection of Belum Temengor forest with Malaysian Nature Society and obtained 80,000 signatures to present to the Perak state government, after which The Royal Belum state park was officially gazetted as a protected rainforest . 92 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) Year Campaign 2011-2012 Where's My Mama Wildlife Conservation We collaborated with TRAFFIC South East Asia to create awareness on the threats of illegal wildlife trade and raised funds for the patrolling of our Malaysian forests to deter poachers. 2013-2014 Cruelty-free We campaigned against cruelty to animals and obtained 60,000 signatures in a campaign with the Society for the Prevention of Cruelty to Animals to call for reform to the Animal Welfare Act 2015 which was successfully passed in the Malaysian Parliament in 2016. 2001 and ongoing Candles of Conscience Fund-raising We launched a range of candles which are sold to raise funds for a number of worthy causes. Over the years, we have partnered with several local non-governmental organisations, such as Women's Aid Organisation, Pink Triangle Foundation, Malaysian AIDS Foundation, Malaysian Nature Society and Sisters In Islam. 2008 and ongoing "Kick The Bag Habit" We have been practising this ongoing campaign in-store since we started in 2008. As a retailer, we eliminated the usage of plastic bags early on, and pioneered the movement to encourage customers to use their own bags as we started charging for our paper bags, the funds of which go towards supporting various environmental projects, such as the Endau Rompin Bio-Bridge project currently. 2014 and ongoing Be More Than Beautiful We conceptualised "Be More Than Beautiful" as a campaign to debunk the stereotype of beauty, in conjunction with International Women's Day, and have been running this campaign annually ever since to build awareness on the need for society to celebrate true role models. 2015 and ongoing Earth Day Plant Give-away We have been partnering with Free Tree Society in giving away free plants every Earth Day since 2015 to encourage Malaysians to adopt and plant trees for a greener environment even in urban townships. 2018 and ongoing End Child Marriage We have joined hands with Women's Aid Organisation, Sisters In Islam, and Association of Women's Lawyers to put an end to child marriage. Through our points-of-sale and social media, we raised awareness on the issue of child marriage in Malaysia and garnered close to 50,000 petitions from our customers and fans to call for the government to enact legislation for the minimum age of marriage of 18 years with no exceptions, regardless of gender, faith and ethnicity. 93 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Year Campaign 2019 #Only200tigersleft On 8 April 2019, together with Wildlife Conservation Society and Malaysian Conservation Alliance for Tigers, we started a "#only200tigersleft" petition in our TBS stores and online calling upon the Government to send 2,000 army personnel to patrol Peninsular Malaysia forests. We collected a total of 121 ,058 signatures and handed this over at the Parliament of Malaysia on 16 July 2019 to the Minister of Water, Land and Natural Resources. Vietnam 2013, 2014 and Brighten Up A Woman's Future 2018 In conjunction with International Women's Day, we collected pre-loved working clothes from our customers at TBS points-of-sale nationwide to donate to the women in need via partnership with Mekong Plus, a non governmental organisation supporting marginalised women and children in Mekong Delta. 2015 and ongoing Annual Coastal Clean Up In partnership with Ocean Conservancy, TBS Vietnam has been holding the annual beach clean up events since 2015, with participation from all TBS Vietnam employees and customers. Global campaigns Year Campaign Malaysia 1996 -1997 Against Animal Testing TBSI was one of the first cosmetics companies to not only ban animal testing, but also campaign globally for law reform on the inhumane practice of animal testing, ultimately leading to its ban in the European Union in 2013. 1998 - 2009 Prevention of HIV/AIDS We raised early awareness on safe sex for the prevention of HIV/AIDS, in collaboration with Pink Triangle Foundation, Malaysian AI DS Foundation and subsequently with MTV Asia. 2000 - 2008 Stop Violence Against Women TBSI was a pioneer globally, in the campaign to raise public consciousness on the issues of sexism, women's rights and self-esteem, violence against women and violence in the home. We also worked locally with Women's Aid Organisation to spread awareness, campaign for law reform, raise funds and provide assistance for victims of violence. 2009 - 2011 Stop Child Sex Trafficking TBSI called for governments around the world to ratify the United Nations convention on Human Trafficking, particularly for the protection of children from the sex trade. We participated and after securing 10,000 signatures, the Malaysian government committed to ratifying the Optional Protocol to the Convention on the Rights of the Child on the sale of children, child prostitution, and child pornography. 94 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Year Campaign 2017-2018 Forever Against Animal Testing TBSI are calling for all governments around the world to enforce the ban on animal testing, in a global campaign with Cruelty Free International. We collected 82,357 signatures in Malaysia, and together with the rest of the petitions from The Body Shop® stores around the world, TBSI presented over 8 million signatures to the United Nations, to end cosmetic testing on animals for good. 2016-2019 Bio-bridges Project In 2016, The Body Shop® embarked on a mission to build Bio-bridges, (restored and protected wildlife corridors in damaged or threatened areas) and protect endangered species. With the help of its customers, TBS has managed to support charities across continents, including in Vietnam, Malaysia, Indonesia, India, Nepal, Tanzania and Kyrgyzstan, contributing towards the building of over 75 million square metres of habitat. We are presently collaborating with Wildlife Conservation Society ("WCS") on a long-term project in Malaysia, to build Bio-bridges in Endau-Rompin, and allow our wildlife to roam freely again. Additionally, we have been funding WCS to conduct anti-poaching controls to protect the Malayan Tigers. Vietnam 2010 Stop Sex Trafficking of Children and Young People We donated the profits from our Soft Hands Kind Heart Hand Cream's sales to CEFACOM, a Vietnamese non-governmental organisation established in 2005 under the Vietnam Union of Science and Technology Associations (VUSTA), to support social activities for women and children. 2011-2012 Vote with Your Lips We donated the proceeds from our Dragonfruit Lip Butter's sales to The Body Shop® Foundation, the brand's global fund for corporate social responsibility ("CSR") activation and campaigns. 2016 Quang Binh Bio-bridge Project For every transaction during 3 months in 2016, TBS Vietnam donated OAGBP to the Bio-bridge project in Khe Nuoc Trong, Quang Binh, Vietnam - a 10-year wildlife conservation and restoration project led by World Land Trust and Viet Nature Conservation Centre. 2017 -2018 Forever Against Animal Testing Similar to our campaign in Malaysia, TBSI called for all governments around the world to enforce the ban on animal testing, in a global campaign with Cruelty Free International. After 14 months of campaigning, TBS Vietnam garnered 30,100 signatures. 95 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) 5.2 Awards The tables below set out various awards that we and our Promoter, Datin Mina have received over the recent decade in connection with our activities: (a) In recognition of our commitment towards social and environmental change, we have received the following awards to-date: Year Recipient Award 1 certification Awarding body 20081 • Rampai • Market with Best TBS Asia Pacific 2009 Niaga Integration of Values into Every Day Business 2009 • Datin Mina • Anugerah CSR Perdana Kementerian, Menteri - Empowerment of Pembangunan Wanita, Women Category, Winner Keluarga dan Masyarakat, Malaysia 2010 • Rampai • 70th Anniversary Award for Malaysian Nature Niaga Environmental Leadership Society 2014 • Rampai • Certificate of Appreciation Society for Prevention of Niaga for Active CSR Cruelty to Animals 2014 • Datin Mina • Heroes of Philanthrophy Forbes 2017 • Rampai • Wildlife Warriors Wildlife Warriors Niaga Campaign on Against Animal Testing 2018 • TBS Vietnam • Best Campaign of The Dep Magazine, Vietnam Year 2017 - Forever Against Animal Testing 2018 • Datin Mina • Malaysian AIDS Malaysian AIDS Foundation Tun Dr Siti Foundation Hasmah Award - Patron award's recipient (b) In addition to the above, our Group has also been consistently recognised for our standards in sales excellence as evidenced by the awards, accolades and accreditations which we have received to-date which include the following: Year Recipient Award 1 certification Awarding body 2008, • Rampai • Sales Excellence - highest The Curve Mall 2009, and Niaga sales per square foot in the 2011 retail category 2009 • Rampai • Window Display Outlet 2nd Sunway Pyramid Niaga Runner Up 2011 • Rampai • Moment of Truth - Mystery Malaysian Airports Niaga Shopper: Customer Berhad Service Award 96 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) Year Recipient Award I certification Awarding body 2011 • Rampai- • Head Franchise Winner TBS Asia Pacific Niaga Best Brand Attractor Window Event 2011 and • Rampai- • Out of the Box Award Malaysian Airports 2012 Niaga Berhad 2013 • Rampai- • Favourite Body Care and Brand Awards Niaga Skin Care - The Body Shop® 2013 • Rampai- • The Body Shop Asia TBS Asia Pacific Niaga Pacific Head Franchise Forum - Best Performing Pulse Store • Rampai- • Santa Awards for Best In- Niaga Store Execution 2014 • Rampai- • Retail Operations & Retail TBS Asia Pacific Niaga Academy Forum Strongest Leadership Development 2015/ • Rampai- • Outstanding Sales Sogo,KL 2016 Niaga Achievement Platinum Award 2016 • Rampai- • Touch Recognition Malaysian Airports Niaga (Customer Service) S6 Berhad KLiA • Touch Recognition (Customer Service) MTB KLiA 2016 • Rampai- • Best Christmas Execution TBS Asia Pacific Niaga 2016/ • Rampai- • Outstanding Sales Sogo,KL 2017 Niaga Achievement Platinum Award 2017 • Rampai- • Best Product Category Malaysian Airports Niaga (Sepang) Berhad • Best Customer Service (Sepang) 2017/ • Rampai- • Outstanding Sales Sogo, KL 2018 Niaga Achievement Diamond Award 97 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Year Recipient Award I certification Awarding body 2018 • Rampai • Top 10 Graduate's Choice HRINCAMPUS (Human Niaga Award resources platform to connect employers and graduates) (c) TBS products are well recognised through numerous product awards over the years from leading magazines in Malaysia and Vietnam. In the last 3 years these awards include: Year Award I certification Awarding body 2017 L'OFFICIEL de la Beaute Awards L'OFFICIEL Magazine, Vietnam • Best Body Scrub: SPA OF THE WORLD ™ Mediterranean Sea Salt Scrub (Reader's Choice) • Best Face Exfoliator: Drops of YouthTM Liquid Peel (Reader's Choice) • Best Hand Cream: British Rose Petal - Soft Hand Cream 2017 Reader's Choice Winner 8ep Magazine, Vietnam • Best Bodycare Product: THE BODY SHOP SPA OF THE WORLDTM French Grapeseed Scrub 2017 ELLE International Beauty Awards ELLE Magazine, Vietnam • International Beauty Awards Bodycare Category : THE BODY SHOP SPA OF THE WORLDTM Hawaiian Kukui Cream 2018 ELLE Beauty Awards 2018 ELLE Magazine, Vietnam • Experts' Choice Winner, Best Anti Acne Product: The Body Shop® Tea Tree Oil • Readers' Choice Winner, Best Bodycare Product: The Body Shop® British Rose Instant Glow Body Essence 2018 CLEO Skin Savers Special Award CLEO Magazine, Malaysia • Skin Defence Essence - Best All Rounded Essence • Japanese Matcha Mask - Best Superfood Infused mask • Chinese Ginseng & Rice Clarifying Powder Wash - Best Exfoliator Cleanser 98 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Year Award I certification Awarding body 2018 Her Beauty Awards Her World Magazine, Malaysia • Drops of YouthTM Liquid Peel - Exfoliating Peeling Scrub 2018 Female Beauty Awards Female Magazine, Malaysia • Tea Tree Green Tea Anti Imperfection Night Mask - Hydrating Category Sleeping Mask • Ginger Scalp Care Shampoo - For Dry, Damaged Hair Category: Scalp CarefTreatment 2018 Marie Claire Beauty Award Marie Claire Magazine, Malaysia • Roots of Strength ™ Moisturiser • Roots of Strength ™ Serum • Drops of Youth ™ Eye Mask 2018 Best Hair Scrub - Fuji Green Tea hair CLEO Magazine, Malaysia Scrub 2018 • Best Rinse off Mask - Expert British • Her World Magazine, Rose Plumping Mask Malaysia • Best Exfoliator/Peeling/Scrub - Drops • Women Weekly Of Youth ™ Liquid Peel Magazine, Malaysia • Jelita Magazine, Malaysia 2018 • Hydrating Category Sleeping Mask - Female Magazine, Malaysia Tea Tree Green Tea Anti-Imperfection Night Mask • Scalp CarelTreatment - Ginger Scalp Care Shampoo 2019 • Female Beauty Awards Female Magazine, Malaysia • Tea Tree Skin Clearing Body Wash for Body Wash category 5.3 Our business 5.3.1 Our business activities Our principal business activity is the retailing and distribution of the TBS brand of products in West Malaysia, Sabah and Labuan, Vietnam and Cambodia under the brand name, The Body Shop®. We are also expanding our brand portfolio by introducing the Natura beauty brand in Malaysia. Please see Sections 5.4.4, 5.15.4 and 13.5 of this Prospectus for further details of our collaboration with Natura Cosmeticos SA 99 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) 5.3.2 Our products TBS Products TBS products are 100% vegetarian and certified as "cruelty-free" by Cruelty Free International. It is entrenched in the company policy of TBSI that none of TBS products are tested on animals. This is in compliance with the Cruelty Free International Leaping Bunny Standard. This "cruelty-free" policy coupled with high product quality and continuing innovation to meet consumer trends has helped TBS brand garner a strong following among Malaysian consumers. According to the IMR Report, the preference towards natural products is growing and therefore, the demand for such products is increasing, as they are considered safer, of a better quality, environmentally friendly and more effective. TBS offers personal care products from head to toe, providing a variety of choices for both women and men. The types of products offered by us may be generally categorised as follows: (a) Skincare Skincare includes facial skincare such as facial cleansers, toners, moisturisers, serums, eye cream, lip care, face scrubs, masks, and other treatment products. New product innovations over the last few years include Drops of Youth™ serum and Expert Facial Masks. In addition, TBS's Tea Tree Oil range for blemished skin remains popular among younger customers, particularly in our Vietnam market. (b) Bodycare and Bath and Shower Bodycare includes body moisturisers, body scrubs, and hand and feet care products, as well as massage oils. Bath and Shower includes shower gels, soaps, and bath fizzers. TBS is well-known for its Bodycare and the Bath and Shower range. Our Body Butters are a perennial favourite of customers. Shea Body Butter, infused with hand-crafted shea butter from Ghana, is TBS's best-selling Body Butter. Apart from introduCing seasonal limited editions to inject newness into product line-up, TBSI also launches new innovations such as Body Yogurt, a light refreshing body moisturiser that is suitable for hot climates. In addition, the Spa of the World™ range allows our customers to create their own "Spa at Home" with a complete range of spa products such as the African Ximenia body scrub, the Japanese Camellia body cream and the French Lavender massage oil. (c) Fragrance Fragrance includes perfume oil, eau de parfum, eau de toilette, and fragrance mist. Our signature fragrance line, White Musk® is iconic as it is one of the first "cruelty-free" musk to be sold in the market. Other popular fragrance ranges include Japanese Cherry Blossom, Black Musk, and Kistna for men. 100 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (d) Make-up Make-up includes foundation, powder and concealers for the face, blushers, eye make-up such as eyeshadow, mascara, eye liners, brow liners, lip colours and make-up brushes. We provide a range of different shades and textures in our make-up offering to cater to customers with different skin tones and colour preference. It does not contain bug shell extract to colour the product and our make-up brushes are made using artificial hair. (e) Hair care Hair care includes shampoo, conditioner, hair scrub and hair serum. TBS's hair care range was revamped in 2017 to strengthen the positioning on ingredient efficacy led hair care. The best-seller Ginger shampoo is the number 1 hair care product for TBS in Malaysia. Other flavours include Banana for nourishment and Shea for very dry hair. (f) Men's personal grooming Men's personal grooming includes facial skincare, fragrances and deodorants. TBS also offers products that cater to men's facial and grooming needs as well as fragrance. Our bestselling fragrances for men are Kistna eau de toilette, and White Musk Sport eau de toilette for men. The men's skincare range was revamped in 2018, bringing forth new lead ingredients such as guarana, coffee, green tea, and lemon. (g) Gifts Gifts includes pre-packed gifts supplied by TBSI and gifts made to order. We are also a destination store for gifts, especially during the festive seasons. Our points-of-sale offer a large variety of gifts to attract customers to buy gifts for colleagues, friends and family. Our points-of-sale also offer a customised gift wrapping service for those who would like to select their own products to make up a gift. This service is popular for customers in Malaysia wishing to create personalised gifts according to certain colour themes, in particular as wedding gifts or as part of a wedding trousseau. (h) Other products Other product categories which we offer include hand and feet care products, facial and bath accessories and home fragrance. Natura Products As at the LPD, the type of Natura personal care products offered at the promotional pop-up store in Sunway Pyramid and on the Natura e-commerce website in Malaysia are such as skin care, hair care, bath and body, and fragrances, personal care product series for mothers and babies as well as men. All Natura products sold in Malaysia are 100% vegan. 101 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) The Natura brand is under Natura Cosmeticos SA, a global beauty company which also owns the The Body Shop® and Aesop brands of personal care products worldwide. Natura Cosmeticos SA is a public company with a market capitalisation of R$21.5 billion as at February 2019 (equivalent to RM21 .9 billion) on the Brazilian stock exchange ("B3"), in the Novo Mercado segment, which requires the highest standards in corporate governance. It is also one of only 8 Brazilian companies included in the Dow Jones Sustainability Index, given its social and environmental practices incorporated in its triple bottom line business model. The Natura brand was founded in 1969 in Brazil, and apart from being the country's leading beauty brand, it is also present in 6 LA T AM countries as well as USA and France. In 2018, net sales of Natura Cosmeticos S.A reached R$13.4 billion (approximately RM 13.6 billion), of which Natura represented 63%, achieving net sales of R$8.4 billion (approximately RM8.5 billion), through its' multichannel operations. Natura's proven success formula lies in its relationship-selling model, which aims to create value for both consumers and consultants. Natura develops personal care products which combines Brazil's unique biodiversity with science and innovation, according to Natura's philosophy of "bem estar bem" ("well being well") , which is a concept of the harmonious relationship of oneself with his/her body, with others, and with nature. In pursuit of its sustainable values, Natura works with suppliers to reduce the environmental impact of its products, such as increasing the use of recycled materials in product packaging, and to use sustainable production techniques which preserve the ecosystem of the Amazon forest. Over 80% of the product formulas are plant-based, and therefore, renewable. 5.3.3 Our customer groups Our business garners customers from all walks of life, and the majority of our customers are urban, young, and women. According to the IMR Report, in the CPC industry, the TBS brand is positioned at the "masstige" level, i.e. those products that differ positively from mass products as they provide value-added benefits to consumers, but are priced at a lower level compared to other prestige products. This value-for-money strategy, where we charge a mid range price for quality products, is a growth enabler for the business, vis-a-vis the increasing band of middle-income consumers in Malaysia, Vietnam and now in Cambodia. 102 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) 5.3.4 Our principal markets and distribution channels We generate an average of over 115,000 transactions and 12,000 transactions per month in Malaysia and Vietnam respectively based on the number of transactions recorded at our points-of-sale for the FYE 2018, via both online and retail channels. TBS products are distributed to the end customers in Malaysia and Vietnam through our retail channel and online channels. In Cambodia, TBS products are distributed to the end customers through our mall store in Phnom Penh which was opened in November 2019. The following table sets out the channels of distribution in Malaysia and Vietnam and their contribution to our total sales revenue in the respective franchise territories for the FYE 2018 and FPE 2019. No. of points-of Revenue Revenue sale contribution FYE contribution FPE Distribution channel (As at LPD) 2018 (%) 2019 (%) Malaysia (other than Sa rawak) Retail channel Mall stores 82 87.6 89.0 High street store 0.4 0.5 Stand-alone airport 3 6.4 4.6 stores Department stores 3 2.0 2.5 (Shop-in-shop) Total 89 96.4 96.6 Promotional kiosks 1.8 1.8 Online channel 1.8 1.6 Total 100.0 100.0 Vietnam Retail channel Mall stores 13 16.3 31.6 High street stores 12 51.7 43.9 Third-party airport retail 3 1.0 1.1 operators Department stores 6 22.6 15.2 (Shop-in-shop) Total 34 91.6 91.8 Online channel 8.4 8.2 Total 100.0 100.0 103 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) The following map depicts the locations of our points-of-sale in Malaysia, Vietnam and Cambodia as at the LPD: TBS points-of-sale in Malaysia polnts«-sale in Vi.etnam TBS point-of-sale in Cambodia 1 Notes: (1) Malaysia: in all states other than Sarawak and Perlis (2) Vietnam: in Hanoi, HCMC, Sinh Duong and Danang (3) Cambodia: in Phnom Penh 104 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) 5.3.4.1 Mall stores and high street stores (i) Malaysia In Malaysia, our main retail channel is through our mall stores. As at the LPD, our 82 mall stores are strategically located in shopping malls within urban areas throughout West Malaysia, Sabah and Labuan. We also operate 1 high street store in Sabah. This channel is highly effective as we distribute TBS products directly to and engage directly with our end customers. This allows us to control the manner in which TBS brand is presented and the products are sold which enables us to better manage our ability to meet our customers' preferences. We have managed to expand our points-of-sale openings over the years with the expansion of the retail industry in Malaysia. According to the IMR Report, shopping malls are preferred due to the high traffic and concentration of potential customers. Although saturated, the country's retail industry continues to flourish despite the onset of online retail, as the "malling" culture is popular among Malaysians, particularly due to the harsh tropical weather. Malaysian shoppers frequent shopping malls not only for shopping, but for "retail-tainment", a concept in which the shopping mall offers a place for consumers to be entertained, to dine, and to meet and spend time with others. Therefore, our mall stores are expected to continue to be a key contributor to our performance in future. All our mall stores and high street store in West Malaysia, Sa bah and Labuan are rented from the mall owners or operators on a rental and/or percentage turnover basis. (ii) Vietnam As at the LPD, 13 of our points-of-sale in Vietnam are mall stores and 12 of our points-of-sare are high street stores, which are leased. Due to the lack of modern retail space within shopping malis, we lease shoplots in prominent locations on high streets, i.e. main shopping streets in the urban districts of HCMC and HanoI. In addition to having high foot traffic, these high street locations also provide good branding exposure. According to the IMR Report, the retail culture in Vietnam is different from that of Malaysia. While in Malaysia the "malling" culture is prominent, in Vietnam the majority of consumers still prefer to shop in high street stores. This is due to the lack of development in shopping malls in Vietnam. Nevertheless, the rate of development of shopping malls in Vietnam has been accelerating over the last few years and will continue to do so in the near future. 105 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Business agency arrangement in Vietnam In Vietnam, we have established a business agency arrangement with one of our employees Ms. To Thanh Nga ("Ms. Nga") through her locally incorporated company, GC Vietnam, to accelerate the process of opening new points-of-sale. Ms Nga does not have any family relationship with our Promoters nor Substantial Shareholders of our Group. Under the business agency agreement, GC Vietnam acts only as an agent to TBS Vietnam pending the issuance of retail outlet licenses to TBS Vietnam. The issuance of retail outlet licenses to TBS Vietnam as a foreign owned enterprise has a longer processing timeframe of 3 months or more compared to local Vietnam companies due to the different licensing procedures applied to foreign owned enterprises. As such, pending the issuance of retail outlet licenses to TBS Vietnam, TBS Vietnam sells TBS products through GC Vietnam as its agent, at retail outlets licensed to GC Vietnam. Concurrently, TBS Vietnam proceeds with its own applications for the requisite retail outlet licenses. This expedites the distribution process and enables TBS Vietnam to make TBS products available earlier to its customers in Vietnam. Thereafter, upon TBS Vietnam being granted the respective retail outlet licence, the agency arrangement will cease for that particular outlet. The rental costs for the points-of-sale operated by GC Vietnam would be paid by GC Vietnam. GC Vietnam would receive commission from TBS Vietnam to cover the operating cost of the respective points-of-sale. The rental rates for the points-of-sale in Vietnam varies according to respective points-of-sale; (i) fixed; (ii) percentage of sales or (iii) fixed rate or percentage of sales, whichever is higher. We involve GC Vietnam in the opening of certain new points-of-sale in Vietnam as and when there is a need to expedite the store opening process. As at the LPD, there are 14 outlets included in our total points of-sale for Vietnam, for which GC Vietnam acts as our agent. For the FYE 2018, the revenue contribution of the outlets under this business agency arrangement was VND10.5 billion (approximately RM1.9 million) or approximately only 1.0% of our Group's total sales revenue. For the FPE 2019, the revenue contribution of the outlets operated by GC Vietnam was VND 22.9 billion (approximately RM4.0 million) or approximately only 3.0% of our Group's total sales revenue for the FPE 2019. As such the contracts under the business agency agreement are not materially dependent contracts for the Group. Our solicitors as to Vietnamese laws has opined that this business agency arrangement is legal and recognised under the Law on Commerce No. 36/2005/QH11 of Vietnam. Also, the prevailing laws do not prohibit the principal and the agent to execute the material contracts relating to the business agency agreement, as set out in Section 13.5(vi) and (vii) of this Prospectus to protect the legitimate rights of the principal. While changes in laws of Vietnam may be difficult to predict, the changes are likely to have a limited impact on the business agency arrangement given that the principal-agent model has been common in retail business in Vietnam, and in case of any changes, the new laws enacted from time to time tend to recognise the legal effect of the transactions entered prior to the effective dates of the new relevant laws. 106 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) Our solicitors as to Vietnamese laws have also opined that GC Vietnam is not considered a subsidiary of TBS Vietnam, based on the current ownership structure of GC Vietnam. Ms. Nga is the sole owner of GC Vietnam. (iii) Cambodia In Cambodia, we opened the first TBS point-of-sale in Aeon Mall Phnom Penh in November 2019. 5.3.4.2 Airport retail In the travel retail channel in Malaysia, we are present in the KLiA airport satellite building and klia2 airport main terminal building, as well as KKIA airport main terminal building. The travel retail channel contributed approximately 6.4% and 4.6% of our total sales revenue in Malaysia for the FYE 2018 and FPE 2019 respectively. In Vietnam, we sell TBS products through a third-party airport retail operator who retails our products in its counters within Tan Son Nhat airport in HCMC, Danang airport and Noi Bai airport in Hanoi. 5.3.4.3 Department store (UShop-in-shop") In the department store channel in Malaysia, we operate on a leased-space basis within the SOGO Department Store ("Sogo") in KL, Shah Alam and Johor Bahru. Our point-of-sale in Sogo KL alone contributed approximately 2.0% for the FYE 2018 and approximately 2.5% for the FPE 2019 to our total sales in West Malaysia, Sabah and Labuan. The TBS brand is conSistently ranked as a leading brand in Sogo in terms of sales, and has won Sogo's annual award for Outstanding Sales Achievement consecutively from 2015 to 2018. This is testament to the popularity and performance of the TBS brand, in a highly competitive trading space such as Sogo. In Vietnam, we are presently located in major department stores including Diamond, Parkson, Lotte and Robins. There are 6 of these points-of-sale as at the LPD. These points-of-sale together contributed approximately 22 .6% for the FYE 2018 and 15.2% for the FPE 2019 to our sales revenue in Vietnam. 5.3.4.4 Promotional kiosks We operate short term promotional kiosks which usually occupy smaller retail areas than our full-fledged stores and do not carry the full range of TBS products. The tenure of tenancy for our kiosks is not more than a year compared to the tenure for our full-fledged stores which range between 1 to 3 years. These promotional kiosks contribute approximately 1.8% and 1.8% to our total sales revenue in Malaysia in FPE 2018 and FPE 2019 respectively. 5.3.4.5 Online In the online channel, we distribute TBS products via TBS's websites at www.thebodyshop.com.my and www.thebodyshop.com.vn, as well as through third-party online marketplaces such as Hermo in Malaysia, Tiki in Vietnam, and Lazada in both markets. Breakdown of the revenue contribution from our online channel are as follows: 107 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) Onl ine sales for the FYE 2018 Type of online channel Malaysia Vietnam Total RM'OOO % RM'OOO % RM'OOO % T8S website 2,580 90.0 1,315 72.8 3,895 83 .3 Third-party marketplaces 288 10.0 492 27.2 780 16.7 -- Total 2,868 100.0 1,807 100.0 4,675 100.0 Online sales for the FPE 2019 Type of online channel Malaysia Vietnam Total RM'OOO % RM'OOO % RM'OOO % T8S website 1,663 90.0 1,141 69.0 2,804 80.1 Third-party marketplaces 185 10.0 512 31 .0 697 19.9 -- Total 1,848 100.0 1,653 100.0 3,501 100.0 The majority of our online sales contribution is from TBS's websites in Malaysia and Vietnam which contributed 83.3% for the FYE 2018 and 80.1 % for the FPE 2019 to our total online sales. According to the IMR Report, as at 2018, in Malaysia, we are a leading mono-brand beauty retailer in Malaysia with a market share of 19.6% within this segment. The geographic distribution of customers and lack of modern retail development in Vietnam also result in online stores playing a more instrumental role in market penetration for our business. The rise of e commerce in Vietnam is further supported by mobile phone penetration and internet penetration, according to the IMR Report. Thus, in the FYE 2018 and FPE 2019 respectively, online sales in Vietnam accounted for approximately 8.4% and 8.2% of our total revenue in Vietnam, whilst in Malaysia, it contributed approximately 1.8% and 1.6 % to our revenue for the FYE 2018 and FPE 2019 respectively in Malaysia. Nevertheless, as with most developing and developed markets, the online channel is forecasted to generate an increased share of revenue in both Malaysia and Vietnam in the future. According to the IMR Report, in Malaysia, the online channel recorded a higher growth rate compared to the offline retail channel, between 2013 and 2018, and the online retailing landscape continues to grow healthily in Malaysia; and in Vietnam, the online channel is growing fast, as it provides ease of purchase for consumers that are located outside of major urban centers, and far from main cities, where the key shopping areas are located. The online channel therefore provides a valuable avenue for retailers to reach the consumers in rural and sub-urban areas, reducing the need to establish a physical presence in a large market such as the Vietnamese market. 5.3.5 Our competitive advantages and key strengths (i) We are a leading mono-brand beauty retailer in Malaysia We possess over 35 years of experience in retailing and developing the TBS brand in Malaysia, starting with a single store in 1984. Over time, we have become a leading mono-brand beauty retailer in Malaysia with a market share of 11.0% based on total market sales of RM1.48 billion as at 2018. Among the brands, we are also the largest in Malaysia by geographical coverage, with 89 points-of-sale. (Source: IMR Report) 108 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) In addition, we were one of the first mono-brand beauty retailers to establish an online store in the Malaysian market in 2012, and as at 2018, we are a leading mono-brand beauty with a market share of 19.6% in terms of online sales by mono-brand beauty retailers. (Source: IMR Report) (ii) We have a strong track record and an established long-term work relationship with TBSI Our Group and the Promoter have been the exclusive franchise holder for the TBS brand in West Malaysia for more than 30 years, since the commencement of our business operations in 1984. We have set high standards in retail excellence in Malaysia and this is evidenced by the numerous awards and accolades we have garnered over the years, as set out in Section 5.2 of this Prospectus. Our strong track record and work relationship are evidenced by repeated renewals of our Franchise Agreements with our Franchisor. Over the years, Rampai-Niaga has entered into 4 franchise agreements with TBSI in 2002, 2007, 2015 and 2019. Additional franchises were also awarded to us by our Franchisor - first, in Vietnam in 2009, subsequently renewed in 2019, in Sabah and Labuan in 2015 and in Cambodia in June 2019. The current Franchise Agreements granted to our Group are valid for a period of 10 years with an option to renew for a further term of 5 years. (iii) The TBS brand is globally recognised and known for its sustainably sourced high quality products Our TBS franchise carries with it an international brand reputation and a connotation of quality which gives customers assurance of the high standard of TBS product offerings. TBSI's research and development teams are dedicated to creating high quality products. The production methods of TBS products are guided by the Cosmetics Good Manufacturing Practice (IS022716) and The Body Shop Contract Manufacturing Quality Charter ("Quality Charter") which sets out strict procedures and guidelines from sourcing of raw materials to the control testing of raw materials, components and finished products. This gives TBSI control and visibility into the quality of TBS products during the sourcing and production cycle. The finished product including packaging must meet adequate quality control, and performance tests before it can be marketed. In addition, through its Community Trade programme, TBSI is able to source traceable quality ingredients and gift and accessory products from its suppliers in more than 20 countries which directly benefits thousands of people in marginalised communities around the world. In line with TBSl's Forever Against Animal Testing Campaign, TBS products are not tested on animals. As such, even though all TBS products undergo extensive testing to ensure they are safe and effective, all testing carried out is still Cruelty-free. We believe that as a result of these attributes, the TBS brand has become an ethical icon with strong customer recognition and loyalty globally and a brand that customers associate with quality and high standards. This brand recognition, in turn, enables us to differentiate ourselves from our competitors and attract more customers. 109 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (iv) Our ethical stance resonates with the growing socially conscious consumer base Upholding the ethical values that we share with our Franchisor that business can be a force for good, is essential to how we operate. Through this approach, we seek to create and maximise shared values for our stakeholders, be it our customers, shareholders, employees and our society as a whole, in the long term . We believe that our social and environmental commitments such as our campaigns against animal testing, and for the empowerment of women, resonate with the growing socially conscious consumer base. See Section 5.1 .2 of this Prospectus for further details of values and our campaigns and Section 5.2(a) for further details of our awards. Our public campaigns are intrinsic to the influence we have on customers who try to make ethical purchase decisions. This helps to build trust and positive customer affinity too. (v) We are well-positioned to leverage on the growth of naturals sector of the beauty industry According to the IMR Report, naturals is a key trend going forward in the industry and a growing segment of the market as consumers are looking for skincare solutions that do not harm their skin or the environment. Consumers with a preference for traditional remedies prefer products with high natural ingredient content or vegetarian-friendly products. The benefits include the lower risk of side effects, lower toxicity, and overall healthier and safer products. The growth of naturally-based products in the market indicates the growing demand for these products. A growing number of Vietnamese consumers are opting for natural CPC products, in particular due to the recent scandals about counterfeit products and harmful ingredients. The preference towards natural products is growing, as they are considered, safer, of a better quality, environmentally friendly and more effective. With rising disposable income, consumers are willing to pay more for better quality products. (Source: IMR Report) Based on the above trends, we believe that these consumers could prefer our 100% vegetarian TBS products as vegetarian products are often associated with natural contents which are deemed safer and of better quality. Our Franchisor, TBSI, is one of the leaders in the naturals sector of the beauty industry. This augurs well for our continued growth and development, as our Franchisor continues to ensure that all TBS products are 100% vegetarian, whilst investing substantial research and development to take TBS products a step further by innovating 100% vegan products. (vi) We are well-positioned in the "masstige" market Our value-far-money approach and "masstige" positioning i.e. between mass and prestige, in terms of pricing and brand perception, will continue to be the driver of growth in the markets in which we operate, where the overall disposable income of the population in Malaysia, Vietnam and Cambodia is forecasted to grow at a CAGR of 7.2% for the period between 2018 and 2023, according to the IMR Report. 110 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) According to the IMR Report, the growth in disposable income is contributing to a higher discretionary buying power for the middle-income class in ASEAN countries. The percentage of people with income of USD5,000 (approximately RM20,465) and above is expected to increase across ASEAN countries during the period between 2018 and 2023. In line with growing disposable income and the growth of the middle-income class, the total consumer expenditure in major ASEAN countries has increased continuously from 2013 to 2018, and it is forecasted to continue on the same trend until 2023. (vii) We have a strong base of loyal customers who we can directly access Due to the appeal of our "masstige" pricing, we have garnered a strong customer base of members in Malaysia and Vietnam. In Malaysia, our Love Your BodyTM members contributed approximately 71.0% and 63.6% of our annual sales for the FYE 2018 and FPE 2019 respectively. Our Love Your BodyTM members in Vietnam contributed approximately 66.4% and 64.7% of our annual sales in Vietnam for the FYE 2018 and FPE 2019 respectively. As at the LPD, our customer loyalty programme, Love Your BodyTM has 298,999 active members in Malaysia and 43,352 in Vietnam. In Cambodia, we have 875 members on our Love Your BodyTM programme. Our Love Your BodyTM programme ensures sustainability of the business going forward and provides further growth opportunities to increase the average spending and frequency of visit of each member. Our customer base is also wide in terms of demographics, thereby our growth is not limited to only certain sections of society. Related to the above factor, is that we operate direct channels to our customers, and this direct reach eliminates reliance on third-party distributors. By selling through our own points-of-sale, we have more flexibility and better control over the marketing, retailing and distribution of TBS products. We will continue to strengthen our customer base through our Omnichannel strategy. Please refer to Section 5.4 of this Prospectus for further details of our future plans and strategies. (viii) TBS is one of the leading beauty brands on Facebook in Malaysia and Vietnam We are a leading mono-brand beauty retailer on Facebook in Malaysia, and among the top 3 in Vietnam, as at the LPD in terms of fan base on the local Facebook page, according to the IMR Report. Facebook is a social media platform with a large number of users in the focus countries of the report, the number of likes on FB page are observed as a quantifiable and publicly verifiable measure to represent the fan base on social media. As such, it can provide a quantifiable measure as reference in terms of market acknowledgement of the TBS brand. Based on the IMR Report, as at January 2019, FB is the most active social networking platform in Malaysia and Vietnam with a penetration of approximately 91 % and 95% of internet users respectively, according to the report "Digital Malaysia 2019" and "Digital Vietnam 2019" by We are Social and Hootsuite. The 2nd and 3rd most active social networking platforms with the highest penetration rate among internet users are: Instagram (Malaysia:70%, Vietnam:51%) and Twitter (Malaysia:44%, Vietnam:37%). Social networking excludes video-sharing platforms such as YouTube and social messenger platforms such as WhatsApp, FB Messenger, WeChat and Zalo (Vietnam) . 111 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) According to the IMR Report, we have more than 475,000 likes and 698,000 likes on Facebook in Malaysia and Vietnam respectively as at the LPD. This is evidence of our popularity among our target market of consumers in both markets and allows us to communicate with our fans in an interactive manner on a wide scale of topics, from marketing promotions to activities to our values and campaigns. In addition to Facebook, we also utilise other social media platforms such as Instagram and YouTube in Malaysia and Vietnam. (ix) We have an experienced management team who has developed a strong base of resources and competencies in retail management Our knowledgeable and experienced management team has been the main drivers to our Company's success over the years. Our CEO, COO and CRO have been with us for more than 20 years. Over the years, we have developed a strong base of resources and competencies in retail management: • Sales management - we have a strong focus on constant key performance index monitoring, such as Same Stores Sales Growth and conversion of browsers into buyers, which are tied in with incentive based remuneration and rewards. We combine these holistically with various training and motivational programmes. • Location selection - we have built long-term relationships with our landlords and our experience in negotiating retail space is a key competency. Our points-of-sale are in prime locations in major shopping malls, such as Suria KLCC and Midvalley Megamall in Malaysia and Aeon Mall Phnom Penh in Cambodia, and in high street locations such as Mac Thi Buoi in the centre of District 1, HCMC in Vietnam. These locations not only create awareness and brand exposure, they are crucial in attracting the traffic needed to generate the sales volume for our business. • Inventory management - in a volume business such as ours, productivity is crucial to ensure profitability. Therefore, our key competencies in inventory management are in ensuring optimal inventory levels via efficient systems and processes, as well as managing a smooth supply chain and timely delivery logistics. • Retail marketing - we have a strategic event plan which is rolled out throughout the year, timed according to the seasonalities of the market such as Chinese New Year, Hari Raya, Christmas and Tet (Vietnam New Year) promotions. We use our points-of-sale as a marketing vehicle, to create the in-store ambiance and promotions, driving successful new product launches and seasonal themes. • Retail operations - we enforce standard operating procedures according to international standards as required by TBSI, such as the standards of training, and staff management and ensure management of smooth operations across the chain. • Visual merchandising - the mantra of "Retail is detail" is a principle we uphold in maintaining the highest standards of visual merchandising in our points-of-sale - it is crucial to attracting customer traffic into our points-of-sale, and assisting self-service, as well as ensuring proportionality to sales, vis-a-vis productive inventory management. 112 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) 5.4 Our future plans and strategies Our main focus is to continue to grow our revenue and strengthen our leadership in the mono brand beauty industry as well as the "naturals" beauty market. This will be achieved through the following strategies in each of the various markets which we operate as set out below. The source of funds and timeframe for each strategy are set out in Section 2.8 of this Prospectus. 5.4.1 TBS in Malaysia - Drive TBS Same Store Sales Growth through an Omnichannel strategy As the TBS store network presence is considered well-penetrated with 89 points-of sale in West Malaysia, Sabah and Labuan, our plan is to drive Same Store Sales Growth and transactions by increasing the frequency and lifetime value of our eXisting customers, as well as recruiting new customers. In line with this, we plan to implement an Omnichannel strategy to increase both online and web-influenced retail channel sales. Our loyalty data research for the period between November 2018 and October 2019, showed that our multichannel customers spent 91 .6% more than our single channel customers. Based on this, we plan to enrich our customers' Omnichannel experience with the TBS brand in order to increase the growth in spend per customer. Therefore, we plan to improve our IT network and capabilities including upgrading the servers and hardware, building real-time infrastructure and deploying the latest retail technologies as well as improving our ERP System and e-commerce platform. An example of the Omnichannel capabilities enabled by these IT improvements is a "click & collect" feature on our website which will allow online shoppers to purchase items for pick-up at their preferred local points-of-sale. Another enhanced feature would be to allow our loyalty members to earn points for referrals (member get member) and reviews of our products through the TBS mobile application. In conjunction with this, our digital marketing initiatives will be focused on driving both our online and web-influenced retail channel customer traffic. We also intend to invest in big data management by building our in-house capabilities for data analytics for our CRM management programmes. At the same time, we will invest in smart inventory management technologies coupled with a forecasting system which will allow us to improve accuracy of supply to demand, availability and turnover of stock. We commenced all these IT developments in 2019, with the aim for full completion by 2022. Whilst we focus on the Same Store Sales Growth of our existing points-of-sale in West Malaysia, Sabah and Labuan, we also need to keep up with shopper traffic movement and the continued urbanisation of the country. Thus, we are constantly evaluating new locations in Klang Valley and other major cities as opportunities present for the potential to improve our reach. In the course of our business, we also closely monitor the performance of our existing points-of-sale including opening new points-of-sale or closing under-performing poi nts-of-sal e when required, to ensure optimal performance. Further, we believe that customer shopping experience is one of the key drivers of store traffic and customer loyalty. We target to carry out upgrading and renovation works on 5 to 6 of our existing points-of-sale each year to continuously refresh the appearance and ambience of our stores. 113 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) 5.4.2 TBS in Vietnam - Achieve growth through the expansion of our TBS retail store network and continue to build TBS brand awareness For the Vietnam market, we aim to continue to build brand awareness and achieve greater market penetration through new openings of points-of-sale in the major cities. According to the IIVIR Report, the outlook for the CPC market in Vietnam is positive, with total sales forecasted to grow at a CAGR of 11.6% in the period of 2018 to 2023. The growth of the economy is contributing to the growth of the disposable income and the emergence of the middle-income class. The number of shopping malls in Vietnam is also expected to grow to cater to the changing preferences by Vietnamese consumers, who are increasingly attracted by shopping malls not only as a destination for shopping, but also for entertainment and to socialise. Therefore, we plan to continue the expansion in the key cities of HCMC and Hanoi in 2020, and extend the expansion to other provinces thereafter. We plan to open a minimum of 6 stores per year from 2020 to 2022, depending on the availability of suitable locations. We will ensure that we build up the capacity and competencies of our human resource to cope with our future growth objectives. At the same time, to increase productivity of our existing stores, we are constantly working to improve our in-store standards. Towards this end, we intend to invest in staff training and development to improve our staff performance in terms of product knowledge, selling skills and customer service. With the growth of internet users in Vietnam, we will continue to invest in targeted online advertising to boost TBS brand visibility and improve search engine optimisation to drive traffic to TBS's websites to ensure TBS brand is actively present on social media. In addition, through aggressive activity on social media and digital marketing including user generated content and social influencers, we aim to drive recruitment of new customers, in particular millennial customers, to our stores. As part of our plan to open up more points-of-sale in Vietnam, we plan to further augment our current IT infrastructure in order to support this expansion plan. This includes the installation of digital screens across our top performing stores. We will also be implementing an Omnichannel infrastructure in all our points-of-sale in Vietnam through the integration of the mobile application with our e-commerce platform and the ERP System as well as the business intelligence analytics system. To cater for the increased demand, we intend to expand our current warehousing and logistic facility. We will procure the services of an experienced supply chain and logistic solution provider to support this expansion. We also intend to constantly upgrade our existing stores in Vietnam with a targeted number of 2 store renovations per year. This ensures that our customers' shopping experience in Vietnam is continuously enhanced. 114 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) 5.4.3 TBS in Cambodia - Deliver new growth to the Group through the expansion of TBS in the market According to the IMR Report, Cambodia is a country that is undergoing economic and business landscape reforms with only a few large international mono-brand beauty retailers present in Cambodia in 2018. This presents a favourable opportunity for first mover CPC players to build loyalty with the younger population, who has a growing disposable income, a more consumerist attitude, and a greater attention to the lifestyle. Based on the above, we believe that Cambodia is a promising marketplace poised to deliver new growth for the expansion of the TBS brand. We are confident that with our track record in Malaysia and experience in developing the Vietnam market, we will be able to achieve the successful expansion of TBS brand in this new market. We opened our first point-of-sale in Phnom Penh in November 2019. By end 2021, we plan to open up to 5 more points-of-sale in Cambodia, subject to the availability of locations that will suit The Body Shop® brand positioning and are situated in areas where there is a market for TBS products and the relevant licences and approvals being obtained such as approvals from the Ministry of Commerce and lViinistry of Health, Cambodia related to the opening up points-of-sale and relevant tax registration. We will develop the retail business by first establishing retail operations standards, training and inculcating a culture of service and salesmanship. As with Vietnam, it is our aim to develop a local management team with strong retail operations expertise. We will establish systems and structure similar to that of our existing business adapted to the Cambodian market. In terms of marketing, the brand will be introduced and promoted to Cambodian consumers via an integrated strategy of digital marketing, in-store and out-of-store marketing. We have also launched TBS's website in Cambodia in November 2019 and plan to commence e-commerce transactions by the first half of 2020. 5.4.4 Expand brand portfolio of our Group by developing a new business with the Natura brand in Malaysia We aim to further strengthen our leadership of the naturals sector, and at the same time, expand our share of this segment, by developing the Natura beauty brand in Malaysia. This new business portfolio will be complementary to our current business, and we have already obtained the approval from TBSI to develop the Natura brand in Malaysia. In collaboration with the Natura Cosmeticos SA management team, we have finalised a business plan and have entered into the Natura MOU and the Natura Supply Agreement on which our new business venture for Natura is based on . See Section 5.3.2 of this Prospectus for further details of the Natura brand and products and Sections 5.15.4 and 13.5 of this Prospectus for further details of the Natura MOU and the Natura Supply Agreement. We have launched the Natura e-commerce website in August 2019 and opened a pop-up store in Sunway Pyramid in October 2019 to introduce and promote the brand to the Malaysian market. We will grow the new brand through an Omnichannel approach, focusing on the online channel of social commerce. According to the IMR Report, social network penetration in ASEAN is one of the highest in the world, and together with the fast pace of digital evolution in Malaysia, we believe that the development of the social commerce channel presents a high growth opportunity. The choice of this distribution channel will also be a key differentiating factor for the new brand. 115 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) To capture this opportunity, we will be developing a commercial model to harness the entrepreneurial aspirations of individuals within a social network. This commercial model will be focused on developing the business through social selling. Individuals can leverage on their own social network to promote and sell our products to their network of friends or family or followers, and earn an income. This will be enabled by Natura's robust proprietary digital platform which includes a C2C mobile application and a B2C e-commerce website for online retailing to end consumers as well. This mobile application enables individuals who sign up as our consultants (distributors of the Natura products) to customise content and promote the Natura products to their customers who are their contacts on their social network. The online channel will be complemented by strategically-located physical stores for showrooming and raising awareness through customer experience, enabling consumers to access the brand through different interfaces. We have also identified and are finalising the locations for the Natura points-of-sale. We believe that our digital capabilities garnered from being a first-mover in the online beauty industry coupled with our experience in the naturals sector will be the key driving factors in the growth of our new business in Malaysia. 5.5 Operational process 5.5.1 TBS products (i) Points-ot-sale The following diagram summarises our operation process involving product procurement, replenishment and supply process for our points-of sale: Product order + Delivery of products to warehouse + Generation of auto- reolenishment list .t Packing of orders ~ Delivery of products to stores Product orders We submit our product orders to our Franchisor and supplier, TBSI , on a monthly basis. The products will be invoiced in GBP and shipped from TBS DCs in UK and Singapore to Port Klang, Malaysia, HCMC, Vietnam , and Phnom Penh, Cambodia respectively, All products shipped from TBS DCs in the UK and Singapore are of the same standards as well as range and categories, according to the respective orders from the points-of sale in Malaysia, Vietnam and Cambodia. 116 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Shipment of products from both DCs to our warehouse in Malaysia, Vietnam and Cambodia are based on TBSl's supply chain schedule. Products shipped from TBS DC in UK generally takes approximately 1.5 months to arrive whilst products shipped from TBS DC in Singapore will take approximately 2 weeks. The location from which the products are shipped is at the discretion of TBSI depending on stock availability in the respective DCs. Delivery of products to warehouse Once the products arrive and are cleared by the customs department, the products will be delivered to a warehouse which we lease from a third-party logistics company. We outsource our logistics functions to a third-party logistics company. We also lease the warehouse from them and they manage our DC operations and ensure our shipments are checked, processed, labelled and stored once they are delivered into the DC after customs clearance. Storage in our DCs in Malaysia, Vietnam and Cambodia are segregated to a pallet storage area or a cold room. Products which are sensitive to temperature are stored in the cold room and the rest of the products are stored in the pallet storage area. Generation of auto-replenishment list Our replenishment process of products is automated. Once the sales order from each point-of-sale are extracted at a pre-determined cut-off time, our ERP System would generate a packing list for each point-of-sale that contains information on product SKUs and quantities ordered to enable order processing at the warehouse. Packing of orders Once the warehouse receives the packing list for each point-of-sale, the orders will be packed and sealed for delivery to our points-of-sale. A delivery order will then be generated by the relevant personnel in the warehouse and they will process and arrange for third-party transporters to deliver the products according to the region where our points-of-sale are located. Delivery of products to points-of-sale Upon receipt of the products at our points-of-sale, the store manager conducts a physical check of the stocks ordered to ensure that the order is complete and that the products arrive in marketable condition. The store manager confirms receipt of the stock and sometimes issues a variance note if the products are found to be damaged upon arrival at points-of-sale, or if there is a discrepancy in any order in terms of type or quantity of products ordered. Thereafter, the store manager proceeds to update the store inventory via electronic point-of-sale system . As for our airport retail channel in Vietnam, we sell TBS products to the airport retail operators who will place a monthly purchase order with TBS Vietnam to replenish stocks. A packing list, delivery order and invoice are issued once stock availability is confirmed. Thereafter, the DC in Vietnam proceeds to pack the order in accordance with the packing list and deliver the stocks with the delivery order and invoice to the respective airport retail operators. (ii) Online Stocks allocated for our online operations are placed in a separate room in the DC in Malaysia and Vietnam, as the case may be, and managed and operated by our local third-party logistics providers. 117 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) All orders from TBS's websites in Malaysia and Vietnam, and online marketplaces that operate on drop-shipping model are captured in our ERP System. Orders from TBS's websites and these online platforms are processed daily, picked and packed into delivery boxes and labelled with the right courier dockets and addresses to be sent out to our customers. Conversely, orders from an online marketplace in Malaysia which purchases TBS products outright from us, are placed by way of a purchase order to us directly as and when they need stock replenishment. Once the orders are entered into our ERP System, our local third-party logistics providers process, pick and deliver the products with the invoice to the deSignated warehouse of the online marketplace in Malaysia. The online retailing of TBS products in Vietnam via online marketplace is based on a consignment arrangement. Once their orders are sent to us, we will deliver the stocks to the designated warehouses of the marketplace. We issue invoices directly to the customers within 7 days from the date of orders of customers. To facilitate returns and order placement from the marketplace, stocks are reviewed periodically. In the event of discrepancy in terms of quantities ordered or returned products, the variances are invoiced to the marketplace after we perform our periodic stock take. 5.5.2 Natura products As at the LPD, we have yet to set up a point-of-sale for the Natura brand products and have so far opened a pop-up store in Sunway Pyramid and launched the Natura website to introduce and promote the brand in Malaysia. The operational processes for the Natura brand products both for the pop-up store and the online channel via the Natura website in Malaysia, is similar to the process for the TBS brand products at this point in time. Product orders are submitted directly to Industria Natura on monthly basis and the products will be invoiced in USD and shipped to Port Klang, Malaysia from Port Santos, Brazil taking approximately 2 months to arrive. Please see Section 2.8 of this Prospectus for further details of the IPO proceeds which we intend to use among others, to set up new IT infrastructure and expand warehousing and logistics facilities (via outsourcing) for our new Natura business in Malaysia. Our future plans and strategies in relation to the Natura business are also set out in Section 5.4.4 of this Prospectus. 5.6 Technologies We use various IT systems to conduct our business and assist us in, among others, managing inventories, sales orders, online sales, supply chain and financial reporting. Our ERP System, which includes the EPOS system is integrated with the online system, business intelligence system and accounting software. This system integrates processes such as purchasing, inventory, product management, retail management and operations, sales, marketing, logistics, warehouse management, finance and human resources that support our retail and online sales channels. 5.7 Cash management We practise a standardised and strict cash and credit card transaction management policy emphasizing on security, accountability and accurate reconciliation of payment received at our points-of-sale as well as from sales through our online platform including third-party online marketplaces. As at the LPD, the percentage contribution of cash sales and credit or debit card sales for the Malaysia, Vietnam and Cambodia markets are 48:52, 58:42, and 72:28 respectively. 118 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) The control measures under our cash and credit card transaction management policy stipulate a multi-layered check and balance process in the handling of cash and the reconciliation of credit card transactions at all levels of our operations. The responsibilities of staff authorised to receive, reconcile and deposit cash are specifically outlined with the required cross-checks and stipulated timelines for daily reconciliation of cash deposits. An investigative measure is also set for the event of any detection of variances by enquiring with the responsible point-of-sale manager and area manager. Our finance team is tasked with responsibilities to perform manual reconciliation checks and highlight variances, if any, on a weekly basis for payments received from online sales through TBS's websites as well as third-party online marketplaces, and the Natura website. 5.8 Security and loss prevention We are susceptible to pilferage, shoplifting, theft and robbery at all our points-of-sale. We conduct our monthly management meetings with our shop managers and area managers, during which, we review loss prevention reports on different aspects of the retail operations. These include among others, stock take results, sales monies banking-in dates, membership exceptional transactions and cancelled bills. If there are any queries or anomalies ariSing from the loss prevention reports, our management would request our shop managers and area managers to provide the explanations on the queries or anomalies. To further mitigate risks against pilferage, shoplifting, theft and robbery, we have in place insurance policies to cover inventories in our DC and points-ot-sale, money in transit, money in premises, burglary and fidelity. We are presently also embarking on a review exercise on our closed-circuit television security system for our Malaysia and Vietnam TBS points-ot-sale network. In addition, we hire security guards to sateguard our TBS high street stand-alone retail stores in Vietnam. From time to time, we carry out random stocktake at our points-of-sale to ensure our inventories are monitored closely and to prevent theft by employees and shoplifting incidents. Penalties are also imposed on staff in the event the stocktake outcome shows a shortfall between the actual number of stocks in our points-of-sale and the records in our system. As for inventories in the warehouse, our third-party logistics provider in Malaysia has provided us with an undertaking to indemnify us for any discrepancy of stocks with a variance above 0.5%. For the past 3 financial years and FPE 2019, there has not been any material incidents of pilferage, shoplifting, theft and robbery at our points-of-sale. 5.9 Insurance We purchase insurance policies for our inventories in DC and points-of-sale, money in transit, money in premises, burglary and fidelity. Please refer to Section 7 of this Prospectus which sets out a discussion of the risk factors which we are susceptible to. We believe that our current insurance coverage undertaken is adequate for our business needs and current level of operations. We conduct reviews of our insurance coverage from time to time. 5.10 Marketing and promotion activities Over the years, we have developed our expertise in retail marketing, which is a key competency in attracting shopper traffic into our points-of-sale and converting browsers into buyers. We leverage on the prime locations of our stores in major shopping malls or high streets as marketing vehicles, in almost the same way as advertising billboards on busy high streets. Therefore, we place great emphasis on ensuring brand visibility through these stores. It follows then, that in order to engage the customers who step into our stores, we need to bring the brand to life in-store. 119 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) We do this by developing a comprehensive event plan throughout the year to drive new product launches, reinforce bestseller products and to celebrate seasonal themes timed according to the seasonalities of the market. The event plan is a holistic plan involving, among others, visual merchandising, promotions, training, social media, public relations and customer loyalty programmes. In executing this event plan in our stores, we change the look of our TBS stores almost every month, in terms of the visual displays and promotional materials, and even the uniform of our staff and the music played in-store. Over and above our in-store marketing strategies, we also actively deploy external marketing activities to reach our targeted audience, through road shows to schools, colleges and other companies, collaborations with our landlords and other organisations such as corporate partnerships and sponsorships, and sampling. Some of our core marketing activities are as set out below. 5.10.1 Customer loyalty programme forTBS We actively recruit customers in-store to join our customer loyalty programme called the Love Your BodyTM programme. As at the LPD, a customer is eligible to become a TBS Love Your BodyTM member with a minimum purchase of RM100 in Malaysia, VND1.0 million (RM177) in Vietnam, and KHR200,000 (RM201) respectively. They enjoy member's privileges such as points collection to redeem product vouchers, birthday discounts and exclusive offers in-store all-year round. Membership is valid for 1 year from the date of joining and renewable with a minimum purchase of RM300, VND2 .0 million (RM353) or KHR400,000 (RM401) in a year. The qualifying value and mechanics of the programme are devised so that members are rewarded and therefore, incentivised to increase their purchases. As at the LPD, the average transaction value of members is 17.8%, 20.3%, and 66.3% higher than the average transaction value of all customers in Malaysia, Vietnam, and Cambodia respectively. When we started the programme more than a decade ago in Malaysia, we employed the MyKad technology in-store, to eliminate the use of plastic membership cards, therefore also benefiting customers who do not wish to carry another card in their wallet. Our CRM programme is customised and housed within our ERP System which gives us greater cost-efficiencies and eliminates dependency on external CRM vendors. Customer data ownership resides with our Group and our customer data privacy statement complies with the PDPA. As at the LPD, our Love Your BodyTM programme has 298,999 active members (defined as members who have shopped in the last one year) in Malaysia and 43,352 in Vietnam. In Cambodia, we have 875 members on our Love Your BodyTM programme. In Malaysia, our Love Your BodyTM members in Malaysia contribute approximately 71.0% and 63.6% of our annual sales for the FYE 2018 and FPE 2019 respectively. Our Love Your BodyTM members in Vietnam contributed approximately 66.4% and 64 .7% of our annual sales in Vietnam for the FYE 2018 and FPE 2019 respectively. Total LYB active members in Malaysia grew to 343,423 in FYE 2018 as compared to 324,766 in FYE 2016, and 324,024 in FYE 2017. The percentage contributions of LYB members to the total sales in Malaysia are 70.5%, 69 .9%, 71 .0% and 63 .6% for the FYE 2016, FYE 2017, FYE 2018 and FPE 2019, respectively. Total LYB active members in Vietnam grew to 39,459 in FPE 2019 from 31,336 in FYE 2018 as compared to 21,025 in FYE 2016, and 25,954 in FYE 2017. The percentage contributions of LYB members to the total sales in Vietnam are 59 .0%, 64.5%, 66.4%, and 64.7% for the FYE 2016, FYE 2017, FYE 2018 and FPE 2019, respectively. 120 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) In addition to fostering customer loyalty, the database of our members allows us to employ data analytics to attain in-depth knowledge of the TBS brand's customer demographics, product preferences and purchasing behaviour. As a result, we are able to shape our marketing communications strategically to engage with our customers via a suite of targeted communications and media programmes, to retain customer interest and increase purchase frequency and amount purchased. Customer contactability is also key and we use a multitude of communication methods, from electronic mail, short messaging service, and mobile applications to online advertising, to connect with our customers. In addition, we deploy predictive segmentation, hypertargeting, cross-category campaigning and churn management to manage our customer loyalty programme. We also invest in targeting "look-alike" audiences on social media, based on the mapping we have created of our existing online customers. 5.10.2 Digital marketing We have as early as 2012 recognised the need to embrace a digital strategy in order to grow both online and web-influenced retail channel sales. Web-influenced retail channel sales are driven by our digital marketing initiatives such as targeted online advertising to boost brand visibility, which focus on maintaining top-of-mind brand awareness to increase initial consideration and drive walk-ins to both the points-of-sale and online stores. We also focus on improving search engine optimisation to drive traffic to TBS's and Natura's websites and ensuring that both the TBS and Natura brands are actively present on social media. As at the LPD, according to the IMR Report, we have more than 475,000 likes and 698,000 likes on Facebook for TBS in Malaysia and Vietnam respectively. TBS has also the largest fan base, among mono-brand beauty retailers, based on our Malaysian Facebook page and has one of the largest fan base among the mono-brand beauty retailers through their Vietnamese Facebook page. To maintain our position, we are aware that the TBS brand needs to remain relevant, particularly to the millennial audience. Therefore, as at the LPD, we have a dedicated digital marketing team consisting 7 personnel in Malaysia, 5 personnel in Vietnam, and 1 personnel in Cambodia for the TBS business and 3 personnel in Malaysia for the new Natura business that constantly renews its tactical strategies in social media and digital marketing. These strategies range from investing in targeted posts on both Facebook and Instagram according to our event plan, to engaging our digital audience through contests, giveaways and sampling. Our digital marketing team may also collaborate with social influencers who have large followings on social media by providing them with product samples for review and inviting them to events organised by us, thus generating user-generated content which helps to increase even more brand awareness online. As at the LPD, approximately 69.0% of our TBS fan base in Malaysia are millennials (fans aged 18 to 34). In Vietnam, the demographics of our TBS fan base is even younger, with fans aged 18 to 24 accounting for approximately 53.0% of the fan base. 121 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) 5.10.3 Sales and promotions Our in-store promotions for TBS generates traffic throughout the year, particularly our bi-annual storewide sale event which coincides with the school holidays and festive seasons. Aside from increasing sales and clearing inventories, our bi-annual sale event encourages our customers to try new products and attracts new customers to our points-of-sale. In addition, we also conduct seasonal promotional activities, both in-store and online, from time to time, such as discounted prices for selected items, bundled offers, incentives to purchase more units, and other special offers. We also provide complimentary sample products to our customers as a form of product promotion in our points-of-sale, promotional kiosks and websites with a minimum amount of purchase of products. 5.11 Seasonality The retail industry is a cyclical industry with peaks and troughs in revenue generated throughout the year, according to certain seasons. In Malaysia, as with most other retailers, our business peaks are around the festive seasons of Chinese New Year, Hari Raya, Deepavali and Christmas as well as public and school holiday seasons. Thus, we always ensure that the ambiance at our points-of-sale reflects the festive mood of the season. Christmas is the biggest festive season for us as we are a destination store for gifts. During this season, we receive the patronage of our regular customers as well as customers who specifically drop into our points of-sale to purchase gifts even though they are not our regular customers. Other than Christmas, Hari Raya has also become a major festive season, during which our customers shop generally for personal grooming products, particularly fragrance. Sales of wedding gifts also peak during the holiday periods as weddings are usually held during this time. In Vietnam, sales increases around Tet (Vietnam New Year) and International Women's Day, as well as Vietnam Women's Day, when our Vietnamese customers traditionally purchase gifts for the women in their lives. Other than festive and holiday seasons, the highest sales made in the year for TBS brand products are during our bi-annual sale. As we have only launched the Natura e-commerce website in August 2019 and opened the Natura pop-up store in October 2019, other than the general seasonality for the retail industry above, we have not determined any particular seasonality for the Natura brand products at this point in time. 5.12 Pricing Our business model depends on volume. For the TBS brand, we generate an average of over 115,000 transactions per month in Malaysia and more than 12,000 transactions per month in Vietnam for the FYE 2018. In Vietnam, accessibility in terms of pricing, is key to the ability of TBS brand to reach out to more Vietnamese consumers. Cost price of products from TBSI are usually constant throughout the year. TBSI may increase its prices pursuant to the Franchise Agreements. Our retail prices would therefore change in the event the cost price at which we purchase TBS products change, and also if there are any changes in local tariffs or taxes, or if there is a considerable movement in the currency exchange rate between GBP and RM or VND as the case may be. Similarly, our retail prices of the Natura products would change arising from any changes to the cost price, tariffs or taxes or considerable currency exchange rate movements between USD and the RM. 122 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) 5.13 Major customers Our customer base is primarily walk-in retail customers and there are no major customers as at the LPD. As such , we do not have any material exposure to nor are we dependent on any particular customer. 5.14 Major suppliers We source our TBS products from a single supplier, which is our Franchisor, TBSI. We have been their sole franchisee in West Malaysia since the commencement of our business in 1984 and in Vietnam, and Sabah and Labuan, since 2009 and 2015 respectively. The value of our purchases from our major supplier for the FYEs 2016, 2017 and 2018, and FPE 2019 in respect of Malaysia and Vietnam are as follows: FYE 2016 Percentage FYE 2017 Percentage FYE 2018 Percentage FPE 2019 Percentage RM'OOO % RM'OOO % RM'OOO % RM'OOO % Malaysia 49,708 93.3 46,280 91.4 56,021 89.1 43,400 87.7 Vietnam 3,544 6.7 4,337 8.6 6,834 10.9 6,100 12.3 Total 53,252 100.0 50,617 100.0 62,855 100.0 49,500 100.0 Details of our dependency on our major supplier are set out in Section 5.15 of this Prospectus. 5.15 Material dependency on commercial contracts, agreements and other arrangements 5.15.1 Franchise Agreements The marketing and selling of TBS products under the TBS franchise in Malaysia, Cambodia and Vietnam are materially dependent on the respective Franchise Agreements entered into by each of the TBS Franchisees in its ordinary course of business with TBSI. The franchise of TBSI was granted to Rampai-Niaga in Malaysia in respect of West Malaysia, Sabah and the Federal Territory of Labuan, TBS Vietnam in respect of Vietnam, and Green Cosmetics in respect of Cambodia ("Territories"). In addition to the above Franchise Agreements, TBSI had entered into a Franchise Framework Agreement dated 19 June 2019 with Etheco (Promoter and controlling shareholder of InNature), and Dato' Simon and Datin Mina, (our Promoters) ("Franchise Framework Agreement" or "FFA") to put into place certain control provisions to ensure the sustainability of the TBS business carried out by our Group and to ensure that the Promoters remain in control of TBS franchise in the Territories. The salient terms of the Franchise Agreements and the FFA are set out below and in Section 5.15.2 of this Prospectus. Scope of the Franchise Agreements Under the Franchise Agreements, TBSI granted to the TBS Franchisees the right and license to operate the TBS Business in Malaysia (except Sarawak), Vietnam and Cambodia respectively. The Business refers to a business dedicated to the sale of TBS products and the provision of services in the Territories under TBSI 's Proprietary Marks and in accordance with the System. This may be carried out via the distribution channels allowed under the respective Franchise Agreements (either through Approved Channels or Non-Exclusive Channels, as defined below). 123 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) As at the LPD our Group holds TBS franchises to establish and operate TBS points-of sale in the following territories and distribution channels: Subsidiary Territory Distribution channels Exclusivity Rampai- West Malaysia, • The retail points-of-sale and The Body Shop Niaga Sabah and online channels mentioned in International will not Labuan Section 5.3.4 of this Prospectus. appoint any other third party as TBS Vietnam Vietnam • Subject to TBSl 's approval, we franchisee in the have the right to operate via the territories or grant following reserved and non- equivalent rights to exclusive distribution channels: any third party in the territories under (i) Mail order catalogues; the respective Green Cambodia Franchise Cosmetics (ii) Direct selling in the home or Agreements . at other non-retail locations; and (iii) Hotel chains. "Approved Channels" refer to any approved channels which includes the respective points-of-sale mentioned in Section 5.3.4 of this Prospectus; "System" refers to the distinctive business format and method developed and implemented by TBSI utilising and comprising the Proprietary Marks and certain standard operational procedures, plans, directions specifications, technology, codes of conduct when dealing with customers and advertising techniques and other similar guidance provided by TBSI; "Non-Exclusive Channels" refer to any e-commerce, catalogue sales and any other distance selling (off-premises) channel of distribution via electronic, telephone, or other means of communication; "Proprietary Marks" refer to the TBS trademark and any patents, trade names, know how, formulae and other similar rights owned by TBSI; "Reserved Channels" refer to any future channels (not currently in existence) and any direct selling in any non-retail locations, hotel chains, points-of-sale located in areas dedicated to travel, areas located in tax-exempt, free trade zones or cross-border areas, or areas reserved for a specific clientele (e.g. sales to personnel from the armed forces) exclusively reserved for TBSI or its designated parties to operate. Term and renewal of Franchise Agreements The franchise rights under the Franchise Agreements are granted for a period of 10 years, commencing from the date of the respective Franchise Agreements ("Commencement Date") and we have the option to renew the franchise for a further 5 years ("Term") subject to the tenms and conditions of the respective Franchise Agreements. We may renew our franchise provided that: (a) we give TBSI 6 months prior written notice of our intention to extend the tenm of the respective franchise before the expiry of the Franchise Agreements' initial terms; 124 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (b) our TBS Franchisees, at the time of notice of renewal, are not in default of any provision of the respective Franchise Agreements and any other agreement between TBSI and the respective TBS Franchisees; (c) we agree to execute TBSI's form of the franchise agreement; and (d) we agree to any terms and conditions as TBSI may require with the renewal. Franchise fee An initial franchise fee is imposed upon the signing of each of the Franchise Agreements exclusive of applicable taxes. Additionally, for any renewal of the Franchise Agreements, TBSI may impose a renewal fee. Our obligations as TBS Franchisees As franchisees under the respective Franchise Agreements, among others, we have to: (a) operate the Business in strict conformity with TBSl's System; (b) maintain sufficient volume of TBS products to ensure that the annual forecast of the gross turnover is achieved for each operative period of 12 consecutive calendar months from the Commencement Date; (c) continuously operate the Business, including the points-of-sale and any other Approved Channel on such days and between such hours as TBSI reasonably specifies and as allowed by applicable laws and regulations; (d) ensure that all personnel employed at each points-of-sale or Approved (or Non Exclusive) Channel project a professional image and render service that complies with TBSI 's guidelines; (e) maintain effective insurance coverage at our own cost such as public liability, fire and marine insurance; (f) indemnify TBSI, its subsidiaries, affiliates, related companies together with its shareholders, partners, officers, directors and employees against any claims, actions, liabilities, losses and expenses incurred by TBSI arising out of or in connection with among others, any third party demand, claim or action arising out of any misrepresentation, negligence or breach of statutory duty by any of the TBS Franchisees or its employees, agents or contractors; and (g) pay to TBSI, without demand and under a regular payment schedule as may be mutually agreed, such fees for the management, consultation, advice, service and training provided by TBSI in respect of the use of the System and the Proprietary Marks as TBSI may from time to time prescribe, calculated as a percentage of TBS Franchisees' turnover, and which is in accordance with TBSI's policy. By a letter dated 19 June 2019 entered into between TBSI with Dato' Simon and Datin Mina, Dato' Simon and Datin Mina jOintly and severally undertake to ensure that TBSI will be paid fees equivalent to 1.0% of the total annual retail sales of each business line of the Group for the management, consultation, advise, service and training provided by TBSI in respect of the use of the System and Proprietary Marks. The payment is to be made by end of January each year, in accordance with TBSI's or its related corporations' retail calendar year, with the first payment to be made by end January 2020. 125 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) Purchase and sale of TBS products and provision of services TBSI's maximum aggregate liability in respect of any defect in TBS products and seNices provided in accordance with the System or by reference to the Proprietary Marks or otherwise in connection with the Franchise Agreements ("Service"), is in the case of a defect of the TBS product, based on a price multiple of the TBS product or SeNice in question and for all other claims against TBSI, the transactions carried out between the relevant TBS Franchisee and TBSI. Restrictions on us as TBS Franchisees We are further bound by the following restrictions: (a) Restriction on engaging in any business which is competitive or similar to the existing business of the TBS Franchisees The TBS Franchisees covenants not to be engaged, interested or concerned in any business, which is competitive or similar to the business of the TBS Franchisees. The TBS Franchisees have to ensure that no member, shareholder, director and employee of the TBS Franchisees or other individual having a degree of control or influence over the TBS Franchisees, is or becomes so engaged during the term of the Franchise Agreements and for the following period after the end of the Term of the Franchise Agreements: (i) 2 years for Rampai-Niaga in Malaysia; (ii) 1 year for TBS Vietnam in Vietnam; and (iii) 1 year for Green Cosmetics in Cambodia. In the case of Malaysia, the above restriction extends to the spouses and immediate family of the directors of Rampai-Niaga. (b) Restriction on non-solicitation of any person employed by TBSI or its other franchisees The TBS Franchisees undertake not to directly or indirectly solicit (whether alone or together with another person) or entice away from TBSI or any of its franchisees any TBSI's or its franchisees' employees. TBS Franchisees also undertake to ensure that no member, shareholder, or director of the TBS Franchisees or other individual having a degree of control or influence over the TBS Franchisees shall engage in the solicitation of any TBSI's or its franchisees' employees. Additionally, for Rampai-Niaga in Malaysia, TBSI has undertaken not to solicit any employee from Rampai-Niaga and to ensure that no member, shareholder or director of TBSI does the same. TBSI also undertake to ensure that no member, shareholder, or director of the TBSI or other individual having a degree of control or influence over the TBSI shall engage in the solicitation of any Rampai-Niaga employee. 126 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (c) Confidentiality on all information and knowledge relating to the System In Malaysia, Rampai-Niaga covenants that it will procure that its directors and their spouses and immediate family, officers, staff or any other person employed by or affiliated with Rampai-Niaga shall at all times maintain the confidentiality of all information and knowledge relating to the Business and the System during the term of the Rampai-Niaga Franchise Agreement, and for 2 years after the termination or expiry of its Franchise Agreement. For Vietnam and Cambodia, TBS Vietnam and Green Cosmetics covenant that they shall not and they procure that no other person will, at any time without TBSI's consent, whether before or after the termination of the TBS Vietnam Franchise Agreement or Green Cosmetics Franchise Agreement (as may be applicable), divulge or use for their own benefit or that of any other person, any of such information or knowledge relating to the System or the Business which may be communicated to or otherwise acquired by TBS Vietnam or Green Cosmetics, their respective directors, agents or employees. (d) Restriction on the sale or transfer of business The TBS Franchisees may not assign or transfer the rights and benefits under the Franchise Agreements without the written consent of TBSI. They may only sell the Business with TBSI's consent if all obligations under the respective Franchise Agreements are complied with, subject to the following conditions: (i) any proposed purchaser must be bona fide and at arm's length and meet TBSI's standards with respect to business experience, financial status, ability and compatibility with TBSI and its values; (ii) to notify TBSI of certain details relating to the proposed purchaser and the proposed terms of sale prior to the TBS Franchisees making any binding commitment; (iii) to seek TBSI's approval of the proposed purchaser and the proposed purchaser's business plan and evidence that it has adequate financial resources to implement the same; (iv) to bear all reasonable costs incurred by TBSI in relation to the sale of the TBS Franchisees' business; (v) if the proposed purchaser is a corporation, TBSI must be satisfied that the purchaser's controlling shareholders meets TBSI's criteria, with the suitability of the proposed directors or shareholders, with the shareholding structure of the proposed purchaser; and that the proposed purchaser is willing to enter into the then current form of franchise agreement with TBSI; and (vi) TBS Franchisees to ensure that there are no outstanding sums and obligations due under the respective Franchise Agreements. In the event of a proposed sale of the business, TBSI shall have an option to purchase the Business for the same amount and same terms which is exercisable within 30 days of the receipt of such notice. 127 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cani'd) (e) Restriction upon the death or permanent disability of any person with controlling interest Upon the death or permanent incapacity (mental or physical) of any person who beneficially owns shares carrying an aggregate majority of votes exercisable at a general meeting of the respective TBS Franchisee, or has the right to appoint or dismiss a majority of directors, and in respect of any other business or entity, where that person is beneficially entitled to a majority of share of the assets, proceeds or distribution of the same ("Controlling Interest"), the executor, administrator or personal representative of that person will transfer such interest to a third party to be approved by TBSI at its sole and absolute discretion within 6 months after such death or permanent incapacity. If the transfer is unable to be effected within the 6 months stipulated above, then provided that the relevant TBS Franchisee has been consistently achieving its performance objectives, then the personal representative of the deceased will have 2 years to dispose of the deceased's interest in the respective Franchise Agreements. If the TBS Franchisee has not been consistently achieving its performance objectives, then the personal representative will have 1 year to do so. Furthermore, immediately upon such death or permanent incapacity, TBSI has the right, but not the obligation, to appoint a manager to operate the Business at the respective TBS Franchisee's cost and expense reasonably incurred by the manager. (f) Requirement of written approval from TBSI for any change of management, ownership or control TBSI's written approval must be obtained before any change in the management, ownership or control of the respective TBS Franchisees including without limitation: (i) any change in the shareholders or their respective shareholdings; and (ii) the grant of any option, encumbrance, security, interest, lien or pledge in relation to such shareholdings or interests. (g) Termination of Franchise Agreement TBSI may terminate the respective Franchise Agreements by giving notice in writing in the following events: (i) if a TBS Franchisee is in breach of its respective Franchise Agreement and fails to remedy within 28 days from notification of breach, except that no notice is required to be given in the case of a persistent breach which has occurred twice in any 12 month period, or in the case of any 3 different breaches occurring within any 12 month period; (ii) if there is any change in the management, ownership or control of the TBS Franchisees without the TBSI's prior written approval; (iii) if the TBS Franchisees directly or indirectly and/or any other persons named in the Franchise Agreements shall directly or indirectly engage in or is guilty of conduct which TBSI considers to be prejudicial to its interests or the interests of the Business; (iv) if the TBS Franchisees have failed to achieve certain performance objectives agreed upon between TBSI and the TBS Franchisees and such targets continue not to be achieved within 3 months after the TBS Franchisees is notified of failure effect; 128 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (v) if the TBS Franchisees or any of their officers or employees gives to TBSI any false or misleading information or makes any misrepresentation in obtaining the Franchise Agreements or at any time during the continuance of the Franchise Agreements, in connection with the Business; (vi) if the TBS Franchisees fail to secure a guarantor to secure the performance of the TBS Franchisors' obligations to TBSI within 3 months from TBSI's request to do so; (vii) if the TBS Franchisees fail to obtain TBSI's written consent prior to any assignment or transfer of the TBS Franchisees' rights and benefits under the Franchise Agreements; or (viii) if the TBS Franchisees fail to procure each of its shareholders to execute a deed of undertaking required under the Franchise Agreement in relation to the shareholders' undertakings to TBSI to notify TBSI of the details of any proposal received to purchase the shareholdings of the Franchisees, and to grant TBSI an option to purchase such shareholdings for the same amount and upon the same terms as offered by the proposed purchaser, which option may be exercised by TBSI within 14 days of receipt of such notice in the event of any change of management, ownership or control of Franchisees. Additionally, the respective Franchise Agreements may terminate immediately upon any of the following events occurring: (i) upon written notice by TBSI if the TBS Franchisees become bankrupt or insolvent; (ii) if any person successfully takes action to enforce any legal action or foreclosure proceedings in respect of any property of the TBS Franchisees; (iii) upon written notice by TBSI if the TBS Franchisees has violated the Franchise Agreements terms relating to confidentiality post termination of employment, anti-corruption, economic sanction and repudiatory breaches of the Franchise Agreements and purchase of merchandise from authorised suppliers; or (iv) upon the termination of the FFA. (h) Governing law The construction, validity and performance of the Franchise Agreements and all non-contractual obligations arising from or connected with the Franchise Agreements shall be governed by English law. Other miscellaneous provisions (a) Interest on overdue amount If any payment under the respective Franchise Agreements are overdue, the TBS Franchisees will pay TBSI, in addition to the overdue amount, daily interest on such amount from the date it was due until it is paid at a rate which is four percent (4%) per annum over the London Inter-bank Offered Rate ("UBOR") (as determined oli the payment due date, or if such date is not a business day, the next business day), calculated on a daily basis. 129 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (b) Addendum to Franchise Agreements - Software licence Pursuant to the Franchise Agreements, the TBS Franchisees have been granted a franchise for the operations of TBS outlets pursuant to the System. As part of the System, TBSI has developed certain software. TBSI grants the TBS Franchisees a non-exclusive non-transferable licence to the software pursuant to an Addendum to Franchise Agreements ("Software Licence Addendum"). The TBS Franchisees are permitted to run the software exclusively on hardware which meet the minimum system requirements. The licence commences on 19 June 2019, and automatically terminates upon: (i) termination of the Franchise Agreements for whatever reason; or (ii) upon 30 days prior written notice by TBSI to the TBS Franchisees; or upon 7 days prior written notice by the TBS Franchisees to TBSI subject to TBSI having approved in writing a proposed substitute software. 5.15.2 FFA The FFA was entered into simultaneously with the Franchise Agreements and the salient terms of the FFA are as follows: (a) Board representation in Etheco, BluPlanet and InNature The existing directors of Etheco, BluPlanet and the non-independent directors of InNature must remain in their respective designations; and Datin Mina and Dato' Simon must also each undertake to ensure that directors appointed by them, collectively with Dato' Simon (or his alternate, Daryl Foong) and Datin Mina, shall comprise of a majority of the board of InNature. Such persons nominated by Datin Mina and Dato' Simon to be on the Board of InNature must at all times be executive directors. Dato' Simon and Datin Mina will also procure that TBSI be notified of any changes in the board of Primarium and Pelagos. (b) Capital maintenance/ownership Except with TBSI's prior written consent, Datin Mina and Dato' Simon must directly, legally and beneficially, own 100.0% interest in Etheco and Etheco must in turn directly, legally and beneficially own at least a 51.0% interest in the ordinary share capital of InNature. Dato' Simon and Datin Mina will also procure that TBSI be notified of any changes to Dato' Simon and Datin Mina's shareholding in Bluplanet, Primarium and Pelagos. (c) Guarantee on Etheco Dato' Simon and Datin Mina each irrevocably and unconditionally agrees, undertakes and guarantees the obligations of Etheco under the FFA and also the obligations of the TBS Franchisees under the respective Franchise Agreements. (d) Constitution TBSI's written approval is required for any changes in Etheco's constitution. 130 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (e) Restriction on encumbrance over assets and shares Data' Simon, Datin Mina and Etheco must not and must procure that InNature and the TBS Franchisees must not create or permit the creation of any encumbrance, i.e. any interest, equity of any person (including any right to acquire, option or right of pre-emption or mortgage, charge, pledge, lien, assignment or other similar encumbrances over the respective TBS Franchisees' assets, undertakings and/or property) without TBSI's approval. Prior written approval from TBSI is required for the creation and/or grant of any option, pledge, of any encumbrance, security, interest or lien over the Promoters' 100.0% shareholding in Etheco and Etheco's 51.0% in InNature as well as InNature's 100.0% shareholding in each of the TBS Franchisees. Dato' Simon and Datin Mina will also procure that TBSI be notified of any creation of encumbrance of the shares in Bluplanet, Primarium and Pelagos, or over any shares held by Bluplanet, Primarium and Pelagos. (f) Restrictions on debts and other covenants Dato' Simon, Datin Mina and Etheco shall each ensure and procure that each of InNature and the TBS Franchisees will not obtain any loans, credit facilities, financing or borrowings exceeding the leverage ratio threshold as agreed in the FFA and that Etheco does not issue, grant or provide any guarantee or security to any person in respect of any third party obligations. Dato' Simon and Datin Mina will also procure that TBSI be notified of any issue, grant or provision of guarantee or security for any third party obligations by Bluplanet, Primarium and Pelagos. (g) Removal of a director who is a director of a competitor Each of Dato' Simon, Datin Mina and Etheco shall ensure that the Directors in InNature do not act or enter into any arrangements which will conflict with the interest of InNature and/or the TBS Franchisees. Each of Dato' Simon, Datin Mina and Etheco shall also ensure and procure that InNature does not appoint a director who is also a director of TBS Franchisees' com petitor(s) , and that InNature will do all things to remove or procure InNature to remove any directors who subsequently becomes a director of TBS Franchisees' competitor(s) after their appointment onto the board of InNature. From the day each of Dato' Simon, Datin Mina and Etheco becomes aware that a director is a competitor's director until the director's removal from the Board, each of Dato' Simon, Datin Mina and Etheco shall ensure that no board meeting is convened and no board papers or written resolutions relating to any proprietary information pertaining to the System and/or the TBS franchise or Business of the Company is circulated for approval unless TBSI's prior written consent has been obtained. (h) Focus on existing business Dato' Simon, Datin Mina and Etheco shall each procure that I nNature (whether through itself or another member of the Group) will not operate any other type of business (other than The Body Shop® franchise) without TBSl's prior written approval which shall not be unreasonably withheld. 131 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (i) Issuance of other classes of shares by InNature Consistent with their roles and responsibilities as Directors and shareholder of InNature respectively, Dato' Simon, Datin Mina and Etheco shall each procure that InNature does not issue other classes of shares (including any debt or quasi equity classes of shares) without TBSI's prior written approval. (j) Non-solicitation and non-competing business Save with TBSI's prior written consent, Dato' Simon and Datin Mina each undertakes and covenants that they shall not, whether directly or indirectly do or procure any or all of the following: (i) solicit or entice away from TBSI or any of the TBS Franchisees or any other franchisee of TBSI, any person who is their employee, either to take up employment with Dato' Simon and/or Datin Mina or any other person or entity or for any other purpose; (ii) be employed, interested or concerned in any capacity (including through the ownership of equity interests or as a director) in any business similar to that of or in competition with TBSI (save for a non substantial financial interest in any publicly held corporation listed on a recognised stock exchange and which does not allow Dato' Simon or Datin Mina to influence the conduct of such a business); (iii) seek to obtain, from a customer of any of the TBS Franchisees or TBSI, or such persons who are in the habit of dealing with any of the TBS Franchisees or TBSI, orders for any goods and/or seNices which would be in competition with that of TBSI or any of the TBS Franchisees nor will Dato' Simon and Datin Mina represent themselves to any such person or entity as being in any way connected or having been formerly connected with or interested in the business of TBSI and/or any of the TBS Franchisees with the intent of pursuing any of the foregoing; and (iv) seek to place orders with any supplier of TBSI or any of the TBS Franchisees, or such persons who are in the habit of dealing with TBSI or any of the TBS Franchisees, and with whom Dato' Simon and Datin Mina have had contact or about whom Dato' Simon and Datin Mina have received Proprietary Information (defined below) in respect of any goods supplied to TBSI or any of the TBS Franchisees nor will Dato' Simon and Datin Mina represent themselves to any such person or entity as being in any way connected or having been formerly connected with or interested in the business of TBSI and/or any of the TBS Franchisees with the intent of pursuing any of the foregoing, during the term of the Franchise Agreements and for a further period of 2 years thereafter. In addition, Dato' Simon and Datin Mina shall each procure that their direct family members (namely, parents, children and their children's spouses), any of the directors of InNature and persons connected (as defined in the Franchise Framework Agreement) to any of the directors of InNature shall not own, maintain, engage, be employed, interested or have any equity interest in a competing or similar business in the territories where the TBS Franchisees are operating, save where such interest is an insubstantial interest in publicly held listed corporation during the term of the Franchise Agreements and for a further period of several years thereafter. 132 Registration No.: 199401034915 (32059B·X) 5. BUSINESS OVERVIEW (cont'd) Data' Simon and Oatin Mina also each undertakes to ensure that their siblings, their siblings' spouses or their siblings' children shall not be involved (directly or indirectly and whether through themselves or through their associated companies) ("Specific Categories of Persons") in the TBS business, in InNature or the TBS Franchisees unless a separate deed of undertaking (containing non-compete and confidentiality undertakings) has been executed by these Specific Categories of Persons directly with TBSI. TBSI undertakes and covenants that, save with the prior written consent of Oato' Simon, Oatin Mina, Etheco or any of the TBS Franchisees, during the term of the Franchise Agreements and for a period of several years thereafter that it shall not solicit or entice away from any of the TBS Franchisees any person who is an employee of any of the TBS Franchisees to take up employment with TBSI. Oato' Simon, Oatin Mina and Etheco shall undertake to fully indemnify, defend and hold harmless TBSI against and from any and all claims, damages, liabilities, costs and expenses arising out of any breach in the aforesaid obligations. (k) Subsidiaries and joint venture Oato' Simon, Oatin Mina and Etheco shall each ensure and procure that the TBS Franchisees will not establish any entities without TBSl's approval. (I) Assumption of liabilities Oato' Simon, Oatin Mina and Etheco shall each procure that InNature and the TBS Franchisees will not assume any obligations, charges, losses or liabilities (financial or otherwise) of any person and will notify TBSI of any intra-group loans to subsidiaries once every 3 months simultaneous with the release of any announcement by InNature on its financial statements in compliance with applicable laws. (m) Declaration of dividend Oato' Simon, Datin Mina and Etheco shall each ensure and procure that InNature's and the respective TBS Franchisees' dividend policies be provided to TBSI, and that TBSI is notified of any changes to the dividend policy. The Promoters and Etheco also undertakes to ensure that the board of InNature, in determining the dividend policy of InNature and the TBS Franchisees, and any decisions to payout a dividend shall take into account: (i) InNature's and the TBS Franchisees' annual business plan in respect of each of the TBS Franchisees; and (ii) anticipated funding needs each entity for the purposes of meeting the agreed targets set out within the relevant Franchise Agreements. (n) Acquisition and disposal by third party (substantial shareholdings) Oato' Simon, Oatin Mina and Etheco each undertakes to and shall procure that InNature notifies TBSI in writing of any changes in the substantial shareholdings of InNature. 133 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (0) Termination of the FFA TBSI may terminate the FFA forthwith by giving notice in writing to Dato' Simon, Datin Mina or Etheco in any of the following events: (i) upon the winding up, insolvency, administration, dissolution or bankruptcy of Dato' Simon, Datin Mina or Etheco or upon the appointment of a liquidator, receiver, administrator, trustee or similar officer over all or any part of any of Dato' Simon's, Datin Mina's or Etheco', business or assets; (ii) any event which has an effect equivalent or similar to any of the above events occurs in relation to Dato' Simon, Datin Mina or Etheco; (iii) where in the case of the breach capable of being remedied, failure to remedy such breach within 28 days of being notified to remedy the breach by TBSI, provided that TBSI shall not be obliged to give such notice in the case of a persistent breach which shall be one which has occurred twice in any 12 month period and/or any 3 different breaches occurring within any 12 month period of the FFA; or (iv) in the event that the exclusion of any provisions of the FFA will in the opinion of TBSI, adversely affect TBSl's rights under the FFA, then TBSI shall have the right to terminate the FFA by way of a 30 days' written notice to Dato' Simon, Datin Mina and Etheco. The FFA shall also automatically terminate in the event of a termination or expiration of all of the Franchise Agreements. The parties to the FFA agree that: (i) The FFA shall cease to have any force or effect upon the termination of the FFA but such termination shall be without prejudice to the rights and remedies of any party prior to the termination; (ii) upon termination of FFA, all of the Franchise Agreements and any future franchise agreements will also automatically be deemed to have terminated on the same day and shall cease to have any force or effect, save in respect of any antecedent breaches; (iii) Datin Mina, Dato' Simon and Etheco will, upon termination of the FFA: (1) immediately pay to TBSI the full amount of all monies due under the FFA; and (2) continue to perform and observe the covenants and obligations which survive termination and such provisions (including confidentiality of proprietary information, representations and warranties, events of default, consequences of termination, confidentiality, and arbitration) will continue in full force and effect after termination or expiration of the FFA 134 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (p) Confidentiality of Proprietary Information Each of Dato' Simon, Datin Mina and Etheco undertakes and shall procure that Inl\lature and the TBS Franchisees shall: (i) hold in strict confidence all confidential, proprietary information or know-how that was developed compiled or derived by TBSI ("Proprietary Information"); (ii) not to disclose any Proprietary Information to any third party without TBSI' prior written consent, and even if with such consent, such disclosure must be on a strictly need-to-know basis, and shall be subject to such third party undertaking to maintain confidentiality; (iii) not to make use of any Proprietary Information for any purposes other than for the operation of the Business in accordance with the Franchise Agreements; and (iv) use their best endeavours (including appropriate security measures) to prevent unauthorised disclosure or access to the Proprietary Information. Notwithstanding the above, Dato' Simon, Datin Mina, Etheco and InNature may reveal the Proprietary Information only to such persons lawfully entitled to require any such disclosure if required by law, any court of competent jurisdiction, the rules and regulations of the recognised stock exchange on which the shares of InNature and/or any of the TBS Franchisees are or will be listed, or pursuant to any enquiry to investigation by any regulatory or public authority. Dato' Simon, Datin Mina and Etheco agree that the abovementioned undertaking shall survive the termination of the FFA, cessation of their employment or appointment with, or disposal of any interests in InNature or the TBS Franchisees; and that they shall fully indemnify, defend and hold harmless TBSI (together with its directors, officers, employees and agents) against and from any claims, damages, liabilities, costs and expenses arising from the breach of the aforesaid obligations. (q) Confidentiality Each party to the FFA undertakes to the other party that any information of a confidential nature which relates to a party ('Confidential Information') disclosed to any party by the other shall be kept strictly confidential. The above confidentiality requirement shall not extend to confidential information: (i) which is at the relevant time within the public domain (otherwise than by reason of its wrongful disclosure); or (ii) where such information was lawfully available to that party on a non confidential basis from a source other than any of the parties before any disclosure of the same information by any of the parties to the other. 135 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (r) Governing Law The construction, validity and performance of the FFA and all non-contractual obligations arising from or connected with the FFA shall be governed by English law. 5.15.3 Business continuity As mentioned above, in the event of the death or permanent incapacity of Dato' Simon and Datin Mina, the Franchise Agreements provide that their Controlling Interests can only be transferred to their successors, i.e. Daryl Foong and Dexter Foong, with TBSI's approval. Please refer to Section 7.1.2 of this Prospectus on the risk that the continuity of the Franchise Agreements is dependent on the continued involvement of our Promoters, namely Datin Mina and Dato' Simon. Daryl Foong and Dexter Foong, the sons of Datin Mina and Dato' Simon, are also our shareholders through their direct shareholdings in Pelagos and Primarium respectively. Both of them have had working experiences in Rampai-Niaga, and their respective profiles are set out in Sections 3.1.2 and 3.2.2 of this Prospectus. In addition, Daryl Foong is also our Non-Independent Non-Executive Director, alternate to Dato' Simon. Further to the above, we also have an experienced management team who have been the main drivers to our Company's success over the years. Our CEO, COO and CRO have been with us for more than 20 years and will continue to manage our Group's business in the above event. The Franchise Framework Agreement requires that our Board must include Daryl Foong as Dato' Simon's alternate. His appointment as an alternate director is also part of the Company's succession plan. Daryl Foong is appointed as a Non-Executive Director in our Company due to his role as the Executive Director of Aquawalk Sdn Bhd, where he is involved in the day-to-day operations of the company. 5.15.4 Natura MOU and Natura Supply Agreement It is one of our future plans and strategies to expand our Group's brand portfolio by developing a new business with the Natura brand in Malaysia. Our new business venture for Natura is based on the Natura MOU and the Natura Supply Agreement. On 17 April 2019, InNature entered into the Natura MOU with Natura Cosmeticos SA The Natura MOU is a non-binding agreement entered into to enable the parties to enter into a definitive agreement that will establish the parties' commercial relationship for the purpose of implementing the distribution and commercialisation of certain Natura products in Malaysia. The Natura MOU is effective until 31 March 2020. The initial term of 90 days from 17 April 2019 (being the date of the Natura MOU) had been extended to 31 March 2020 by way of supplemental amendments thereto dated 11 July 2019 and 11 December 2019. Ola Beleza, entered into the Natura Supply Agreement on 28 November 2019 with Industria E Comercio De Cosmeticos Natura LTDA ("Industria Natura"), a subsidiary of Natura Cosmeticos SA The Natura Supply Agreement formalises the terms and conditions for the supply and distribution of the Natura products for the period commencing from 1 October 2019 until the execution of the definitive agreement(s) mentioned above. As at the LPD, we are working with Natura Cosmeticos S.A on finalising the terms of the relevant definitive agreement(s) which is expected to be signed after our Listing . 136 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) The salient terms of the Natura Supply Agreement are as set out below: (a) Scope of the Natura Supply Agreement Under the Natura Supply Agreement, Ola Beleza shall operate the business of selling the Natura products in Malaysia using the Natura Trademark ("Natura Business") through retail stores, department stores, e-commerce and social selling subject to Industria Natura's agreement and pursuant to applicable laws and regulations. Prior to signing of the definitive agreement(s), our exclusivity to sell the Natura products in Malaysia through the approved channels are based on the agreed principles for our commercial relationship with Natura in the Natura MOU. "Natura Trademark" means any Natura® trade names, trademarks, seNice marks, logos, designs, symbols, emblems, insignia, slogans, get-up, whether or not registered or capable of registration, and all other proprietary rights whatsoever owned by or available to Industria Natura, its affiliates or any other party designated by Industria Natura, adopted or designated by Industria Natura or any other party designated by Industria Natura for use in connection with the Natura Business. (b) Supply of Natura products Industria Natura shall be the sole and exclusive supplier of the Natura products to Ola Beleza and Ola Beleza shall be prohibited from acquiring or importing the Natura products from any other person unless otherwise expressly authorised by Industria Natura. The purchase and sale of the Natura products are intended only for the sale and distribution in Malaysia during the duration of the Natura Supply Agreement and Ola Beleza shall not be allowed to use, distribute, promote or sell the Natura products for other purposes. (c) Term of the Natura Supply Agreement The Natura Supply Agreement shall take effect from 1 October 2019 and shall remain in full force and effect up until 31 March 2020 unless terminated earlier in accordance with the terms and conditions of the Natura Supply Agreement. The Natura Supply Agreement may be renewed upon the parties' mutual agreement in writing. (d) Termination Each party is entitled to terminate the Natura Supply Agreement in the following events: (i) for cause if the other party fails to comply with any condition or obligation of the Natura Supply Agreement and does not cure such failure within a period of 90 consecutive days after the other party delivers written notice of the failure or any such longer term provided under the Natura Supply Agreement; (ij) if any of the parties: (1) becomes insolvent; (2) makes an assignment for the benefit of creditors; (3) admits its inability to pay its obligations as they become due; (4) files a voluntary petition for bankruptcy; (5) is declared bankrupt or insolvent; or 137 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (iii) upon the mutual agreement of the parties. (e) Consequences of termination In the event the Natura Supply Agreement is terminated: (i) ala Beleza shall immediately pay all outstanding invoices and amounts owed to Industria Natura; (ii) Industria Natura shall have the sole discretion to determine the manner in which the residual inventory of Natura products shall be dealt with and in the event Industria Natura's decision on the inventory caused unreasonable expenses to be incurred by ala Beleza, ala Beleza shall be reimbursed; (iii) at Industria Natura's election, ala Beleza shall cancel or transfer all approvals or product registrations received from any regulatory authority pertaining to the sale of the Natura products; and (iv) the Natura Supply Agreement shall cease to have further effect (save for the provisions which will survive termination) and no party shall have any claim against each other save in respect of any antecedent breach of any provision of the Natura Supply Agreement. (f) Industria Natura's obligations During the term of the Natura Supply Agreement, Industria Natura shall be responsible for, among others: (i) product development, manufacture and packaging for international market; and (ii) the registration of the Natura Trademark in Malaysia. (g) Ola Beleza's obligations During the term of the Natura Supply Agreement, ala Beleza shall be responsible to, among others: (i) comply with the licensing and business set-up regulatory affairs, including product registration and interacting with governmental authorities in Malaysia with respect to the Natura products; (ii) create and maintain a customer service centre; (iii) conduct promotions strategies in accordance with Industria Natura's policies and guidelines; (iv) participate in training agendas developed by Industria Natura and be responsible for staff and consultant recruitment, training and management; (v) implement local operations management, including inventory replenishment and supply chain management; (vi) allow Industria Natura to conduct audits on the Natura Business, inspect the inventory of products and inspect the facilities of ala Beleza to verify compliance with the Natura Supply Agreement and Industria Natura's guidelines; 138 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (vii) not (without prejudice to its freedom to determine the sale price of the Natura products) charge its customers a price which is higher than the maximum recommended retail price (which will be communicated by Industria Natura from time to time and subject to consultation between the parties twice a year); and (viii) comply with such other obligations which may be mutually agreed between the parties from time to time in writing. (h) Liabilities and indemnification Industria Natura and Ola Beleza shall indemnify, defend and hold each other and their respective affiliates, directors, employees, agents, successors, assignees, clients and consumers harmless from any and all claims resulting from, directly or indirectly, in whole or in part, with the breach of any provision of the Natura Supply Agreement or any applicable law; or any torts, actions or omissions in performing their respective obligations under the Natura Supply Agreement. Either party shall not have any liability to the other party for any indirect or consequential loss or damage of any kind howsoever arising, whether such loss or damage was foreseeable or in the contemplation of the parties, unless such loss is awarded to a third party by a court or tribunal of competent jurisdiction in connection with a claim filed by such third party; or arises from the wilful misconduct, tort or gross negligence. Industria Natura's total liability in connection with any Natura product which is adulterated, tainted, contaminated, spoiled, unsafe, hazardous, expired, not of satisfactory quality or otherwise unfit to be used for its intended purpose or otherwise declared to be unfit pursuant to the quality standards provided under the Natura Supply Agreement ("Defective Product") is limited to the replacement of the Defective Product or reimbursement of its regular price. Industria Natura's liability arising out of the manufacture, sale or supply of the Natura products or their delivery, commercialisation or use shall not exceed the purchase price paid by Ola Beleza for the purchase of the Natura products. The parties' overall liability for any breach or default under the Natura Supply Agreement shall be limited to a specific value in accordance to a formula to be agreed between the parties. (i) Non-competition Other than the TBS brand, Ola Beleza shall not distribute, commercialise or enter into any agreements with any competitor of Industria Natura or the Natura products. The operational teams that manage each TBS brand and Natura brand shall be segregated and the TBS products shall not be sold or distributed in any Natura points-of-sale and vice versa. (j) Assignment The parties shall not assign the Natura Supply Agreement to any other person without the prior consent of the other. Notwithstanding the foregoing, Industria Natura shall be allowed to assign the rights granted under the Natura Supply Agreement to its affiliate, without prior written consent of Ola Beleza, by means of simple notice to Ola Beleza. 139 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (k) Intellectual property All intellectual property rights in and to any and all designs, formulations and artworks with respect to Natura products will be solely and exclusively owned by Industria Natura through itself or its affiliates. ala Beleza shall take all reasonably expected actions in relation to the use of any of the Natura Trademarks in the Natura Business as Industria Natura or any other party designated by it may from time to time direct in order to make clear that the Natura Trademarks are the subject of intellectual property rights owned by Industria Natura or any other party designated by it and used under licence by ala Beleza. (I) Governing law and arbitration The Natura Supply Agreement and any dispute arising out of or related to the Natura Supply Agreement will be resolved in accordance with Singapore laws. The Parties will first attempt to resolve any claim by entering into negotiations by or among the key persons to be determined by the parties. Such negotiations shall commence no later than 10 business days after the receipt a notice of such claim , and will terminate 2 business days after such commencement. If the claim is not resolved within such period, the claim shall be finally settled under arbitration. If the parties do not reach an amicable solution, any party may request the commencement of the arbitration before the Singapore International Arbitration Centre ("SIAC") to resolve the controversy or dispute, in accordance with the SIAC's rules of arbitration through a notice sent to the other parties. The arbitration proceeding shall be governed by Singapore law. 5.16 Quality control procedure for TBS products TBS products are controlled by the standards set in the Quality Charter of our Franchisor. TBS products are manufactured by appointed manufacturers using raw materials sourced in accordance with the technical dossier of our Franchisor which regulates, among others, the formulation, the raw materials and the method of manufacture. The control of quality is based on, among others, Compliance with Good Manufacturing Practices in accordance with standard ISO 22716 and quality surveillance. The Quality Charter regulates all aspects of production setting the standards for: • staff training; • production facilities and equipment; • utilities such as process water; • transfer, storage and weighing of raw materials; • packaging components; • bulk manufacturing and batching; • microbiological testing, physico-chemical testing, sampling and control testing, quality of-use testing, and packing characteristic testing; 140 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) • non-conforming batches of finished products and procedures for rework and/or destruction; • filling and packing of products; and • recall procedure. The Quality Charter also sets standards for shipping requiring records of production of a finished product batch whereby information of each component, raw materials, semi-finished product and bulk batch used in the finished product can be traced, and standards for archiving records related to the quality of the finished products including the test results. We maintain a set of comprehensive quality control procedures that are intended to ensure that the quality and condition of all TBS products sold through various distribution channels are regularly monitored and maintained. In general, we adopt the following approaches and measures for our points-of-sale operations: • physical inspection on incoming stocks upon arrival in our points-of-sale where stocks are inspected for damage, missing items, faulty packaging or product, inaccurate labelling and use-by date; • our retail operations manual requires our points-of-sale to perform quarterly audit to identify expired products or products which are close to their use-by date by at least 6 months. Expired products are returned to the DC for disposal , whereas products which are near their use-by date but are still useable will be offered to our staff or donated to non-governmental organisations for distribution; • we maintain standard product display guidelines to ensure that TBS products are displayed in a consistent manner throughout all points-of-sale; and • we provide induction programmes for newly joined staff as well as product training to retail staff as and when new products are launched. 5.17 Research and development We do not carry out any product research and development as we do not manufacture any of the products that we sell. 5.18 Interruptions to the business for the past 12 months We have not experienced any interruptions to our business having a significant effect on our Group's operation for the past 12 months prior to the LPD. 141 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) 5.19 Employees 5.19.1 Number of employees As at the LPD, we have a total workforce of 784. In Malaysia, we have 599 permanent employees, of whom 88 are based in our HQ in Subang Jaya. In Vietnam, we have 177 permanent employees and 37 of them are based in our HQ in HCMC. We have 8 permanent employees in Cambodia, out of which 2 are based in our HQ in Phnom Penh. As at the LPD, our Group has 1 contract employee based in Malaysia and 114 contract employees based in Vietnam. The contract employees in Vietnam are in various roles and currently under a definite 1-year contract. They may be offered an indefinite contract after the completion of the 1-year contract. The term definite contract in Vietnamese context refers to contract with fixed term from 12 months to 36 months, whereas for indefinite contract, employees are offered for permanent positions in TBS Vietnam. The following table sets out the breakdown of our employees in our Group by job function and geographical location as at the LPD: Number of employees as at the LPO(1) Malaysia HQ - Executive directors and senior management 18 - Managerial 31 - Non-managerial 31 - Clerical and administrative staff 8 Points-ot-sale - Store manager 59 - Staff(1) 452 Total 599 Vietnam HQ - Senior management 6 - Managerial 13 - Non-managerial 16 - Clerical and administrative staff 2 Points-ot-sale - Store manager 14 - Staff 126 Total 177 Cambodia HQ - Senior management - Managerial 142 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) Number of employees as at the LPD(1) - Non-managerial 2 - Clerical and administrative staff Point-of-sale - Store manager - Staff 6 Total 8 Total workforce 784 Note: (1) Excluding part-time staff employed during peak times to assist with the varying peak time rest. On average, there would be approximately 8 part timers during peak times. None of our employees in Malaysia belong to any trade unions and there has been no labour dispute in Malaysia or Vietnam since we commenced operations in these 2 countries. In Vietnam, establishment of trade unions is not compulsory. However, our employees have formed a trade union as provided for under the Labour Code and the Law on Trade Union of Vietnam as they will be able to enjoy the benefits of the company's contribution to the trade union funds. We comply with the governing laws in Malaysia and Vietnam in providing all the statutory contributions such as social insurance for our employees, including medical, personal accident and work injury insurance in compliance with applicable local laws and regulations concerning social insurance. For the past financial years under review, there has been no non-compliances with the relevant laws in relation to employee statutory contributions. In Vietnam, we also contribute to the trade union fund formed by the employees. The fund monies are mostly used to provide welfare benefits to the staff, among others, birthday gifts, year-end parties and Women's Day gifts. With respect to Cambodia, we are also in the process of attending to labour registration and compliance with the Ministry of Labour and Vocational Training of Cambodia. In addition, we have complied with the obligation to attend to the registration with National Social Security Fund of Cambodia and are also required to contribute on a monthly basis to the National Social Security Fund of Cambodia for our employees. 5.19.2 Health and Safety We value the health of our employees and place great emphasis on safety in our HQ and points-of-sale. This means taking practical steps to ensure that the products, services and operations do not harm or pose an unacceptable risk to the health and safety of any person affected by our activities, including our employees. Some of the steps we take include providing our employees with training on fire, health and safety. Our safety programme and training focus on the following priorities: • Competence - people knowing how to work safely • Communication - talking about health and safety • Culture - health and safety is everyone's responsibility • Controls- having effective procedures that manage risks and accident reporting 143 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) 5.20 Approvals, major licences and permits obtained Details of the approvals, major licences and permits obtained by our Group as at the LPD are set out below: 5.20.1 Approvals, major licences and permits obtained in respect of our business operations in Malaysia (i) Franchise registration The Rampai-Niaga Franchise Agreement was entered into on 19 June 2019. Following thereto, we had submitted as franchisee our franchise registration application on 21 June 2019 to the Ministry of Domestic Trade and Consumer Affairs ("MDTCC") and have obtained the approval from MDTCC on 30 September 2019. The registration for the The Body Shop® franchise in West Malaysia, Federal Territory of Labuan and Sabah by Rampai-Niaga as franchisee with the MDTCC is pursuant to section 6A of the Franchise Act 1998. (ii) Business and signage licences of our points-of-sale It is a legal requirement under the Local Government Act 1976 ("LGA"), Trades Licensing Ordinance 1949 of Sabah and the by-laws of the respective local councils and authorities applicable to where our points-of-sale are located that business and signage licences shall be obtained prior to commencement of operations of our points-of-sale, with the exception that there is no requirement under the respective by-laws of Dewan Bandaraya Kota Kinabalu, Sabah and Majlis Perbandaran Sandakan, Sabah to obtain signage licences for our points-of-sale located in these 2 locations. Generally, these business and signage licences are renewable on a yearly basis. For our points-of-sale in KL , a licence is also required when we exhibit advertisements on any wall, building and street. As at the LPD, all of our points-of-sale and promotional kiosks in Malaysia have the valid and subSisting business and signage licences, where applicable, issued by the relevant local councils and authorities, save for the business and signage licence in respect of 1 point of-sale which has yet to be obtained . We are also pending a local council licence for the exhibition of a digital signboard at 1 of our points-of-sale in KL. For our points-of-sale in KL, Johor Bahru and Shah Alam which we operate on a leased-space basis within the department store, the business and signage licences are held under the department store. In accordance with subsection 107(6) of the LGA, any person who fails to exhibit or produce his licences on the premises shall be liable to a fine not exceeding RM500 or to imprisonment for a term not exceeding 6 months or to both. Under the LGA, a fine of not exceeding RM2,000 or a term of imprisonment not exceeding 1 year or both will be imposed on anyone who is guilty of any offence against the LGA or any by-law, rule or regulation for which no penalty is expressly provided. Further, pursuant to the Trades Licensing Ordinance 1949 of Sabah, a fine of 4 times the amount of the licence fee and a further fine of RM1 0 for each day or part of a day during which the continuance of the contravention will be imposed on persons who carryon any business in Sabah without a valid licence. 144 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (iii) Direct sales licence As part of our future plans and strategies further detailed in Section 5.4.4 of this Prospectus, we plan to develop our Natura business through social selling, which will involve the use of a C2C mobile application by individuals who sign up as our consultants for the sale and distribution of the Natura products to the consumers. Pursuant to the Direct Sales and Anti-Pyramid Scheme Act 1993, a licence is required to carryon any sale of goods or services through place visits, telephone calls, mailing, or electronic transactions ("Direct Sales") ("Direct Sales Licence"). Any person who carries on any Direct Sales business without a valid Direct Sales Licence shall be liable to a fine not exceeding RM1,OOO,OOOand for a second or subsequent offence, to a fine not exceeding RM 2,000,000. As at the LPD , we have obtained the Direct Sales Licence from MDTCC as further detailed below: Licence Issuing Subject matter I Issue Expiry Status of Company no. authority purpose date date Major conditions imposed compliance Ola Beleza AJL MDTCC Direct Sales 29 28 1. Ola Beleza shall not: 932292 Licence to carry October October (i) transfer the Direct Sales Complied on a direct sales 2019 2021 Licence to any other person. business (ii) practice a marketing plan Complied which has not been approved by the Controller of Direct Sales. (iii) market products or services Complied other than those which have been approved by the MDTCC. (iv) amend any part of the Complied approved marketing plan for a period of 2 years. 2. Ola Beleza shall obtain the approval from MDTCC to: (i) commence any campaign, Complied promotion, or any type of advertisement for the purpose of marketing the products. 145 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) Licence Issuing Subject matter I Issue Expiry Status of Company no. authority purpose date date Major conditions imposed compliance (ii) market new products, or amend Complied the pricing structure and other matters related to the products, before marketing the products. (iii) make any changes to the name, Complied equity structure and directors of the company. 3. Ola Beleza shall commence full Complied business operation within 6 months from the date of issuance of the Direct Sales Licence; 4. Ola Beleza shall provide training to its Complied distributors or members. 5. Ola Beleza shall display the Direct Complied Sales Licence number on all billboards, all types of advertisements, print materials and company letterhead. 146 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (iv) Other operational licences I approvals The business and signage licences in respect of our HQ are valid and subsisting as at the LPD. Such licences are issued by Majlis Perbandaran Subang Jaya and are typically valid for a period of 1 year and renewable annually upon expiry. We also hold a non-exclusive music licence issued by Music Rights Malaysia Berhad to play copyright music at our retail outlets listed under the music licence. When new retail outlets are opened subsequent to the renewal of such music licence, separate music licences will be issued for the new retail outlet. Major License no. I Certificate Issuing Subject matter I Expiry conditions Status of Company no. IReference no. authority purpose Issue date date imposed compliance Rampai 186971832B Majlis Business and Nil 31 Nil N/A Niaga Perbandaran signage licence in December Subang Jaya respect of our HQ in 2020 Subang Jaya InNature MPSJ/LES/600103/07607 - Majlis Temporary Nil 21 Nil N/A 19 Perbandaran business and February Subang Jaya signage licence in 2020 respect of our HQ in Subang Jaya N/A Ola MPSJ/LES/600103/07608- Majlis Temporary Nil 21 Nil Beleza 19 Perbandaran business and February Subang Jaya signage licence in 2020 respect of our HQ in Subang Jaya N/A Rampai IN 1801245211N 190066661 Music Rights Non-exclusive 1 January 31 Nil Niaga IN19011950 Malaysia music licence for 2019, 17 December Berhad our retail channel January 2019, 2019 points-of-sale and and 22 promotional kiosks November (excluding 2019 department stores) 147 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) (v) Product notification It is a legal requirement under the Control of Drugs and Cosmetics Regulations 1984 ("CDCR 1984") that any cosmetic imported and sold in Malaysia must be a notified cosmetic, and the person responsible for placing the cosmetic in the market must be an authorised person under the notification note issued under the CDCR 1984. The notification notes are issued by the Director of Pharmaceutical Services, Ministry of Health Malaysia. Generally, these notification notes are valid for 2 years and are renewable upon expiry. For TBS products, TBSI registers the notifications for TBS products in Malaysia and Rampai-Niaga is named as an authorised importer under such notification notes. For Natura products in Malaysia, Ola Beleza registers the notifications for the Natura products and is also named as an authorised importer under such notification notes. As at the LPD, Ola Beleza has obtained 154 notification notes for the Natura products and will be required to do so from time to time for new Natura products to be imported into Malaysia. (vi) Mandatory registration as data user under the PDPA for our Natura Business Ola Beleza, in the course of operating the Natura business, collects and processes personal data from various third parties i neluding its customers or social commerce consultants. As a Direct Sales Licence holder under the Direct Sales and Anti-Pyramid Scheme Act 1993, Ola Beleza is required to be registered as a data user pursuant to the Personal Data Protection (Class of Data Users) Order 2013. As at the LPD, Ola Beleza's registration as a data user has been approved by the Personal Data Protection Commissioner. Ola Beleza also has a data privacy statement in place which complies with the PDPA. 5.20.2 Approvals, major licences and permits obtained in respect of our business operations in Vietnam (i) Franchise registration Our franchise of The Body Shop® is registered by TBSI in Vietnam as follows: Franchise Issuing Subject matter Expiry date I Validity Status of Holder authority purpose Issue date period Major conditions imposed compliance TBS Ministry of Registration of "The 9 July 2009 10 calendar years from TBS Vietnam shall operate TBS Complied Vietnam Industry and Body Shop®" the date of TBS stores in Vietnam pursuant to Trade, franchise in Vietnam Vietnam's first store terms conditions under TBS Vietnam by TBSI opening (i.e. 8 Vietnam Franchise Agreement. December 2009) 148 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) The above franchise registration is in relation to our previous franchise agreement dated 14 August 2009 between TBS Vietnam and TBSI. On 19 June 2019, TBS Vietnam and TBSI have entered into the TBS Vietnam Franchise Agreement which is valid for a term of 10 calendar years from the signing date. Further to the entering of the TBS Vietnam Franchise Agreement, TBSI is required under Vietnamese laws (Decree No. 35/2006/ND-CP detailing Law on Commercial 2005 regarding franchising) to update the registrations by lodging relevant notifications with the Ministry of Industry and Trade Vietnam within 30 days from 19 June 2019. As at the LPD, the notifications by TBSI has been lodged. (ii) Business license It is a legal requirement under Decree No. 09/2018/ND-CP guiding trading and trading related activities of foreign owned companies that TBS Vietnam shall obtain a business license prior to implementation of retail activities. Generally, the business license has perpetual term. As at the LPD, the business licence of TBS Vietnam (No. 0306717450/KD-0242) is in full force and effect. (iii) Business location registration certificate It is a legal requirement under Decree No. 50/2016/ND-CP regarding settlement of administrative violations against regulations on planning and investment of the Vietnamese government applicable to where our points-of-sale are located that TBS Vietnam shall obtain business location registration certificates prior to commencement of operations of the points-of-sale. Generally, these business location registration certificates have perpetual term. As at the LPD, all of our points-of-sale which are directly operated by TBS Vietnam, and the 14 points-of-sale operated by its agent, GC Vietnam, in Vietnam have valid and subsisting business location registration certificates. (iv) Outlet retail license It is a legal requirement under Decree No. 09/2018/ND-CP guiding trading and trading related activities of foreign owned companies of the Vietnamese government that outlet retail licenses shall be obtained prior to commencement of operations of our points-of-sale directly operated by TBS Vietnam. Generally, these outlet retail licenses are renewable upon expiry oftheir respective term which range from 7 months to 5 years. As at the LPD, all of our points-of-sale directly operated by TBS Vietnam have valid and subsisting outlet retail licenses. 149 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) (iv) Other operational licences I approvals License no. Expiry date I Certificate no. Issuing Issue Validity Status of Company Reference no. authority Subject matter / purpose Renewal date period Major conditions imposed compliance TBS 4307141580 - 3rd Department Investment Registration Issue date: Subject to To comply with regulations on trading Complied Vietnam amendment of Planning Certificate / To allow TBS - 1st issuance the expiry of activities and related trading activities and Vietnam to carry out its on 27 the operation of foreign owned enterprises (i) Decree Investment investment project to retail November term which is 09/2018/ND-CP regarding trading of Ho Chi products and provide beauty 2015; 50 years activities and trading related activities Minh City consultancy services in 3rd from 15 of foreign-owned company in Vietnam, HCMC amendment on January (ii) Circular No. 08/20131TT-BCT 24 October 2009 detailing licensing procedures to obtain 2018 the relevant licences, (iii) Circular No. 34/20131TT-BCT providing list of goods which are subject to restriction on import, export and distribution, and (iv) and other relevant regulations. TBS 5482537601 - 4'h Department Investment Registration Issued date: Subject to To satisfy the conditions on investment Complied Vietnam amendment of Planning Certificate / To allow the - 151 issuance the expiry of in accordance with the prevailing laws, and branch of TBS Vietnam in on 17 October the operation and only conduct the conditional Investment Hanoi City to carry out its 2011 ; term which is investment business after obtaining of Hanoi investment project to retail 4'h 50 years relevant certificates. City products and provide beauty amendment on from 15 consultancy services in Hanoi 6 November January 2018 2009 TBS 0306717450-001 Department Operation Registration Issue date: Nil Nil Not applicable Vietnam - 4'h amendment of Planning Certificate To allow the - 151 issuance and branch of TBS Vietnam in on 17 October Investment Hanoi City to represent TBS 2011; of Hanoi Vietnam in the following 4th City transactions with individuals, amendment on enterprises and authorities of 4 May 2017 Vietnam: 150 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) License no. Expiry date I Certificate no. Issuing Issue Validity Status of Company Reference no. authority Subject matter I purpose Renewal date period Major conditions imposed compliance - To retail distribute, wholesale distribute goods coming with the Harmonized System Codes listed in the Business License of TBS Vietnam; - To provide consultancy services regarding beauty care ; consultancy services regarding use of The Body Shop® cosmetics and consultancy services regarding The Body Shop® beauty care products; and Consultancy services regarding business management: consultancy service regarding management in general, consultancy service regarding marketing management; and other consultancy service regarding management. 151 Registration No.: 199401034915 (32059B·X) 5. BUSINESS OVERVIEW (cont'd) License no. Expiry date I Certificate no. Issuing Issue Validity Status of Company Reference no. authority Subject matter I purpose Renewal date period Major conditions imposed compliance TBS 0306717450-002 Department Operation Registration Issue date: Nil Nil Not applicable Vietnam - 151 amendment of Planning Certificate To allow the - 1st issuance and branch of TBS Vietnam in Ho on 14 February Investment Chi Minh City to represent 2015; of Ho Chi TBS Vietnam in the following _ 1st Minh City transactions with individuals, amendment on enterprises and authorities of 9 May 2017 Vietnam: - To retail distribute, wholesale distribute goods coming with the Harmonized System Codes listed in the Business License of TBS Vietnam; - To provide consultancy services regarding beauty care, consultancy services regarding use of The Body Shop® cosmetics and consultancy services regarding The Body Shop® beauty care products; and Consultancy services regarding business management, consultancy service regarding management in general, consultancy service regarding marketing management, and other consultancy service regarding management. 152 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) 5.20.3 Approvals, major licences and permits obtained in respect of our business operations in Cambodia (i) Franchise registration On 19 June 2019, Green Cosmetics has entered into the Green Cosmetics Franchise Agreement which is valid for a term of 10 calendar years from the Signing date. As at the LPD, our The Body Shop® franchise registration in Cambodia is in progress and has yet to be registered in Cambodia. Under the Law on Unfair Competition and Notification on Recordal of Franchise Contract in Cambodia, for a franchise agreement to be legally enforceable against any third party, it must be submitted for registration and recordal with the Ministry of Commerce ("MOC"). The regulated timeline for the filing for recordal of a franchise agreement in Cambodia is 60 business days or longer. In addition, the exclusive right of the franchisee to use the mark granted under the franchise agreement shall also be acquired by the franchisee via registering the franchise agreement with the MOC. These registrations can be done by either TBSI as the franchisor or Green Cosmetics as the franchisee, after the mark is registered with the MOC by TBSI or any its authorised persons and a Certificate of Mark Registration is obtained. Nonetheless, the registration of the Green Cosmetics Franchise Agreement and the exclusive right to use the marks granted therein is not a pre-requisite requirement for the validity of the Green Cosmetics Franchise Agreement and the non registration will not impede Green Cosmetics' rights as franchisee granted under the Green Cosmetics Franchise Agreement to commence the franchise operations in Cambodia. As at the LPD, 12 of TBSI's marks are in the process of registration with the MOC in Cambodia and 7 of TBSI's marks have been registered. (ii) Office location registration Filing for office location registration is a practical requirement imposed by the local authority in Cambodia. After the registration with the MOC and the General Department of Taxation ("GOT"), Green Cosmetics shall register its office location with local authority of the jurisdiction where its office is located. The application shall be processed from the village (lowest level) to city/provincial hall (highest level). This letter of registration of office location is issued by the governor of the city/province. Generally, this letter has a validity period of 1 to 2 years (depending on each local authority) and shall be renewed regularly. From the legal perspective, failure to apply for and obtain or renew the approval would cause Green Cosmetics to be considered as not fully in compliance with the practical requirement. Failing to register office location would risk having the local authority (i.e. the Phnom Penh Municipality): (i) prohibiting any display of signage and/or signboards; and/or (ii) ordering Green Cosmetics to move its office out of that jurisdiction. 153 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cant'd) As a matter of practice, the requirement for registration of the office location with local authority has not been strictly implemented and it can easily be rectified, when requ ired , by filing for such registration with the Phnom Penh Municipality where the office of Green Cosmetics is located , and no penalty will be imposed on any non-compliance. As at the LPD , Green Cosmetics has filed for office location registration with the Phnom Penh Municipality and has complied with such obligation. (iii) Other operational licences I approvals License no. I Issue Expiry date Certificate no. I Issuing Subject matter I Renewal I Validity Status of Company Reference no. authority purpose date period Major conditions imposed compliance Green Permit on the Ministry of Permit to set up a Issued for 2 years with 1 . The warehouse of the Complied Cosmetics Establishment Health cosmetic trading the first an expiry cosmetic products shall be of a Cosmetic Cambodia company in time on 6 date on 11 technically suitable for storing Product Import ("MOH") Cambodia March January the products, and approved Export 2019 2021 by the SangkaUCommune Enterprise authority. 2. Green Cosmetics must: Be responsible for all business activities; Import, showcase, and distribute the product with quality, effectivity, safety to the consumers; Ensure that the product has a minimum period of 6 months for usage when sold; and Obtain the product notification for the cosmetic products to be imported into Cambodia from the MOH . 154 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Cosmetic product notification In order for TBS products to be legally imported into Cambodia, Green Cosmetics needs to register TBS products with the Department of Drug, Food , Medical Equipment and Cosmetic Product of MOH to obtain a Cosmetic Product Notification Certificate for each TBS product. As at the LPD, Green Cosmetics has obtained the Cosmetic Product Notification Certificates for 482 TBS products. The Cosmetic Product Notification Certificates carry a 2-year validity period. Green Cosmetics will also be required to do so from time to time for any new TBS products to be introduced in Cambodia . When Green Cosmetics intends to import the TBS products into Cambodia, in addition to the cosmetic product notification, it will also need to obtain necessary import approvals. As at the LPD, Green Cosmetics has obtained all the necessary approvals for the TBS products to be brought into Cambodia thus far. 5.21 Brand names, patents and trademarks Save for the intellectual property licences under the Franchise Agreements disclosed in the Section 5.15 of this Prospectus below, we do not own any brand name, trademark or patent and have not paid or received any royalties for any license or use of any intellectual property material. 5.22 Property, plant and equipment 5.22.1 Properties owned by our Group The Group does not own any real properties as at the LPD. 5.22.2 Material properties rented by our Group (i) Properties rented by our Group in Malaysia The table below provides an overview of the number of properties as at the LPD rented by our Group in Malaysia according to location, including the approximate total rented area and tenure of the tenancies. 155 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) (a) Points-of-sale and promotional kiosks Points-of-sale Approximate total rented Mall Department store Promotional area 1 Approximate rented Location store (Shop-in-shop) Airport kiosks area per property Tenure Selangor 23 1 2 5(3) 16,367 1100 to 1,044 3 months (in relation to the airport points-ot- sale) to 3 years Federal 16 11,0491 391 to 1,455 2 to 3 years Territories(1 ) Sabah 10(2) 7,771/411 to 1,231 3 months (in relation to the airport point-ot-sale) to 3 years Johor 10 6,265/ 324 to 1,356 1 to 3 years Penang 4 1,821 /409 to 500 3 years Perak 5 2,723/349 to 727 2 to 3 years Melaka 3 1,572/463 to 600 2 to 3 years Kedah 3 1,238 / 200 to 463 1 to 3 years Negeri 3 1,836/544 to 746 2 to 3 years Sembilan Pahang 2 1,111 1500 to 611 3 years Terengganu 2 1 ,167 1 500 to 667 1 to 3 years Kelantan 2 1,101 /444 to 657 2 to 3 years Total 83 3 3 6 54,021 1100 to 1,455 156 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) Notes: (1) Including Kuala Lumpur, Putrajaya and Labuan. (2) Including 1 high street store. (3) Including the pop-up store in Sunway Pyramid for our Natura business. As at the LPD, all of our points-of-sale are rented from the mall owners or operators on a rental basis and/or percentage turnover basis. This includes our 3 stand-alone retail stores located in the KLlA, klia2 and KKIA airports in Malaysia and our 3 points-of-sale in Sago in KL, Shah Alam and Johor Bahru which are rented on a leased-space basis. Most of the tenancies for our points-of-sale are usually for terms not exceeding 3 years with an option to renew for a further period of 2 years. As at the LPD, the total tenanted area for our points-of-sale is approximately 54,021 sq. ft., ranging from approximately 100 sq . ft. to 1,455 sq. ft. for each point-of-sale in Malaysia. The distribution of our points-of-sale by each region of Malaysia as at the LPD is set out in Section 5.3.4 of this Prospectus. The total rental paid by our Group for the FYEs 2016 , 2017 and FYE 2018, and FPE 2019 for our rented points-of-sale in Malaysia is approximately RM16.1 million, RM17.4 million, RM17.5 million, and RM13.4 million respectively. (b) Our HQ Approximate rented area Date of Tenure of tenancy I (Total built issuance Descriptionl Date of expiry Yearly Rental up area) (sq. of Tenant Landlord Postal address Existing use tenancy (RM) ft.) CFICCC Rampai- Steady NO.3 Jalan USJ 3 storey shop- 2 yearsl 123,300 7,152 28 April Niaga Property 10/1 C, 47620 office 1 Office 1 January 2019 to 31 1994(1) UEP, Subang premises December 2020 for all Jaya, Selangor 3 floors No. 5 Jalan USJ 3 storey shop- 2 years 1 115,000 8,294 28 April 1011C, 47620 office 1 Office First and second floor: 1994(1) UEP, Subang premises 1 January 2019 to 31 Jaya, Selangor December 2020 1.5 years / Ground floor, 1 July 2019 to 31 December 2020 157 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) Note: (1) Municipal council permit for renovation at the HQ in Subang Jaya To facilitate access by InNature's personnel who move between the adjoining Unit No. 3 and Unit NO.5 of the HQ, our Group had earlier carried out renovation works to knock down part of a section of the wall between Unit NO.3 and Unit No.5, on the 1st and 2nd floors respectively of the HQ ("Renovation"). Under By-Law 87 of the Uniform Building By-Laws 1984 ("UBBL"), openings may be made in a 'party wall' if it is made with the consent and in accordance with the requirements of the local authority, and the written permission of the properties' owner. A penalty will be imposed for any openings made without a permit from Majlis Perbandaran Subang Jaya ("MPSJ") ("MPSJ Permit") and such penalty will be calculated based on the size of the area being demolished or removed. The relevant permits for the Renovation were not obtained at that point in time as our Group had not been adequately advised on the relevant laws and regulations in relation to such Renovation by the renovation contractors. Upon discovery of the above non-compliance, Rampai-Niaga had taken steps to rectify the non-compliance and had submitted an application in relation to the Renovation to MPSJ on 12 April 2019. As at the LPD, the application is pending approval from MPSJ. The InNature Group will continue to work on obtaining the approval for the Renovation from MPSJ. Our Group anticipates to obtain the MPSJ Permit by August 2020. As at the LPD, no fine had been imposed on the Group nor any order been issued by the relevant regulatory authority in relation to the Renovation. In the event MPSJ imposes a penalty on the non-compliance, the estimated penalty amount payable is RM28,500 comprising enforcement compound of RM12,500 and building fine of RM16,000, being estimated based on the size of the area of wall being knocked down, which is not material. In the event that the MPSJ Permit is not obtained, the cost of restoring the access is negligible and is estimated to be less than RM10,000. (The rest of this page has been intentionally left blank) 158 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) As at the LPD, 3 of our points-of-sale and our HQ office are rented from a related party, Steady Property Management Sdn Bhd. Please see Section 9.1.1 of this Prospectus for the details of these transactions. These tenancy agreements are carried out at market value and on an arm's length basis As at the LPD, we are operating all of the rented properties as our retail outlets and HQ office. As at the LPD, all the tenancies for the rented properties are valid and subsisting, save for 2 of our retail outlets which are pending renewal. As at the LPD, save for the MPSJ Permit which is pending approval, none of the existing use of the properties rented by us in Malaysia breach any laws, regulations, rules and requirements in relation to land and buildings. (ii) Properties rented by our Group in Vietnam The table below provides an overview of the number of properties rented by our Group in Vietnam according to location, including the approximate total rented area and tenure of the tenancies. Points-of-sale Approximate total Department rented area 1 store Approximate rented Shopping High (Store-in- area per property Location mall street store) (sq. ft.) Tenure HCMC(1) 2 6 16,8341 1 to 7 409 to 2,949.31 years Hanoi(1) 2 2 2 6,9731 1 to 3 311 .91 to 4,430.4 years 23,8071 Total 4 B 3 311.9 to 4,430.4 Note: (1) Including our HQ which is operated from one of the points-of-sale in HCMC and Hanoi respectively. We do not own any of our points-of-sale in Vietnam. Of our 34 points-of-sale in Vietnam, 3 of our points-of-sale in the airports and 2 of our points-of-sale in the department stores are operated by the third-party airport counters and department stores owners respectively, and 14 points-of-sale are operated by GC Vietnam. The remaining 15 points-of-sale are directly operated by TBS Vietnam and TBS Vietnam rents the respective premises from third parties and mall owners. The terms of our tenancies in Vietnam ranges from 1 to 7 years in HCMC and 1 to 5 years in Hanoi. All the tenancies for points-of-sale in Vietnam rented by TBS Vietnam may be renewed subject to agreements between the parties. As at the LPD, the total tenanted area for our points-of-sale by TBS Vietnam is approximately 23,807 sq. ft., ranging from approximately 311.9 sq. ft. to 4,430.4 sq. ft. for each point-of-sale-in Vietnam. The total rental paid by our Group for the FYEs 2016,2017, and 2018 and FPE 2019 for our rented points of-sale in Vietnam is approximately RM1.9 million, RM2.9 million, RM3.4 million, and RM2.9 million respectively. 159 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cont'd) As at the LPD, all the tenancies for the properties rented by TBS Vietnam are valid and subsisting . None of the existing use of the properties rented by us in Vietnam breach any laws, regulations, rules and requirements in relation to land and buildings as at the LPD. 5.23 Regulatory requirements and environmental issues 5.23.1 Governing laws and regulations (a) Malaysia Our Group's business operations in Malaysia are subject to the following governing laws and regulations: (i) Franchise Act 1998 which services to provide for the registration of, and to regulate, franchises, and for incidental matters; (ii) the Local Government Act 1976, Trades Licensing Ordinance 1949 of Sabah and the by-laws of the respective local councils and authorities setting out the requirements to obtain business and signage licences; (iii) the Sale of Drugs Act 1952, Control of Drugs and Cosmetics Regulations 1984, the Guidelines for Control of Cosmetic Products in Malaysia which serves as reference for notification process including quality control, inspection and post market surveillance activities of cosmetics; (iv) the Sales Tax Act 2018 which governs the imposition and collection of sales tax, and for matters connected therewith; (v) the Service Tax Act 2018 which governs the imposition and collection of service tax, and for matters connected therewith; (vi) the Sale of Goods Act 1957 governing the sale of goods; (vii) the Price Control and Anti-Profiteering Act 2011 which serves to control prices of goods and charges for services and to prohibit profiteering and to provide for matters connected therewith or incidental thereto; (viii) the Customs Act 1967 and regulations made thereunder which imposes import tariff between 5.0% to 25.0% on selected products; (ix) the prevailing taxation policies in Malaysia; (x) Personal Data Protection Act 2010 governing the processing of personal data in Malaysia; (xi) Employment Act 1955 governing employment laws in Peninsular Malaysia; (xii) Sabah Labour Ordinance governing employment laws in Sabah; (xiii) the Occupational Safety and Health Act 1994 which regulates amongst others safety, health and welfare of persons at work and protection of workers against risks to safety or health in relation to his activities at work; and (xiv) Direct Sales and Anti-pyramid Scheme Act 1993 which governs direct sales business in Malaysia. 160 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) (b) Vietnam Our Group's business operations in Vietnam are subject to the following governing laws and regulations: (i) Law No. 67/2014/QH13 on Investment (as amended by Law No. 03/2016/QH 14) governing foreign investment in Vietnam; (ii) Law No. 68/2014/QH13 governing enterprises; (iii) Labor Code No. 10/2012/QH13 governing the employment laws in Vietnam; (iv) Law No. 58/2014/QH13 governing social insurance of employees in Vietnam; (v) Law No. 25/2008/QH12 (as amended by Law No. 46/2014/QH13) governing the health insurance of employees in Vietnam; (vi) Law No. 14/2008/QH12 (as amended by Law No. 32/2013/QH13 and Law No. 71/2014/QH13 and as guided by Decree No. 218/2013/ND CP and Circular No. 78/2014ITT-BTC) governing Corporate Income Tax; (vii) Law No. 13/2008/QH12 (as amended by Law No. 31/2013/QH13, Law No. 71/2014/QH13, Law No. 106/2016/QH13 and as guided by Decree No. 209/2013/ND-CP and Circular No. 219/2013/TT-BTC) governing the imposition of value added tax; (viii) Law No. 04/2007/QH12 (as amended by Law No. 26/2012/QH13, Law No. 71/2014/QH13) governing Personal Income Tax; (ix) Law No. 107/2016/QH13 (as guided by Decree No. 134/2016/ND-CP) governing Export and Import Tax; (x) Circular No. 103/2014/TT-BTC governing the imposition of withholding taxes; (xi) Decree No. 139/2016/ND-CP governing business registration tax; (xii) Circular No. 186/2010ITT-BTC governing repatriation of profit; (xiii) Circular No. 19/2014/TT-NHNN guiding foreign currency in connection with foreign direct investment; (xiv) Decree No. 20/2017/ND-CP prescribing tax administration for enterprises engaged in transfer pricing; (xv) Civil Code No. 91/2015/QH13 governing civil laws; (xvi) Law No. 36/2005/QH11 governing commercial matters; (xvii) Decree No. 09/2018/ND-CP governing trading activities and directly related activities by foreign investors and economic organisations with foreign invested capital in Vietnam; (xviii) Law No. 51/2005/QH11 (as guided by Decree No. 52/2013/ND-CP) governing e-transactions; 161 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (xix) Law No. 50/2005/QH11 (as amended by Law No. 36/2009/QH12) governing intellectual property; (xx) Law No. 88/2015/QH13 (as guided by Decree No . 174/2016/ND-CP) governing accounting matters; (xxi) Law No. 67/2011/QH12 governing independent audit; (xxii) Decree No. 41/2018/ND-CP guiding penalties for administrative violations in the fields of accounting and independent audit; (xxiii) Law No. 16/2012/QH13 (as guided by Decree No. 181/2013/ND-CP) governing advertising; (xxiv) Circular No. 06/20111TT-BYT providing cosmetic management; (xxv) Decree No. 43/2017/ND-CP governing matters on good labels; (xxvi) Decree No. 81/2018/ND-CP detailing the commercial law regarding trade promotion activities; and (xxvii) Decree No. 69/2018/ND-CP on guidelines for the Law on Foreign Trade Management. (e) Cambodia Our Group's business operations in Cambodia are subject to the following governing laws and regulations: (i) Law on Commercial Rules and Commercial Register dated 18 November 1999; (ii) Law on the Amendment to Law on Commercial Rules and Commercial Register dated 18 November 1999; (iii) Law on Commercial Enterprises dated 19 June 2005; (iv) Prakas No.299 MOC .CRD .P on Online Commercial Registration dated 29 December 2015; (v) Prakas No.107 MOC.CRD.P on Filing of Annual Declaration for Commercial Enterprise Online dated 05 April 2017; (vi) Prakas No.142 MOC.CRD.P on Formality and Procedure for Registration of any Change and Amendment in the Enterprise Company dated 03 June 2015; (vii) Law on Mark, Trade Name & Unfair Competition dated 07 February 2002; (viii) Notification NO.0738 MOC.IP on License Contract and Franchise Contract dated 12 March 2015; (ix) Prakas No.172. P on Display of Trade Name Boards, Billboards and Signboards dated 12 June 2002; (x) Labour Law dated 20 July 2007; (xi) Law on the Amendment to Labour Law dated 26 June 2018; 162 Registration No.: 199401034915 (32059B-X) 5. BUSINESS OVERVIEW (cont'd) (xii) Law on Trade Union dated 17 May 2016; (xiii) Law on Social Security Regime under Labour Law Provisions dated 25 September 2002; (xiv) Law on Taxation dated 24 February 1997; (xv) Law on the Amendment to Law on Taxation dated 31 February 2003; (xvi) Law NO.57 DL promulgating Law on Tax on Export & Import Products dated 26 July 1989; (xvii) Law on the Amendment to the Law on Management of Pharmaceutical dated 28 December 2007; (xviii) Sub-Decree No. 122 SO . P on Cosmetic Products Control Sub-Decree dated 28 August 2008; (xix) Prakas No. 0187 MOH on the Formality and Procedure of the Issuance of Notification Number for Cosmetic Products dated 09 March 2010; (xx) Notification No. 058 on Online Registration of Visa for Cosmetic Products Notification dated 20 January 2018; (xxi) Sub-Decree No. 122 SD.P on Cosmetic Products Control Sub-Decree dated 28 August 2008; (xxii) Prakas No. 0318 MOH on the Request for the Trading of Cosmetic Products in Cambodia dated 29 April 2010; (xxiii) Joint-Ministerial Prakas on Conditions of Ads of Medicines, Cosmetic, Feeding Products for Infants and Children, Tabacco and Private Medical, Paramedical and Medical Aid Services dated 21 February 2006; (xxiv) Prakas No.1158 GDHT.MP on Formalities and Conditions of Applying for Cosmetics Advertisement from Ministry of Health dated 03 October 2002; (xxv) Prakas No.1160 GDHT.MP on Formalities and Conditions of Cosmetic Products Registration dated 03 October 2002; (xxvi) Prakas No. 093 GDHT.MP on the Amendment of Prakas No. 1031 GDHT.MP dated 03 November 2008 on Formalities of Import-Export of Medicines dated 09 February 2015; (xxvii) Civil Code dated 08 December 2007; (xxviii) Law on Management of Quality and Safety of Products, Goods and Services dated 21 June 2000; (xxix) Prakas No. 415 on Provisions on Technical Inspection on Quality and Labelling of Manufactured and Packaged Products dated 19 May 2014; (xxx) Law on Foreign Exchange dated 22 August 1997; and (xxxi) Joint-Ministerial Prakas on Public Services and Fines by the Ministry of Health No. 1358 MEF. PrK dated 18 November 2016. 163 Registration No.: 199401034915 (320598-X) 5. BUSINESS OVERVIEW (cant'd) As at LPD, we are not in breach of laws and regulations governing our business that may have a material adverse impact on our business operations. 5.23.2 Environmental issues As at the LPD, there are no environmental issues which may materially affect our Group's operations and utilisation of our assets. (The rest of this page has been intentionally left blank) 164 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW FRO S T & SULLIVAN Suite C-11-02, Block C, Plaza Mont' Klara, 2 Jalan Kiara, t~ont' FROST fir SULLJVAN Kiara, 50480 Kuala Lumpur Ph: +603 6204 5800 Fax: +603 6201 7402 www.frost.com Date: 1 0 JA N 2010 Board of Directors InNature Berhad 1st Floor, No. 5 Jalan USJ 10/1 C, 47620 UEP Subang Jaya, Selangor Darul Ehsan, Malaysia Dear Sirs / Madams, Independent Market Research Report on the Cosmetics and Personal Care Industrv in Malaysia and Vietnam, and Brief Overview for Cambodia for InNature Berhad ("lnNature" or the "Company") We, Frost & Sullivan GIC Malaysia Sdn Bhd ("Frost & Sullivan"), have prepared this Independent Market Research ("IMR") report on the Cosmetics and Personal Care ("CPC") Industry in Malaysia and Vietnam, and Brief Overview for Cambodia ("Report") for inclusion in InNature's Prospectus dated 2 9 JAN 2020 ("Prospectus") in relation to the initial public offering of ordinary shares in InNature in conjunction with the listing of and quotation for the entire enlarged ordinary shares in InNature ("Shares") on the Main Market of Bursa Malaysia Securities Berhad comprising an offer for sale of existing Shares and a public issue of new Shares. We are aware that this Report will be included in the Prospectus and we further confirm that we are aware of our responsibilities under Section 215 of the Capital Markets and Services Act, 2007. We acknowledge that if we are aware of any significant changes affecting the content of this Report between the date hereof and the issue date of the Prospectus, we have an on-going obligation to either cause this Report to be updated for the changes and, where applicable, cause InNature to issue a supplementary prospectus, or withdraw our consent to the inclusion of this Report in the Prospectus. Frost & Sullivan has prepared this Report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of this Report. We believe that this Report presents a true and fair view of the industry within the limitations of, among others, secondary statistics and primary research, and does not purport to be exhaustive. Our research has been conducted with an "overall industry" perspective looking at the industry trends in their totality and these trends may not necessarily reflect the performance of individual companies in the industry. Frost & Sullivan shall not be held responsible for the decisions and/or actions of the readers of this Report. This Report should also not be considered as a recommendation to buy or not to buy the shares of any company or companies as mentioned in this Report or otherwise. For and on behalf of Frost & Sullivan GIC Malaysia Sdn Bhd : IMR Report Page i © Frost & Sullivan 2019 165 Registration No.: 199401034915 (320598-X) 6. INDUSTRY OVERVIEW (cant'd) FRO S T & SULLIVAN COPYRIGHT NOTICE The contents of this Report are copyright © of Frost & Sullivan GIG Malaysia Sdn Bhd. All rights reserved . Except with the prior written permission of Frost & Sullivan GIG Malaysia Sdn Bhd , no part of this Report shall be (whether directly or indirectly) given, lent, resold, or disclosed to any third party, in any format for commercial and non-commercial purposes. Additionally, except with prior written permission from Frost & Sullivan GIG Malaysia Sdn Bhd, no part of this Report shall be copied or otherwise incorporated into, transmitted to, or stored in any other website, electronic retrieval system, publication, or other work in any form (whether hard copy, electronic, or otherwise) for purposes other than the listing of InNature Berhad on the Main Board of Bursa Malaysia Securities Berhad. Any use of the information in this Report for the purpose of, but not limited to , the production of any third party publications or analysis shall be based on consent of Frost & Sullivan GIG Malaysia Sdn Bhd, and accompanied by an acknowledgement or citation of FROST & SULLVIAN as the source. Methodology For the purpose of preparing this Report, Frost & Sullivan has conducted primary research encompassing inteNiews with industry experts and participants, and secondary research, which included reviews of company reports, official websites/social media pages, independent research reports, information from industry associations/authoritieslinternational organisations, and information from Frost & Sullivan research database. Unless being made available in the publicly available sources, projected data was derived by Frost & Sullivan using historical data analysis with the consideration of the social, economic, and political environments in the relevant markets from 2019 to 2023. Comparable key mono-brand beauty retailers identified in this report have been selected with long list of brands developed by screening directories and visiting key shopping malls in each respective country. Subsequently, the list was presented and discussed with industry players and experts 1 that agreed to be inteNiewed for the purpose of the analysis. Information were further validated by contacting identified brands via official channels (e.g. social media platform, telephonic method, among others) and fine-tuned via public information through secondary research (which covers reviews of company reports, official websites/social media channels, independent research reports, information from industry associations/authoritieslintemal organisations, as well as information from Frost & Sullivan research database). Profile of Frost & Sullivan GIC Malaysia Sdn Bhd FROST & SULLIVAN is a global independent industry research and consulting organisation headquartered in the United States of Amen'ca with over 60 years of establishment. In Malaysia, FROST & SULLIVAN's subsidiary, Frost & Sullivan GIC Malaysia Sdn Bhd, operates two offices (Kuala Lumpur and Iskandar Malaysia) with more than 200 employees offering market research, marketing and branding strategies and business advisory seNices across 12 industries. FROST & SULLIVAN is involved in the preparation of independent market research reports for capital market exercises, including initial public offerings, reverse takeovers, mergers and acquisitions, and other related fund-raising and corporate exercises. Profile of the IMR signee, June Liang Pui San June Liang is the Country Head, for Frost & Sullivan GIC Malaysia Sdn Bhd. June Liang possesses over 22 years of experience in market research and consulting, including over 12 years in independent market research and due diligence exercises for capital markets across the Asia Pacific region. June Liang holds a LLB (hons) from University of Wales, Cardiff and MBA from Imperial College. For further information, please contact: FROST & SULLIVAN GIC MALAYSIA SDN BHD Suite G-11-02, Block G, Plaza Mont' Kiara, 2 Jalan Kiara, Mont' Kiara, 50480 Kuala Lumpur Ph: +6036204 5800 Fax: +6036201 7402 www.frost.com 1 Industry players are individuals currently or previously working for key mono-brand beauty retailers. Industry experts are individuals with in-depth knowledge on the industry (e.g. industry analysts). IMR Report Page ii © Frost & Sullivan 2019 166 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW (cont'd) FRO S T & SULLIVAN 1 MACROECONOMIC OVERVIEW OF MALAYSIA, VIETNAM AND CAMBODIA Malaysia's economy grew during the period 2013-2018 with its GDP increasing from RM 1,033.1 billion in 2013 to RM1,446.9 billion in 2018 at a CAGR of 7.0%2 However, due to the depreciation of the Ringgit Malaysia ("RM") against the United States Dollar ("USO"), the GDP recorded a lower growth rate in the same period in USD terms3, moving from USD327.9 billion in 2013 to USD358.6 billion in 2018 at a CAGR of 1.8%. The International Monetary Fund ("IMF") forecasts Malaysia's economy to grow at a CAGR of 5.6% from USD358.6 billion in 2018 to USD470.2 billion in 2023, as the economic activity is expected to be further supported specifically by the private sector's expenditure, household spending and stable labour market conditions 4. Vietnam's GDP grew from USD170A billion in 2013 to an estimated USD241.3 billion in 2018 at a CAGR of 7.2%. The on-going shift of labour from the agriculture to the manufacturing and services sectors and the strong inflow of foreign direct investments ("FOls") are expected to support Vietnam's GDP growth from USD241.3 billion in 2018 to USD363.0 billion in 2023 at a CAGR of 8.5%. CambOdia's GDP grew from USD15.2 billion in 2013 to USD24A billion in 2018 at a CAGR of 9.9%. The supply of affordable and low-skilled labour in Cambodia has attracted FDls into the country, particularly for the production of garments and footwear for export, in addition to its construction and services sectors which are the main drivers of their economy. Cambodia's GDP is forecasted to grow from USD24A billion in 2018 to USD37.0 billion in 2023 at a CAGR of 8.6%. Chart 1-1: GOP based on current pricess of selected ASEAN countries6, 2013-2023F .... 500 u c: --~~~~~C~AG!R~(~2~01~~~2~02~3~F~) ~~~l 't: 0 400 ~:s~ 300 ~<.'lc 200 8 2. 100 o Malaysia Vietnam Cambodia 112013 112014 112015 112016 112017 112018 112019F 112020F 112021F 1!12022F lil2023F Note: Nominal GDP measured at current prices excludes changes in inflation and fluctuations of the foreign exchange. Source: IMF (World Economic Outlook ("WED", October 2019); Frost & Sullivan As of 2018, the population of Malaysia, Vietnam, and Cambodia was 143.2 million, and it is expected to reach 151.1 million by 2023, achieving a 1.1 % CAGR during 2018-20237. The population of Malaysia, Vietnam and Cambodia is also on average younger compared to that in some other ASEAN countries. Malaysia has a higher urbanisation rate compared to Vietnam and Cambodia, with the urban population estimated to grow from 76.0% in 2018 to 78.7% in 2023. In terms of labour partiCipation rate, all three countries are above the global average as of 2018, due to strong economic performance and resilience to external economic impacts. The positive economic situation is contributing to rising incomes and the emergence of the middle-income class. The percentage of people with annual income of USD5,000 and below is forecasted to decrease steadily across ASEAN countries during 2018-2023, and the average household disposable income is forecasted to rise, with Malaysia and Vietnam expected to be the fastest-growing. From 2018 to 2023, the overall disposable income in Malaysia, Vietnam and Cambodia is forecasted to continue increasing at a CAGR of 7.2%. The growth of the disposable income and the growth of the middle-income class have contributed to the growth of the total household final consumption expenditure from 2013 to 2018. Household final consumption expenditure per capita in Cambodia and Malaysia registered a CAGR of 3.6% and 5.3%, respectively, from 2013 to 2018, while Vietnam grew at a faster pace at a CAGR of 6.3%9. The ASEAN economies are coming out as strong players in the fast-moving digital economy and social commerce 10 is growing in these countries. It is a trend that is uniquely suited to the ASEAN environment, where social network user penetration is one of the highest in the world'" 2 INTRODUCTION TO THE CPC INDUSTRY IN MALAYSIA, VIETNAM AND CAMBODIA Cosmetics and Personal Care ("CPC") forms part of the Personal Products SUb-industry in the Global Industry Classification Standards l 2. CPC products satisfy all types of personal hygiene, and beauty needs. It comprises two main types of products, namely: Cosmetics (products used to enhance a person's appearance) and Personal Care (products used for personal hygiene and/or beautification purposes). CPC products can, among others, be classified based on their pricing and distribution channels. Prestige: CPC products sold at a high price and generally distributed at stand-alone stores, multi-brand beauty retailers, beauty service providers and department stores. Mass: CPC products sold at a low price and generally distributed at hypermarkets, supermarkets and drugstores. Masstige: CPC products that carry higher value- 2 Based on GDP at current price (national currency). Source: IMF (WEO October 2019) 3 Due to the depreciation of the Malaysian Ringgit against the US Dollar in the period 2013-2018 4 Bank Negara Malaysia, BNM Quarter1y Bulletin 2Q 2019, July 2019 5 Refers to GDP al prices of the current reporting period. It is also known as nominal GDP , Selected ASEAN countries is referring to Malaysia, Vietnam and Cambodia where InNature Berhad is present ' IMF (WEO, October 2019) • World Bank.' World Development Indicators" 10 Social commerce: usage of social networks to support 8-commerce transactions of purchasing products and services. " Frost & Sullivan analysis \2 MSCI and Standard & Poors: Global Industry Classification Standard. Personal Products (code 30302010) IMR Report Page 1 © Frost & Sullivan 2019 167 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW (cont'd) FRO S T & SULLIVAN added benefits13 compared to mass products, and they are distributed similarly to prestige products but are priced at a lower level. Distribution: Mass, masstige and prestige CPC products are distributed through various channels. Table 2-1: Main distribution channels of CPC products - . ~~I"'" :'~J- '1:J·~_ ~~'~--'r": ~-:Y7.~;!t;~;;;:~ - \t"'" ". . - ~t?ffi:: .... • .- ... '1;:;' - Traditional retail Mini markets, grocers, wet markets Mom and pop convenience stores, local grocery stores, wet markets. " Hypennarkets, supennarkets, convenience Modern retail Tescc, AEON, Giant, 7-Eleven, Parkson, SOGO, Big C, Intimex, Superstore stores; del2artment stores Drugstores / Independent, chain stores Guardian, Watsons, Pharmacity, Ucare Phanna parapharmacies Beauty service providers Hair salons/spa brands Sothys, AsterSpring, Cat Mac Spa, Badia Spa Multi-brand Sephora, Sasa Beauty retailers The Body Shop, L'Occitane, Kiehl's, The Face Shop, Innisfree, Aesop, Yves Mono-brand Rocher, Elianto Brand's websites The Body Shop, L'Occitane Online retailers Th i rd-~arty websites Lazada, Zalora, Henna, Tiki -- /Direct selling Multi-level marketing Nu Skin, Avon, Amway, Mary Kay, Oriflame, Elken Note. Marked m bold and underlmed are the types of channels which will be the focus of this report. They are the channels used by mono-brand beauty retailers for the sales of their CPC products. Source: Frost & Sullivan This report focuses on the market where InNature operates. InNature is a mono-brand beauty retailer. It sells its CPC products mainly via its own mono-brand physical points-of-sale, via department stores, or via online points-of-sale (both its own and third-party online websites). 3 ANALYSIS OF THE MALAYSIAN MONO-BRAND BEAUTY RETAILING INDUSTRY 3.1 DEMAND DRIVERS Growing population and growth of the middle-income class: Total population grew from 30.2 million in 2013 to 32.4 million in 2018 with increasing employment rate over the same period being driven by the positive economic perfonnance of the country. Simultaneously, the upper income group with annual income of more than USD30,001 are expected to increase from 25.7% of population in 2018 to 39.6% of population by 2023 1S Rise in spending power by female consumers: Over the last five years, the number of employed women increased from 5.0 million in 2013 to 5.7 million in 2018 at a CAGR of 2.7% . Disposable income per capita for the female population grew at a CAGR of 10.6% during 2013-2018, which is at a faster rate compared to the male popUlation, which grew at a CAGR of 6.4%. The growth trend is expected to continue between 2018 and 2023 at a CAGR of 8.1 % for the female population and 7.4% for the male population 1s. Growth of the online market for CPC products: The increase in e-commerce participation by consumers coupled with the higher ease of selling products online has supported the growth of the online market for CPC products via different channels: via own-brand websites, business-to-consumer channels such as Zalora or Hermo or consumer-to-consumer channels such as Shopee or Lazada. This has encouraged the entry of more CPC brands, to cater to the increased demand for CPC products. Improving consumer confidence index ("CCI"): Malaysia's CCI registered 127.0 points during the third quarter of 201817, attributed to post-election optimism as well as the zerorisation of the Goods and Services Tax on 1st June 2018. In 402018, the re-introduction of Sales and Services Tax in September 2018 may have also contributed to lower CCI. The lower CCI figure reported in 302019 (109.0) comparing to 30 2018 (127.0), indicates challenging market conditions and poor consumer sentiments based on job prospects, household spending, and intentions to spend lB . Although CCI has recorded steady quarter-on-quarter decline in 2019 as compared to 03 2018, it remained above the 100 point mark 1g indicating overall stabilising market conditions and cautious optimism approach among consumers. Growing demand for natural-based ethically-sourced products and positive ethical consumerism behavior: The benefits of using products with high natural ingredient content include lower risk of side effects20 which encourages consumer to opt for products that are natural-based or vegetarian-friendly. Malaysian consumers are also becoming more conscious about environmental sustainability issues and are believed to increasingly make purchase decisions based on sentiments to support conservation movements, purchasing products that are cruelty-free, vegan-friendly, have recyclable packaging, produced naturally, support wildlife conservation, or promote environmental sustainability21,22 The Malaysian Government has introduced, among other initiatives, recycling campaigns, as well as the movement to ban and limit the usage of single-use plastics such as plastic straws and plastic bags. 13 Value-added benefits defined as either delivered to or perceived by consumers (e.g. health benefits, status, branding). 15 Data based on income at purchasing power parity. Source: IMF and Frost & Sullivan analysis 16 Frost & Sullivan analysis 17 Nielsen, Malaysia's 04 Consumer Confidence Dips, February 2019 18 The Star, "Consumer confidence stable in third quarter", December 2019 "Malaysia's CCI surpassed the 100 paint mark in 012018 for the first time since 03 2013. 20 US National Library of Medicine National Instrtutes of Health "Cosmetic benefits of naturat ingredients", 2014 21 Minlel, "2018 Global Beauty and Personal Care Trends' , 2018 Z2 HalaIFocus.net, "Malaysia: Ethical Consumerism and the Importance of Halal Cosmetics", April 201 8 IMR Report Page 2 © Frost & Sullivan 2019 168 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW (cant'd) FRO S T & SULLIVAN Growing demand for halal-compliant products among consumers: Halal products are based on the concept that, among others, products must be clean, manufactured and handled with proper hygiene and do not intoxicate or cause harm to consumers. Ethically sourced and natural-based products address some of these concerns and are therefore more suitable to the wider population in Malaysia who favour safe and environmentally friendly products. Higher added value benefits: Masstige CPC products carry higher value-added benefits compared to mass products but are affordably priced compared to premium or lUxury CPC products. These products would appeal to the growing middle-income group who looks for premium quality at an affordable price. Product visibility for brands with international presence: Masstige CPC products which have international presence tend to portray a synchronised international image that is more exclusive and appealing to consumers who associate international brands with premium quality. These brands usually have elaborate and distinctive product display and retail outlet designs at all points-of-sale. Expanding personal care routines: Consumers are increasingly following a multi-step skin care routine and practicing a proactive approach towards skin care and appearance. The number of products used in skin care routine for Asian consumers can expand up to 10 to 15 items23 and consumers are likely to purchase from more than one established and trusted CPC brand name for their personal care routines. Strong purchasing power from tourists: In 2018, the top three visitor arrivals by nationality were from Singapore (10.6 million), Indonesia (3.3 million), and China (2.9 million), all with a strong propensity to spend. Evidently, tourist spending grew at a CAGR of 5.2% from RM65.4 billion in 2013 to RM84.1 billion in 2018. The growth of tourist arrivals with strong spending power from neighbouring countries is likely to increase the purchases on established consumer brands, including branded CPC products, as such brands may not be available in their country. 3.2 RESTRAINTS More consumers buy mass CPC products: Majority of consumers prefer to buy mass CPC products due to convenience and accessibility. Consumers who prefer to purchase mass CPC products may not easily convert to buying products from mono-brand beauty retailers as they are likely to have different needs, are more cost conscious and do not prioritise ethical consumerism behaviour. Rising cost of doing business: The costs of doing business in Malaysia such as rental fee, staff cost and distribution cost are increasing which can narrow the margins for mono-brand beauty retailers, especially those in the masstige segment as CPC products in the masstige segment are priced at a lower level. Nonetheless, masstige brands with a high number of physical points-of-sale can achieve better economies of scale, and therefore can stay competitive and profitable. 3.3 SUPPLY DYNAMICS The growth of the market has supported the expansion of CPC brands during 2013-2018, across multiple retail channels; through the opening of physical stores and expansion of their online presence. Offline channels are still the main distribution channels, accounting for an estimated 99.8% of total sales as at 2018. Nonetheless, the online channel recorded the highest growth rate between 2013 and 2018, growing at a CAGR of 24.3% from RM6.0 million in 2013 to RM17.8 million in 201824. Total retail sales: CPC products are heavily distributed in department stores, pharmacy and personal care stores, and by beauty retailers, among others. According to Retail Group Malaysia ("RGM"), the personal care section is the main driver of growth under the pharmacy and personal care distribution channel with Korean and luxury brands opening beauty stores in Malaysia. Shopping malls: The total space (in square meters ("sqm"» of shopping complexes grew from 12.4 million sqm in 2013 to 16.0 million sqm in 2018, at a CAGR of 5.2%. The market slightly softened in 2018, with the total existing space increased by 2.9% as compared to 2017, but the availability rate grew to 20.7% . Shopping malls are highly favoured by monO-brand beauty retailers due to the high traffic and concentration of potential customers. The highly saturated retail landscape has led to a decline in retail sales but Malaysians are still expected to visit shopping malls and the mailing culture still remains popular as shoppers could enjoy the combination of shopping, entertainment, wellness, dining, and learning among other activities ("retail-tainment") without being under a hot weather. Shop units: With the increasing number of townships being developed across the country, the stock of shop units increased from 392,304 in 2013 to 517,337 in 2018, growing at CAGR of 5.7%. Townships are deemed to be attractive for retailers, as they have high customer traffic by combining the residential, commercial, recreational, and leisure components. The growth of townships may benefit the CPC market as beauty retailers are able to establish their own mono-brand outlets in these shop lots. Airport retail: The growth of airport retailing is supported by the growing number of passengers which grew from 68.3 million people in 2013 to 88.1 million people in 2018 at a CAGR of 5.2%. MAHB is also planning to 23 Skin Care in Asia Pacific. "Key Trends and Opportunities, In-Cosmetics Asia Presentation Summary", 12 April 2018. '4 Frost & Sullivan analysis IMR Report Page 3 © Frost & Sullivan 2019 169 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW (cant'd) FRO S T & SULLIVAN revamp the retail space in five Malaysian international airports 25, for the airports to become a shopping destination, aside from being solely a transportation hUb . Online retail: The online channel recorded the highest growth rate between 2013 and 2018 and the online retailing landscape is growing healthily in Malaysia. More mono-brand beauty retailers are launching their own online stores and engaging third-party online stores. Both mono-brand beauty retailers' online store and third party websites are adapting to the changing needs of consumers by offering greater ease of purchase, incentives, and value-added services. 3.4 INDUSTRY SIZE AND GROWTH The CPC industry has grown continuously during 2013-2018, at a CAGR of 6.2%. In the period 2018-2023, Frost & Sullivan estimates that the growth rate is forecasted to accelerate to a CAGR of 8.0%, driven by growing disposable income, urbanisation and overall total population 2s. Out of the total CPC industry27, mono brand beauty retailing is estimated to account for 16.4% (RM1.48 billion) of the total market sales in 2018. Driven by continuous launches of new physical points-of-sale, this segment has grown at a CAGR of 7.3%, outpacing the growth of the total CPC industry which recorded a CAGR of 6.2% between 2013-2018. Moving forward, the mono-brand beauty retailing market is forecasted to grow at a CAGR of 9.0% as compared to a CAGR of 8.0% for the total CPC industry between 2018-2023. Chart 3-1: Size of the CPC industry, Malaysia, 2013 - 2023F Total CPC IndustrY ' 5l -~ - ~ ~ I "r::;;---M-o-n-o--B-r-a-nd-B-e-a-u- ty- R-e-ta- i-Iin- g----'" 1l ::;; 15] '" (") ~ a ~ ~ ,0:: - 31 N "' ;;; 0 ~ I" iI ': 1111.1 i i.i U11 11 i~ :1 i i : ; II iii i II , 0 '2013 2014 2015 20tS 2017 2018 2019F2020F 2021F2022 F2023~ 0 '2013' 2014 2015' 2016' 2017' 2018 '2019F'2020F'2021 F'2022F 2023F'! Source: Frost & Sullivan analysis 3.5 COMPETITIVE LANDSCAPE The mono-brand beauty retailers market is dominated by international brands. The Body Shop is among the pioneer mono-brand beauty retailers to be established in Malaysia and also one of the first mono-brand beauty retailers to establish an online store in the Malaysian market. Among all mono-brand beauty retailers in Malaysia, The Body Shop (under Rampai-Niaga Sdn Bhd) has the widest geographical coverage in Malaysia, with 89 points-of-sale in 11/13 states and 313 federal territories as at 31st December 2019. The Body Shop's Malaysian FB 28 page has the largest fan base 29 compared to the Malaysian FB page of other mono-brand beauty retailers in Malaysia. Table 3-1: Physical and online presence of key mono-brand beauty retailers with 10 or more points-of sale, Malaysia, December 2019 25 This refers to KLlA, KLlA2, Langkawi International Airport, Kuching International Airport, and Kota Kinabalu International Airport 26 Frost & Sullivan analysis v On top of mono-brand beauty retailing, Ihe CPC industry includes: Traditional Grocery Retail, Modern Grocery Retail, Drugslores I Parapharmacies, Beauty Service Providers, Multi-brand Beauty Retailers, Online Retailers, Direct Selling, Beauty and Treatmenl 28 As at January 2019, FB is the most aclive social networking platform in Malaysia with a penetralion of approximately 91% of internet users according to the report "Digital Malaysia 2019'" by We are Sociat and Hootsuite. (The 2" and 3" most aclive social networking platforms with the highest penetration rate among internet users are: Instagram (70%) and Twitter (44%). Social networking excludes video·sharing platforms such as YouTube and social messenger platforms such as WhatsApp, FB Messenger, and WeChat). '" Number of fans referred to as the number of "likes" on the Malaysian FB page. As at 31 " December 2019 not all key monO -b rand beauty retailers have a Malaysian FB page. Instead, they rely on their global FB page which covers multiple countries. IMR Report Page 4 © Frost & Sullivan 2019 170 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW (cant'd) FRO S T & SULLIVAN Bobbi Brown (N/A) US 32 12 Shizens 2010 Mala sia (6 11 Shu Uemura (N/A) L'Oreal Mala sia _ Japan(N/A) 10 no MY FB page Note: (1) All companies are Sdn Bhd; (2) The # of physical points-of-sa/e is as at 31st December 2019; (3) Physical points-of-sa/e include stand alone retail stores (mono-brand beauty retailing store) and counters in department stores (store-in-store); (4) The # of likes is as at 31st December 2019. Source: Frost & Sullivan The mono-brand beauty market is largely fragmented. There are numerous companies with multiple brands under their portfolio. No company holds a market share of more than 20%. The top two companies, Estee Lauder Malaysia Sdn Bhd and L'Oreal Malaysia Sdn Bhd have 9 and 5 mono-brands under their portfolio respectively. Rampai-Niaga Sdn Bhd is a leading mono-brand beauty retailer, with a market share of 11.0%30 based on total market sales of RM 1.48 billion as at 2018. • _ :1111'" -;; N - ) L'Oreal Malaysia 5 Lanc6me, Kiehl's, Shu Uemura, Biotherm, Urban Decay 14.6% Rampai-Niaga The Body Shop f~S::~%~ 11.0% ~------.------AmorePacific Malaysia 5 Laneige, Sulwhasoo, Innisfree, Etude House, Mamonde 9.8% Shiseido Malaysia 4 Shiseido, Laura Mercier, NARS, Cl Procter & Gamble (Malaysia) SKI! 6.9".. L'Occitane Malaysia 2 L'Occitane, Melvita _ 5.0% LG Household & Health Care 3 The Face Shop, The History Of Whoa, Belif 3.9% _ 2.9% Naresh Global Concepts Bath & Body Works r---...- .------,------_ 2.7% r------.------Clarins ------.------Elianto Make Up Elianto . 1.9% ~------Kose Malaysia 2 KOSE, DECORTE iii 1.8% Kanebo Cosmetics Malaysia Kanebo I 0.9% 3-1 with less than 10 physical points-of-sale as at LPD. marnet share is estimated by Frost & Sullivan based on the available public information (e.g. number of stores, past industry reports), primary interviews (e.g. with selected industry players) and analysis of revenue from the latest available financial statements of key mona-brand beauty retailers, which as at LPD is as follows: Financial Year Ended ("FYE'~ March 2019 (L 'Occitane Malaysia Sdn Bhd); June 2018 (Procter & Gamble (Malaysia) Sdn Bhd, and Estee Lauder Malaysia Sdn Bhd); FYE September 2018 (Naresh Global Concepts Sdn Bhd); December 2018 (Rampai-Niaga Sdn Bhd, LG Household and Health Care Sdn Bhd, L'Oreal Malaysia Sdn Bhd, Shiseido Malaysia Sdn Bhd, Amorepacific Malaysia Sdn Bhd, Clarins Sdn Bhd, Kose Malaysia Sdn Bhd, Elianto Make Up Sdn Bhd and Kanebo Cosmetics Malaysia Sdn Bhd). Source: Frost & SuI/ivan The total online market for mono-brand beauty retailers is estimated at RM14.7 million as at 2018. Rampai Niaga Sdn. Bhd. is estimated to be the market leader, with a market share of 19.6% as at 2018 31 . 3.6 INDUSTRY OUTLOOK AND PROSPECTS While the CPC industry is considered to be highly competitive in a saturated retail landscape, the outlook for the CPC market is positive as there are stili opportunities to grow for mono-brand beauty retailers. Frost & Sullivan forecasts the total sales to grow at a CAGR of 8.0% during 2018-2023 due to the higher disposable income of consumers, driven by favourable demographic and economic prospects. During this period, the sales by mono brand beauty retailers are forecasted to grow at a CAGR of 9.0%. The retail landscape for CPC products by mono-brands beauty retailers is highly driven by shopping malis, due to the popularity of the mailing culture among Malaysians. Online retailing is growing due to higher internet penetration, improvement of logistics capabilities and customers are becoming more accustomed to online purchases. Additionally, airport retailing is also growing due to the increasing traffic of outbound and inbound passengers at the Malaysian airports. 30 Based on total sales of RM162.9 million by Rampai-Niaga Sdn 8hd, over the lotal industry size of RM1,483.5 million in 2018 31 Based on online sales of RM2.87 million by Rampai-Niaga Sdn Bhd, over the estimated induslry online sales at RM14.7 million in 2018 IMR Report Page 5 ©Frost & Sullivan 2019 171 Registration No.: 199401034915 (320598-X) 6. INDUSTRY OVERVIEW (cont'd) FRO S T & SULLIVAN 4 ANALYSIS OF THE VIETNAMESE MONO-BRAND BEAUTY RETAILING INDUSTRY 4.1 DEMAND DRIVERS Growth of the middle-income class, both in urban and rural areas: The average monthly income per capita for the urban population rose at a CAGR of 14.8% while average monthly income per capita for the rural population rose at a CAGR of 16.1 % during 2002-2018. The middle-income population in Vietnam is rising, with the number of individuals with annual income ranging between USD10,000-USD20,000 growing from an 8% share of the total population in 2013 to a 14% share of the total population in 2018, and forecasted to grow further to a 20% share of the total population by 2023. Increasing spending power of female consumers: The number of women joining the workforce grew from 49.8% in 2005 to 54.1% in 2018. In 2017, approximately 40% of the female population (or 19 million people) were considered to be potential customers of the industry, with 80% of them purchasing at least one CPC product in the previous year32. The disposable income per capita of the female population is also expected to grow at a faster pace as compared to the male population during the 2018-2023 period. Growing market for prestige and masstige products: There is a growing demand by Vietnamese women to purchase prestige/masstige cosmetics or skin care products due to growing brand awareness. Increasing internet and mobile devices penetration: Vietnam has made improvements in providing access to high-speed Internet. As at Jan 2019, an estimated 62 million people are active social media users (with approximately 64% penetration rate) and 72% of the adult population use smartphones33. On a daily average, adults spend 6 hours 42 minutes on the internet and spend 2 hours 32 minutes on social media via any electronic devices33. During the same period, major e-commerce activities among internet users are to search for product or services to buy online (87%), visit an online retail store via any devices (87%), and purchase product or services online via mobile devices (62%). Mobile phones can potentially be the main gateway for retailers to reach consumers in rural areas, specifically those living outside of the three main cities - Ho Chi Minh City ("HCMC"), Hanoi and Da Nang 34 . More purchases of CPC products via e-commerce platforms: Mobile phone penetration and internet penetration has supported the rise of e-commerce in Vietnam. According to Vietnam E-Commerce and Information Technology Agency ("VECITA"), in 2016 the online purchase value per capita was estimated at USD170 in 2016, up from USD160 in 201535. Growing acceptance of natural products: A growing number of Vietnamese consumers are opting for naturally-sourced CPC products, in particular due to the frequent scandals on counterfeit products and harmful ingredients 36 . The counterfeit CPC products of various international brands are sold in traditional markets, including in key cities such as HCMC and Hanoi, at prices substantially lower than original products. These products that are distributed and sold without relevant authority approval could contain harmful or poor quality substances that can harm consumers' appearance and health. Natural products are considered safer, of a better quality, environmentally friendly, and more effective. Vietnamese consumers also believe that naturally sourced CPC products will reduce the chances of suffering from allergy reactions and/or other health complications 37. 4.2 RESTRAINTS Competition from traditional herbal cosmetics: Local consumers may be inclined to opt for traditional herbal cosmetics due to their price competitiveness and the relevance to their beauty care traditions. Overseas purchase of branded CPC products: Apart from spending domestically, the high and upper middle-income populations in Vietnam may also be spending on branded products when they travel overseas, especially on branded CPC and clothing products due to availability, higher variety of product selections, and better pricing as compared to those sold in the country. Additionally, some original or non-counterfeit goods are imported without the authorised permission of brand owner38 Due to the high demand for masstige or premium international brands between 2015 and 2018, these products are sold at a lower price compared to the official points-of-sale prices. As of 2018, the prices of CPC products sold in official points-of-sale are relatively higher than unauthorised imported products, due to additional expenses occurred by retailers (such as store rents, staff wage, among others). As a result, there are a large number of Vietnamese consumers, especially from the lower to middle-income class that still prefers to purchase unauthorised imported products sold online. The sales of unauthorised imported products affect the brand sales of CPC products in Vietnam . 4.3 SUPPLv DVNAMICS The modern retail sector in Vietnam is developing at a faster rate compared to traditional retail, as consumers' shopping culture is constantly changing over the years. Modern retail constitutes 32% of total retail sales in 32 Viet Nam News, "Vietnamese Women's Cosmetics Market Sees Stable Growth', February 2017 33 We are Social and Hootsuite, Digital 2019 Vietnam '" IFC," E- and M-Commerce and Payment Sector Development in Vietnam", 2014 35 VEC ITA, "Vietnam E-commerce Report", 2015 36 Kantar World Panel, "Finding New Beauty Shoppers", May 2018 37 The Economic and Trade MiSSion, the Embassy of Israel in Vietnam, "Vietnam, Cosmetic Review", January 2017 J6 This refers to cases such as 3rd party vendors who buys the products in bulk then sells via their own website or other non-official sales channels at prices lower than original retail prices IMR Report Page 6 © Frost & Sullivan 2019 172 Registration No.: 199401034915 (320598-X) 6. INDUSTRY OVERVIEW (cont'd) FRO S T & SULLIVAN 2017, as compared to 25% in 2015, and it is expected to reach 45% by 2020 39 . Majority of the modern retailers are concentrated in major urban cities such as Hanoi, HCMC, and Da Nang. The retail culture in Vietnam is different from that of Malaysia. While shopping culture and preference in Malaysia are prominently toward shopping malls, high-street stores are observed to be a popular channel for Vietnamese consumers even though there is an emerging popularity and growing acceptance of shopping malls. Although online retailing is the fastest growing trade channel, Vietnamese consumers prefer the benefit of physical proximity of purchasing fast-moving consumer goods in bricks and mortar points-of-sale as this allows them the convenience to consult staff, get advice and test products before making purchases, due to the growing emphasis on product quality and suitability40 In January 2017, approximately 90% to 95% of the market for international cosmetics products was mainly centered in two big cities, namely the southern-based HCMC and the northern-based Hanoi41 . Shopping malls: The number of shopping malls is growing at a CAGR of 10.1 % from 130 shopping malls in 2013 to 210 shopping malls in 201842 . The number of shopping malls is forecasted to reach more than 300 by 202043 despite several malls closing down due to inability to adapt to local consumer behaviour. Department stores: Approximately 20% of CPC products are distributed by department stores 44. As a reference on the growth of department stores in the country, selected nine companies 45 have established 78 department stores as at 2018, and the number is forecasted to increase to 96 department stores by 2019. Shop units: Majority of consumers prefer to shop in high-street stores compared to shopping malls due to the limited number and lack of well-developed shopping malls. As a result, most CPC retailers are setting up their points-of-sale in high-street stores to suit the preference of the local customers. Airport retail: Passenger traffic increased from 6.0 million in 2013 to 10.9 million in 2017 at a CAGR of 14.4% and the Airports Corporation of Vietnam ("ACV") is looking to increase its revenue from retail. As the ACV recognises the need to expand the retail areas in airports, mono-brand beauty retailers have the opportunity to grow their revenue by opening physical points-of-sale at the airports. Online retail: In Vietnam, the online channel is growing as it provides ease of purchase for consumers that are located outside of major urban centers and far from main cities where the key shopping areas are located, which provides a valuable channel for retailers to reach mass consumers in rural and sub-urban areas, reducing the need for a physical presence. In 2016, the Government of Vietnam approved the E-Commerce Development Master Plan to develop the e-commerce platform in all cities and provinces throughout the country by 2020. The Master Plan forecasts that online shoppers is expected to reach 30% of the nation's population by 2020, with the average annual spending on online shopping likely to reach USD350 per individual 46 .The business-to-consumer retail sales is forecasted to reach USD10 billion by 2022, which will account for 5% of the total retail and services revenue in Vietnam. 4.4 INDUSTRY SIZE AND GROWTH The CPC industry grew at a CAGR of 12.0% from VND22.23 trillion to VND39.19 trillion during the period 2013- 2018 and it is expected to increase to VND67.98 trillion in 2023, at a CAGR of 11.6% in 2018-202347 . The mono-brand beauty retailing market is estimated to account for 8.8% (VND3.46 trillion) of the total CPC industry in 2018. This segment has been growing at a CAGR of 14.5% during 2013-2018, faster than the total CPC industry which registered a CAGR of 12.0%. In the period 2018-2023, the mono-brand beauty retailing market is expected to grow faster than the total CPC industry at a CAGR of 13.2% and 11 .6% respectively_ Chart 4-1: Size of the CPC industry, Vietnam, 2013 - 2023F ro r------~ Total CPC Industry ro C;; 0> 1 0 Mono-Brand Beauty Retailing 0 ,..: 0 en ... 0> 0> 0 <0 <0 '" 80 , N ~ o:i "'V <0 Z ... ill C N 0 ~ c- 0> ... 60 1 '""! o:i "' ... "' '"c 19 EU-Vietnam Business Network ("EVBN"), "Vietnam's Distribution and Retail Channel Edition", 2018 '" The Voice of Vietnam, "Wealthy Vietnamese shoppers prefer to purchase product online', August 2017 41 The Economic and Trade Mission, the Embassy of Israel in Vietnam, "Vietnam , Cosmetic Review", January 2017 42 General Statistics Office of Vietnam 43 EVBN, "Vietnam's Distribution and Retail Channel Edition", 2018 44 This includes supermarkets as well. Source: in-cosmetics ASia, Vietnam Market o IMRReport Page 7 © Frost & Sullivan 2019 173 Registration No.: 199401034915 (320598-X) 6. INDUSTRY OVERVIEW (cont'd) FRO S T & SULLIVAN compared to the Vietnamese FB page of other mono-brand beauty retailers. In the mono-brand beauty market, 49 The Body Shop holds a market share of 3.5% based on total market sales of VND3.46 trillion as at 2018 . Table 4-1: Physical and Online Presence of Key Mono-Brand Beauty Retailers with 10 or More Points-of Sale, Vietnam, December 2019 , ' .. ·T::.:; .... ;:1' ::: .' ...... '}!: ,'.' :;';'~1' ~.: ~l ~ I\~~; -~ ~::';~~:.:. ~ ~j) ';:~;:~::j> r;. --.~.'~> ~l::'::.. , ,;J::~t~~~·· ·~·:~~~~E.;:~~~~~:~~· , III I', 'f" o~ _ -iI'~'I4;%~ - . ,"CI3!h~<:o 21',,12..... !l'·'$"l6i:,..-,,!' "_"~!cl~.,,,~~-.. ,,, §tiWJ!jl\"'!1' • • )'j''':.~"''1·, .' • Yves Rocher (2007) Botanical Cosmetic France(-90) 50 998k likes The Body Shop (2009) TBS Vietnam UK (58) 34 698k likes OHUI(N/A LG Vin a Cosmetics South Korea N/A 34 113k likes Shiseido 1997 Shiseido Cosmetics Vietnam Japan 29 30 no VN FB page Menard(2004) TTM Trading Japan 19 29 149k likes Vichy (2007) L'Oreal Vietnam France(51) 17 noVN FB page Laneige (2005) Amore Pacific Vietnam South Korea(9) 15 342k likes The History of Whoa 2003 LG Vina Cosmetics South Korea N/A 14 22k likes Innisfree Amore Pacific Vietnam South Korea 11 12 626k likes ~(2007) L'Oreal Vietnam France 130 11 no VN FB page M·A·C Cosmetics (2013) Estee Lauder (Vietnam) US(120) 10 no VN FB ~alle Clinique (2012) Estee Lauder (Vielnam) US (51) 10 noVN FB page Note. (1) The number of phYSical pomts-of-sale IS as at 31" December 2019, (2) PhYSical pomts-of-sale Include stand-alone retail stores (moncr brand beauty retailer stores), counters in department stores (store-in-store), and spas; (3) The number of likes is as at 31" December 2019. Source: Frost & Sullivan Chart 4-2: Market share of total sales by key mono-brand beauty retailers, Vietnam, 2018 interviews (e.g. with industf}' players) and analysis of sales via points-of-sale by selected key moncrbrand beauty retailers. Source: Frost & Sullivan The Face Shop has the highest number of points-of-sale (81 points-of-sale) compared to Yves Rocher, The Body Shop, 0 HUI, and Shiseido with 50, 34, 34 and 30 points-of-sale respectively as at 31 s1 December 2019. The Body Shop has established stores in major high-street areas such as Ba Trieu, Hai Ba Trung District, Hanoi, where competitors, such as Yves Rocher and Innisfree, are also present within the same street. The online market for mono-brand beauty retailers is estimated at VND85 billion as at 2018. TBS Vietnam is estimated to be one of the largest in tenns of online sales, with a market share of 10% as at 201850. 4.6 INDUSTRY OUTLOOK AND PROSPECTS The outlook for the CPC market is positive. Frost & Sullivan forecasts the total sales to grow at a CAGR of 11.6% in the period 2018-2023. During this period, the sales by mono-brand beauty retailers are forecasted to grow at a CAGR of 13.2%. The positive demographic and economic prospects for Vietnam are attracting new CPC companies to establish their presence in the country and existing players to expand their physical presence. The growth of the economy is contributing to the growth of the disposable income and the emergence of the middle-income class. The number of shopping malls in Vietnam is expected to grow to cater to the changing preferences by Vietnamese consumers, who are increaSingly attracted by shopping centres not only as a destination for shopping, but also for entertainment and to socialise. Due to the growth of the Internet penetration, the online platform is also becoming an important channel for retailers to reach consumers with access to the internet, without the need for a significant geographical expansion of the physical points-of-sale. 5 OVERVIEW OF THE MONO-BRAND BEAUTY RETAILING INDUSTRY IN CAMBODIA 5,1 DEMAND DRIVERS Growth of wealth per adult supporting the spending power: During 2013-2018, wealth per adult grew at a CAGR of 5.2%. The economic development in the country is supporting the growth of income and of disposable income, for both men and women, contributing to higher expenditure on CPC products. among internel users are: Inslagram (51%) and Twitter (37% ). Social netwoll IMR Report Page B © Frost & Sullivan 2019 174 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW (cont'd) FRO S T & SULLIVAN Growing attention to appearance: The young population is increasingly becoming exposed to social media, particularly in the major urban areas, and pay greater attention to physical appearance. Social media is likely to result in a greater influence among consumers in their purchasing habits and selection of products. CPC brands are increasingly using social media as a platform to reach potential customers. Growing interest over quality and original products: Due to growing income and literacy levels, consumers are increasingly looking for better quality and original products, thus limiting the market for imitation products which in the past have been responsible for health issues to consumers51 . Cambodians are increasingly aware of the side effects of counterfeited CPC products, through social media platforms, as consumers share their experience with products and provide feedback on the sellers. Growing tourism industry likely to expand demand for branded CPC products: International tourist arrivals have grown from 4.2 million in 2013 to 6.2 million in 2018 at a CAGR of 8.1% with average spending per tourist increasing from USD605 to USD706 over the same period52 5.2 RESTRAINTS Poor infrastructure network, which inhibits access by consumers to modern retail stores: Poor infrastructure network is seen as one of the main challenges to Cambodia's growth53 However, the ongoing development of internet infrastructure, which has resulted in the favourable growth of internet penetration in the country from 6.8% in 2013 to 40% in 201854, is likely to foster the development of the e-commerce channel as an alternative for CPC distribution. Although growing, the disposable income remains low in rural areas: The middle-income class is still relatively small compared to the total population and it is concentrated in main urban areas. Masstige and prestige CPC products, mostly imported, may only be affordable to consumers within urban areas. Overseas purchases of branded CPC products: The high-income population is still small in Cambodia, and may prefer to purchase branded CPC products abroad while travelling overseas, due to a higher variety of products available and better pricing as compared to the ones available within the country. 5.3 SUPPlv DVNAMICS Most consumers purchase their CPC products from points-of-sale within their proximity, largely due to poor infrastructure and long-lasting relationships with the store owner and employees. In large cities, however, the emergence of shopping malls with multiple stores and offering leisure facilities, are attracting consumers to travel for their purchases. Therefore, due to the high traffic of consumers per day, major global mono-brand beauty retailers are expanding their presence in the country by opening shops in new emerging shopping malls. As at 2018, while there are a growing number of purchases made online, the majority of mono-brand beauty retailers still rely on physical sales channels for their business activities in Cambodia . While still being a nascent trend, the online channel is the fastest growing sales channel in Cambodia, driven by growing internet penetration in the country which grew from 5.0 million people in 2014 to 13.6 million people in 2018 at a CAGR of 28.4%55. As a country that is undergoing economic and business landscape reforms, only a few large international mono-brand beauty retailers are present in Cambodia as at 2018. This presents a favourable opportunity for first-mover CPC players to build loyalty with the younger population, who has a growing disposable income, a more consumerist attitude, and a greater attention to the lifestyle. 5,4 INDUSTRV SIZE AND GROWTH The market for CPC products in Cambodia grew during 2013-2018, at a CAGR of 17.0%, driven by the positive performance of the economy, which has given a boost to the disposable income, and therefore stimulated the growth of local commercial activities and attracted multiple international brands to expand their presence in the country. Sales are forecasted to grow both in physical points-of-sale and online. Online sales are forecasted to grow at a faster pace, as an increasing number of Cambodians are connected to the internet and consumers located far from commercial areas rely on online purchases to overcome the commercial accessibility challenge posed by poor infrastructure network. Out of the total CPC industry, the mono-brand beauty retailing segment is estimated to account for 12.9% of the total CPC market, at USD8.1 million. This segment grew at a CAGR of 22.4% during 2013-2018, faster than the CAGR of 17.0% registered by the total CPC industry. The market grew significantly in the years 2012-2016, as numerous international mono-brand beauty retailers such as Nature Republic (15 stores), The Face Shop (9 stores), and Yves Rocher (6 stores) has established and expanded their presence in the country56 In the period 2018-2023, the mono-brand beauty retailing market is forecasted to grow at a CAGR of 17.1 %, as other mono-brand beauty retailers are expected to establish their presence in the country, either by opening physical points-of-sale, or by providing international shipping. 51 One example was the case of contaminated skin-whitening creams. Journalhealthpollution.org: Mercury Contamination of Skin-whitening Creams in Phnom Penh, Cambodia, December 2015 52 Ministry of Tourism, Tourism Statistics Report Year 2018 53 IMF, "The Cambodian Economy: Outlook, Risks and Reforms", June 2017 54 International Telecommunication Union (ITU) 55 Telecommunication Regulator of Cambodia, "htlps: /lwwwJrc.gov khlinternet-subcrigersl", accessed on 11 November 2019. As at 11'" November 2019, the 2019 full year figure is not publicly available. 56 The no. of stores is as at 31" December 2019. IMR Report Page 9 © Frost & Sullivan 2019 175 Registration No.: 199401034915 (32059B-X) 6. INDUSTRY OVERVIEW (cant'd) FRO S T & SULLIVAN Chart 5-1: Size of the CPC industry, Cambodia, 2013 - 2023F r.- .. - ---T~;;i ·· cpci;;du;trY ·--· ·········· · ·· · ········-·· ...... :~ -.--~ ..... - ······--····.. ·-M~~~--B ;~~ ;;B~~· ~tY--R~t;il ing ······ ····· ~-········ ~- -1 @ gj I:: 20 N ro cO 1<0 ~g ~~~ 1~ :;) ~ ~ ~ ~ ~ I~ ~'2 L m ~ ~ ~ I :::.= N <'l I I :_:: ~e- 10 :;: ; ::l . •m . 1 . • . I .1 I ~ 'E ~ ., . I, I ,I I , I , , , , , v. 0 _ _ _ . _ _ , , 20 13 2014 2015 20 16 2017 2018 201 9F2020F2021F2022 F2023F 2013 2014 201 5 2016 2017 20182019F 2020F202 1F 2022F 2023F Source: Frost & Sullivan analysis 5.5 INDUSTRY OUTLOOK AND PROSPECTS The outlook for the CPC market is positive. Frost & Sullivan forecasts the total sales of the CPC market to grow at a CAGR of 15.7% during 2018-2023. In the same period, the sales by mono-brand beauty retailers are forecasted to grow faster at a CAGR of 17.1 %. This is due to an increasing number of brands gradually penetrating the market57 .ln fact, the growth of average salary, sustained by positive economic prospects, provides consumers with higher disposable income for the purchase of discretionary goods. In particular, with the population becoming increasingly urbanised , and with the increasing consumer awareness to lifestyle and physical care and appearance, CPC products are increasingly becoming an important item in the basket of goods for Cambodian consumers. 6 SUMMARY PROSPECTS AND OUTLOOK FOR INNATURE The CPC industry prospects in Malaysia and Vietnam, and Cambodia are positive due to a number of factors including growing population, growing disposable income and growing attention to personal care and physical appearance. In particular, within the CPC industry, the sa les of CPC products by mono-brand beauty retailers are growing at a faster pace compared to the overall CPC industry, as consumers are increasingly being attracted by prestige and masstige products, due to their higher perceived quality and branding. Consumers are also increasingly favouring natural products and brands that practice and promote ethical values. Nonetheless, industry risks may persist in developing markets like Vietnam and Cambodia, whereby the sale of counterfeit and unauthorised imported CPC products remains active in the past years due to high-price sensitivity (for original imported products), particularly among the lower and middle-income class, and difficulties faced by enforcement agencies in controlling the retail market. Due to the lack of relevant regulatory approval and poor product quality, the sale of counterfeit and unauthorised CPC products in these markets may adversely impact the brand reputation of the original Imported CPC brands. The CPC industry is growing in tandem with the positive outlook for the overall retail landscape in Malaysia, Vietnam and Cambodia. In this context, InNature may capitalise on the growth of the modern retail space via its expansion plan to increase the number of The Body Shop's pOints-of-sale in Malaysia and Vietnam . In Cambodia, where only few renowned international brands are present as at 31 st December 2019, The Body Shop brand has the potential to be established as an early-mover, and gain consumer acceptance. Additionally, the introduction of the Natura brand in Malaysia by InNature may also allow InNature to further strengthen its position as one of the largest players in the mono-brand beauty retailing industry in Malaysia. Natura is a leading CPC brand in Brazil with growing presence across Latin America. It is owned and operated by Natura Cosmeticos SA, a global cosmetics group listed on the Sao Paulo Stock Exchange since 2004 which also owns The Body Shop and Aesop brands5B Online retailing is the fastest growing retail channel in Malaysia, Vietnam , and Cambodia s9 , in line with the growing internet penetration and growing tendency for consumers to purchase online. This allows InNature to benefit from its established online presence compared to other mono-brand beauty retailers, driven by a strong following on its social media platforms in Malaysia and Vietnam, and an early mover in establishing an online store in both markets. Frost & Sullivan opines that InNature's multi-channel approach, coupled with its loyalty program, will support InNature's revenue growth and customers' loyalty. In addition, its masstige pricing of The Body Shop products is expected to support its penetration of the growing middle-income market. Despite many new brands entering in the highly competitive beauty industry and heavily saturated retail landscape in Malaysia, The Body Shop brand has achieved sustainable growth in over three decades of presence in the country, indicating the attractiveness of the brand (recognised internationally for natural products and ethical values) among consumers and the acceptance and relevance of its local campaigns to fulfill the brand's philosophy. As at 2018 , as shown in chart 3-2, InNature secured a leading position in Malaysia among mono brand beauty retailers and, as shown in chart 4-2, it became one of the top-10 mono-brand beauty retailers in Vietnam. 57 Frost & Sullivan analysis: over 6 mono·brand beauty retailers have established their presence in Cambodia between 2013 and 201 8. Brand (an d year of establi shment): TonyMoly(2013), Kosi> (2013), L'Occitane (2014), The Saem, (2014), Cl arins (2015). J.estina (2017) . .. Natura & Co 2018 Report 59 Bangkok Post, "Emergin g Asia poised ase-commerce hub", December 201 7 IMR Report Page 10 © Frost & Sullivan 2019 176 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING KEY RISK FACTORS WHICH MAY HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS OPERATIONS, FINANCIAL POSITION AND THE FUTURE PERFORMANCE OF OUR GROUP, IN ADDITION TO OTHER INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, BEFORE INVESTING IN OUR COMPANY. 7.1 Risks relating to our business and operations 7.1.1 We may not be able to renew or comply with the terms of our Franchise Agreements with The Body Shop International Risk of non-renewal or termination of the Franchise Agreements Our rights to retail and distribute TBS products in the territories where we operate in, namely West Malaysia, Sabah, Labuan, Vietnam and Cambodia, are derived from the rights granted to us under our Franchise Agreements with our Franchisor, The Body Shop International. Our group is reliant on the revenue generated from the sale of TBS products which accounts for nearly all of our Group's total revenue for the financial years under review. The Franchise Agreements are valid for a period of up to 10 years from the date of the respective Franchise Agreements and are renewable for an additional period of up to 5 years subject to the terms and conditions of the respective Franchise Agreements (please see Section 5.15.1 of this Prospectus for the conditions for renewal of the Franchise Agreements). Therefore, the termination of our Franchise Agreements can adversely affect our ability to carryon our business. The events that could cause our Franchise Agreements to be terminated are set out in Section 5.15.1 (g) of this Prospectus and include: (i) if Rampai-Niaga, TBS Vietnam, and Green Cosmetics ("TBS Franchisees") are in breach of the Franchise Agreements and fail to remedy the breach within 28 days of the Franchisor's notification to us of such breach; (ii) if there are any changes in our Group's management, which encompasses Datin Mina and the manager(s) approved by the Franchisor from time to time, ownership or control without our Franchisor's written approval; (iii) if TBS Franchisees and/or any other persons named in the Franchise Agreements directly or indirectly engage in or is guilty of conduct which our Franchisor considers to be prejudicial to its interests or interests of the Business (as defined in Section 5.15.1 of this Prospectus); (iv) if the TBS Franchisees become bankrupt or insolvent; (v) if any person successfully takes action to enforce any action including legal proceedings or foreclose any lien or mortgage over or in respect of any property of the TBS Franchisees; or (vi) upon the termination of the Franchise Framework Agreement. 177 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cont'd) There can be no assurance that the TBS Franchisees will be able to renew each of the Franchise Agreements as and when they expire, or that any of the Franchise Agreements will not be terminated prior to its expiry by our Franchisor. Any non renewal or termination of the Franchise Agreements would result in us not being able to distribute products under the The Body Shop® brand and in such case, our business prospects, financial condition and results of operations would be materially and adversely affected. Risk of termination of our Franchise Framework Agreement Further, our Franchisor may terminate the Franchise Framework Agreement (which could lead to the termination of the Franchise Agreement) arising from certain breaches by Etheco as well as by Oato' Simon and Oatin Mina under the Franchise Framework Agreement. The events that could cause our Franchise Framework Agreement to be terminated are set out in Section 5.15.2(0) of this Prospectus and include: (i) upon the winding up, insolvency, administration, dissolution or bankruptcy of Oato' Simon, Oatin Mina or Etheco or upon the appointment of a liquidator, receiver, administrator, trustee or similar officer over all or any part of any of Oato' Simon's, Oatin Mina's or Etheco's business or assets or event having a similar effect as the above events; or (ii) where in the case of the breach capable of being remedied, Oato' Simon, Oatin Mina or Etheco fail to remedy such breach within 28 days of being notified to remedy the breach, provided that TBSI shall not be obliged to give such notice in the case of a persistent breach which shall be one which has occurred twice in any 12 month period and/or any 3 different breaches occurring within any 12 month period of the FFA. Based on the above, among others, if a liquidator, receiver, administrator, trustee or similar officer is appointed in relation to the business or assets held by Oato' Simon and Oatin Mina in their personal capacity outside of the Group, such events could cause the Franchise Framework Agreement to be terminated if not remedied within the agreed timeframe. As such, any breach by Oatin Mina, Oato' Simon or Etheco of their obligations and undertakings under the Franchise Framework Agreement, may result in a termination of the Franchise Framework Agreement by our Franchisor which in turn would lead to a termination of the Franchise Agreements and such termination would lead to a material adverse effect on our business, prospects, financial condition and results of operations. Other risks under the Franchise Agreements In addition, under the Franchise Agreements, our TBS Franchisees are required to comply with certain obligations and undertakings such as our Group shall not be engaged, interested or concerned in any business which is in competition or similar to our business during the term of the Franchise Agreements and for a period of 1 year (in respect of TBS Vietnam and Green Cosmetics) or 2 years (in respect of Rampai Niaga) following the termination and no member, shareholder, director and employee of the TBS Franchisees or other individual having a degree of control or influence over the TBS Franchisees, is or becomes so engaged during the term of the Franchise Agreements and for the following period after the end of the term of the Franchise Agreements. 178 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cont'd) The Franchise Agreements also restrict us from disposing our TBS business to other parties save with the consent of the Franchisor provided that all our obligations under the Franchise Agreements are complied with and subject to certain conditions imposed by our Franchisor, such as the disposal shall be bona fide and at arm's length and the proposed purchaser shall meet the criteria set by the Franchisor with respect to business experience, financial status, ability and compatibility with the Franchisor and its values, as well as suitability of the directors and shareholders of the proposed purchaser. While compliance with such provisions in the Franchise Agreements ensure that our Franchisor's operating and quality standards are maintained , there can be no assurance that such provisions would not curtail our competitiveness in any of the markets that we operate in or restrict our business activities and expansion plans, which may have an adverse impact on our business, results of operations and financial condition. Please refer to Section 5.15 of this Prospectus for further details of the above terms and other salient terms of the Franchise Agreements and the Franchise Framework Agreement. 7.1.2 The continuity of our Franchise Agreements is dependent on the continued involvement of our Promoters, Datin Mina and Dato Simon The continuity of our Franchise Agreements is dependent on our Promoters, Datin Mina's and Dato' Simon's continued involvement in the business. Specifically, under the Franchise Agreement, upon the death or permanent incapacity of Datin Mina or Dato Simon being persons who beneficially own a Controlling Interest, (being an aggregate majority of shares of the respective TBS Franchisee, or has the right to appoint or dismiss a majority of directors, and in respect of any other business or entity, where that person is beneficially entitled to a majority of share of the assets, proceeds or distribution of the same ("Controlling Interest"»), their Controlling Interest will have to be transferred to a third party approved by TBSI at its sole and absolute discretion within 6 months after such death or permanent incapacity. If the transfer is unable to be effected within the 6 months stipulated above, then provided that the relevant TBS Franchisee has been consistently achieving its performance objectives, then the personal representative of the deceased will have 2 years to dispose of the deceased's interest in the respective Franchise Agreements. If the TBS Franchisee has not been consistently achieving its performance objectives, then the personal representative will have 1 year to do so. If the transfer is not effected within the said periods, TBSI may terminate the Franchise Agreements. Under the Franchise Agreements, the prior written approval of TBSI must be obtained before any change in the ownership or control of the Franchisees. Although Daryl Foong and Dexter Foong are the sons of Datin Mina and Dato' Simon, and presently have equity participation in the Company through their direct shareholding in Pelagos and Primarium respectively, written approval from the Franchisor is required to be obtained prior to any transfer of shares to them in the event of death or permanent disability of Datin Mina and/or Dato Simon. As such, if the approval from the Franchisor for the transfer of shares to Daryl Foong and/or Dexter Foong is not obtained, and the transfer is not effected within the said periods consequently, this may result in a termination of the Franchise Agreements by our Franchisor. 179 Registration No.: 199401034915 (32059B-X) 7. RISK FACTORS (cont'd) In addition, under the Franchise Agreements, InNature shall undertake to notify TBSI of the details of any proposal received to purchase the shareholdings of the Franchisees. InNature shall also undertake to grant TBSI an option to purchase such shareholdings for the same amount and upon the same terms as offered by the proposed purchaser, which option may be exercised by TBSI within 14 days of receipt of such notice. Given the above, upon the death or permanent incapacity of Dato' Simon or Datin Mina, there is a possibility that their shareholdings in our Franchisees may be transferred to an unrelated party at a lower price, subject to TBSI 's consent. Such termination or transfer of ownership of our Franchisees to an unrelated party, may lead to a material adverse effect on our business, prospects, financial condition and results of operations. Please refer to Section 5.15 of this Prospectus for further details of the above terms of the Franchise Agreements. 7.1.3 We depend on the supply of goods from TBSI for TBS products and Industria Natura for Natura products Currently, our TBS Franchisees retail and distribute only TBS products and as such we depend on the supply of goods from our Franchisor in our operations. TBSI is our top supplier, and the value of our purchases from TBSI in FYE 2016 to 2018 and FPE 2019 are set out in Section 5.14 of this Prospectus. Our TBS products are mostly supplied from the UK of which accounts for approximately 99 .0% of our total purchases on TBS products annually . The impending withdrawal of the UK from the European Union (UBrexit") has created significant uncertainty about the future relationship between the UK and the European Union, including the laws and regulations that will apply in the UK as it determines which European Union laws to adopt or replace upon its withdrawal. Until the terms and timing of UK's exit from the European Union are finalised, the exact impact that Brexit and its related matters may have on our business and results of operations remain uncertain. Any changes in the laws and regulations in the UK arising from Brexit may result in a potential disruption to our business and operations. These disruptions may in turn have a material adverse effect on our business and results of operations. We also depend on the supply of products from Industria Natura, a subsidiary of Natura Cosmeticos SA, for our Natura business. Any disruption in supply of the TBS products or Natura products to us for any other reason may also materially and adversely affect our operations and ability to meet our customers' needs. 7.1.4 Our success is closely linked to the value of the TBS brand which may be eroded by events beyond our control The Body Shop® brand name and related logos, trademarks and other intellectual property rights have significant brand value. Our continued growth and success depend significantly on our ability to maintain and promote the TBS brand and to strengthen our customers' connection with the TBS brand , in the countries where we operate in . If we are unable to maintain and increase the awareness of the TBS brand and products, we may not be able to continue to attract and retain our customers. 180 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cant'd) Over the years we have put significant effort into ensuring that the TBS brand and its ethical values are embodied in our business processes and operations of our Company through adopting a culture that is synonymous with these values, from product training to dealing with customers. Any negative publicity surrounding the way we carry out the business, source our TBS products, service our customers or run our campaigns may severely damage the TBS brand value. In particular, any negative commentary regarding TBS products or incidents that result in consumers' perception that our employees have acted in an irresponsible manner against the TBS brand and its ethical values, may be posted on TBS's websites or social media platforms by consumers which may have an adverse effect to our TBS brand reputation and our business. It is the nature of consumers to often value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording us an opportunity for redress or correct, causing the TBS brand value to be affected. As at the LPD, there were no past incidents that resulted in negative publicity for the TBS brand, which had material adverse impact on the Group's business and profitability. We have no control over third party actions which may erode the TBS brand or violate their ethical values. Any such violation or negative publicity at the global level would cause damage to the TBS brand in the countries where we operate in and affect customer demand for the TBS products. 7.1.5 Our success depends on our ability to secure optimal locations and to renew the tenancies or leases ot our present points-ot-sale We continuously strengthen the TBS brand through marketing efforts and use our TBS brand value to enhance our ability to secure attractive locations. As at the LPD, all our points-of-sale in Malaysia, Vietnam and Cambodia are rented. Our points-of-sale in Malaysia are mostly located in leading malls within urban areas throughout West Malaysia, Sabah and Labuan, whereas in Vietnam, our points-of-sale are concentrated in malls and high street locations i.e. main shopping streets in the urban districts of HCMC and Hanoi. In Cambodia, our first point-of-sale which we opened in November 2019 is located in Aeon Mall Phnom Penh . As with our present markets, we target to open our future points-of-sale in Cambodia in shopping malls in major urban areas in Phnom Penh. There is no assurance that we will succeed in securing these prime locations on commercially reasonable tenancy terms in view of the constant rise in demand of properties in prime locations. Due to the high demand for retail space, there is usually a long waiting list for brands to open their stores, particularly in popular shopping malls. In addition, high demand for retail space can drive up rental rates . Furthermore, most of the mall operators for the reputable shopping centres are usually stringent when it comes to the selection of their tenants as they take into consideration, amongst others, the tenants' brand reputation, sales potential , and area of business. Although presently most of our points-of-sale are located in prime locations, the terms and conditions in respect of the new tenancies may not be as competitive which could result in us incurring additional costs in order to secure these new locations. As such, we cannot assure you that we are able to maintain our current rental rates in the future should the rental in respect of our points-of-sale continue to increase. We may also potentially lose our current locations to other competing tenants who are able to offer higher rentals or more favourable terms to the landlord for the locations. 181 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cont'd) In Malaysia and Vietnam, the duration of our tenancies range from 1 to 3 years and 1 to 7 years respectively. In Cambodia, the duration of our tenancy for our point-of-sale is 3 years. As at the LPD, out of our 89 points-of-sale in Malaysia, 2 tenancies have expired and are pending renewal, 14 will expire over the next 6 months and out of our 34 points-of-sale in Vietnam, 3 will expire over the next 6 months. If these tenancy agreements are not renewed upon their expiry, our Group may have to re-Iocate these outlets to other locations which may be less viable commercially and/or which are subject to higher rental rates. As such, if we are unable to obtain the desired point-of-sale locations on commercially reasonable terms or at all, our business, results of operations and ability to implement our growth strategy may be adversely affected. 7.1.6 We may not be able to successfully implement our future plans and strategies As part of our future plans and strategies further detailed in Section 5.4.4 of this Prospectus, we will be expanding the TBS business further in Vietnam and Cambodia and growing our brand portfolio of our Group through our new business venture with Natura. We cannot assure you that we will be able to anticipate all the business and operational risks arising from our future plans and strategies. Our ability to implement our expansion of the TBS business in Cambodia and expand into our new business venture with Natura depend on our ability to adapt our experience and expertise to the local retail landscape for the TBS brand in Cambodia, and the business model of distribution via online social commerce for our Natura business. Our heads of departments and key senior management team who have been the main drivers to ou r business over the years have an average of 23 years of relevant experience with approximately half of the number of years of relevant experience being under the employment of the Group. Investors should also note that any new investments by us into new points-of-sale and other distribution channels for the TBS and Natura brands will typically take time to reach their full potential in term of sales, profitability, market penetration and scale. Pending the new investments reaching their targeted business potential levels, they will continue to incur rentals, staff costs, and other operating costs. In addition , our new business venture with Natura may incur costs such as franchise fees, royalty fees and/or licensing fees, which may affect our results of operations and our Group's financial performance. Our new business venture for Natura is based on the l'Jatura MOU and the Natura Supply Agreement. Please refer to Section 5.15.4 for further details of the Natura MOU and the Natura Supply Agreement. In this regard, if the definitive agreement(s) are not signed for this new venture prior to the expiry of the Natura Supply Agreement, or if the Natura MOU and/or the Natura Supply Agreement are not renewed or terminated, we may be subject to the risks of our Natura business not continuing . Such termination may limit the business growth and prospects of our Group. Additionally at this juncture, we are unable to assess whether the Natura products would pose direct competition to the TBS products as the Natura products have only been introduced in Malaysia in August 2019. Both the Natura and TBS products are naturally inspired products and as such there may be an overlap in terms of purchasing interest for customers with such preference. However, as both the Natura and TBS products would be offered by the InNature Group, the introduction of the Natura products is intended to complement the current offering by InNature instead of cannibalizing the market share of InNature through the offering of TBS business products. Any optimisation of sales and product mix to improve sales will only be 182 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cant'd) determined after the launch of the products and analysing customers' preferences. This would be a risk to the TBS brand offering in Malaysia rather than our Group. We cannot assure you that we will be able to successfully implement the plans for our new business venture in the future and failure to do so may materially and adversely affect our future business, earnings growth, future results of operations and prospects. 7.1.7 We are subject to currency fluctuations as we import all TBS products and Natura products All our TBS product inventories are imported from the UK and we are therefore exposed to fluctuations in the GBP currency. We are also exposed to fluctuation in USD and VND from our TBS operations in Vietnam and KHR and USD for our operations in Cambodia. For the Natura products, all our product inventories are imported from Brazil and we are therefore exposed to fluctuations in the USD. The reporting currency for our consolidated financial results is in RM. There is a financial risk to our business if there is any adverse fluctuation in anyone or more currencies transacted by our Group. The Group's net foreign exchange gain for the FYE 2016, FYE 2017, FYE 2018 and FPE 2019 were RM1.4 million, RMO .7 million, RMO.7 million and RMO.5 million respectively. Any significant fluctuation in the value of the RM against the currencies of the countries where we operate in or from which we obtain our supplies could adversely affect our financial results and financial position . In such a situation, there may also be a possibility that we could incur foreign exchange losses and/or our product pricing may have to be increased which could render us less competitive than our competitors in the areas where we operate. 7.1.8 Our success depends, in part, on the quality, efficacy and safety of the TBS and Natura products If the TBS and Natura products are found or perceived to be contaminated, defective or unsafe, or if they fail to meet our customers' expectations, the TBS brand value and the Natura brand value could be diminished. Any loss of confidence in the ingredients used in the TBS products or the Natura products, whether related to product contamination or safety, or quality failures, actual or perceived, or inclusion of prohibited ingredients, could damage the TBS brand or the Natura brand. As at the LPD, there were no past instances of contamination, defective or unsafe TBS products nor Natura products which had material adverse impact on the Group. Despite the measures we and our Franchisor (for TBS products) have in place, and our efforts with Natura Cosmeticos SA, (for Natura products) to control the quality of the products, contamination or degradation of ingredients of the products may occur during the production, transportation, distribution and sales processes due to reasons unknown to us and/or beyond our control. The occurrence of such problems may result in the possibilities of negative publicity, product recalls, product liability claims and/or regulatory action, which could cause serious damage to our reputation and the TBS brand or the Natura brand as well as cause us to lose sales or market share. 7.1.9 Our business operations may be adversely affected if our distribution, warehousing and logistics experience any significant disruption or disasters or operational delays Our TBS products are shipped from TBSl's warehouses in the UK and Singapore directly to third party DCs in Malaysia, Vietnam and Cambodia respectively leased by us from third party logistics companies who manage the distribution of our TBS products in Malaysia, Vietnam and Cambodia. 183 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cont'd) As we rely on a single DC as the centre of our distribution of TBS products in each of the countries that we operate in, as well as the Natura products in Malaysia; any significant disruption, disasters, system failures, prolonged power outages or other unforeseen events affecting these DCs or delays in the operations of these DCs may affect our product distribution and business operations. As at the LPD, the Group has not experienced any past instances of significant service disruption or disasters or delays in operations. In the event we encounter the above issues, we cannot guarantee that the critical systems and operations will be restored in a timely manner or at all, nor can we guarantee that the above preventive measures taken by us are adequate or our insurance policies are sufficient to cover our actual losses. Any disruption or disasters on a large scale could have a material adverse effect on our business, prospects, financial condition and results of operations. 7.1.10 OurTBS and Natura product offering is dependent on us obtaining the cosmetics notification approval and the product registrations in a timely manner We are subject to compliance with various laws and regulations relating to cosmetic products and general consumer protection and product safety in the jurisdictions in which we sell our products. These rules principally set out requirements for the composition, testing, labelling and packaging of our products. Failure to comply with these rules may result in the imposition of conditions on or the suspension of sales or seizure of our products, significant penalties or claims and, in some jurisdictions, criminal liability. Further, in the event that the countries in which we sell our products increase the stringency of such laws and regulations relating to cosmetic products and general consumer protection and product safety, our costs may increase, and we may be unable to pass these additional costs on to our customers. In the event that any such change in law or regulations requires that we obtain a license or permit for our operations, we may be unable to obtain or, if obtained, maintain such license or permit, which may result in a temporary or permanent suspension of some or all of our business activities, which could disrupt our operations and adversely affect our business. Further, in the event that any jurisdiction in which we operate in or plan to operate imposes any new laws, regulations, restrictions and/or other barriers to entry, our ability to expand may be thereby limited and our growth and development may be adversely affected. For TBS products, TBSl's regulatory team is currently responsible to obtain cosmetics notification approval from the National Pharmaceutical Regulatory Agency for Malaysia and we directly handle cosmetics notifications in Vietnam and Cambodia. For the TBS products to be brought into Vietnam and Cambodia, we will be required to obtain these cosmetic notifications or product registrations from time to time for new TBS products to be introduced in these countries. When we intend to import the TBS products into Cambodia, in addition to the cosmetic product notification, we will need to obtain necessary import approvals as well. For Natura products, we will obtain the cosmetics notification approvals for the Natura products to be brought into Malaysia. There is no guarantee that in future, the requisite approval or notification will be issued to us in time or at all, for the launch of new TBS products or Natura products as the authorities may change their internal importation guidelines from time to time and this may extend the lead time for the processing of our applications for approvals or notifications. Any delay or failure in obtaining the requisite approvals or notifications would cause a delay or failure in the roll-out of new TBS products or Natura products and may have a negative impact on our business and results of operations. 184 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cant'd) 7.1.11 Any IT malfunctions or system failure, cyber-based attacks or network security breaches may affect our business operations and reputation We depend on ERP and IT systems to, among others, process, transmit and store electronic and financial information, manage a variety of business processes and activities and comply with regulatory, legal and tax requirements. The ability to receive and fulfil orders successfully without interruption to the operation of our computer hardware and software systems is crucial for a smooth operation of our business. Any malfunctions of or system failure on our computer hardware or network connections may interrupt our business operations and hinder our ability to manage ordering, ensure optimal inventory levels, oversee our cash management and expose us to other operational inefficiencies and risks which could materially and adversely affect our business, financial condition and results of operations. As part of our business operations, we also collect, maintain, transmit and store data of our customers, including personally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers that collect, store, process and transmit proprietary, personal and confidential information, including credit card information, on our behalf. We and our service providers may not be able to prevent third parties including employee and other insiders, from breaking into or altering our systems, conducting attacks, installing viruses or malicious software on our website or devices used by our employees or contractors, or carrying out other activity to disrupt our systems, gain access to confidential or sensitive information or monetary funds in our or our service providers' systems. We have had some minor IT breaches in the past but such breaches did not have any material adverse impact on the Group. However, any compromise or breach of our security measures, or those of our service providers, may violate applicable privacy, data security and other laws, and expose us to litigation risk or regulatory action and possible liability as well as result in adverse publicity and a loss of confidence in our security measures. This could have a material adverse effect on our business, financial condition and results of operations and damage our reputation . 7.1.12 We are dependent on our skilled and experienced personnel and the loss of their continued services may affect the operations and growth of our business Our success and future growth are dependent on the expertise and experience of our Key Senior Management and other key employees in the countries. which we operate. Our success also depends on our continuing ability to identify, hire, train and retain other highly qualified personnel. We recognise that the loss of our Key Senior Management and other key employees may have a material adverse effect on our business, prospects, financial condition and results of operation. If we experience any significant, material changes to the composition of our Key Senior Management team, we may not be able to recruit suitable or qualified replacements, and may incur additional expenses to recruit and train new personnel, which could disrupt our business and slow down our ability to grow. Further, if we lose our Key Senior Management or other key employees to our competitors, our competitiveness, operations and our ability to grow may be adversely affected. 185 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cant'd) 7.1.13 We may face human resource challenges which could lead to issues in the quality of our customer service As customer service is crucial in our business, any shortage in manpower on the floor could have a negative impact on our customers' shopping experience. As such, it is vital that we ensure we have sufficient staff stationed in each point-of-sale to attend to our customers' needs. Shortage of manpower may affect the quality of our customer service and may result in loss of sales and loss of our loyal customers. We have put in place competitive remuneration packages, benefits and incentives above the statutory and standard benefits that covers health insurance, product allowance, and grooming allowance, to attract and retain our staff. In addition, we employ a combination of incentive programmes to motivate our retail store team which include cash commission based on various tiers of sales targets achievement, rewards for consistent achievement of targets, and attractive incentive trips for achievement of annual sales targets. Notwithstanding our continuing efforts to provide motivation to our retail staff, there is no assurance that the above measures would be successful in retaining them. In addition, any changes in the regulatory requirements in the countries we operate in relation to minimum wage may result in the increase of our operating costs. 7.2 Risks relating to the industry in which our Group operates 7.2.1 We operate in a competitive environment The CPC industry in Malaysia and Vietnam is highly competitive, comprising numerous mass, masstige and prestige brands, both local and international, offering a wide variety of CPC products. Within the CPC mono-brand beauty retailers segment, the market is highly fragmented, where no company holds a market share of more than 20.0%. (Source: IMR Report) Our TBS or Natura products face and will continue to face competition for consumer recognition and market share with products that have achieved significant national and international brand name recognition and customer loyalty. Our competitors may attempt to gain market share by offering products at prices at or below the prices at which our products are typically offered . Our competitors, who may have greater resources than we do, may be better able to withstand these price reductions and lost sales. It is difficult to predict the timing and scale of our competitors' activities. Further, the constant emergence of new entrants to the same market as we operate in will always pose a challenge for us in our continuous effort to gain brand awareness. In addition, our business growth and strategy may be constrained in view of new and enhanced technologies which increase competition in the online platforms, new product offerings by competitors and the strength and success of our competitors' marketing programmes. There is no assurance that we are able to continue to compete effectively and our business, results of operations and financial condition will not be materially and adversely affected if we are unable to do so. 186 Registration No.: 199401034915 (32059B-X) 7. RISK FACTORS (cant'd) 7.2.2 Our performance is dependent on the performance of economy and consumer spending patterns in the countries we operate in Total spend ing on the epe products are at consumers' discretionary spending and is influenced by general economic conditions and the availability of disposable income. Adverse economic conditions in the countries we operate in may decrease consumers' spending power, which will have a significant negative impact on the epe industry. Although our price positioning is intended to allow us to reach a wide base of consumers who would buy our TBS products or Natura products even in an economic downturn, there is no guarantee that a decline in the economic conditions in the countries we operate in will not materially and adversely affect our business, financial conditions and results of operations. 7.2.3 Our financial performance is subject to political, economic, social, regulatory and other developments in the countries we operate in Our business, prospects, financial conditions and results of operations may be affected by political, economic, social, regulatory and other developments in the countries we operate in. Our exposure to the risks associated with our operations in the countries we operate in include, but are not limited to , burdens of complying with a wide variety of laws and regulations, political and economic instability, changes in interest rates, economic recession , fiscal and monetary policies of the governments such as foreign exchange control regulations, inflation, deflation, methods of taxation and tax policy, natural disasters, trade restrictions, imposition of government controls, tariffs and customs duties and the classifications of our products by applicable governmental bod ies , logistics and sourcing , military conflicts, acts of terrorism and other matters that influence consumer confidence and spending. In Vietnam, we have an established principal-agent relationship with Ge Vietnam from 2013 for the purpose of expediting the opening of TBS points-of-sale in Vietnam. Please refer to Section 5.3.4 of this Prospectus for further details of this arrangement. Should there be any changes to the applicable laws, regulations or policies governing this type of agency relationships, the opening of our new reta il points-of-sale in Vietnam may be affected. The occurrence of any of these risks could negatively affect our international business and consequently our overall business, financial condition and results of operations. 7.2.4 The sale of unauthorised imported products in the market may affect our sales and growth According to the IMR Report, in Vietnam some original or non-counterfeited goods are imported without the authorised permission of the brand owner. This activity grew from 2015 to 2018, due to the high demand for masstige or premium international brands. These original or non-counterfeited goods are sold at a lower price compared to the official points-of-sale prices. As of 2018, the prices of epe products sold in official points-of-sale are relatively higher than unauthorised imported products, due to additional expenses incurred by retailers. As a result, there are a large number of Vietnamese consumers especially from the lower to middle-income class who still prefer to purchase unauthorised imported products sold through the internet. The sale of unauthorised imported products affect the brand sales of epe products in Vietnam. There can be no assurance that the growth of the epe industry in Vietnam will not be impeded by the unauthorised imported products. 187 Registration No.: 199401034915 (320598-X) 7. RISK FACTORS (cont'd) It is difficult for us to predict whether these unauthorised imported products would saturate the markets which we operate in and any attempt by the operators of these unauthorised imported products would have an adverse impact on our business, results of operations and financial condition. 7.2.5 The sale of counterfeit products may affect our reputation and profitability In Vietnam there also exists counterfeit CPC products, especially in key cities such as HCMC and Hanoi, according to the IMR Report. The counterfeit CPC products of various famous international brands are sold in traditional markets at prices substantially lower than the original products. These products are distributed and sold without relevant authority approval and could contain harmful or poor quality substances that can harm consumers' appearance and health. As with Vietnam, the sale of counterfeit products in Cambodia have proliferated in the past years due to customers' high-price sensitivity (for original imported products) and the difficulties by enforcement agencies in controlling the retail market. As TBS brand enjoys worldwide consumer recognition and masstige positioning in the CPC industry, we cannot assure that we will not encounter counterfeiting of TBS products, such as unauthorised imitation or replication of the designs, trademarks or labelling by third parties from time to time in the future and there can be also no assurance that any actions that may be taken by our Franchisor on a global scale to combat against counterfeiting of TBS products will be successful in prevention of counterfeiting . The presence of counterfeit products in the market could have a negative impact on the value and image of the TBS brand, result in a loss of consumer confidence in TBS brand, and as a consequence, adversely affect our business and results of operations. 7.3 Risks relating to investment in our Shares 7.3.1 No prior market for our Shares and it is uncertain whether a sustainable market will ever develop Prior to our IPO, there has been no public market for our Shares. Hence, there is no assurance that upon Listing , an active market for our Shares will develOp, or if developed, that such a market will be sustainable. There is also no assurance as to the liquidity of any market that may develop for our Shares, the ability of holders to sell our Shares or the selling prices at which holders would be able to obtain for our Shares. We, our Promoters, the Selling Shareholder, and the Sole Bookrunner have no obligation to cause our Shares to be marketable. The Final Retail Price was determined after taking into consideration various factors and these factors could cause our Share price to fluctuate which may adversely affect the market price of our Shares. There can be no assurance that the Final Retail Price will correspond to the price at which our Shares will trade on the Main Market upon our Listing and that the market price of our Shares will not decline below the Final Retail Price. 188 Registration No.: 199401034915 (32059S·X) 7. RISK FACTORS (cant'd) 7.3.2 Capital market risks and share price volatility The performance of capital market is very much dependent on external factors such as the performance of the regional and global bourses and the inflow or outflow of foreign funds. Sentiment is also largely driven by internal factors such as economic and political conditions of the country as well as the growth potential of the various sectors of the economy. These factors invariably contribute to the volatility of trading volumes in capital market, thus adding risks to the market price of our listed Shares. Nevertheless, the profitability of our Group is not dependent on the performance of the capital market as the business activities of our Group have no direct correlation with the performance of securities listed in the capital market. Our Shares could trade at prices lower than the Final Retail Price depending on various factors, including current economic, financial and fiscal condition in Malaysia, our operations and financial results, and the price volatility in the markets for securities in similar or related industry in Malaysia or emerging markets. There is no assurance that any market for our Shares will not be disrupted by price volatility or other factors, which may have a material adverse effect of the market price of our Shares. In addition, the market price of our Shares may be highly volatile and could fluctuate significantly and rapidly in response to, amongst others, the following factors, some of which are beyond our control: (i) variations in our results and operations; (ii) success or failure in our management team in implementing business and growth strategies; (iii) changes in securities analysts' recommendations, perceptions or estimates of our financial performance; (iv) changes in conditions affecting the industry, the general economic conditions or stock market sentiments or other events or factors; (v) additions or departures of our key management personnel; (vi) fluctuations in stock market prices and volumes; or (vii) involvement in litigation. In addition, many of the risks described herein could materially and adversely affect the market price of our Shares. Furthermore, if the trading volume of our Shares is low, price fluctuation may be exacerbated. Accordingly, there can be no assurance that our Shares will not trade at prices lower than the orig inal issue price of our Shares. 189 Registration No.: 199401034915 (32059B-X) 7. RISK FACTORS (cont'd) 7.3.3 The interest of our Promoters who control our Group may not be aligned with the interest of our shareholders As disclosed in Section 2 of this Prospectus, our Promoters and Substantial Shareholders will collectively hold in aggregate approximately 75% of our enlarged issued and paid-up share capital upon Listing. As a result, they will be able to, in the foreseeable future, effectively control the business direction and management of our Group including the election of directors, the timing and payment of dividends as well as having majority voting control over our Group and as such, will likely influence the outcome of matters requiring the vote of our shareholders, unless they are required to abstain from voting either by law and/or by the relevant guidelines or regulations. There can be no assurance that the interests of our Promoters and Substantial Shareholders will be aligned with those of our other shareholders. 7.3.4 The sale or the possible sale of a substantial number of Shares in the public market following our IPO could adversely affect the price of our Shares Following the completion of the IPO and Listing, approximately 25% of our enlarged issued and paid-up share capital will be publicly held by investors participating in our IPO, while approximately 75% of our enlarged issued and paid-up share capital, will be held by our Promoters and Substantial Shareholders. It is possible that our Promoters and Substantial Shareholders may dispose of some or all of their Shares after the moratorium period of 6 months, subject to the terms of the Franchise Framework Agreement, pursuant to their own investment objectives. If our Promoters and Substantial Shareholders sell, or are perceived as intending to sell, a substantial amount of our Shares, the market price of our Shares could be adversely affected. 7.3.5 Delay in or cancellation of our Listing The occurrence of certain events, including the following, may cause a delay in, or termination of, our Listing: • the Managing Underwriter's exercise of its rights under the Retail Underwriting Agreement, to discharge themselves of their obligations under such agreements; • our inability to meet the minimum public spread requirement under the Listing Requirements of having at least 25.0% of the total number of our Shares for which our Listing is sought being in the hands of at least 1,000 public shareholders holding at least 100 Shares each at the point of our Listing; or • the revocation of the approvals from the relevant authorities for our Listing for whatever reason. Where prior to the issuance and allotment of our IPO Shares: (a) the SC issues a stop order pursuant to Section 245(1) of the CMSA, the applications shall be deemed to be withdrawn and cancelled and we or the Selling Shareholder shall repay all monies paid in respect of the applications for our IPO Shares within 14 days of the stop order, failing which we shall be liable to return such monies with interest at the rate of 10.0% per annum or at such other rate as may be specified by the SC pursuant to Section 245(7)(a) of the CMSA; or (b) our Listing is aborted, investors will not receive any IPO Shares, all monies paid in respect of all applications for our IPO Shares will be refunded free of interest within 14 days. 190 Registration No.: 199401034915 (32059B-X) 7. RISK FACTORS (cant'd) Where subsequent to the issuance and allotment of our I PO Shares: (i) the SC issues a stop order pursuant to Section 245( 1) of the CMSA, any issue of our IPO Shares shall be deemed to be void and all monies received from the applicants shall be forthwith repaid and if any such money is not repaid within 14 days of the date of service of the stop order, we shall be liable to return such monies with interest at the rate of 10.0% per annum or at such other rate as may be specified by the SC pursuant to Section 245(7)(b) of the CMSA; or (ii) our Listing is aborted other than pursuant to a stop order by the SC, a return of monies to our shareholders could only be achieved by way of a cancellation of share capital as provided under the Act and its related rules to the extent that our IPO Shares form part of our share capital. Such cancellation can be implemented by the sanction of our shareholders by special resolution in a general meeting and supported by either (aa) consent by our creditors (unless dispensation with such consent has been granted by the High Court of Malaya) and the confirmation of the High Court of Malaya, in which case there can be no assurance that such monies can be returned within a short period of time or at all under such circumstances, or (bb) a solvency statement from the directors. 7.3.6 There is no assurance that we will declare and distribute any amount of dividends in the future The payment of dividends is not guaranteed and our Board may decide in its sole absolute direction, at any time and for any reason, not to pay dividends if it is not in the best interest of the Company. The absence of dividends may have a negative effect on the market price of our Shares and the value of any investment in our Shares. It is the intention of our Board to recommend and distribute dividend of at least 30.0% of our annual audited PAT attributable to the shareholders of our Company to allow shareholders to partiCipate in the profits of our Group. However, as a holding company, our income, and therefore our ability to pay dividends, is dependent upon the dividends and other distributions we receive from our Subsidiaries. Our Board when recommending dividends for the year will also take into account a number of factors, including our results of operations and cash flow, our expected financial performance and working capital needs, the payment by our Subsidiaries of cash dividends or other distributions to us, our future prospects, applicable laws and contractuaJ obligations that we are obliged to observe, where applicable, and other factors that our Board may consider important. Our ability to pay dividends is also subject to us having sufficient distributable reserves. It is also a requirement under the Franchise Framework Agreement that our Board shall also take into account the business plans of I nNature and the TBS Franchisees and the antiCipated funding needs for the purposes of meeting the agreed targets and performance objectives when considering the dividend recommendation. Please refer to Section 11.10 of this Prospectus for further discussion on our Company's dividend policy. 191 Registration No.: 199401034915 (320598-X) 8. APPROVALS AND CONDITIONS 8.1 Approvals and conditions The approvals and conditions imposed by the relevant authorities for our Listing are as follows: 8.1.1 SC The SC has, via its letter dated 30 August 2019, approved our I PO and Listing under Section 214(1) of the CMSA, subject to compliance with the following conditions: Details of condition imposed Status of compliance CIMS and InNature to fully comply with the requirements Complied of the SC's Equity Guidelines and Prospectus Guidelines pertaining to the implementation of the IPO. The SC has, via its letters dated 24 May 2019 and 9 August 2019 approved the reliefs sought by us from having to comply with certain requirements under Division 1, Part II of the Prospectus Guidelines, and Part III of the Prospectus Guidelines (Procedures for Registration). The details of the reliefs granted and corresponding conditions imposed by the SC are as follows: Reference to Conditions Status of Prospectus imposed compliance Guidelines Details of reliefs sought (if any) (if any) Paragraphs Relief from having to disclose in the N/A 5.02(h) of Prospectus, the amount of franchise Division 1, fees payable by the respective Part II franchisees under InNature Group, in the Franchise Agreements and certain commercially sensitive and confidential salient terms of the Natura IVIOU and the Natura Consent Letters in the Prospectus. Paragraph Relief from having to make available N/A 13.01(b)(i) of the complete Franchise Division 1, Agreements, Franchise Framework Part II Agreement, Natura MOU and the Natura Consent Letters for public inspection and to allow certain commercially sensitive and confidential terms in aforesaid documents to be redacted. 192 Registration No.: 199401034915 (320598-X) 8. APPROVALS AND CONDITIONS (cant'd) Reference to Status of Prospectus Conditions compliance Guidelines Details of reliefs sought imposed (if any) Paragraph Relief from having to submit the N/A 13.01 (b)(v) of audited financial statements of the Division 1, following companies for the purpose Part II of prospectus registration and making available for public inspection: (i) Green Cosmetics for the FYE 2018; (ii) InNature for the FYE 2016 and FYE 2017; and (iii) Rampai-Niaga for the FYE 2016 and FYE 2017. Paragraph Relief to submit the audited financial N/A 1.12(e) of Part statements of the following III (Procedures companies for the purpose of for prospectus registration: Registration) (i) Green Cosmetics for the FYE 2018; (ii) InNature for the FYE 2016 and FYE 2017; and (iii) Rampai-Niaga for the FYE 2016 and FYE 2017. The SC, has also via its letter dated 30 August 2019, approved, under the equity requirements for public listed companies in relation to the resultant equity structure of InNature pursuant to the Listing . The effects of the Listing on the equity structure of our Company are as follows: After the Internal As at 30 April 2019" Restructuring Exercise After our Listing % of % of % of issued enlarge enlarged Category of No. of share dissue issued shareholders Shares capital No. of Shares capital No. of Shares capital Bumiputera - Malaysian public via 7,065,800(1) 1.00 balloting - Bumiputera 81,600 ,000(1) 11.56 investors to be approved by MITI Total Bumiputera 88,665,800 12.56 Non-Bumiputera 2,500,000(2) 100.00 631 ,807,488(3) 100.00 528,607,488(3) 74.89 Total Malaysian 2,500,000 100.00 631,807,488 100.00 617,273,288 87.45 Foreigners 88,608,200(4) 12.55 TOTAL 2,500,000 100.00 631,807,488 100.0 705,881,488 100.00 193 Registration No.: 199401034915 (32059B-X) 8. APPROVALS AND CONDITIONS (cont'd) Notes: A Being the latest practicable date, prior to submission of our Listing application to the SC. (1 ) Assumes all the IPO Shares allocated to Bumiputera investors under the Retail Offering and Bumiputera investors approved by MITI under the Institutional Offering are fully subscribed. (2) Held by Dato' Simon and Datin Mina. (3) Held by Etheco, BluPlanet, Pelagos and Primarium. (4) Also includes non-Bumiputera Malaysian public, and Bumiputera and non-Bumiputera Directors and eligible employees under the pink form allocation. The shareholding breakdown can only be determined after the closing of the application period for the IPO Shares. The SAC of the SC has, via its letter dated 18 November 2019, classified our Shares as Shariah-compliant securities based on our latest audited financial information for the FYE 2018. 8.1.2 Bursa Securities Bursa Securities has, via its letter dated 15 November 2019, approved the Admission of our Company to the Official List and our listing of and quotation for the entire enlarged issued share capital of our Company of 705,881,488 Shares on the Main Market. The conditions imposed by Bursa Securities and the status of the compliance with these conditions are as follows: Details of conditions imposed Status of compliance InNature and its adviser shall make the relevant To be complied announcements pursuant to Paragraphs 8.1 and 8.2 of Practice Note 21 of the Listing Requirements; InNature and its adviser to furnish Bursa Securities with a Complied copy of the Constitution and letter of compliance pursuant to Paragraph 2.12 of the Listing Requirements; and InNature and its adviser to furnish Bursa Securities with a To be complied copy of the schedule of distribution showing compliance to the share spread requirements based on the entire issued share capital of InNature on the first day of listing. 8.1.3 MITI MITI has, via its letter dated 13 December 2019, taken note of and has no objection to our Listing. 194 Registration No.: 199401034915 (320598-X) 8. APPROVALS AND CONDITIONS (cant'd) 8.2 Moratorium on our Shares In accordance with the Equity Guidelines, our Promoters will not be allowed to sell, transfer or assign its or their entire shareholdings of 528,607,488 Shares in our Company, representing 74.89% of the enlarged issued share capital as at the date of our Listing, within 6 months from the date of Listing of our Company on the Main Market (" Moratorium Period"). Our Promoters have provided undertaking letters to the SC that they will not sell, transfer or assign their respective shareholdings under moratorium during the Moratorium Period, including all Shares, if any, issued to our Promoters during the Moratorium Period, in accordance with the Equity Guidelines. The details of Shares to be held under moratorium are as follows: Direct Indirect No. of % of enlarged No. of % of enlarged Name Shares held share capital(1) Shares held share capital(1) Etheco 360,000,000 51 .00 BluPlanet 126,249,600 17.89 Primarium 21 ,178,944 3.00 Pelagos 21,178,944 3.00 Datin Mina(2) 507,428,544 71 .89 Dato' Simon(3) 507,428,544 71 .89 Daryl Foong(4) 21,178,944 3.00 Dexter Foong(5) 21,178,944 3.00 Total 528,607,488 74.89 Notes: (1) Based on the enlarged issued share capital of 705,881 ,488 Shares. (2) Deemed interested by virtue of Section 8(4) of the Act, through her shareholdings of more than 20.00% in Etheco, BluPlanet and Pelagos respectively. (3) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Etheco, BluPlanet and Primarium respectively. (4) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Pelagos. (5) Deemed interested by virtue of Section 8(4) of the Act, through his shareholdings of more than 20.00% in Primarium. The shareholders of Etheco, BluPlanet, Pelagos and Primarium, namely Datin Mina and Dato' Simon as well as the shareholders of Pelagos and Primarium, namely Daryl Foong and Dexter Foong respectively, have also provided undertaking letters to the SC that they will not sell, transfer or assign their respective shareholdings in Etheco , BluPlanet, Pelagos and Primarium during the Moratorium Period. The above moratorium restriction is specifically endorsed on the share certificates representing the Shares held by our Promoters which are under moratorium to ensure that our Share Registrar does not register any transfer that contravenes such restrictions. 195 Registration No.: 199401034915 (32059B-X) 9. RELATED PARTY TRANSACTIONS 9.1 Related party transactions Under the Listing Requirements, a "related party transaction" is a transaction entered into by a listed issuer or its subsidiaries that involves the interest, direct or indirect, of a related party. A "related party" of a listed issuer (not being a special purpose acquisition company) is: (i) a director, having the meaning given in subsection 2(1) of the CMSA, and includes any person who is or was within the preceding 6 months of the date on which the terms of the transaction were agreed upon, a director of the listed issuer, its subsidiary or holding company or a chief executive of the listed issuer, its subsidiary or holding company; or (ii) a major shareholder, and includes any person who is or was within the preceding 6 months of the date on which the terms of the transaction were agreed upon, a major shareholder of the listed issuer or its subsidiaries or holding company, and has or had an interest or interests in one or more voting shares in a corporation and the number or aggregate number of those shares, is : (a) 10% or more of all the voting shares in the corporation; or (b) 5% or more of all the voting shares in the corporation where such person is the largest shareholder of the corporation; or (iii) a person connected with such director or major shareholder. (The rest of this page has been intentionally left blank) 196 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cant'd) 9.1.1 Material related party transactions Save as disclosed below, there are no existing or potential material related party transactions that we have entered into or that are proposed to be entered into by our Group with related parties for the FYE 2016, FYE 2017, FYE 2018, FPE 2019 and for the period from 1 October 2019 up to the LPD: Transaction value 1 October 2019 up to FYE 2016 FYE 2017 FYE 2018 FPE 2019 the LPD Transacting No. parties Nature of relationship Nature of transaction RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO 1. Rampai-Niaga Datin Mina and Dato' Simon Professional fee for management 60 60 and Feliz are common directors and services provided by Feliz Natur Natur shareholders of Rampai-Niaga through Datin Mina to Rampai (0 .2% of our (0 .2% of our and Feliz Natur Niaga(1) Group's Group's FYE FYE 2016 2017 PAT) PAT) 2. InNature and Datin Mina and Dato' Simon Acquisition of TBS Vietnam by 1,447(2) Feliz Natur are common directors and InNature from Feliz Natur shareholders of InNature and (1.9% of our Feliz Natur Group's FYE 2018 NA) 3. InNature and Dato' Simon is a director and Disposal of 9,181 ,857 shares in Negligible(3) Dato' Simon shareholder of InNature Graphene Nanochem PLC by InNature to Dato' Simon 4. Rampai-Niaga Datin Mina and Dato' Simon • Disposal of a unit of 950(4) and Steady are common directors and commercial shoplot known as Property shareholders of Rampai-Niaga Lot No. LG20J, Lower Ground (1.3% of our and Steady Property Floor, Subang Parade, Group's FYE Selangor by Rampai-Niaga to 2018 NA) Steady Property 197 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cant'd) Transaction value 1 October 2019 up to FYE 2016 FYE 2017 FYE 2018 FPE 2019 the LPD Transacting No. parties Nature of relationship Nature of transaction RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Rampai-Niaga • Disposal of a unit of 1,160(4) and Steady commercial shoplot known as Property Lot No. G41, Ground Floor, (1.5% of our (cont'd) Mahkota Parade, Melaka by Group's FYE Rampai-Niaga to Steady 2018 NA) Property • Disposal of a unit of 1,250(4) commercial shoplot known as Lot No. LG03A, Summit City, (1.7% of our Selangor by Rampai-Niaga to Group's Steady Property. FYE 2018 NA) • Disposal of a commercial 360(4) parcel known as Unit 44, Ground Floor, Central Square, (0.5% of our Sungai Petani, Kedah by Group's FYE Rampai-Niaga to Steady 2018 NA) Property • Disposal of a 3-storey shop 4,900(4) office known as No.3, USJ 10/1 C, UEP Subang Jaya, (6.5% of our Selangor by Rampai-Niaga to Group's FYE Steady Property 2018 NA) • Disposal of a 3-storey shop 4,900(4) office known as No.5, USJ 10/1 C, UEP Subang Jaya, (6.5% of our Selangor by Rampai-Niaga to Group's FYE Steady Property 2018 NA) 198 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cont'd) Transaction value 1 October 2019 up to FYE 2016 FYE 2017 FYE 2018 FPE 2019 the LPD Transacting No. parties Nature of relationship Nature of transaction RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO • Tenancy of ground, first and 92 (5) 31 (5)(6) second floor of No.3, USJ 10/1C, UEP, Subang Jaya, (0.6% of our Selangor by Steady Property Group's FPE to Rampai-Niaga as part of our 2019 rental HQ expense excluding MFRS16 impact) • Tenancy of ground, first and 74( 5) 41 (5)(6) second floor of No.5, USJ 10/1 C, UEP Subang Jaya, (0.5% of our Selangor by Steady Property Group's FPE to Rampai-Niaga as part of our 2019 rental HQ expense excluding MFRS16 impact) • Tenancy of a unit of 71(5 ) 24(5)(6) commercial shoplot known as Lot No. G41 , Ground Floor, (0.4% of our Mahkota Parade, Melaka by Group's FPE Steady Property to Rampai 2019 rental Niaga expense excluding MFRS16 impact) 199 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cont'd) Transaction value 1 October 2019 up to FYE 2016 FYE 2017 FYE 2018 FPE 2019 the LPD Transacting No. parties Nature of relationship Nature of transaction RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Rampai-Niaga • Tenancy of a unit of 109(5) 36(5)(6) and Steady commercial shoplot known as Property Lot No. LG20J, Lower Ground (0.7% of our (cont'd) Floor, Subang Parade, Group's FPE Selangor by Steady Property 2019 rental to Rampai-Niaga expense excluding MFRS16 impact) • Tenancy of a commercial 25(5) 8(5)(6) parcel known as Unit 44, Ground Floor, Central Square, (0.2% of our Sungai Petani, Kedah by Group's FPE Steady Property to Rampai 2019 rental Niaga expense excluding MFRS16 impact) 5. InNature and Datin Mina and Data' Simon The Promoters' Share Issuance as 1,888 (6) BluPlanet, are common directors and set out in Section 4.1.2 of this Pelagos, shareholders of InNature and Prospectus. Primarium BluPlanet. respectively Dato' Simon is a common director and shareholder of lnNature and Primarium. Dexter Foong is a director and shareholder of Primarium. 200 Registration No.: 199401034915 (32059B-X) 9. RELATED PARTY TRANSACTIONS (cani'd) Transaction value 1 October 2019 up to FYE 2016 FYE 2017 FYE 201B FPE 2019 the LPD Transacting No. parties Nature of relationship Nature of transaction RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Datin Mina and Daryl Foong are common directors of InNature and Pelagos. Datin Mina and Daryl Foong are also shareholders of Pelagos. Dato' Simon and Datin Mina are spouses to each other. Dexter Foong and Daryl Foong are the children of Dato' Simon and Datin Mina. Notes: (1) The fee is in relation to the consultancy service provided by Feliz Natur to Rampai-Niaga. The scope of the consultancy services includes negotiating with TBSI in respect of the franchise agreements between Rampai-Niaga and TBSI as and when required and overseeing the day-to-day operations of Rampai-Niaga during the tenure of the consultancy contract which commenced since 1 January 2013. Datin Mina is not the chief executive officer or managing director of Feliz Natur but a director of Feliz Natur. The consultancy service has been terminated since FYE 2018 and hence this related party transaction will not recur in the future. (2) On 24 September 2018, as part of our Internal Restructuring Exercise, InNature had acquired the entire charter capital of TBS Vietnam (VND 5.6 billion) equivalent to USD 350,000) for a purchase consideration of USD 350,000 (equivalent to VND5.6 billion or RM1.4 million) from Feliz Natur. Subsequent to the TBS Vietnam Acquisition, TBS Vietnam had become a wholly-owned subsidiary of our Group. Please refer to Section 4.1.2 of this Prospectus for further details of the TBS Vietnam Acquisition and Section 13.5(i) of this Prospectus for further details of the share sale agreement for the TBS Vietnam Acquisition. (3) The investment shares held by our Company in Graphene NanoChem PLC, a company previously listed on London Stock Exchange, were disposed to Dato' Simon for a nominal value of RM1.00 on 29 March 2018 to concentrate on the Group's core business. In the FYE 2017, our Company had impaired the cost of investment of these shares. Please refer to Section 11.3.1 (xii) and 12 (Accountants' Report) of this Prospectus for further details of the impairment. (4) These properties were transferred to Steady Property pursuant to a distribution-in-specie under the Rampai-Niaga 2018 Dividend (defined in Section 4.1.2(b) of this Prospectus) under our Internal Restructuring Exercise, further details of which are set out in Section 4.1.2 of this Prospectus. 201 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cant'd) (5) These tenancies have a tenure of 2 years with an option to renew for a further extension of 2 years subject to the tenant giving the landlord 3 months' notice in advance. The rental rate for the renewal term is subject to the prevailing market rates at the time of renewal. Either party may terminate the tenancy by giving the other 3 months' notice in advance. The rental rates are based on a third party valuation on the market rental carried out by a registered property valuer. (6) The percentage is unable to be ascertained as at the LPD as the Group's audited financial statements for 1 October 2019 up to LPD is not available. (7) Please refer to Section 4.1.2 of this Prospectus for further details of the purchase consideration payable by Bluplanet, Pelagos and Primarium for the Promoters' Share Issuance. The Promoters' Share Issuance under the pre-listing Internal Restructuring Exercise was completed on 20 December 2019. (The rest of this page has been intentionally left blank) 202 Registration No.: 199401034915 (32059B-X) 9. RELATED PARTY TRANSACTIONS (cant'd) In addition to the above, our Directors also confirm that our Group has not entered into other material related party transactions which were effected after the LPD, or were entered into but yet to be effected up to the date of this Prospectus. Our Directors confirm that the above related party transactions were conducted at market value and on an arm's length basis and are based on terms and conditions which are not detrimental to us nor our minority shareholders. After Listing, we will be required to seek our shareholders' approval each time we enter into a material related party transaction in accordance with the Listing Requirements. However, if the related party transactions can be deemed as recurrent related party transactions, we may seek a general mandate from our shareholders to enter into these transactions without having to seek separate shareholders' approval each time we wish to enter into such related party transactions during the validity period of the mandate. In this regard, our Company, after Listing, will seek for our shareholders' ratification and mandate at the next annual general meeting for the tenancies in Item 4 of Section 9.1.1 above which are recurrent related party transactions, unless otherwise exempted under the Listing Requirements. By virtue of Dato' Simon and Datin Mina's common shareholdings in InNature and Steady Property, they are deemed interested in the said tenancy arrangements. In this respect, Dato' Simon and Datin Mina as well as any person connected to them are required to abstain from voting on any resolution with regards to such related party transactions. As at the LPD, Dato' Simon and Datin Mina as well as the persons connected to them comprise all the shareholders of InNature. As such, no prior shareholders' approvals were able to be obtained in respect of the said tenancy arrangements. In addition, to safeguard the interest of our Group and our minority shareholders, and to mitigate any potential conflict of interest situation, our Directors through our Audit and Risk Management Committee will, among others: (i) supervise and monitor any recurrent transaction and review the terms of all related party transactions before the transactions are being entered into; (ii) ensure that all related party transactions are carried out on an arm's length basis and on normal commercial terms which are not more favourable to the related parties than those generally available to third parties dealing at arm's length , and are not to the detriment of our Group or our minority shareholders; and (iii) make appropriate disclosure in our annual report with regard to any recurrent related party transaction entered into by our Group. 9.1.2 Related party transactions that are unusual in their nature or condition There were no transactions that are unusual in nature or conditions, involving goods, services, tangible or intangible assets, to which our Company or any of our Subsidiaries was a party for the FYE 2016, FYE 2017, FYE 2018, FPE 2019 and for the subsequent period up to the LPD . 203 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cont'd) 9.1.3 Loans made to or for the benefit of related parties Save as disclosed below, there were no outstanding loans (including guarantees of any kind) or financial assistance made by our Group to or for the benefit of any related parties for the FYE 2016, FYE 2017, FYE 2018, FPE 2019 and for the subsequent period from 1 October 2019 up to the LPD: Outstanding amount As at 31 December As at 30 September As at the LPD 2016 2017 2018 2019 Interested related RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO party and nature Nature of transaction No. of relationship and purpose Total Total Total Total Total Malaysia 1. InNature and Advances from InNature 62,165 78,481 Steady Property to Steady Property to fund capital and (33.7% of our (40.0% of our Dato' Simon and operating requirements Group's FYE 2016 Group's FYE 2017 Datin Mina are of Steady Property(1) NA) NA) common directors and shareholders of both companies. 2. InNature and Advances from InNature 1,378 1,382 Versatrad to Versatrad Agencies Agencies Sdn Bhd Sdn Bhd to fund capital (0.7% of our Group's (0 .7% of our Group's and operating FYE 2016 NA) FYE 2017 NA) Dato' Simon and requirements of Datin Mina are Versatrad Agencies Sdn common directors Bhd(1) and shareholders of both companies. Molly Fong is also a director of Versatrad Agencies Sdn Bhd . 204 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cani'd) Outstanding amount As at 31 December As at 30 September ------As at the LPD 2016 2017 2018 2019 Interested related RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO party and nature Nature of transaction No. of relationship and purpose Total Total Total Total Total 3. InNature and Feliz Advances from InNature 33,662 32,473 Natur to Feliz Natur to fund capital and operating (18.2% of our (16.6% of our Dato' Simon and requirements of Feliz Group's FYE 2016 Group's FYE 2017 Datin Mina are Natur 1) NA) NA) common directors and shareholders of both companies. 4. Rampai-Niaga and 2 corporate guarantees 4,697 4,697 Steady Property given by Rampai-Niaga to HSBC Amanah (2.5% of our Group's (2.4% of our Group's Dato' Simon and Malaysia Berhad FYE 2016 NA) FYE 2017 NA) Datin Mina are ("HSBC Amanah") for common directors credit facilities granted and shareholders to Steady Property(2) of both companies. 5. InNature and Dato Advances from Dato 2,429 1,035 Simon & Datin Simon and Datin Mina to Mina InNature (1.3% of our Group's (0.5% of our Group's FYE 2016 NA) FYE 2017 NA) 205 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cant'd) Outstanding amount As at 31 December As at 30 September As at the LPD 2016 2017 2018 2019 Interested related RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO party and nature Nature of transaction No. of relationship and purpose Total Total Total Total Total Vietnam 6. TBS Vietnam and Loan granted by Feliz 2,169 1,967 2,009 1,936 _(4) Feliz Natur Natur to TBS Vietnam for the operating (USD 485) (USD 485) (USD 485) (USD 461) Dato' Simon and expenses of TBS Datin Mina are Vietnam(3) (1.2% of our Group's (1.0% of our Group's (2.7% of our Group's (2.2% of our Group's indirect FYE 2016 NA) FYE 2017 NA) FYE 2018 NA) FPE 2019 NA) shareholders of TBS Vietnam. Datin Mina is also the general director of T8S Vietnam . Dato' Simon and Datin Mina are directors and equal shareholders of Feliz Natur. Notes: (1) The interest free , repayable on demand advances were given by InNature as a private-exempt company to assist Steady Property, Versatrad Agencies Sdn Bhd and Feliz Natur respectively. Data' Simon and Datin Mina are equal shareholders in Steady Property and Feliz Natur, whilst in Versatrad Agencies Sdn Bhd, Data' Simon holds 70.0% shareholdings and Datin Mina holds 30 .0% shareholdings. Data' Simon and Datin Mina are common directors in all 3 companies whilst Molly Fong, our CEO is also a director in Versatrad Agencies Sdn Bhd. The advances were made by InNature for the benefit of these companies and as such were not carried out on an arm's length basis. Nonetheless, as a private-exempt company, InNature is not prohibited under section 225 of the Act (previously section 133A of the Companies Act 1965) to give loans to Steady Property, Versatrad Agencies Sdn Bhd and Feliz Natur, being persons connected with its directors, Dato' Simon and Datin Mina at the time the advances were made. As of 31 December 2018, all outstanding amounts due from Steady Property, Versatrad Agencies Sdn Bhd and Feliz Natur had been fully repaid. Moving forward, InNature as a public company, will ensure that no such guarantees will be given by our Group to any third parties in the future. 206 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS (cant'd) (2) The above corporate guarantees were given by Rampai-Niaga as security for Steady Property's banking facility ("Guarantees"). The Guarantees were given pursuant to a condition set out in the letter of offer from HSBC Amanah. Under section 225 of the Act, a company, other than a private exempt company, shall not enter into a guarantee or provide any security in connection with a loan made to any person connected with the director of the company or its holding company, by another person. Any director who authorises the entering into any guarantee in contravention of section 225 commits an offence under the Act and shall on conviction be liable to imprisonment for a term not exceeding 5 years or to a fine not exceeding RM3 million or both. At the relevant time of the provision of the Guarantees, both Dato' Simon and Datin Mina were common directors and shareholders in InNature (which is the holding company of Rampai-Niaga) and Steady Property, and also the directors of Rampai-Niaga. They each held 50.0% shareholdings in Steady Property at the relevant time when the guarantees were provided. As such, pursuant to section 225 of the Act (previously section 133A of the Companies Act 1965), any guarantee given by Rampai-Niaga (not being a private-exempt company), in connection with a loan made to Steady Property, being a person connected to Dato' Simon and Datin Mina, the directors of Rampai-Niaga, would be in contravention of section 225 of the Act. The transaction of providing security for the benefit of a person connected with the director of Rampai-Niaga as such would not have been carried out on an arm's length basis. The breach was inadvertent as Rampai-Niaga was not advised by the relevant advisers handling the loan transaction that the entry into the Guarantees by Rampai-Niaga would amount to a breach of Section 255 of the Act. Notwithstanding the above, Guarantees have since been released effective from 29 November 2018 and no action has been brought against Datin Mina or Dato' Simon under the Act to-date and neither Datin Mina nor Dato' Simon expects any action to be brought. Moving forward, InNature has put in place strict internal control and compliance procedures and amongst others, all related party transactions entered into by the Group will need to be brought to the Audit and Risk Management Committee and the Board for approval. (3) TBS Vietnam was a wholly-owned subsidiary of Feliz Natur since its incorporation on 15 January 2009 up to 24 September 2018. On 24 September 2018, InNature acquired the entire charter capital of TBS Vietnam as part of our Internal Restructuring Exercise and TBS Vietnam became our wholly-owned subsidiary. The loan was granted by Feliz Natur to TBS Vietnam when it was the parent company of TBS Vietnam to facilitate the operating expenses of TBS Vietnam. The loan is interest free and repayable on demand. The loan was advanced in 2009 and 2010. Dato' Simon and Datin Mina are directors and equal shareholders of Feliz Natur. Datin Mina is the general director ofTBS Vietnam. As the loan was given by Feliz Natur as the then parent company for the benefit of TBS Vietnam to facilitate its operating expense and is interest free, these terms are not to our detriment and not to the detriment of our minority shareholders. Pursuant to the loan agreement, the tenure of the loan is 1 year, and has been subject to annual renewal since 2009/2010. Accordingly, the loan is treated as short-term. Out of the total outstanding loan amount of USD485,OOO, USD461 ,000 has been registered with the State Bank of Vietnam and the remaining amount of USD24,OOO was waived. The waived amount represents the portion of the loan which was unable to be substantiated by bank statements for the purpose of the foreign loan registration with the State Bank of Vietnam since the loan was disbursed a few years back. The loan has been repaid to Feliz Natur on 26 November 2019. Accordingly, upon repayment, the loan has been cancelled . As at the LPD, there are no outstanding loan amounts due from TBS Vietnam to Feliz Natur. (4) The percentage is unable to be ascertained as at the LPD as the Group's audited financial statements for 1 October 2019 up to the LPD is not available. (5) All outstanding amounts as at the FYE 2016, FYE 2017, FYE 2018 , FPE 2019 and as at the LPD as disclosed above are short-term in nature. 207 Registration No.: 199401034915 (320598-X) 9. RELATED PARTY TRANSACTIONS 9.2 Monitoring and oversight of related party transactions 9.2.1 Audit and Risk Management Committee review Our Audit and Risk Management Committee assesses the financial risk and matters relating to related party transactions and conflict of interest situations that may arise within the Company or Group including any transactions, procedures or course of conducts that raises questions of management integrity. Our Audit and Risk Management Committee maintains and periodically reviews the adequacy of the procedures and processes set by our Company to monitor related party transactions and conflicts of interest. It also sets the procedures and processes to ensure that transactions are carried out in the best interest of the Company on normal commercial terms that are industry norms and not more favourable to the related party than those generally available to third parties dealing at arm 's length, and are not to the detriment of the interest of our Company's minority shareholders. Amongst others, the related parties and parties who are in a position of conflict with the interest of the Group will be required to abstain from deliberations on the transactions. All reviews by our Audit and Risk Management Committee are reported to our Board for its further action . 9.2.2 Our Group's policy on related party transactions Some of the Directors and/or Substantial Shareholders of our Group are also directors and/or shareholders of related parties of our Group or persons connected. It is the policy of our Group that all related party transactions and conflicts of interest must be immediately and fully disclosed by the interested Directors or SUbstantial Shareholders to the management for reporting to the Audit and Risk Management Committee. Such transactions must be reviewed by the Audit and Risk Management Committee to ensure that they are negotiated and agreed upon in the best interest of the Company on an arm's length basis, and are based on normal commercial terms and not more favourable to the related party than those generally available to third parties, and are not to the detriment of the interest of our Company's minority shareholders. In addition , in line with the MCCG, our Directors are required to make an annual disclosure of any related party transactions and conflicts of interest with the Group and the Audit and Risk Management Committee must carry out an annual assessment of our Directors which include an assessment of such related party transactions and/or conflicts of interest. Our Audit and Risk Management Committee will in turn report to our Board after their evaluation and assessment and make the appropriate recommendations to our Board. 208 Registration No.: 199401034915 (32059B-X) 10. CONFLICTS OF INTEREST 10.1. Conflict of interest 10.1.1. Interest in similar businesses or in customers or suppliers of our Group As at the LPD, none of our Directors and Substantial Shareholders have any interest, direct or indirect, in other businesses or corporations carrying on a trade similar to that of our Group or which are our customers or suppliers. Details of the interests, shareholdings and directorships in other businesses of our Directors and Substantial Shareholders are disclosed in Section 3.1.4 of this Prospectus. 10.2. Declaration by advisers on conflicts of interest 10.2.1. CIMB CIMB has given its confirmation that it has no existing or potential interest in the Company and there is no existing or potential conflict of interest in its capacity as the Principal Adviser, Managing Underwriter, Joint Underwriter and Sole Bookrunner in respect of our IPO. 10.2.2. Chooi & Company + Cheang & Ariff Chooi & Company + Cheang & Ariff has given its confirmation that it has no existing or potential interest in the Company and there is no existing or potential conflict of interest in its capacity as the Solicitors as to Malaysian laws in respect of our IPO. 10.2.3. RHTLaw Vietnam (formerly known as RHTLaw Taylor Wessing Vietnam) RHTLaw Vietnam (formerly known as RHTLaw Taylor Wessing Vietnam) has given its confirmation that it has no existing or potential interest in the Company and there is no existing or potential conflict of interest in its capacity as the Solicitors as to laws of Vietnam in respect of our IPO. 10.2.4. R&T Sok & Heng Law Office R& T Sok & Heng Law Office has given its confirmation that it has no existing or potential interest in the Company and there is no eXisting or potential conflict of interest in its capacity as the Solicitors as to laws of Cambodia in respect of our IPO. 10.2.5. KPMG PLT KPMG PL T has given its confirmation that it has no existing or potential interest in the Company and there is no existing or potential conflict of interest in its capacity as the Auditors and Reporting Accountants in respect of our IPO. 10.2.6. Frost & Sullivan GIC Malaysia Sdn Bhd Frost & Sullivan GIC Malaysia Sdn Bhd has given its confirmation that it has no existing or potential interest in the Company and there is no existing or potential conflict of interest in its capacity as the Independent Market Research Consultants in respect of our IPO. 209 Registration No.: 199401034915 (32059B-X) 10. CONFLICTS OF INTEREST (cont'd) 10.2.7. Malaysian Issuing House Sdn Bhd and Boardroom Share Registrars Sdn Bhd (formerly known as Symphony Share Registrars Sdn Bhd) Malaysian Issuing House Sdn Bhd and Boardroom Share Registrars Sdn Bhd (formerly known as Symphony Share Registrars Sdn Bhd) respectively have given their confirmation that they do not have existing or potential interest in the Company and there are no existing or potential conflicts of interest in their respective capacities as the Issuing House and Share Registrar in respect of our IPO. 10.2.B. Zul Rafique & Partners Zul Rafique & Partners has given its confirmation that it has no existing or potential interest in the Company and there is no existing or potential conflict of interest in its capacity as the Solicitors to the Managing Underwriter, Joint Underwriters and Sole Bookrunner in respect of our IPO. 10.2.9. MIDF Amanah Investment Bank Berhad MIDF Amanah Investment Bank Berhad has given its confirmation that it has no existing or potential interest in the Company and there is no existing or potential conflict of interest in its capacity as the Joint Underwriter in respect of our I PO. (The rest of this page has been intentionally left blank) 210 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION Our Company is principally involved in investment holding. Presently, our Company has 5 wholly-owned Subsidiaries. For the purposes of presenting our Group's financial information in this section and elsewhere in this Prospectus, the financial information of the following entities were used in the preparation of our consolidated financial information: 9 months period ended 30 FYE September ("FPE") Financial information of entity 2016 2017 2018 2018 2019 Note InNature ,/ ,/ ,/ ,/ ,/ Rampai-Niaga ,/ ,/ ,/ ,/ ,/ TBS Vietnam ,/ ,/ ,/ ,/ ,/ (i) Green Cosmetics ,/ (ii) Hello Natural ,/ (iii) Ola Beleza ,/ (iii) Prior to FYE 2017, InNature and Rampai-Niaga's accounts were prepared under Malaysian Private Entities Reporting Standard. For the purpose of this IPO, the financial information provided in this Prospectus is based on the Accountants' Report covering the FYE 2016, FYE 2017, FYE 2018 and FPE 2019 which have been audited by KPMG PL T under MFRS. The financial information for the FPE 2018 has not been audited but are presented for comparison purposes. Notes: ,/ Denotes the financial information of the relevant entities for the respective year/period being used in the preparation of our consolidated financial information Denotes that the financial information of the relevant entitites for the respective year/period are not being used in the preparation of our consolidated financial information (i) Although TBS Vietnam only became our Subsidiary on 24 September 2018, our Company and TBS Vietnam were under the common control of Datin Mina and Dato' Simon during the relevant years/periods under review. As such, the financial information of TBS Vietnam has been accounted for in our Group as if the acquisition had occurred at the beginning of the FYE 2016; (ii) Green Cosmetics was incorporated on 4 October 2018 in Cambodia. As at the LPD, Green Cosmetics has commenced operations in Cambodia with the opening of its first point-of-sale in November 2019. For the FPE 2019, the financial statements of Green Cosmetics mainly comprise initial capital, set-up costs and minor administration expenses. In addition, Green Cosmetics is not required to conduct a statutory audit and prepare audited financial statements. For the FYE 2018, the financial information of Green Cosmetics is immaterial to the financial information of our Group; (iii) Hello Natural and Ola Beleza were incorporated on 15 February 2019 and 21 February 2019 respectively. As such , our Group's financial information for the FYE 2016, FYE 2017, FYE 2018 and FPE 2018 do not contain the financial information of Hello Natural and Ola Beleza. The e commerce website of Ola Beleza went live on 23 August 2019 and the first transaction occurred on the 10 September 2019. As at the LPD, Hello Natural is dormant. 211 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) Following the above, the management's discussion and analysis of our Group's financial condition and results of operation for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 as set out in Section 11.3 of this Prospectus excludes those relating to Green Cosmetics, Hello Natural and Ola Beleza. Unless otherwise stated , our Group's financial information for the financial years/periods under review, reflect mainly the financial information of our The Body Shop® business in Malaysia and Vietnam. The financial statements used in the preparation of our consolidated financial statements were prepared in accordance with MFRS and IFRS. Any adjustments which were dealt with when preparing our consolidated financial statements have been highlighted and disclosed in Section 11.3 of this Prospectus. There has been no audit qualification on our audited financial statements for the FYE 2016, FYE 2017, FYE 2018 and FPE 2019. (The rest of this page has been intentionally left blank) 212 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) 11.1 Historical Consolidated Financial Information The following historical audited consolidated financial information for the FYE 2016, FYE 2017, FYE 2018 and FPE 2019 and the unaudited consolidated financial information for the FPE 2018 have been extracted from the Accountants' Report as set out in Section 12 of this Prospectus. The historical consolidated financial information presented below should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Section 11 .3 of this Prospectus and our historical consolidated financial statements and the accompanying notes as set out in the Accountants' Report included in Section 12 of this Prospectus. Our historical consolidated financial statements have been prepared in accordance with MFRS and IFRS. 11.1.1 Consolidated Statements of Profit or Loss and Other Comprehensive Income Audited Unaudited Audited FYE 31 December FPE 30 September 2016 2017 2018 2018 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Revenue 159,902 171 .919 184,474 132,322 138,195 Other operating income 2,011 1,011 1,606 944 1,233 Total operating revenue 161,913 172,930 186,080 133,266 139,428 Operating expenses Changes in inventories (53,598) (56,424) (62,488) (44,014) (44,966) Rental expenses (1,341) (1,878) (1,629) (1,142) (2,664) Employee related expenses (31,854) (36,778) (36,453) (27,125) (29,762) Selling and distribution expenses (4,029) (4,274) (4,744) (3,230) (3,200) Advertising and promotion expenses (3,504) (3.794) (4,716) (3,289) (3,4 70) Depreciation and amortisation expenses (21,042) (20,808) (20,860) (15,660) (15,672) Other operating expenses (7,469) (6,097) (6,138) (4,182) (5,576) Total operating expenses (122,837) (130,053) (137,028) (98,642) (105,310) Profit from operations 39,076 42,877 49,052 34,624 34,118 Finance income 617 742 1,277 1,100 356 Finance costs (2,686) (2,866) (1,809) (1,331) (1,650) Listing-related expenses (2,683) Fair value loss on other investments (234) (4,230) Impairment loss on other investments (2,239) Fair value gain arising from distribution of non-cash assets to owners 10,030 Profit before tax 36,773 34,284 58,550 34,393 30,141 Tax expense (9,960) (10,184) (12,925) (8,534) (7,900) Profit for the year/period 26,813 24,100 45,625 25,859 22,241 213 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Audited Unaudited Audited FYE 31 December FPE 30 September 2016 2017 2018 2018 2019 RM 'OOO RM'OOO RM'OOO RM'OOO RM 'OOO Other comprehensive income/(Ioss), net of tax Item that is or may be reclassified subsequently to profit or loss Foreign currency translation differences for foreign operation, representing other comprehensive income/(Ioss) for the year/period 430 (1,496) (349) (83) 116 Total comprehensive income for the year/period 27,243 22,604 45,276 25,776 22,357 Profit attributable to: Owners of the Company 26,813 24,100 45,625 25,859 22,241 Non-controlling interests Profit for the year/period 26,813 24,100 45,625 25,859 22,241 Total comprehensive income attributable to: Owners of the Company 27,243 22,604 45,276 25,776 22,357 Non-controlling interests Total comprehensive income for the year/period 27,243 22,604 45,276 25,776 22,357 Other selected financial data: Gross profit(1) 106,304 115,495 121 ,986 88 ,308 93,229 Adjusted EBITDN2) 60,118 63,685 69,912 50,284 49,790 Gross profit margin (%)(3) 66.5 67.2 66.1 66.7 67.5 Profit before tax margin (%)(4) 23.1 23.7 26.3 26.0 23.8 Profit after tax margin (%)(5) 16.9 17.8 19.6 19.5 18.0 Basic and diluted EPS (6) (sen) 4.24 3.81 7.22 4.09 3.52 Notes: (1) Gross profit is computed based on revenue less changes in inventories (cost of goods sold). (2) Adjusted EBITDA represents earnings before interest, taxation , depreciation and amortisation, after excluding our non-core earnings, which comprise listing-related expenses, fair value loss on other investments, impairment loss on other investments and fair value gain arising from distribution of non-cash assets to owners ("Non-core Earnings"). The table below sets out the reconciliation of our profit after taxation to EBITDA and adjusted EBITDA for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019. 214 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) Audited Unaudited Audited FYE 31 December FPE 30 September 2016 2017 2018 2018 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Profit after tax 26,813 24,100 45,625 25,859 22,241 Tax expense 9,960 10,184 12,925 8,534 7,900 Profit befo re tax 36,773 34,284 58,550 34,393 30,141 Interest* 2,069 2,124 532 231 1,294 Depreciation and amortisation 21 ,042 20,808 20,860 15,660 15,672 EBITDA 59,884 57,216 79,942 50,284 47,107 Non-core Earnings: Listing-related expenses 2,683 Fair value loss on other investments 234 4,230 Impairment loss on other investments 2,239 Fair value gain arising from distribution of non-cash assets to owners (10,030) Total Non-core Earnings 234 6,469 (10,030) 2,683 Adjusted EBITDA 60,118 63,685 69,912 50,284 49,790 Interest in the above table represents finance income less finance expenses for the financial years/periods. EBITDAladjusted EBITDA and their related ratios presented in this Prospectus are supplemental measures of our performance and liquidity that are not required by, or presented in accordance with MFRS and IFRS. They are not measurements of financial performance or liquidity under MFRS and IFRS and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with MFRS and IFRS or as alternatives to cash flows from operating activities or as measures of liquidity. The EBITDAladjusted EBITDA presented here may not be comparable to similar terms or measures presented by other companies because not all companies use the same definitions or methodology to derive their EBITDA/Adjusted EBITDA (3) Gross profit margin is computed based on gross profit divided by revenue. (4) Profit before tax margin is computed based on profit before tax (after excluding our Non core Earnings, which comprise listing-related expenses, fair value loss on other investments, impairment loss on other investments and fair value gain arising from distribution of non-cash assets to owners) divided by revenue. (5) Profit after tax margin is computed based on profit after tax (excluding our Non-core Earnings, which comprise listing-related expenses, fair value loss on other investments, impairment loss on other investments as well as fair value gain and its tax impact arising from distribution of non-cash assets to owners) divided by revenue. (6) Basic and diluted EPS (sen) is calculated by dividing the profit for the year attributable to the equity holders of our Company by 631,807,488 Shares being the number of shares after the completion of the pre-listing Internal Restructuring Exercise as set out in Section 4.1.2 of this Prospectus. 215 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) 11.1.2 Consolidated Statements of Financial Position The table below sets out the summary of our audited historical consolidated statements of financial position as at 31 December 2016,31 December 2017,31 December 2018 and 30 September 2019 which have been extracted from the Accountants' Report in Section 12 of this Prospectus. Audited As at 30 As at 31 December September 2016 2017 2018 2019 RM'OOO RM'OOO RM'OOO RM'OOO Total non-current assets 106,851 94,399 87,680 95,122 Total current assets 146,208 164,701 56,527 53,431 TOTAL ASSETS 253,059 259,100 144,207 148,553 TOTAL EQUITy(1 ) 184,569 195,173 75,441 87,798 Total non-current liabilities 19,213 13,241 13,546 13,507 Total current liabilities 49,277 50,686 55,220 47,248 TOTAL LIABILITIES 68,490 63,927 68,766 60,755 Net current assets 96,931 114,015 1,307(2) 6,183 Net assets 184,569 195,173 75,441 87,798 Notes: (1) Total equity represents issued share capital and reserves balances at the end of the financial years/periods under review. (2) Please refer to Section 4.1.2 of this Prospectus for further details on our pre-listing Internal Restructuring Exercise. 11.1.3 Adoption of MFRS 16, Leases At the beginning of the FPE 2019, the Group has adopted NI FRS 16, Leases which is effective for annual periods beginning on or after 1 January 2019 using the full retrospective approach. MFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use ("ROU") representing its right to use the underlying assets and lease liability representing its obligations to make lease payments. The Group has a number of operating leases which are tenancies for its retail operations. The ROU assets will be depreciated on a straight-line basis over the shorter of the lease term and the useful life of the leased asset. Please refer to Note 30 of the Accountants' Report in Section 12 of this Prospectus for further details on the adoption of MFRS 16, Leases. 216 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) The impact following the adoption of IVIFRS 16 are set out below: (a) To the consolidated statements of financial position As at 30 As at 31 December September 2016 2017 2018 2019 RM'OOO RM'OOO RM'OOO RM'OOO ROU assets As previously stated Effects of MFRS 16 30,101 25,608 23,759 23,597 Changes after the adoption 30,101 25,608 23,759 23,597 Lease liabilities As previously stated Effects of MFRS 16 31,143 26,565 24 ,121 24,457 Changes after the adoption 31,143 26,565 24,121 24,457 Reserves As previously stated 168,371 178,890 68,667 81 ,522 Effects of MFRS 16 (1,042) (957) (362) (860) Changes after the adoption 167,329 177,933 68,305 80,662 (b) To the consolidated statements of profit or loss and other comprehensive income FYE 2016 FYE 2017 FYE 2018 FPE 2019 RM'OOO RM'OOO RM'OOO RM'OOO Rental expenses As previously stated (18,005) (20,311) (20,855) (16,292) Effects of MFRS 16 16,664 18,433 19,226 13,628 Changes after the adoption (1,341) (1 ,878) (1,629) (2 ,664) Depreciation and Amortisation As previously stated (6 ,211) (4,894) (3,926) (2,997) Effects of MFRS 16 (14 ,831) (15,914) (16,934) (12,675) Changes after the adoption (21,042) (20,808) (20,860) (15,672) Finance costs As previously stated (77) (380) (112) (204) Effects of MFRS 16 (2 ,609) (2,486) (1,697) (1,446) Changes after the adoption (2,686) (2,866) (1 ,809) (1 ,650) Profit after tax As previously stated 27,589 24,067 45,030 22,734 Effects of MFRS 16 (776) 33 595 (493) Changes after the adoption 26,813 24,100 45 ,625 22,241 217 Registration No.: 199401034915 (32059B-X) 11 . FINANCIAL INFORMATION (cont'd) 11.2 Capitalisation and Indebtedness The table below sets forth our Group's capitalisation and indebtedness information based on the management accounts of our Group as at 30 November 2019. The pro forma capitalisation and indebtedness information has been adjusted to reflect the completion of our pre-listing Internal Restructuring Exercise, our IPO and the utilisation of the IPO proceeds. Unaudited Pro Forma After pre-listing Internal Restructuring,IPO 30 November and utilisation of 2019 IPO proceeds RM'OOO RM'OOO Indebtedness: Loans and borrowings Current Revolving credit - secured 12.000 12,000 Other borrowings 329 329 Lease liabilities(1) 13,513 13,513 Non-current Other borrowings 290 290 Lease liabilities(1) 12,133 12,133 Total indebtedness(2) 38,265 38,265 Capitalisation: Total equity attributable to the owners of the Company 80,324 113,378 Non-controlling interest Total equity/capitalisation(3) 80,324 113,378 Total capitalisation and indebtedness 118,589 151,643(3) Gearing ratio (times) ( ~ ) 0.48 0.34 Notes: (1) The Group adopted MFRS 16, Leases on 1 January 2019 which supersedes MFRS 117, Leases. Lease liabilities of the Group primarily comprise of tenancy agreements entered with the landlords in relation to the lease of retail stores. (2) Total indebtedness includes current revolving credit, current and non-current other borrowings as well as current and non-current lease liabilities. (3) For the purposes of presenting the Group's total equity, the pro forma capitalisation and indebtedness are illustrated after the effects of the transactions below: (i) a dividend amounting to RM10,000,000 for the FYE 2019 declared by the Company on 26 November 2019 which was paid on 27 December 2019, as set out in Section 4.1.2(h) of this Prospectus; (ii) the InNature Acquisition, Promoters Share Issuance and Subdivision, as set out in Sections 4.1.2(e), 4.1.2(f) and 4.1.2(g), respectively; 218 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) (iii) the Public Issue pursuant to our IPO ; (iv) The total listing expenses to be borne by the Company is estimated to be RM6 ,370,000. As of 30 November 2019, RM2,866,000 has been charged to the profit or loss of the Group and RM2,325,000 has been paid . Upon completion of the IPO, the estimated listing expenses of RM1 ,550,000 directly attributable to the Public Issue will be debited against the share capital of the Company and the remaining estimated listing expenses of RM1 ,954,000 will be charged to the profit or loss of the Group; and (v) The business development cost for Natura in Malaysia is estimated to be RM5,700,000 which is directly attributable to the development of the new Natura business in Malaysia within 36 months from the date of Listing . These expenses are mainly in relation to the marketing expenses budgeted for the initial launch and introduction of the brand to the market. The expenses comprise the cost of organising launch events, cost of printing and distributing promotional materials and cost of digital marketing that will be charged to the profit or loss of the Group. (4) Computed based on total indebtedness (as computed above) divided by total equity attributable to the owners of the Company. 11 .3 lVIanagement's discussion and analysis of financial condition and results of operations The following discussion and analysis on our Group's financial condition and results of operations for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 should be read in conjunction with the historical consolidated financial statements and the accompanying notes as set out in the Accountants' Report included in Section 12 of this Prospectus. This discussion and analysis contains data derived from our historical consolidated financial statements as well as forward-looking statements reflecting our current views with respect to future events and our financial performance. Our actual results may differ significantly from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Section 7, Risk Factors of this Prospectus. 11.3.1 Results of operations Overview Our Company is principally involved in investment holding. The TBS Franchisees are principally involved in the retailing and distribution of TBS products. Through the TBS Franchisees, our Group holds the TBS franchises to establish and operate TBS points-of-sale in West Malaysia, Sabah and Labuan, Vietnam, and Cambodia. As at the LPD, we have 89 points-of-sale in West Malaysia, Sabah and Labuan; 34 points-of sale in Vietnam, 1 point-of-sale in Cambodia as well as online platforms. Please refer to Section 5 of this Prospectus for further information on our business. Please also refer to Section 11.3.2 of this Prospectus for significant factors affecting our financial position and results of operation. The analysis of the results of operations of our Group are as follows : (i) Revenue Our Group generates revenue from the retailing and distribution of TBS products to customers in most part of Malaysia (namely West Malaysia, Sabah and Labuan) and Vietnam. We also hold the TBS franchise for Cambodia, and we opened our first point-of-sale in Cambodia in November 2019. 219 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) Our products Generally, the products distributed by us under "The Body Shop®" brand comprise personal grooming, and personal care products from head to toe, for both women and men . The products mainly include skincare, bodycare, fragrance, make-up, hair care and men's personal grooming. Our principal markets and distribution channels Currently, our TBS products are distributed to the end customers in Malaysia and Vietnam through our retail channel and online channel. Our retail channel include mall stores, high-street stores, standalone airport stores and third-party airport operators, departments stores (shop-in-shop), and also temporary promotional kiosks in which details of each of the retail channel are as set out in Section 5.3.4 of this Prospectus. Additionally, we have also opened our first point-of-sale in Cambodia in November 2019. In the online channel, we distribute TBS products via TBS's websites at "www.thebodyshop.com.my" and "www.thebodyshop.com.vn", as well as through third-party online marketplaces such as Hermo in Malaysia, Tiki in Vietnam, and Lazada in both markets. We have also launched TBS's website in Cambodia at .. www.thebodyshop.com.kh .. in November 2019 and we plan to commence our e-commerce transactions in Cambodia by first half of 2020. Further details on our online channel is as set out in Section 5.3.4.5 of this Prospectus. Revenue composition and recognition Our Group's revenue is recognised from the sales of TBS products at our retail channel and online channel. Sales of TBS products at our retail channel and online channel are recognised upon the transfer of control over TBS products to our customers. Currencies Our sales in Malaysia are transacted in RM whilst our sales in Vietnam are transacted in VND. For the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019, approximately 89.6%, 89.3%, 88.3%, 88.6% and 85.3% of our total sales are transacted in RM with the remaining sales being transacted in VND. 220 Registration No.: 199401034915 (320598-X) 11 . FINANCIAL INFORMATION (cont'd) (a) Revenue by geographical locations The following table sets out our Group's revenue by geographical locations for the financial years/periods under review: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 Growth Growth Growth RM'OOO RM'OOO % RM'OOO % RM'OOO RM'OOO % Revenue From retailing and distribution of TBS products Malaysia 143,278 153,483 7.1 162,927 6.2 117,289 117,829 0.5 % of contribution 89.6 89.3 88.3 88.6 85.3 Vietnam(l) 16,544 18,404 11.2 21 ,523 16.9 15,018 20,321 35.3 % of contribution 10.3 10.7 11 .7 11.4 14.7 159,822 171 ,887 7.5 184,450 7.3 132,307 138,150 4.4 From consultancy services(2) Vietnam 80 32 (60.0) 24 (25.0) 15 45 200.0 % of contribution 0.1 0.0 0.0 0.0 0.0 Group 159,902 171,919 7.5 184,474 7.3 132,322 138,195 4.4 Notes: (1) Inclusive of revenue from retailing and distribution of TBS products through points-of-sale under GC Vietnam which we directly recognise as our sales. (2) Revenue from consultancy services represent fees earned from managing GC Vietnam, a local entity established pursuant to a business agency arrangement for our Vietnam operations, which is discussed in Section 5.3.4.1(ii) of this Prospectus. The revenue contributed by our Malaysia and Vietnam operations for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 are as set out in the chart below: 1---- - ~-- - .... - --.-.--•. --..... --.-.. -.. -.-.-.--.----.--. Revenue by geographical location l c 200 184 o i § 175 ' E ~ 150 0:::: 125 100 75 50 25 o FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 ,_ ___ .. _._ __ .._ ._... _ ~ ...~ . ?I. ?'!.~. iCl ______... ~~_y. i. E?tr1 . ClI11_ _ .. _...... _ .. ___ The revenue from our Malaysia operations and Vietnam operations have been growing from the FYE 2016 to FYE 2018 and from FPE 2018 to FPE 2019. 221 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Sales from our Malaysia operations experienced a year-on year/period-on-period growth of 7.1%,6.2% and 0.5% in the FYE 2017, FYE 2018 and FPE 2019 respectively. On the other hand, the sales from our Vietnam operations recorded a year-on-year/period-on-period growth of 11.2%, 16.9% and 35.3% in the FYE 2017, FYE 2018 and FPE 2019 respectively. The faster growth experienced by our Vietnam operations is reflective of the growing Vietnamese market. Further analysis on the revenue of each market is as discussed below. (b) Revenue by channel Our revenue is derived from 2 main distribution channels: • Retail channel; and • Online channel. The breakdown of our revenue by each channel for both markets are as set out below. Malaysia The retail channel remains as the largest contributor to our total revenue in Malaysia. For the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019, the retail channel contributed 99.0%, 98.6%, 98 .2%, 98.2% and 98.4% of our total revenue in Malaysia respectively. The sales from the retail channel have also registered a year-on year/period-on-period growth of 6.7%, 5.8% and 0.7% for the FYE 2017, FYE 2018 and FPE 2019 respectively. The lower sales growth for the FPE 2019 was mainly due to challenging market conditions and poor consumer sentiments during the period. On the other hand, the sales from the online channel have grown at a faster rate of 53.0% in the FYE 2017 and 32 .6% in the FYE 2018 respectively. The lower growth rate in the FYE 2018 is a result of the higher comparison base (i.e. total sales) as denominator. As a result, the online sales' contribution to total revenue in Malaysia increased from 1.0% in FYE 2016 to 1.8% in the FYE 2018. Similar to the retail channel sales, the online channel sales for the FPE 2019 recorded a period-on-period decline of 14.1% amid challenging market conditions and poor consumer sentiments. Additionally, we have also been selective in our promotional approach during this period in order to maintain the profitability of our business. FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 Growth Growth Growth RM'OOO RM'OOO % RM'OOO % RM'OOO RM'OOO % Malaysia Retail channel sales 141,864 151,320 6.7 160,059 5.8 115,137 115,981 0.7 % of contribution 99.0 98.6 98.2 98.2 98.4 Online channel sales 1,414 2,163 53.0 2,868 32.6 2,152 1,848 (14.1) % of contribution 1.0 1.4 1.8 1.8 1.6 Total sales 143,278 153,483 7.1 162,927 6.2 117,289 117,829 0.5 222 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Vietnam Similarly in Vietnam, the retail channel is the main contributor to our total revenue. For the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019, the retail channel contributed 96.4%, 94.1 %, 91.6%, 91.8% and 91.9% to our total revenue in Vietnam respectively. The sales from the retail channel have also registered a year-on-year/period-on period growth of 8.6%, 13.9% and 35.4% for the FYE 2017, FYE 2018 and FPE 2019 respectively. Due to the local market conditions (as elaborated in paragraph 3 of Section 5.3.4.5 of the Prospectus), sales from the online channel have been growing at a faster rate of 83.0% and 66.2% for the FYE 2017 and FYE 2018 respectively as compared to the sales from the retail channel. This has resulted in the increase of the online sales contribution to total revenue in Vietnam from 3.6% in the FYE 2016 to 8.4% in the FYE 2018. As for the FPE 2019, the online channel sales registered another period of growth of 34.5% as compared to the FPE 2018. FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 Growth Growth Growth RM'OOO RM'OOO % RM'OOO % RM'OOO RM'OOO % Vietnam Retail channel sales 15,950 17,317 8.6 19,716 13.9 13,789 18,668 35.4 % of contribution 96.4 94.1 91.6 91.8 91 .9 Online channel sales 594 1,087 83.0 1,807 66.2 1,229 1,653 34.5 % of contribution 3.6 5.9 8.4 8.2 8.1 Total sales 16,544 18,404 11.2 21,523 16.9 15,018 20,321 35.3 (c) Revenue growth drivers and key performance indicators The revenue growth for each channel and for each market are attributable to a few key factors. Firstly, productivity of existing points of-sale can generate continued growth in an established market like Malaysia. Therefore, Same Store Sales Growth is analysed below to derive like-for-like comparison in terms of the performance of existing points-of-sale. Secondly, the total growth of our retail channel is also heavily influenced by the opening of new points-of-sale, particularly for our developing business in Vietnam, which is further discussed in Section 11.3.1 (c)(ii) of this Prospectus. In addition, the growth of our online channel has been a main driver of the total growth of both markets during the past years/periods under review - the discussion on this factor is as set out below. (i) Same Stores Sales Growth ("SSSG") SSSG is one of our operational performance measure used to analyse our sales performance. SSSG measures the growth of our revenue generated by our existing points-of-sale (including our online channel) over a certain period, as compared with the preceding corresponding period. The following table sets out our SSSG for both markets for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019. 223 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 % % % % % Malaysia Retail channel sales (2 .6) 5.5 5.5 3.5 0.3 37.2 53.0 32.6 39.2 (14.1) Online channel sales(l) ------Total(2) __---'-(2_ .3...!....) ____5._9 ____5._9 ____4._0 ___0_.0_5 Vietnam Retail channel sales (15.6) 9.4 12.3 12.5 2.0 Online channel sales(l) 60.2 89.6 74.5 -----94.3 32.8 Total(2) (14.0) 12.4 16.1 16.8 4.6 ----- Notes: (1) For the purpose of SSSG computation, the online channel sales are assumed to be derived from 1 point-of-sale. (2) Sales made through HQ (such as corporate sales) are exclude from SSSG computation. Malaysia The retail sales recorded SSSG of (2 .6)%, 5.5%, 5.5%, 3.5% and 0.3% respectively for the financial years/periods under review while the online sales recorded SSSG of 37.2%, 53.0% , 32.6%,39.2% and (14 .1)% in the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. Overall Malaysia operations recorded a negative SSSG in the FYE 2016 as sales were impacted by poor customer sentiments due to the implementation of the Goods and SeN ices Tax ("GST") on 1 April 2015. SSSG of our Malaysia operations subsequently improved to 5.9% for the FYE 2017 and achieved another year of growth of 5.9% for the FYE 2018. However, for the FPE 2019, overall SSSG decreased to 0.05% as compared to 4.0% in the FPE 2018 due to the challenging market conditions and poor consumer sentiments. Nonetheless, we continue to focus our efforts in driving traffic to our stores and thereafter, to convert potential customers walking into our stores, as further discussed below: Combination of retail marketing efforts Our continuous marketing efforts to increase walk-ins to our points-of-sale include digital advertising, social media marketing , influencer engagement, sampling activities, in-mall marketing as well as in-store marketing. These marketing strategies are a combination of long-term branding activities and tactical promotions designed accord ing to the seasonalities of the market. 224 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) We also introduce new products regularly to draw interest of customers to visit our points-of-sale. New products which we have recently launched and are now bestsellers include our White Musk Flora eau de toilette, Recipes of Nature Masks, and Japanese Cherry Blossom Kiss eau de toilette. Our learning and development programmes ensure that our consultants in our points-of-sale are equipped with the product knowledge and selling competencies to convert browsers to buyers. We also employ a combination of incentives and motivational programmes to maintain a high standard of in store customer seNice. We continue to enhance our in-store customer experience by investing in visual merchandising and refreshing various elements of our points-of-sale, from our product display to our staff uniform. This attracts window shoppers to walk into our points-of-sale. Please refer to Sections 5.10.2 and 5.10.3 of this Prospectus for more details on our retail marketing efforts. Customer loyalty programme Another key factor in driving SSSG is our CRM programme called Love Your BodyTM ("LYB"). Through this programme, we incentivise members to return to the shops via purchase rebates, exclusive offers, birthday rewards and etc. Using data-mining to seNe our members with relevant communications all year round helps to maintain the relationship with our customers, thereby increasing their visits as well as spend per visit. We grew our number of active members in Malaysia to 343,423 in FYE 2018 as compare to 324,766 in FYE 2016 and 324,024 in FYE 2017. Overall, total sales from our members increased approximately by 6.2% and 7.8% year-on-year in the FYE 2017 and FYE 2018 respectively. During the FPE 2019, the number of active members declined from 338,421 in the FPE 2018 to 313,554 in the FPE 2019. This is mainly due to the reclassification of the Group's recruitment criteria for LYB members in Malaysia to cater for Malaysian only and therefore excluded foreign tourist who would have been previously recruited. This factor, together with the general decline in consumer sentiments, resulted in the total sales from our members being comparatively lower by 10.7% period-on-period in the FPE 2019. Please refer to Section 5.10.1 of this Prospectus for more details on our customer loyalty programme. Vietnam The retail channel sales recorded SSSG of (15.6)% , 9.4%, 12.3%, 12.5% and 2.0% respectively for the financial years/periods under review while the online channel sales recorded SSSG of 60.2%, 89.6%, 74.5%, 94 .3% and 32.8% for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019. 225 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) Overall Vietnam operations recorded a negative SSSG of 14,0% in the FYE 2016 mainly due to the effect of a price increment being implemented during the FYE 2015 as part of our effort to cope with escalating operational costs, However, we managed to reverse the downtrend in SSSG in the FYE 2017 by conducting a review of our prices in the FYE 2016, whilst keeping our operational costs in check. The price review involved decreasing some of the prices, yet we were able to increase the quantity sold to compensate for the price reduction, As a result, our products are now priced at a more affordable level, which is important in a developing market like Vietnam . SSSG increased to 16,1% in the FYE 2018 as the existing points-of-sale continued to grow well , and our online sales expanded its reach to customers outside of the main urban areas. An accelerated expansion of new points-of-sale would normally reduce the SSSG of the existing points-of-sale as the customers have the option to purchase TBS products at new points-of-sale which may be nearer to their location, For the FPE 2019, we were able to achieve SSSG of 4.6% for our TBS business in Vietnam despite the opening of 8 new points-of sale. The SSSG for the FPE 2019 was lower than the FPE 2018 as there was a higher net addition of points-of-sale of 5 points-of-sale in the FPE 2019 as compared to 1 point-of-sale in FPE 2018. Please refer to Sections 5.10.2 and 5.10.3 of this Prospectus for more details on our retail marketing efforts. Customer loyalty programme As we gain customers over the years, one of the more important long-term marketing strategies to retain these customers is our customer loyalty programme, We grew our number of active members in Vietnam to 31,336 in the FYE 2018 as compared to 21 ,025 in the FYE 2016 and 25,954 in the FYE 2017. The number of active members in the FPE 2019 also increased to 39,459 as compared to 29 ,390 in the FPE 2018. As a result, the total sales from members increased approximately by 21 .8%, 20.4% and 31 .6% year-on year/period-on-period in the FYE 2017, FYE 2018 and FPE 2019 respectively, Please refer to Section 5.10.1 of this Prospectus for more details on our customer loyalty programme. (ii) New Points-of-Sale ("POS") openings Our total revenue is also influenced by the number of new points-of-sale openings, as well as closures. This is further discussed by analysing the movement in our number of points of-sale during the respective year/period as stated in the table below, 226 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) The following tables show the number of new points-of-sale in the financial years/periods under review, the revenue from the date of opening of these new points-of-sale, the number of points-of-sale closed as well as the revenue until the date the points-of-sale were closed. Malaysia FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 No. of No. of No. of No. of No. of RM'OOO pes RM'OOO pes RM'OOO pes RM'OOO pes RM'OOO pes Retail channel sales Existing points-at-sale 136.163 87 146,856 88 154,707 86 112,242 86 109,964 87 2,952 3 862 1,348 3 44 2 1,913 3 New points-at-sale --- 139,115 90 147,718 89 156.055 89 112,286 88 111,877 90 Closed points-at-sale 164 (2) 733 (3) 993 (2) 598 (1 ) 1,223 (2) (1 Tota1 ) 139,279 88 148,451 86 157,048 87 112,884 87 113,100 88 Note: (1 ) The total sales tram the retail channel do not include the revenue tram promotional kiosks. Overall, our net total number of points-of-sale in Malaysia have remained stable throughout the financial years/periods under review. As per the IMR Report, the Malaysian retail market is saturated. Accordingly, retailers have to be careful when selecting their new store locations. As the TBS brand is considered well-penetrated in Malaysia, with points-of-sale located in most of the major shopping malls throughout the main urban areas of Malaysia, we are now selective on where we choose to open more points-of-sale. We take into account factors such as shopper traffic movement, development of new townships, urban transport evolution, and of course, the ability of a new mall to generate traffic, in our decision to open new points-of-sale. In the past financial years/periods above, we opened a total of 10 new points-of-sale. We also took the opportunity to consolidate our retail presence by closing underperforming points-of-sale, in order to increase our overall points-of-sale profitability. In addition, we are sometimes required to close a point-of-sale for reasons beyond our control, for example when leases are not renewed. In this respect, we have closed a total of 7 points-of-sale between the FYE 2016 and the FYE 2018. Despite maintaining the same number of points-of-sale between the FYE 2016 and the FYE 2018, we managed to increase overall total revenue from RM139.3 million in the FYE 2016 to RM157.1 million in the FYE 2018. The Group also opened a total of 3 new points-of-sale and closed 2 points-of-sale during the FPE 2019, bringing the total number of points-of-sale to 88. Consequently, the Group managed to increase its total retail sales from RM112.9 million in the FPE 2018 to RM 113.1 million in the FPE 2019. 227 Registration No. : 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) We do not expect the number of points-of-sale to significantly grow in the next few years, as we will focus more on the productivity of each points-of-sale by growing SSSG through our Omnichannel strategy, which is further discussed in our future plans and strategies under Section 5.4 of this Prospectus. Vietnam FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 No. of No. of No. of No. of No. of RM'OOO POS RM'OOO POS RM'OOO POS RM'OOO POS RM'OOO POS Retail channel sales Existing points-of-sale 15,877 22 16,416 20 17,938 22 12,633 22 17,257 26 45 661 4 1,749 6 930 3 1,407 6 New points-of-sale -- 15,922 23 17,077 24 19,687 28 13, 563 25 18,664 32 Closed points-of-sale 28 (3) 240 ~ 29 ~ 226 ~ 4 __(1_ ) Total 15,950 20 17,317 22 19,716 26 13,789 23 18,668 31 Overall, our total number of points-of-sale in Vietnam has grown steadily, in line with our expansion strategy in Vietnam. Since 2016, we have opened 17 new points-of-sale and closed 8 points-of-sale, mainly at the end of the lease, or when the mall or department store is closed, bringing our total number of points-of-sale to 31 in the FPE 2019 as compared to 20 in the FYE 2016. As a result, we have managed to increase our retail sales in Vietnam from RM16.0 million in the FYE 2016 to RM19 .7 million in FYE 2018, and from RM13 .8 million in FPE 2018 to RM18.7 million in the FPE 2019. According to the I!VIR Report, shopping mall development will continue to increase in Vietnam. We have been able to open the new points-of-sale mainly due to the opening of new malls as property developers continue to build more malls across the country. We have also taken the opportunity to open shop in-shop formats within popular department stores, as these are lower cost options to trial a new segment of the market. In addition, we identified under-penetrated areas within greater HCMC and Hanoi to open new points-of-sale in high street locations where shopping is popular. In tandem with the increased rate of new points-of-sale opening, we have also ensured that our retail operations expertise and store opening processes have improved. Thus, we now plan to continue to expand further in Vietnam by opening at least 6 points-of-sale per year from 2020-2022, as set out in Section 5.4.2 of this Prospectus. 228 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) (iii) Growth of online channel The revenue from our online channel for both our Malaysia and Vietnam operations have been a key driver of our total revenue, as set out as below: Malaysia The following chart illustrates the year-on-year/period-on period growth of our online sales in Malaysia: Online sales (Malaysia) 3,000 2,868 0 0 0 !iE a:: 2,500 2,000 1,500 1,000 500 FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 • TBS website Ii&! Third party marketplaces Our total online sales grew by 53.0% and 32.6% in the FYE 2017 and FYE 2018 respectively, as we continuously implement digital marketing strategies to grow online traffic to our website, enhance user's online experience and increase online sales conversion. As for the FPE 2019, our total online sales decrease period on-period by 14.1 % due to challenging market conditions and poor consumer sentiments. On the other hand, we have also been selective in our promotional approach for online channel in order to maintain the profitability of our business. TBS website contributed 91 .6%, 92 .0%, 90 .0%, 91 .3% and 90.0% of the total online sales in Malaysia for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. We invest in digital advertising to continuously acquire and target new and existing online customers and generate traffic to our website through optimisation of our web and social display ads and improving search engine optimisation on our keywords. Our digital marketing strategies are executed in a collective and continuous manner and the results are achieved over the years. Hence, the result of each strategy cannot be separately analysed for each financial year/period under review. We revamped our website in 2017 to improve browsing experience on site and on mobile. Traffic to our website has grown from 1.6 million in the FYE 2016 to 1.9 million in the FYE 2017 and 2.8 million in the FYE 2018. In FPE 2019, the traffic to our website has also increased to 2.2 million as compared to 1.9 million in the FPE 2018. 229 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) We also regularly conduct tactical commercial offers online and provide services such as free delivery with purchase and cash on delivery to promote the convenience of online shopping. This has contributed to an increase in the number of our online transactions recorded from 11,286 in the FYE 2016 to 14,502 in FYE 2017 to 21,958 in FYE 2018. As for FPE 2019, the number of online transaction decreased from 16,342 in FPE 2018 to 14,058 due to a challenging market condition and poor consumer sentiments. Vietnam The following chart illustrates our sales and the year-on year/period-on-period growth of our sales from the online channel in Vietnam: Online Sales (Vietnam) 2,000 1,807 g 1,750 1,653 0 ~ 0:: 1,500 1,250 1,000 750 500 250 FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 • TBS website ii"> Third party marketplaces The online sales for our Vietnam operations grew year-on year/period-on-period by 83.0%, 66.2% and 34.5% in the FYE 2017, FYE 2018 and FPE 2019 respectively mainly due to our continuous efforts to drive traffic to our website and improve our online sales experience for our customers in Vietnam. TBS website contributed 74.9%, 73.1 %, 72.8%, 71 .0% and 69.0% of the total online sales in Vietnam for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. Our digital marketing strategy in Vietnam focuses heavily on developing our brand presence and acquiring online customers through our search engine optimisation campaigns which helps to improve organic search and drive visitors to our website. Similar to our operations in Malaysia, our digital marketing strategies are executed in a collective and continuous manner and the results are achieved over the years. Hence, the result of each strategy cannot be separately analysed for each financial year/period under review. 230 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) Facebook remains as an important channel of reach with regular social advertising and postings to drive traffic to our website and in-store. Traffic to our website has increased from 1.0 million in the FYE 2016 to 1.4 million in the FYE 2017 to 1.6 million in the FYE 2018. As for the FPE 2019, the traffic to our website has also increased to 0.7 million as compared to 0.6 million in the FPE 2018. We launched our revamped website in the FYE 2017 to enhance the user experience of our customers. We offer cash on-delivery payment option which is preferred by Vietnamese consumers and constantly evaluate our logistics arrangement to provide faster delivery to our customers. Marketplaces like Lazada and Tiki have helped us expand our online sales and capture new customers in the highly populated areas of Vietnam. We conduct tactical commercial events to drive sales conversion on both our website and marketplaces. Further, based on the IMR Report, there is an increase in the internet and mobile devices penetration in Vietnam, and this has supported the rise of e-commerce in the country. All the above collectively contributed to the increase in the number of transactions for Vietnam online sales from 5,569 in the FYE 2016 to 8,727 in the FYE 2017 and 14,797 in the FYE 2018 . As compared to the FPE 2018, the number of online transactions has also increased from 9,998 to 11 ,906 in the FPE 2019. We expect that our online sales in Vietnam will further improve in line with our continued investment in bolstering our IT infrastructure as well as Omnichannel capabilities as set out in our future plans in Section 5.4.1 of this Prospectus. (ii) Changes in inventories (Cost of goods sold) Changes in inventories, or cost of goods sold , include cost of products purchased from our Franchisor as well as local tariffs or taxes imposed on importation of products. We aim to ensure optimal inventory levels via efficient systems and processes. The inventory control measures we have in place such as monthly stocktake, stock variances reviews and quarterly monitoring of stock shelf-life help to minimise stock losses and offer fresh supply of products to our customers. The following table sets out our Group's cost of goods sold by geographical locations for the financial years/periods under review: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM '000 % RM '000 % RM'OOO % RM'OOO % RM'OOO % Changes in inventories Malaysia 48,307 90.1 50,521 89.5 55,510 88.8 39,205 89.1 38,378 85.3 Vietnam 5,291 9.9 5,903 10.5 6,978 11.2 4,809 10.9 6,588 14.7 Group 53.598 100.0 56,424 100.0 62,488 100.0 44,014 100.0 44,966 100.0 231 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) The factors affecting the changes in inventories for both our Malaysia and Vietnam operations are as set out as below: Malaysia In line with the increase in revenue as elaborated in Section 11.3.1 (i) of this Prospectus, cost of goods sold for our Malaysia operations increased year-on year by 4.6% to RM50.5 million for the FYE 2017, and by 9.9% to RM55.5 million for the FYE 2018. The increase in cost of goods sold in the FYE 2018 was also in part due the reintroduction of sales tax which took effect on 1 September 2018. Generally, our products are subject to tax rates ranging from 5.0% to 10.0%. As sales tax is a single-stage tax charged at the point of product importation, this has therefore added to our cost of inventories and subsequently, cost of goods sold. Nevertheless, the strengthening of RM against GBP had partially mitigated the increase in cost of goods sold, as evidenced in the lower average GBP/RM spot rate of our purchases of TBS product in the FYE 2017 and the FYE 2018 as compared to the FYE 2016. For the FPE 2019, cost of goods sold decreased period-an-period by 2.1 % to RM38.4 million due to the strengthening of RM against GBP in 2019. Vietnam In line with the increase in revenue as elaborated in Section 11.3.1 (i) of this Prospectus, cost of goods sold for our Vietnam operations increased year-on year by 11 .6% and 18.2% for the FYE 2017 and the FYE 2018 respectively. For the FYE 2017, the increase in the cost of goods sold is also due to the increase in average cost price of TBS products (in GBP). As for the FPE 2019, the cost of goods sold for our Vietnam operations increased period-on-period by 37.0% which is in line with our revenue growth during the same period. (iii) Gross profit and gross profit margin The following table sets out our Group's gross profit and gross profit margin by geographical locations for the financial years/periods under review: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO % RM'OOO % RM'OOO % RM'OOO % RM'OOO % Gross profit Malaysia 94,971 89.3 102,962 89.1 107,417 88.1 78,084 88.4 79,451 85.2 11 ,333 10.7 12,533 10.9 14,569 11.9 10,224 11.6 13,778 14.8 Vietnam --- Group 106,304 100.0 115,495 100.0 121,986 100.0 ---88,308 100.0 93,229 100.0 Gross profit margin (%) Malaysia 66.3 67.1 65.9 66.6 67.4 Vietnam 68.2 68.0 67 .6 68.0 67 .7 Group 66.5 67.2 66.1 ---66.7 67.5 The gross profit derived from both our Malaysia and Vietnam operations increased from the FYE 2016 to the FYE 2018, as well as from the FPE 2018 to the FPE 2019, in tandem with the growth trend of our revenue. 232 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) Malaysia The gross profit margin for our Malaysian operations in the FYE 2017 improved by approximately 0.8% from the FYE 2016, mainly due to favourable exchange rate, whereby RM had strengthened against GBP reducing our cost of sales for the FYE 2017. As an illustration, the cost of goods sold for the FYE 2017 would have been RM2.6 million higher if the inventory purchases in GBP for the FYE 2017 were translated using the average GBP/RM inventory purchases spot rate in the FYE 2016. The gross profit margin declined by approximately 1.2% in the FYE 2018, attributable to the re-i ntroduction of SST during the year, as explained in our earlier discussion on changes in inventories in Section 11 .3.1 (ii) of this Prospectus. For the FPE 2019, the gross profit margin increased to 67.4%, in part due to the strengthening of RM against GBP during the financial period. As an illustration, cost of goods sold for the FPE 2019 would have been higher by approximately RMO.4 million if the inventory purchases in GBP for the FPE 2019 were translated using the average GBP/RM inventory purchases spot rate in the FPE 2018. Vietnam The decline in the gross profit margin for our Vietnam operations from the FYE 2016 to the FYE 2018 can be attributable to an average price reduction of approximately 25% for the selected SKUs which was implemented in mid-2016 as set out in Section 11 .3.1(i)(c)(i) of this Prospectus. In addition, the weakening of VND against GBP in the FYE 2018 resulted in a higher cost of sale. As an illustration, the cost of goods sold for the FYE 2018 would have been lower by approximately RMO .3 million (VND1 .7 billion) if the inventory purchases in GBP for the FYE 2018 were translated using the average GBPNND inventory purchases spot rate in FYE 2017 . For the FPE 2019, the gross profit margin decreased slightly to 67.7% as compared to 68.0% in the FPE 2018. (iv) Other operating income The following table sets out our Group's other operating income during the financial years/periods under review: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO % RM 'OOO % RM 'OOO % RM'OOO % RM'OOO % Rental income 239 11.9 158 15.6 216 13.5 159 16.9 27 2.2 Gain on disposal of property, plant and equipment 735 45.8 185 19.6 260 21 .1 Gains on foreign exchange Realised 1,434 71 .3 539 53.3 631 39.3 596 63.1 479 38.8 Unrealised 185 18.3 20 1.2 26 2.1 Others 338 16.8 129 12.8 4 0.2 4 0.4 441 35.8 Total 2,011 100.0 1,011 100.0 1,606 100.0 944 100.0 1,233 100.0 233 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Our Group derived rental income primarily from the letting out of our investment properties and shop lots in Malaysia, which was wholly from external parties. On 31 December 2018, we disposed all our investment properties and shop lots as part of our pre-listing Internal Restructuring Exercise which was set out in Section 4.1.2 of this Prospectus. Consequently, the Group recorded a lower rental income in the FPE 2019. Gains on foreign exchange mainly arise from our trade purchases in GBP. Please refer to Note 19 of the Accountants' Report as set out in Section 12 of this Prospectus. Other operating income for the FYE 2017 recorded a year-on-year decline by approximately 49.7% to RM1.0 million. This is mainly attributable to the lower gains on foreign exchange by RMO.7 million. The comparative FYE 2016 benefited from higher foreign exchange gains following the weakening of GBP against RM by 14.2%. For the FYE 2018, other operating income increased year-on-year by approximately RMO.6 million or 58.9%, mainly due to the gain on disposal of certain property, plant and equipment amounting to RMO .7 million. Other operating income of the Group increased period-on-period by 30 .6% to RM1 .2 million for the FPE 2019, mainly driven by higher income from gain of disposal of property, plant and equipment. Others mainly consist of (i) write-back of expired gift vouchers amounting to RMO .2 million in the FYE 2016; (ii) rebates from TBSI for digital and e commerce initiatives amounting to approximately RMO.1 million for the FYE 2016, RM33,000 for the FYE 2017 and RMO.2 million for the FPE 2019; and (iii) partial loan waiver of RMO.1 million in respect of a loan granted by TBS Franchise to TBS Vietnam for working capital purposes. Please refer to Section 9.1.3 of the Prospectus for further details of the loan. (v) Rental expenses The Group's rental expenses relate to our points-of-sale and HQ in both Malaysia and Vietnam , as well as the registered office in Cambodia. Following the distribution of dividend-in-specie in the form of properties on 31 December 2018, the Group no longer owns the 5 premises that served as our HQ and our points-of-sale in Malaysia. As such, the Group has been renting the said premises from Steady Property, the new owner. Please refer to Section 9.1.1 of this Prospectus for further details. The Group's rental expenses are as follows: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO % RM'OOO % RM'OOO % RM'OOO % RM'OOO % Rental expenses Malaysia 16,073 89.3 17,411 85.7 17,454 83 .7 12,869 83.5 13,405 82.3 Vietnam 1,932 10.7 2,900 14.3 3,401 16.3 2,541 16.5 2,883 17.7 Cambodia(1) 4 Rental expenses 18,005 100.0 20,3 11 100.0 20,855 100.0 15,410 100.0 16,292 100.0 pre adoption of MFRS16 Effects of MFRS (16 ,664) (18,433) (19,226) (14,268) (13,628) 16(2) Rental expenses 1,341 1,878 1,629 1,142 2,664 post adoption of MFRS16 234 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 Rental expenses as a percentage to revenue(3) Malaysia 11.2% 11 .3% 10.7% 11 .0% 11.4% Vietnam 11.6% 15.7% 15.8% 16.9% 14.2% Cambodia(4) Group 11.3% 11.8% 11.3% 11.6% 11.8% Notes: (1) The rental expense in Cambodia is in relation to the registered office. (2) Due to the adoption of MFRS 16 as explained in Section 11.1.3, a significant portion of the Group'S rental obligations (other than variable lease payments that depend on sales) are recognised on the balance sheet as ROU assets. The ROU asset is amortised over the shorter of the lease term and the useful life of the asset. As a result, the rental expenses have decreased with a corresponding increase in depreciation expense and finance cost. Please also refer to Note 30 of the Accountants' Report in Section 12 of this Prospectus. (3) The MFRS 16 impact is excluded from the calculation of rental expenses as a percentage to revenue. (4) As at 30 September 2019, the Group has yet to commence its sales operation in Cambodia. Excluding the MFRS 16 impact, the rental expenses for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 make up approximately 14.7%, 15.6%, 15.2%, 15.6% and 15.5% of the Group's total operating expenses respectively. Excluding the MFRS 16 impact, the Group experienced a year-on-year increase in rental expenses by approximately RM2.3 million or 12.8% for the FYE 2017, and by approximately RMO.5 million or 2.7% for the FYE 2018. For the FPE 2019, rental expenses were higher period-on-period by approximately RMO .9 million or 5.7%. In the Group's experience, the rental expenses (excluding the MFRS 16 impact) as a percentage of revenue is higher for our operations in Vietnam as compared to Malaysia due to a generally higher rental rates in Vietnam. As a percentage of revenue, our Group's total rental expenses stood at 11 .3%, 11 .8%, 11.3%, 11.6% and 11.8% for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. The increase in rental expenses during the financial years/periods under review are mainly due to (i) annual rental rate adjustments, including new rates for renewal of existing leases; and (ii) additional rent arising from new points of-sale in Vietnam (a net addition of 2 points-of-sale in the FYE 2017,4 in the FYE 2018 and 5 in the FPE 2019). (vi) Employee related expenses Employee related expenses make up approximately 25.9%, 28.3%, 26.6%, 27.5% and 28.3% of total operating expenses for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. As a percentage of revenue, employee related expenses stood at 19.9% for the FYE 2016, 21.4% for the FYE 2017,19.8% for the FYE 2018,20.5% for the FPE 2018 and 21.5% for the FPE 2019. 235 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Employee related expenses include salaries, wages, bonuses, commissions, incentives, allowances and payments to statutory contribution plans for our employees at both points-of-sale and HQs. The following table sets out the components of our employee related expenses during the financial years/periods under review: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO % RM'OOO % RM'OOO % RM'OOO % RM'OOO % Salaries, wages, bonuses, commissions, incentives and allowances 27,857 87.5 32,546 88.5 31,676 86.9 24,023 88.6 26,028 87.5 Statutory contribution plans 3,127 9.8 3,356 9.1 3,581 9.8 2,696 9.9 3,077 10.3 Others 870 2.7 876 2.4 1,196 3.3 406 1.5 657 2.2 Total 31,854 100.0 36,778 100.0 36,453 100.0 27,125 100.0 29,762 100.0 Our employee related expenses increased year-on-year by approximately RM4.9 million or 15.5% for the FYE 2017, but declined year-on-year by approximately RMO.3 million or 0.9% for the FYE 2018 due to a non-routine incentive for senior management in the FYE 2017. This non-routine incentive did not recur in the FYE 2018 and resulted in a decline in employee related expenses from the previous year. Excluding the non-routine incentive from the FYE 2017, the employee related expenses of the Group would have shown a year-on-year increase of 12.1 % for the FYE 2017, and 2.1% for the FYE 2018. As for the FPE 2019, our employee related expenses increased period-on period by RM2 .6 million or 9.7%. Aside from annual salary adjustments, these increases are largely in line with the headcount growth of the Group which increased from 625 in the FYE 2016 to 661 in the FYE 2017 and 668 in the FYE 2018. The headcount of the Group has also increased from 645 in the FPE 2018 to 736 in the FPE 2019. Others mainly consist of contributions to Social Security Organisation and Human Resource Development Fund, uniforms, insurance, medical fees, refreshment, training and hostel. (vii) Selling and distribution expenses Our selling and distribution expenses mainly comprise logistics and transportation charges for distribution of goods. Other expenses included in selling and distribution expenses are packing materials and bank commission for credit cards and e-commerce sales. Selling and distribution expenses of the Group increased year-on-year by 6.1 % and 11.0% for the FYE 2017 and FYE 2018. The selling and distribution expenses of Group decreased period-on-period by 0.9% for the FPE 2019. As a percentage of revenue, selling and distribution expenses remain largely stable at 2.5%, 2.5%, 2.6%, 2.4% and 2.3% for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. This indicates that selling and distribution expenses move largely in tandem with the Group's revenue during the financial years/periods under review. Higher logistics and transportation charges were incurred as higher volume of products were transported during the FYE 2017 and FYE 2018 to meet the increase in sales demand at our points-of-sale as well as increase in orders for products for our online sales. 236 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) (viii) Advertising and promotion expenses Advertising and promotion expenses are spending incurred on our marketing programmes, both online and offline, in engaging our current and potential customers. This includes our Love Your BodyTM loyalty programme, as well as promotional and display merchandises at our points-of-sale. Please refer to Section 5.10 of this Prospectus for details of the Group's marketing and promotion activities. Advertising and promotion expenses of the Group increased year-on-year/ period-on-period by approximately RMO.3 million or 8.3% for the FYE 2017, RMO.9 million or 24.3% for the FYE 2018 and RMO.2 million or 5.5% for the FPE 2019. As a percentage of revenue, advertising and promotion expenses stood at 2.2%,2.2%,2.6%,2.5% and 2.5% for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. The higher percentage in FYE 2018 can be attributed to additional promotional activities undertaken during the financial year. (ix) Depreciation and amortisation expenses Depreciation and amortisation expenses comprise depreciation of our property, plant and equipment, investment properties, as well as amortisation of franchise rights arising from (i) acquisition of our TBS business in West Malaysia (2006), Sabah and Labuan (2015), (ii) renewal of franchise agreements for TBS business in West Malaysia, Sabah, Labuan and Vietnam (2019), and (iii) new franchise agreement for TBS business in Cambodia (2019). The Group's depreciation and amortisation expenses are as follows: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO % RM'OOO % RM'OOO % RM'OOO % RM'OOO % Depreciation and amortisation expenses Malaysia 5,581 89.9 4,537 92.7 3,576 91.1 2,845 91.7 2,408 80.3 Vietnam 630 10.1 357 7.3 350 8.9 256 8.3 581 19.4 Cambodia --- 8 0.3 Depreciation and 6,211 100.0 4,894 100.0 3,926 100.0 3,101 100.0 2,997 100.0 amortisation expenses pre adoption of MFRS 16 Effects of MFRS 16(1) 14,831 15,914 16,934 12,559 12,675 Depreciation and amortisation expenses post adoption of MFRS --- 16 21,042 20,808 ---20,860 15,660 15,672 Note: (1 ) Due to the adoption of MFRS 16 as explained in Section 11.1 .3, a significant portion of the Group's rental obligations (other than variable lease payments that depend on sales) are recognised on the balance sheet as ROU assets. The ROU asset is amortised over the shorter of the lease term and the useful life of the asset. As a result, the rental expenses have decreased with a corresponding increase in depreciation expense and finance cost. Please also refer to Note 30 of the Accountants' Report in Section 12 of this Prospectus. 237 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) Excluding the effect of MFRS 16, depreciation and amortisation expenses of the Group declined year-on-year/period-on-period by approximately RM1.3 million or 21.2% for the FYE 2017, RM1 .0 million or 19.8% for the FYE 2018 and RMO.1 million or 3.4% for the FPE 2019. As a percentage of revenue, depreciation and amortisation expenses had declined from 3.9% in the FYE 2016 to 2.8% in the FYE 2017, and 2.1 % in the FYE 2018. As for the FPE 2019, as a percentage of revenue, depreciation and amortisation has also declined to 2.2% as compared to 2.3% in the FPE 2018. The decline in the FYE 2017 is mainly due to the full and final amortisation of intangible asset arising from the acquisition of West Malaysia operations in the comparative FYE 2016. The said acquisition took place in 2006, where we acquired our West Malaysia operations from Kejora Harta, a then public listed company, for a cash consideration of RM80.0 million. Following the acquisition, our Group recognised intangible asset amounting to RM8.2 million which was amortised for 10 years at RMO.8 million per annum. For the FY E 2018, the decrease in depreciation and amortisation is main Iy due to the full depreciation of certain property, plant and equipment of existing points-of-sale, whilst additional depreciation from new points-of-sale only took place towards the end of the financial year. For the FPE 2019, the decrease in depreciation and amortisation expenses (excluding IV1FRS 16 impact) is mainly due to the full depreciation of certain property, plant and equipment of existing points-of-sale, particularly in Malaysia. The Group has adopted MFRS 16, Leases, which is effective for annual periods beginning on or after 1 January 2019. Please refer to Section 11.1 .3 of this Prospectus for further details on the new accounting standards and the impact to our Group's depreciation and amortisation expense assuming the adoption of MFRS 16. (x) Other operating expenses Other operating expenses mainly comprise repair and maintenance, commission to GC Vietnam, professional fees, utilities and other general and administrative expenses. Commission to GC Vietnam relates to the business agency arrangement for our Vietnam operations, where selected new points of-sale will be operated under GC Vietnam initially before transferring to us. We incur commission for the tenure of which a point-of-sale is operated under GC Vietnam. As at the LPD, out of the of 34 points-of-sale in Vietnam, 14 points-of-sale are operated by GC Vietnam. Please refer to Section 5.3.4.1(ii) of this Prospectus for further details of the business agency arrangement. Other operating expenses of the Group declined year-on-year/period-on period by 18.4% to RM6.1 million for the FYE 2017, remained largely at the same position of RM6.1 million for the FYE 2018 and increased by 33.3% to RM5 .6 million for the FPE 2019 as compared to RM4 .2 million for the FPE 2018. As a percentage of revenue, other operating expenses stood at 4.7%, 3.5%, 3.3%, 3.2% and 40% for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 respectively. The decline in the FYE 2017 is mainly due to lower commission paid to GC Vietnam by approximately RMO .8 million following the lesser number of points of-sale operated under GC Vietnam during that financial year. This is due to the fact that not all of the newly opened points-of-sale are initially operated under GC Vietnam. 238 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) For the FPE 2019, the higher other operating expenses is mainly due to (i) higher commission paid to GC Vietnam of approximately RM1.0 million, following the increase in number of points-of-sale operated under GC Vietnam during the financial period; (ii) additional operating expenses incurred for the purpose of setting up our TBS business in Cambodia and Natura business in Malaysia amounting to RMO.3 million. (xi) Finance income and finance costs Finance income represents interest earned from the placement of short-term deposits with licensed banks and financial institutions. Finance costs comprise interest charges on revolving credit and hire purchase for motor vehicles, and interest expense on lease liabilities arising from the adoption of MFRS 16, as illustrated in Section 11.1.3 of this Prospectus. The breakdown of our finance income and finance costs for the financial years/periods under review are as follows: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO % RM'OOO % RM'OOO % RM'OOO % RM'OOO % Finance income Short-term deposits 617 100.0 742 100.0 1,277 100.0 1,100 100.0 356 100.0 Finance costs Revolving credits (71 ) 92.2 (379) 99.7 (97) 86.6 (86) 90.5 (191 ) 93.6 Hire purchase (6) 7.8 (1 ) 0.3 (15) 13.4 (9) 9.5 (13) 6.4 Finance costs (77) 100.0 (380) 100.0 (112) 100.0 (95) 100.0 (204) 100.0 pre adoption of MFRS16 Effects of MFRS 16(1) (2,609) (2,486) (1,697) (1,236) (1,446) Finance costs post adoption of MFRS 16 (2,686) (2,866) (1 ,809) (1,331) (1,650) Note: (1) Due to the adoption of MFRS 16 as explained in Section 11.1.3, a significant portion of the Group's rental obligations (other than variable lease payments that depend on sales) are recognised on the balance sheet as ROU assets. The ROU asset is amortised over the shorter of the lease term and the useful life of the asset. As a result, the rental expenses have decreased with a corresponding increase in depreciation expense and finance cost. Please also refer to Note 30 of the Accountants' Report in Section 12 of this Prospectus. Finance income of the Group increased year-on-year/period-on-period to RMO.7 million for the FYE 2017, and RM1.3 million for the FYE 2018. The increase in finance income is mainly due to higher amount of placement in short-term deposits. As for the FPE 2019, the finance income decreased to RMO.4 million due to a reduction in short-term deposits resulting from the payment of approximately RM12.6 million dividend from TBS Vietnam to the Promoters in the FYE 2018. Excluding MFRS 16, finance costs increased year-on-year to RMO.4 million for FYE 2017, but decreased to RMO.1 million for the FYE 2018. For the FPE 2019, the finance costs increased period-on-period to RMO.2 million. The fluctuations in finance costs are impacted mainly by the drawdown period of revolving credit, which are interest-bearing. 239 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) The Group has adopted MFRS 16, Leases, which is effective for annual periods beginning on or after 1 January 2019. Please refer to Section 11.1.3 of this Prospectus for further details on the new accounting standard and the impact to our Group's finance cost assuming the adoption of MFRS 16. (xii) Profit before taxation ("PST") The following table sets out the analysis of our Group's PBT for the financial years/periods under review: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Group Core PST(1 ) 37,007 40,753 48,520 34,393 32,824 Adjusted for Non-Core earnings: Listing-related expenses (2,683) Fair value loss on other investments (234) (4,230) Impairment loss on other investments (2.239) Fair value gain arising from distribution of non-cash assets to owners 10,030 Group PST 36,773 34,284 58,550 34,393 30,141 PST margin (%) Group Core PST margin 23.1 23.7 26.3 26.0 23.8 Group PST margin 23.0 19.9 31.7 26.0 21 .8 Notes: (1 ) "Core" refers to the retail and distribution business of the Group which excludes one-off/non-recurring items such as listing-related expenses, fair value loss on other investments, impairment loss on other investments and fair value gain arising from the distribution of non-cash assets to owners. As a result of the foregoing, our Group's core PBT increased year-on-year by approximately 10.1% to RM40.8 million for the FYE 2017, and by approximately 19.1% to RM48.5 million for the FYE 2018. For FPE 2019, the Group's core PBT decreased by approximately 4.6% to RM32.8 million as compared to RI\II 34.4 million in FPE 2018. Core PBT margin has similarly shown improvement from 23.1 % in the FYE 2016 to 23.7% in the FYE 2017, and 26.3% in the FYE 2018. Forthe FPE 2019, core PBT margin decreased period-on-period to 23.8%, mainly due to lesser interest income from Vietnam following a dividend payment of RM12 .6 million by TBS Vietnam to the Promoters in the FYE 2018 as well as the additional operating cost incurred for the purpose of setting up our TBS business in Cambodia and Natura business in Malaysia. 240 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) The decrease in our Group's PBT and Group's PBT margin for the FYE 2017 is due to the fair value and impairment losses on other investments related to our investment in Graphene NanoChem PLC, a company previously listed on London Stock Exchange. Graphene Nanochem was delisted from the London stock exchange on 19 March 2018. We have since impaired our remaining cost of investment in the FYE 2017 in view of the uncertainties to recoup the cost of investment following the delisting, and have disposed our investment in this company in the FYE 2018. Fair value gain arising from the distribution of non-cash asset to owners relates to the valuation gain of the Group's shop lots and investment properties following the granting of these assets to the owners as part of the dividend-in specie declared and paid out during the the FYE 2018. The fair value gain was determined by comparing the market value of the properties based on the valuation reports produced by independent property valuer to their net book value as at the date of distribution. (xiii) Taxation The following table sets out a summary of our tax expenses and the relevant statutory tax rates by country where our Group operates for the financial years/periods under review: FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM 'OOO Current tax Malaysia 9,744 10,208 11 ,799(2) 7,843 7,493 Vietnam 313 448 862 503 654 Cambodia(1) 10,057 10,656 12,661 8,346 8,147 Deferred tax Malaysia (86) (474) 264 188 (209) Vietnam (11 ) 2 (38) Cambodia(1) (97) (472) 264 188 (247) Tax expenses 9,960 10,184 12,925 8,534 7,900 Statutory tax rates Malaysia 24.0% 24.0% 24.0% 24 .0% 24.0% Vietnam 20.0% 20.0% 20 .0% 20 .0% 20.0% Cambodia(1) N/A N/A N/A N/A 20.0% Notes: (1) We have not commenced operations in Cambodia during the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019. (2) Includes real property gains tax ("RPGT") of RM502,000 arising from the disposal of investment properties and shop lots in Malaysia. 241 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) The following table sets out the effective tax rate ("ETR") of our Group for the financial years/periods under review: FYE FYE FYE FPE FPE 2016 2017 2018 2018 2019 Effective tax rate (%) 27.1 29.7 22.1 24.8 26.2 ETR is computed by dividing the tax expense for the financial year/period by the profit before taxation for the same financial year/period. ETR of our Group reflects largely the position of our Malaysia operations by virtue of it being the largest profit contributor to the Group. Group ETR is higher than the statutory tax rate, mainly because of certain expenses which are not tax deductible. There was an increase in the ETR to 29.7% in the FYE 2017 as the fair value and impairment losses on other investments which amounted to RM6.5 million in aggregate were not tax deductible. ETR for the FYE 2018 was lower than the statutory tax rate, mainly due to non taxable income arising from the fair value gain on distribution of non-cash assets to owners of RM1 0.0 million, and gain on disposal of property, plant and equipment of RMO.7 million. ETR for the FPE 2019 was higher period-on-period at 26.2% as the listing related expenses amounting to RM2 .7 million were not tax deductible. We assume responsibility for the withholding of tax on payment of our service providers who are not resident in Malaysia where the services are rendered for IT and digital consultancy. We remit such withheld tax to the relevant tax authorities. (xiv) Profit after taxation ("PAT") FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Group Core PAT(1) 27,047 30,569 36,097 25,859 24,924 Adjusted for the non-core items: Listing-related expenses (2,683) Fair value loss on other investments (234) (4,230) Impairment loss on other investments (2,239) Fair value gain arising from distribution of non-cash assets to owners(2) 10,030 RPGT (502) Group PAT 26,813 24,100 45,625 25,859 22,241 PAT margin (%) Group Core PAT margin 16.9 17.8 19.6 19.5 18.0 Group PAT margin 16.8 14.0 24.7 19.5 16.1 Note: (1) "Core" refers to the retail and distribution business of the Group which excludes one-off/non-recurring items such as listing-related expenses, fair value loss on other investments, impairment loss on other investments and fair value gain and its tax impact arising from the distribution of non-cash assets to owners. 242 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) (2) The fair value gain was determined by comparing the market value of the properties based on the valuation reports produced by independent property valuer to their net book value as at the date of distribution. Consistent with the Group's core PBT, our Group's core PAT increased year on-year by 13.0% and 18.1% for FYE 2017 and FYE 2018 respectively. As for the FPE 2019, our Group's core PAT decreased period-on-period by 3.6%. Core PAT margin has shown improvement from 16.9% in the FYE 2016 to 17.8% in the FYE 2017 and 19.6% in the FYE 2018. For the FPE 2019, Core PAT margin decreased period-on-period from 19.5% to 18.0%, mainly due to lesser interest income from our Vietnam operations following a dividend payment of RM12 .6 million by TBS Vietnam to the Promoters in the FYE 2018 as well as the additional operating cost incurred for the purpose of setting up our TBS business in Cambodia and Natura business in Malaysia. The decrease in our Group's PAT and Group's PAT margin for the FYE 2017 is due to the fair value and impairment losses on other investments relating to our investment in Graphene NanoChem PLC, a company previously listed on London Stock Exchange. Graphene Nanochem was delisted from the London stock exchange on 19 March 2018. We have since impaired our remaining cost of investment in the FYE 2017 in view of the uncertainties to recoup the cost of investment following the delisting, and have disposed our investment in this company in FYE 2018. 11.3.2 Significant factors affecting our Group's operating and financial results Our Group's operations and financial performance may be affected by various key factors, primarily the risk factors as discussed in Section 7 of this Prospectus and other significant factors, which include the following: (i) Growth in our Group's number of pOints-of-sale Our ability to generate and grow our revenue from the retail channel is dependent on our ability to continuously improve and/or increase the number of our points-of-sale as it enables us to expand our geographical coverage and hence reach a larger base of potential customers. This factor is particularly pertinent for the growth of our business in Vietnam, where the TBS brand is still at an early stage of market penetration and has plenty of room to grow in tandem with the country's development of its modern retail infrastructure. Whereas in Malaysia, as at the LPD, we have the widest geographical coverage in Malaysia with 89 points-of-sale according to the IMR Report. The following table sets out the breakdown of the number of our points-of-sale by geographical segments, as at 31 December 2016, 31 December 2017, 31 December 2018, 30 September 2018, 30 September 2019 as well as at the LPD: As at 31 December As at 30 September As at 2016 2017 2018 2018 2019 the LPD Malaysia 88 86 87 87 88 89 Vietnam 20 22 26 23 31 34 Cambodia Total 108 108 113 110 119 124 243 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Our Group expects an increase in the number of points-of-sale in the future, with up to 29 new points-of-sale across Malaysia, Vietnam and Cambodia to be opened within 36 months from the date of our Listing. Nevertheless, the pace of opening of new points-of-sale depends on our ability to secure strategic locations with good prospects. We may also close down non-performing points-of-sale from time to time to maintain our operational efficiency. (ii) Growth in our Group's online sales Other than the points-of-sale, we are also able to expand our customer base through TBS websites in Malaysia and Vietnam, as well as through third-party online stores. Online sales contributed to approximately 1.3%, 1.9% and 2.5% of total sales for the FYE 2016, FYE 2017 and FYE 2018 respectively. We have also managed to register a growth of 61 .9% and 43.8% for our Group's overall online sales in the FYE 2017 and the FYE 2018 respectively. As for the FPE 2018 and the FPE 2019, online sales contributed to approximately 2.6% and 2.5% to our Group's total sales respectively while registering a growth of 3.5% for our Group's overall online sales in the FPE 2019. Based on the growing online retailing trend of CPC products as outlined in the IMR, we expect the CPC industry to continue to grow in the future. This is particularly pertinent for the growth of our business in Malaysia, where the country's retail development is considered at a mature stage. In this regard, our investment in Omnichannel capabilities as discussed in Section 5.4 of this Prospectus will be key in further boosting our online sales. In Vietnam, our online channel enables us to reach customers in all the provinces throughout the country, as our physical points-of-sale are currently located only in the urban hub of HCMC and Hanoi. For the FYE 2018, approximately 41 .0% of our e-commerce sales through our own website, are made to customers residing outside of these 2 main cities. In tandem with the opening of our first Cambodia points-of-sale in November 2019, we have also launched TBS's website in Cambodia in the same month and we plan to commence e-commerce transactions by the first half of 2020 . This will complement our efforts to expand our market share in Cambodia where modern retail development is at its infancy, and therefore, availability of suitable retail space is limited. Nonetheless, the success of the online channel in Cambodia is contingent upon the country's broadband infrastructure and online payment facilities, as well as the general economic development in Cambodia. (iii) Tenancy expenses and capital expenditure Our retail business requires volume, as such we prefer setting up points-of sale at high-traffic locations in order to achieve maximum brand awareness. Accordingly, it follows that rental is one of our major operating expenses. Most of our tenancies are short term in nature, usually for 3 years term plus 2 years renewal option. Such tenancy agreements may be subject to review and revision by property owners, depending on the provisions and terms stipulated in the respective tenancy agreements. Furthermore, rental rates are also subject to prevailing property market conditions, location and the demand profile of particular retail lots within a locality. I n our Group's experience, the rental expenses as a percentage of sales are generally higher in Vietnam as compared to Malaysia. 244 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) Our operating expenses may be affected if the property owners choose to significantly increase rental rates upon renewal, particularly for prime locations, or if property owners choose not to renew our tenancies. In such an event, we may not be able to operate the affected point-of-sale optimally, or may even need to relocate or terminate the tenancy. Each new point-of-sale requires investment for in store fit-out. Fit-out costs include flooring, painting , lighting, and electrical works. The cost of these materials vary according to the design as prescribed by TBSI from time-to-time, as well as the fluctuation of the USD, which is the main currency quoted for the cost of these materials. From time to time, we may also be required by property owners and TBSI to refurbish our points-of-sale to improve storefront appearance. Refurbishment cost, which is borne by us, may affect the performance of the affected point of-sale temporarily due to (i) disruption to the operations during the renovation period; and (ii) depreciation of additional capital expenditures impacting profitability as we open up more new points-of-sale. Nonetheless, such periodic refurbishments are necessary to upkeep, or even elevate, the perception of the brand. The Group has adopted MFRS 16, Leases, which is effective for annual periods beginning on or after 1 January 2019. Please refer to Section 11 .1.3 of this Prospectus for further details on the new accounting standard and the impact to our Group's rental expenses upon the adoption of MFRS 16. (iv) Staff costs Staff costs include, among others, wages, salaries, bonuses, commissions, incentives, allowances and contributions to statutory contribution plans. Staff costs may increase year-on-year. In addition, the rising competition in the retail industry has rendered experienced retail staff a valuable resource. Accordingly, we review our remuneration package from time to time to attract and retain the right talent in maintaining our competitive advantage. (v) Competition According to the IMR Report, we are a leading mono-brand beauty retailer in Malaysia with a market share of 11.0% based on the total market sales of RM1.48 billion as at 2018. Among the brands, we are also the largest in Malaysia by geographical coverage, with 89 points-of-sale as at the LPD. Our Group faces competition from various local and international players involved in the personal care and beauty industry at similar locations. We believe that our Group would be able to stay competitive based on, among others, our brand, track record, quality and standards of our products, our ethical values and our ability to cope with the demands of our customers as well as to differentiate ourselves by being 100% vegetarian. With the implementation of our future plans and strategies as disclosed in Section 5.4 of this Prospectus, we believe this will contribute towards our long term growth and sustainability within the epe industry. 245 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) (vi) Fluctuations in product pricing Our Group sources TBS products from TBSI in accordance with the Franchise Agreements. Our Franchisor may increase the selling price of the TBS products to TBS Franchisees from time to time. In addition, increases in local tariffs or taxes will have an impact on our purchasing costs. In the event we are unable to pass on the abovementioned cost increases to customers, our gross margins and operating results will be affected . (vii) Annual fee payable to our Franchisor Under the Franchise Agreements, in addition to the franchise fee, TBS Franchisees are required to pay to TBSI, without demand and under a regular payment schedule as may be determined between the TBS Franchisees and TBSI from time to time, fees for the management, consultation, advice, service and training provided by TBSI in respect of the use of the System and the Proprietary Marks as TBSI may from time to time prescribe, calculated as a percentage of TBS Franchisees' respective turnover, and which is in accordance with TBS/'s policy. Pursuant to the paragraph above, by a letter dated 19 June 2019 entered into between TBSI with Dato' Simon and Datin Mina, Dato' Simon and Datin Mina jointly and severally undertake that TBSI will be paid fees equivalent to 1.0% of the total annual retail sales of each business line of the Group under the Franchise Agreements and any other agreements that InNature Group may enter into with TBSI or its related corporations from time to time ("Annual Fee"). The payment is to be made at the end of January each year, in accordance with TBSI's or its related corporations' retail calendar year, with the first payment to be made by end January 2020. No Annual Fee was imposed by TBSJ in the FYE 2016 to FYE 2018. An Annual Fee of RMO.5 million has been accrued for in respect of FPE 2019 . The franchise fee under the Rampai-Niaga Franchise Agreement, TBS Vietnam Franchise Agreement and the Green Cosmetic Franchise Agreement are payable within 14 days of execution of the respective Franchise Agreements. The Franchise Agreements do not stipulate when the renewal fees are payable. (viii) Fluctuations in foreign currency exchange rates Our Group's exposure to fluctuations in foreign currency exchange rates are mainly due to our purchases from TBSI in GBP. In this respect, our business is subjected to the risk relating to any unfavourable foreign currency exchange rate fluctuations which may affect our profitability. The impact on fluctuation in the foreign currency exchange rate of GBP against RM and VND on our purchases in the past financial years/periods under review are as set out in the table below. 246 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) FYE 2016 FYE 2017 FYE 2018 FPE 2018 FPE 2019 Impact to amount of purchases RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Malaysia Total purchase amount in GBP: 49,708 46,280 56,021 42,207 43,400 In RM'OOO equivalents(1) Sensitivity analysis (RM'OOO): GBP/RM - strengthened by 1% (497) (463) (560) (422) (434) GBP/RM - weakened by 1% 497 463 560 422 434 Vietnam Total purchase amount in GBP: 3,544 4,337 6,834 4,767 6,100 In RM'OOO equivalents (2) Sensitivity analysis (RM '000): in RM equivalents GBPNND - strengthened by 1% (35) (43) (68) (48) (61 ) GBPNND - weakened by 1% 35 43 68 48 61 Notes: (1) The total purchase amounts in GBP are translated to RM using the average transaction spot rates for the respective periods. (2) The total purchase amount in GBP is translated to VND using the average transaction spot rate for the respective periods. For comparison purposes, the total purchase amounts are expressed in RM terms. The Group's net foreign exchange gain for the FYE 2016, FYE 2017, FYE 2018, FPE 2018 and FPE 2019 are RM1.4 million, RMO.7 million, RMO.7 million, RMO.6 million and RMO .5 million respectively. The decreasing net foreign exchange gain is mainly due to the higher appreciation of RM against GBP in FYE 2016 as compared to the FYE 2017 and the FYE 2018. Similarly, the Group's net foreign exchange gain decrease from RMO .6 million in the FPE 2018 to RMO.5 million in the FPE 2019 due to the higher appreciation of RM against GBP in the FPE 2018 as compared to the FPE 2019. Please refer to Note 19 of the Accountants' Report in Section 12 of this Prospectus for more details on the realised and unrealised foreign exchange gains for the financial years/periods under review. For hedging purposes, we purchase 1-month forward exchange contracts on a monthly basis for the purchases of our inventories from TBSI. The outstanding forward exchange contracts for each of the financial years/periods under review are as shown below. As at 31 December As at 30 September 2016 2017 2018 2019 RM'OOO RM'OOO RM 'OOO RM 'OOO Forward exchange contracts with HSBC Bank Malaysia Bhd 551 3,162 247 Registration No.: 199401034915 (32059B·X) 11. FINANCIAL INFORMATION (cont'd) In addition to the above, our Group's presentation currency is RM while the functional currency of our material foreign operation in Vietnam is VND. Fluctuations of RM against VND may impact the reporting of Vietnam's financial results in the Group's presentation currency. For the financial years/periods under review, there is no significant fluctuation of RM against VND. (ix) Changes in political, economic and regulatory conditions Risks relating to political, economic and regulatory cond itions which may materially affect our operations are set out in Section 7 of this Prospectus. Although we will continue to comply with the legal and regulatory frameworks in the countries which we and our customers operate, there is no assurance that the introduction of new laws or other economic, political and regulatory conditions in future will not have adverse effect on our business, results of operations or financial performance. 11.4 Liquidity and Capital Resources 11.4.1 Working capital Our Group has been financing our operations through a combination of cash generated from our operations and external borrowings from financial institutions. The principal utilisation of these funds are to finance our working capital requirements, which include, among others, the purchases of products as well as payments to landlords, employees and other suppliers and service providers. As at 30 September 2019, our Group has cash and cash equivalents as well as other fixed deposits placements totaling RM11.7 million, total borrowing of approximately RM5.7 million and a debt to equity ratio of 0.06 times. As at 30 September 2019, we have an amount of RM55 .0 million undrawn secured credit facilities available for future use. On 10 April 2019, the Company declared a dividend of RM10 .0 million which was paid on 30 August 2019 and is reflected in the consolidated financial position of the Group. On 26 November 2019, the Company declared an interim dividend of RIVI1 0.0 million which was paid on 27 December 2019. The dividend was paid via our internally generated fund. Taking into consideration the existing cash and cash equivalent of the Group, the interim dividend of RM10.0 million that was paid on 27 December 2019, the expected collection to be generated from our operations, amounts available under our existing financing facilities and new financing facilities that may be granted to our Group as well as the estimated proceeds to be raised from our IPO, our Board is of the opinion that we will have sufficient working capital for at least 12 months from the date of this Prospectus. Our subsidiary, i.e. Rampai-Niaga, is required to comply with the following bank covenants:- (i) to maintain a gearing ratio (defined as total external borrowings divided by the sum of tangible net worth, where tangible net worth represents equity attributable to owners of the company less intangibles) not more than 1 time; and (ii) not to declare or pay dividends in excess of 50% of its profit after tax in any financial year. 248 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Further details on the covenants are as set out in Section 11.4.3 of this Prospectus. In addition, our Group is also required to comply with certain obligations in maintaining debt levels under the Franchise Framework Agreement. Save as disclosed above, and in Section 11 .10 of this Prospectus in relation to Dividend Policy, there are no other legal, financial or economic restrictions on our Subsidiaries' ability to transfer funds to our Company in the form of cash dividends, loans or advances to meet our cash obligations, subject to availability of distributable reserves and/or loans or advances and compliance with legal requirements and financial covenants. 11.4.2 Cash flows The following table sets out the summary of the historical consolidated statement of cash flows for our Group for the financial years/periods under review: FYE FYE FYE FPE FPE 2016 2017 2018 2018 2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Net cash generated from operating activities 31,696 40,043 32,005 19,910 19,015 Net cash (used in)/from investing activities (27,356) (31,118) 13,144 (925) (4,648) Net cash used in financing activities (5,692) (14,455) (32,379) (10,222) (26,543) Net changes in cash and cash equivalents (1,352) (5,530) 12,770 8,763 (12,176) Effects on exchange rate fluctuations on cash held 337 (667) 3 (81) 38 Cash and cash equivalents at the beginning of the year/period 18,263 17,248 11,051 11,051 23,824 Cash and cash equivalents at the end of the year/period 17,248 11,051 23,824 19,733 11,686 Cash and cash equivalents comprise the following: Cash and bank balances 8,051 10,695 23,824 19,733 11,686 Deposits placed with licensed banks less than 3 months 9,605 777 434 434 17,656 11,472 24,258 20,167 11,686 Less: Pledged deposits (408) (421) (434) (434) 17,248 11,051 23,824 19,733 11,686 Commentaries on cash flows (i) Net cash generated from operating activities FYE 2016 For the FYE 2016, our operating cash flow comes primarily from operating profit before changes in working capital of RM60.3 million. After accounting for key items below, the Group generated a cash flow from operating activities of RM31.7 million: (a) RM1.8 million increase in inventories balances, as a result of our product stock-up initiatives, primarily to replenish the inventory balances of our newly acquired Sabah and Labuan operations; 249 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) (b) RMO.3 million increase in the receivables, deposits and prepayments, mainly due to the higher tenancy deposits by RM 1.1 million in tandem with the increase in the number of points-of-sale resulting from the acquisition of our Sabah and Labuan TBS business, being offset by lower trade receivables of RMO.3 million as a result of prompt repayment made by GC Vietnam, and lower prepayment of RMO .5 million mainly due to lesser prepaid expenses incurred in the FYE 2016. (c) RM1.3 million decrease in payables and accruals as a result of timely settlements of invoices for our purchases from the Franchisor; and (d) RM 16.7 million lease liabilities payments mainly for our points-of-sale and HQ; and (e) RM8.7 million payments for taxation. FYE 2017 For the FYE 2017, we generated operating cash flows before working capital changes of RM63.6 million . We derived our net cash generated from operations after taking into account the key items below: (a) RM 1.4 million decrease in inventories balances, as we have made higher sales, and cleared through inventories in our Vietnam points of-sale during the year as compared to the prior year; (b) RMO .2 million increase in the receivables, deposits and prepayments mainly due to the the delay in repayment of the credit or debit card sales by the banks; (c) RM4.1 million increase in payables and accruals is mainly due to the slower repayment made by us to TBSI. Nonetheless, these payables were within the credit terms granted by TBSI to us; (d) RM18.4 million lease liabilities payments mainly for our points-of-sale and HQ; and (e) RM10.6 million as tax payments. FYE 2018 For the FYE 2018, we generated operating cash flows before working capital changes of RM69 .2 million. The Group's net cash flow from operating activities was RM32.0 million after taking into account the key items below: (a) RM2.3 million increase in inventories balances at year end, attributable to the opening of new points-of-sale in Vietnam; (b) RMO.4 million increase in the receivables, deposits and prepayments, increase in deposits in relation to the opening of our new points-of-sale by RMO.3 million, offset by the decline in the trade receivables by RMO.5 million and prepayment increase by RMO .6 million; (c) RM3 .2 million decrease in payables and accruals as a result of the settlement of invoices for our purchases from the Franchisor; and (d) RM19.2 million lease liabilities payments mainly for our points-of-sale and HQ; and (e) RM12.2 million tax payments. 250 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) FPE 2018 For the FPE 2018, we generated operating cash flows before working capital changes of RM50.1 million. The Group's net cash flow from operating activities was RM19 .9 million after taking into account the following key items: (a) RM5 .5 million increase in inventories balances, mainly due to stock up for year end holiday sales as well as to cater for the opening of new points-of-sale in Vietnam; (b) RMO .9 million increase in receivables, deposits and prepayments, mainly due to mainly due to higher prepayments by RMO.4 million during the financial period and an increase of RMO.3 million in rental deposits in respect of new points-of-sale opened during the current financial period; (c) RM1.4 million decrease in payables and accruals, mainly due to payment of RMO .9 million to trade creditors, settlement of other payables amounting to RMO.3 million and RMO .2 million decrease in accruals; (d) RM14.3 million lease liabilities payments for our points-of-sale and HQ; and (e) RM8.4 million tax payments. FPE 2019 For the FPE 2019, we generated operating cash flows before working capital changes of RM49.6 million. The Group's net cash flow from operating activities was RM19.0 million after taking into account the following key items: (a) RM9 .7 million increase in inventories balances, mainly due to increase in inventory level in anticipation of the opening of new TBS points-of sale in Vietnam, stocking up for year end holiday sales as well as the commencement of our Natura business in Malaysia in the following months; (b) RM1.9 million increase in receivables, deposits and prepayments, mainly due to (i) higher trade receivables by RMO .8 million as we made more sales from our new points-of-sale; and (ii) higher prepayment of RMO .8 million; (c) RM3.6 million increase in payables and accruals, mainly the effect of (i) the additional operating cost incurred for the purpose of setting up our TBS business in Cambodia and Natura business in Malaysia; and (ii) accrued franchise fee amounting to RM 1.8 million ; (d) RM13 .6 million lease liabilities payments for our points-of-sale and HQ; and ; and (e) RM9.2 million tax payments. 251 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) (ii) Net cash (used in)/from investing activities FYE 2016 I n the FYE 2016, our net cash used in investing activities amounted to RM27.4 million, mainly in relation to advances made to companies in which certain Directors have interest in as set out in Section 9.1.3 of this Prospectus, of RM23 .8 million, and acquisition of plant and equipment, mainly on renovations of our points-of-sale, furniture and fittings as well as motor vehicles amounting to RM3.0 million in which RMO.7 million were acquired by hire purchase. We have also made placement of short-term deposits amounting to RM3.6 million. This is partly offset by the receipts of advances from certain Directors of RM2.4 million and interest received amounting to RMO.6 million during the financial year. FYE 2017 In the FYE 2017, our net cash used in investing activities was RM31.1 million, mainly in relation to advances made to companies in which certain Directors have interest in as set out in Section 9.1.3, of RM15.5 million, acquisition of plant and equipment, mainly on renovations and furniture and fittings for our points-of-sale, amounting to RM3 .2 million, and repayment of advances from certain Directors of RM1.4 million. We have also made a placement of short term deposits amounting to RM11.8 million. The cash outflows are being offset by the interest received amounting to RMO.7 million on our short-term placements during the year. FYE 2018 In the FYE 2018, net cash generated from investing activities was RM13.1 million. The cash generated is mainly derived from the withdrawal from our short-term deposits amounting to RM12 .3 million for the purpose of payment of dividend to our Promoters during the year, repayment of advances from companies in which certain Directors have interest in as set out in Section 9.1.3 of this Prospectus, amounting to RM1.8 million, as well as proceeds from disposal of investment properties, property, plant and equipment amounting to RMO.7 million. We have also received interest on our short-term placements amounting to RM1 .3 million. The cash inflows are being offset by the renovation and furniture and fittings incurred during the year amounting to RM2.0 million, and repayment of advances from certain Directors of RM1.0 million. FPE 2018 For FPE 2018, net cash used in investing activities was RMO.9 million, mainly on net advances to companies in which certain Directors have interest totaling RM5.3 million, and acquisition of plant and equipment amounting to RM1.1 million. The cash outflows are partly offset by the withdrawal of short-term placements amounting to RM4.7 million, interest received of RMO .6 million as well as proceeds from disposal of investment properties and property, plant and equipment of RMO .2 million. 252 Registration No.: 199401034915 (32059B-X) 11. FINANCIALINFORMATION (cont'd) FPE 2019 For the FPE 2019, net cash used in investing activities was RM4.6 million, mainly on acquisition of plant and equipment amounting to RM7A million. The cash outflow is partly offset by the withdrawal of short-term placements amounting to RM2.2 million, and interest received of RMOA million (iii) Net cash used in financing activities FYE 2016 In the FYE 2016, our net cash outflows in financing activities amounted to RM5.7 million. The cash outflows mainly relate to an interim dividend paid to our shareholders amounting to RM12.0 million. This is offset by the additional revolving credit drawn down of approximately RM6.5 million. FYE 2017 In the FYE 2017, our net cash outflows in financing activities amounted to RM14.5 million. The cash outflows mainly relate to an interim dividend paid to our shareholders amounting to RM12.0 million, and the repayment of revolving credit of approximately RM2 .0 million. FYE 2018 In the FYE 2018, our net cash used in financing activities amounted to RM32A million, mainly as a result of a cash dividend distribution to our shareholders during the financial year amounting to RM42.1 million, as part of our pre-listing Internal Restructuring Exercise. This was offset by the additional drawdown of revolving credit amounting to RM10.0 million to finance our working capital during the financial year. FPE 2018 For the FPE 2018, net cash used in financing activities was RM10.2 million, mainly on repayment of revolving credit amounting to RM10.0 million as well as repayment of other borrowings and interest amounting to RMO .2 million . FPE 2019 For the FPE 2019, net cash used in financing activities was RM26.5 million, mainly on repayment of revolving credit of RM15.0 million, dividend payment of RM1 0.0 million and payment of listing-related expenses amounting to RM1.5 million. 253 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) 11.4.3 Borrowings As at 30 September 2019, our Group has a total outstanding borrowings of RM5.7 million, all denominated in RM . The details of our Group's total outstanding borrowings are as follows: Maturity profile As at 30 September 2019 Interest rate Within 1 Within 1- Purpose (per annum) Total year 5 years RM'OOO RM'OOO RM'OOO Short term Purchase of Fixed rate motor between Other borrowings vehicle 1.22% to 4.47% 389 389 Revolving credit- Working 1.60% + 1 month secured capital KLiBOR 5,000 5,000 5,389 5,389 Long Term Purchase of Fixed rate motor between Other borrowings vehicle 1.22% to 4.47% 314 314 Total borrowings 5,703 5,389 314 There has been no default on payments of either interest or principal for any of our borrowings in the FPE 2019 as at the LPD . Rampai-Niaga, is required to comply with the following covenants:- (i) to maintain a gearing ratio (defined as total external borrowings divided by the sum of tangible net worth, where tangible net worth represents equity attributable to owners of the company less intangibles) not more than 1 time; and (ii) not to declare or pay dividends in excess of 50% of its profit after tax in any financial year. In respect of (i), the gearing ratios of Rampai-Niaga as at 30 September 2019, 31 December 2018,31 December 2017 and 31 December 2016 are 0.67 times, 2.38 times, 0.54 times and 0.61 times respectively. Rampai-Niaga exceeded its gearing ratio as at 31 December 2018, and has obtained a waiver to comply with the covenant from the bank on 19 March 2019. In respect of (ii), Rampai-Niaga declared dividends in excess of 50% of its profit after tax for 2018 and 2017. Waivers have been obtained from the bank on 17 December 2018 and 12 March 2018 respectively. Other than as disclosed above, as at the LPD, we are not in breach of any terms and conditions or covenants associated with credit arrangements or bank loans which may materially affect our financial position and results of our business operations, or the investment holdings of our securities. 254 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) 11.4.4 Material commitments Save as disclosed below, our Group does not have any other capital commitments as at the LPD: Source of Funding Total RM'OOO Approved but not contracted for: Office facility J PO proceeds 1,600 Renovation of existing points-of-sale I PO proceeds 8,400 IT network, infrastructure and website IPO proceeds 5,200 Expansion of number of points-of-sale IPO proceeds 19,300 Total commitments 34,500 Office facility We plan to use approximately R1II10 .7 million from our IPO proceeds in expanding and upgrading our HQ in HCMC. Additionally, we plan to spend approximately RMO.9 million in expanding and upgrading our HQ in Subang Jaya, Malaysia for the purpose of developing the new Natura business in Malaysia. Renovation of existing points-of-sale We plan to spend approximately RM8A million in renovating 15 TBS points-of-sale in Malaysia and 6 TBS points-of-sale in Vietnam. The cost of renovation amongst other includes, the cost of: • purchasing and installing new fixtures, fittings, lighting and flooring; • renovation works; and • new merchandising and display tools. IT network, infrastructure and website In line with our plan to drive Same Store Sales Growth in Malaysia and to open up to 18 new points-of-sale in Vietnam, we plan to utilise approximately RM2.0 million and RM1.3 million of our IPO proceeds respectively to improve our IT network and capabilities for our TBS business operations in Malaysia and Vietnam. Additionally, we also plan to use RMOA million and RM 1.5 million respectively to set up the IT infrastructure for the TBS business in Cambodia and the new Natura business in Malaysia. Expansion of number of points-of-sale We plan to spend approximately RM14.5 million from our IPO proceeds to open up to 29 new TBS points-of-sale across 3 markets in tandem with our business development plan. Additionally, we have also allocated RM4.8 million to open up to 6 new points-of sale for the new Natura business in Malaysia. For further details of the above material capital commitments in relation to usage of the IPO proceeds, please refer to Section 2.8 of this Prospectus. 255 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) 11.4.5 Contingent liabilities As at 30 September 2019, we have provided financial guarantees for the benefit of Rampai-Niaga amounting to RM2 .0 million. These financial guarantees consist of a corporate guarantee of RM1 .0 million for revolving credit facility granted to Rampai Niaga as well as bank guarantees of RM1.0 million granted for the benefit of Rampai Niaga in relation to our airport points-of-sale in Malaysia. Save as disclosed above, as at the LPD, our Board , having made all reasonable enquiries, confirms that there are no contingent liabilities that, upon becoming enforceable, may have a material adverse impact on our results of operations or financial condition. 11.4.6 Material litigation or arbitration proceedings As at the LPD, neither our Company nor our Subsidiaries is engaged in any governmental, legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings which may have or have had, material or significant effects on our financial position or profitability, in the 12 months immediately preceding the date of this Prospectus. 11.5 Key Financial Ratios The key financial ratios of our Group for the FYE 2016, FYE 2017, FYE 2018 and FPE 2019 have been computed based on the historical audited consolidated financial statements for the respective year/period. The key financial ratios of our Group are as set out below: FYE 2016 FYE 2017 FYE 201B FPE 2019 Trade receivables turnover period (days) (1)(8) 5.56 5.07 4.40 4.65 Trade payables turnover period (days) (2)( 8) 65.48 64.51 57.23 63.37 Inventory turnover period (days) (3)(8) 171.49 163.68 149.49 191 .84 Current ratio (times)(4) 2.97 3.25 1.02 1.13 Gearing ratio (times)(S) 0.07 0.05 0.27 0.06 Net gearing ratio (times)(6) (0.05)(7) (0.08)(7) (0 .08)(7) (0.07)(7) Notes: (1) Computed based on the average closing balance of trade receivables divided by revenue for the respective financial year/period multipJied by number of days in the respective financial year/period. (2) Computed based on the average closing balance of trade payables divided by changes in inventories (cost of goods sold) for the respective financial year/period multiplied by number of days in the respective financial year/period . (3) Computed based on the average closing balance of inventory divided by changes in inventories (cost of goods sold) multiplied by number of days in the respective financial year/period . (4) Computed based on total current assets over total current liabilities as at the respective financial year/period end. (5) Computed based on bank borrowings over total equity as the respective financial year/period end. (6) Computed based on net borrowings (total bank borrowings less cash and cash equivalents and other investments) divided by total equity. 256 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) (7) Negative net gearing ratio denotes a net cash position. (8) Average closing balance is derived based on the sum of the closing balance of the previous financial year/period and the closing balance of the current financial year/period, divided by 2. 11.5.1 Trade receivables turnover period FYE 2016 FYE 2017 FYE 2018 FPE 2019 Trade receivables (RM'OOO) 2,297 2,480 1,964 2,745 Revenue (RM'OOO) 159,902 171,919 184,474 138,195 Trade receivables turnover period (days)(1) 5.56 5.07 4.40 4.65 Note: (1) Trade receivables turnover period is computed based on the average closing balance of trade receivables divided by revenue for the respective financial year/period multiplied by number of days in the respective financial year/period. Average closing balance is derived based on the sum of the closing balance of the previous financial year and the closing balance of the current financial year, divided by 2. Our trade receivables mainly comprise amounts due from banks for credit or debit card transactions, as well as amounts due from department stores and other third-party retail space providers in relation to sales generated from these distribution channels. The amounts due from banks for credit or debit card transactions arise from (i) retail sales from physical points-of-sale and (ii) online sales from TBS website. The amounts due from banks for credit or debit card transaction does not include online sales from third party marketplaces. The decline in trade receivables turnover period from FYE 2016 to FYE 2018 was mainly due to the declining contribution from our points-of-sale in Parkson department stores to Vietnam sales from 3.9% in FYE 2016 to 3.3% in FYE 2018. A total of 4 Parkson department stores which we were operating in were closed during the financial years/periods under review, 3 in FYE 2016 and 1 in FYE 2018. Trade receivables turnover period increased slightly to 4.65 days for FPE 2019, mainly due to higher amounts due from department stores and other third-party retail space providers following the opening of new points-of-sale in Malaysia and Vietnam during FPE 2019. 11.5.2 Trade payables turnover period FYE 2016 FYE 2017 FYE 2018 FPE 2019 Trade payables (RM'OOO) 8,927 11,019 8,577 12,297 Changes in inventories (RM'OOO) 53,598 56,424 62,488 44,966 Trade payables turnover period (days) (1) 65.48 64.51 57.23 63.37 Note: (1) Trade payables turnover period is computed based on the average closing balance of trade payables divided by change in inventories (cost of goods) sold for the respective financial year/period multiplied by number of days in the respective financial year/period. Average closing balance is derived based on the sum of the closing balance of the previous financial year and the closing balance of the current financial year, divided by 2. 257 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) Our trade payables mainly relate to the purchases of products from our Franchisor. To maintain good relationship with our supplier, we normally make payments on a timely basis. The trade payables turnover period for the FYE 2016, FYE 2017, FYE 2018 and FPE 2019 have been within the credit terms granted by our supplier and there has not been any significant change in our payment and settlement trends in the financial years/periods under review. The trade payables turnover period in the FYE 2018 improved from FYE 2017 mainly due to a deferment of a shipment of the TBS products to post FYE 2018. For FPE 2019, trade payables turnover period was approximately 64 days. Our Group has not been involved in any dispute with any of the suppliers, and no legal actions have been initiated by any of our suppliers during the financial years/periods under review up to the LPD. As at 30 September 2019, the trade payables of our Group amounted to RM12.3 million. The ageing analysis of the trade payables as at 30 September 2019 is as set out below: 0- 30 days 31 - 60 days > 60 days RM'OOO % Total RM'OOO % Total RM'OOO % Total Malaysia 9,634 98.2 1,065 53 .7 499 98.2 Vietnam 174 1.8 916 46.3 9 1.8 Total 9.808 100.0 1,981 100.0 508 100.0 As at the LPD, save for RM8,000, all of the overdue payables above have been fully paid . 11.5.3 Inventory turnover period FYE 2016 FYE 2017 FYE 2018 FPE 2019 Inventories (RM'OOO) 26,154 24,451 26,734 36,463 Changes in inventories (RM'OOO) 53,598 56,424 62,488 44,966 Inventory turnover period (days) (1) 171.49 163.68 149.49 191.84 Note: (1) Inventory turnover period is computed based on the average closing balance of inventory divided by total changes in inventories (cost of goods sold) for the respective financial year/period multiplied by number of days in the respective financial year/period. Average closing balance is derived based on the sum of the closing balance of the previous financial year and the closing balance of the current financial year, divided by 2. Our inventories consist of products that we purchase from our Franchisor. Generally, TBS products' shelf life are within the 36 months validity period, hence we conduct regular review of the stockholding level and inventory ageing analysis of all products in hand to ensure the quality of TBS products remain at a high level and safe for our customers. Our stock turnover period has improved from approximately 172 days in the FYE 2016 to approximately 150 days in the FYE 2018. Our stock turnover period improved by approximately 8 days from the FYE 2016 to FYE 2017 and by 14 days for the FYE 2018. This is attributable to the higher sales and demand of TBS products during the FYE 2017 and the FYE 2018 respectively. The continued improvement in our inventory turnover days for the years under review is also reflective of our continued monitoring effort as elaborated below, to enhance our inventory management and system in demand forecasting, stock ordering and stock replenishment to our points-of-sale. 258 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) For the FPE 2019, the higher inventory turnover period of approximately 192 days was mainly due to the increase in inventory level in anticipation of the opening of new TBS points-of-sale in Vietnam, as well as the commencement of our Natura business in Malaysia in the following months. Our demand forecasting process calculates the right volume of stock to order in anticipation of future demand for each product identification codes, or SKUs and it also ensures adequate inventory cover based on SKU productivity. Stocks are replenished to the points-of-sale via an automated process based on stock balance, historical sales, forecasted sales and model stock quantity set for every point-of-sale based on their sales trend. The complete supply chain management allows us to have the right volume in stock to fulfil our customer demand, ensures our points-of-sale are well merchandised and at its optimum level of stockholding to maximise sales while minimizing any excess or obsolete inventory. As a result, no impairment on the products was recorded for the financial years/periods under review. 11.5.4 Current ratio FYE 2016 FYE 2017 FYE 2018 FPE 2019 Current assets (RM'OOO) 146,208 164,701 56,527 53,431 Current liabilities (RM'OOO) 49,277 50,686 55,220 47,248 Current ratio (times)(1) 2.97 3.25 1.02 1.13 Note: (1) Current ratio is computed based on total current assets over total current liabilities as at the respective financial year/period end. For the FYE 2017, our current ratio increased year-on-year to 3.25 times, mainly due to higher amounts due from companies in which certain Directors have interests in , by approximately RM15.2 million. For the FYE 2018, our current ratio reduced year-on-year to 1.02 times following the declaration of dividends amounting to RM165.0 million of which RM151.5 million was settled in cash and through off-setting with existing amounts due from companies in which certain Directors have interests on 31 December 2018. Our current ratio has improved from 1.02 times as at FYE 2018 to 1.13 times as at FPE 2019, mainly as a result of the repayment of borrowings during the current financial period. 11.5.5 Gearing and net gearing ratio FYE 2016 FYE 2017 FYE 2018 FPE 2019 Bank borrowings 12,062 10,000 20,505 5,703 Cash and cash equivalents 17,656 11,472 24,258 11,686 Other investments 3,638 14,554 2,241 47 Total equity 184,569 195,173 75,441 87,798 Gearing ratio (times)(1) 0.07 0.05 0.27 0.06 Net gearing ratio (times)(2) (0.05)(3) (0.08)(3) (0.08)(3) (0.07)(3) 259 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) Notes: (1) Computed based on bank borrowings over total equity as at the respective financial year/period end . (2) Computed based on net borrowings (total bank borrowings less cash and cash equivalents and other investments) divided by total equity. (3) Negative net gearing ratio denotes a net cash position. Our total borrowings decreased by RM2.1 million in the FYE 2017, mainly due to the repayment of borrowings during the year while total equity increased in tandem with the PAT recorded during the year. These movements in our borrowings and total equity have resulted in an improvement of our Group's gearing ratio from 0.07 times as for the FYE 2016 to 0.05 times for the FYE 2017. Our cash and cash equivalents and other investments increased by a total of RM4.7 million in the FYE 2017 as compared to the the FYE 2016. This has contributed to the improvement in our net cash position in the the FYE 2016 and the FYE 2017. In the FYE 2018, our total borrowings increased to RM20.5 million mainly due to the additional drawdown of revolving credit for the purpose of financing our working capital. In addition, we have also utilised hire purchase for the acquisition of motor vehicles. During the year we have also declared a total dividend of RM165 .0 million to our owners. The dividend was settled through a combination of cash, offsetting of amounts due from companies in which certain Directors have interest in, and transfer of investment properties and shop lots. The declaration of dividend as well as the increase in borrowings have resulted in a higher gearing ratio at 0.27 times for the FYE 2018. However, we were able to maintain our net cash position as at FYE 2018. Our cash and cash equivalents and other investments stood at RM26.5 million as at the FYE 2018. For the FPE 2019, our bank borrowings reduced to RM5 .7 million following the repayment of borrowings during the period. Consequently, we were able to reduce our gearing ratio to 0.06 times as compared to 0.27 times for the FYE 2018. Further details on the dividend payments are set out in Note 22 of the Accountants' Report in Section 12 of this Prospectus. 11.5.6 Treasury policies and objectives We have been financing our operations through a combination of shareholder equity, cash generated from our operations and external source of funds. Our external source of funds comprise credit terms granted by our supplier as well as credit facilities from a financial institution. We have short-term bank borrowings facilities available to our Group. Our short-term bank borrowings are mainly revolving credit to finance working capital and purchases. We also utilised hire purchase for acquisition of motor vehicles. Please refer to Section 11.4.3 of this Prospectus for interest rates of the revolving credit and hire purchases. The decision to either utilise banking facilities or internally generated funds for our operations depend on, inter alia, our cash reserves, expected cash inflows or receipts from customers, future working capital requirements, future capital expenditure requirements and the prevailing interest rates of the banking facilities. 260 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) Our cash and cash equivalents and other investments are primarily maintained in RM, VND, GBP and USD. As at 30 September 2019, the cash and cash equivalents and other investments of our Group were held in the following currencies: Currency RM'OOO RM 7,931 VND 2,830 GBP 951 USD 22 Our revenue generated from Malaysia and Vietnam operations are typically denominated in RM and VND respectively. We also purchase goods from the Franchisor in GBP, which is partially hedged with 1-month forward exchange contracts, when necessary. 11.5.7 Inflation We do not believe that inflation has had a material impact on our business, financial condition or results of operations for the financial periods presented. However, inflation may affect our financial performance by increasing the cost of our operating expenses, including expenses relating to labour costs, selling and administrative expenses and other operating expenses. Any increase in the inflation rate beyond levels experienced in the past may affect our operations and financial performance if we are unable to fully offset higher costs through increased revenues. 11.5.8 Seasonality Our business, financial condition or results of operations are impacted by seasonality as disclosed in Section 5.11 of this Prospectus. 11.6 Order Book As at the LPD, due to the nature of our business which is primarily a retailer of TBS products, an order book is not applicable to us. 11.7 Trend Information As at the LPD, our Board confirms that there are no: (i) known trends, demands, commitments, events or uncertainties that have had or that we reasonably expect to have a material favourable or unfavourable impact on our financial performance, position and operations other than those disclosed in this section, Sections 5 and 7 of this Prospectus; (ii) material commitments for capital expenditure save as disclosed in Section 11.4.4 of this Prospectus; (iii) unusual, infrequent events or transactions or any significant economic changes that have materially affected our financial performance, position and operations, save as disclosed in this section and Section 7 of this Prospectus; (iv) known trends, demands, commitments, events, or uncertainties that had resulted in a material impact on our revenue and/or profits, save as disclosed in this section, and in Sections 5 and 7 of this Prospectus; 261 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) (v) known trends, demands, commitments, events or uncertainties that have had, or that are reasonably likely to have a material favourable or unfavourable impact on our liquidity and capital resources, other than those discussed in this section, Sections 5 and 7 of this Prospectus; and (vi) known trends, demands, commitments, events, or uncertainties that are reasonably likely to make our historical financial statements not indicative of the future financial performance and position other than those disclosed in this section and Sections 5 and 7 of this Prospectus. Based on the outlook of the CPC industry in Malaysia, Vietnam and Cambodia as set out in Section 6 of this Prospectus, our competitive advantages and key strengths as well as our future plans and strategies as set out in Section 5 of this Prospectus, our Board is optimistic about the future prospects of our Group. 11.8 Significant changes Save as disclosed in Section 4.1.2 of this Prospectus on our pre-listing Internal Restructuring Exercise, and the RM10.0 million dividend declared on 26 November 2019 which was paid on 27 December 2019, there are no other significant changes that have occurred which may have a material effect on the financial position and results of our Group since 30 September 2019 up to the date of this Prospectus. 11.9 Accounting standards issued that are not yet effective The Malaysian Accounting Standards Board ("MASS") has issued new accounting standards, amendments and interpretations of the MFRSs which have not been adopted by the Group in the FPE 2019. Further details of the aforementioned new accounting standards, amendments and interpretations of the MFRSs are set out in Note 1(a) of the Accountants' Report in Section 12 of this Prospectus. 11.10 Dividend history/policy Dividend History Please refer to Note 22 of the Accountants' Report in Section 12 of this Prospectus for the details of the dividend history of the Group for FYE 2016 to FPE 2019. The interim dividend of RM10 .0 million declared on 26 November 2019 has been paid on 27 December 2019. Such payment has resulted in a decrease to the Group's cash and cash equivalents and net current assets of such amount. The effects of the dividend payment are as illustrated in Attachment A of the Pro Forma Financial Position in Section 11 .11 of this Prospectus. Dividend policy It is the intention of our Board to recommend and distribute dividend of at least 30.0% of our annual audited PAT attributable to the shareholders of our Group. This will allow our shareholders to partiCipate in our Group's profit. Any dividend declared will be subject to the approval of our Board. 262 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) Notwithstanding our intentions above, as a holding company, our income, and therefore our ability to pay dividends, is dependent upon the dividends and other distributions we receive from our subsidiaries. The payment of dividends by our subsidiaries is subject to their profitability and financial condition and shall have regard to their working capital needs, capital expenditure plans, availability of cash to fund such dividends or other distributions, the covenants in their existing loan agreements (if any), which restrict the payment of dividends or other distributions until such loans are fully settled (or unless the prior approval of the lenders is obtained), and/or other agreements to which any of our subsidiaries are parties to and any other relevant factors that their respective boards of directors deem relevant. Under the Franchise Framework Agreement, in determining the dividend policies of InNature and the TBS Franchisees, our Board shall take into account InNature's and the TBS Franchisees' annual business plan in respect of each of the TBS Franchisees and the anticipated funding needs of each entity for the purposes of meeting the agreed targets set out within the relevant Franchise Agreements. The dividend policies of InNature and the TBS Franchisees should be provided to TBSI and TBSI should be notified of any changes to the dividend policies. Please see Section 5.15.2(m) of this Prospectus for the relevant provision under the Franchise Framework Agreement. In respect of our Vietnam subsidiary, there are no restrictions on the repatriation of capital and remittance of profits by TBS Vietnam so long as all financial obligations owed to the government of Vietnam have been satisfied. Whereas in respect of our subsidiary in Cambodia, the Law on Foreign Exchange (No. CS/RKM/0897/03 dated 22 August 1997) which governs foreign exchange operations in Cambodia imposes no restrictions on remittances of dividends in foreign currency to their foreign shareholders overseas and repatriation of fund or investment back to home country provided that all relevant applicable taxes are cleared first. However, Cambodian law requires that such operations to be undertaken only through authorised intermediaries, which are banks permanently established and licensed in Cambodia; and a prior declaration be made to the National Bank of Cambodia for any investment of an amount equalling or exceeding USD100,OOO made abroad by a Cambodian resident, if any. There is no restriction on Green Cosmetics, after paying necessary withholding taxes at a rate of 14% for the remittance of dividends and interest payment to InNature, so long as such remittance is performed only through authorised intermediaries as mentioned above. In addition to the factors above which may affect the ability of our subsidiaries to pay dividends to us, our Board will also take into consideration, among others, the following factors in recommending dividends for the year: (i) our results of operations and cash flow; (ii) our expected financial performance and working capital needs; (iii) our future prospects; (iv) our capital expenditures and other investment plans; (v) other investment and growth plans; (vi) any material impact of tax laws and other regulatory requirements; and (vii) the general economic and business conditions and other factors deemed relevant by our Board. 263 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) You should note that this dividend policy merely describes our Company's present intention and shall not constitute a legally binding obligation on our Company or legally binding statement in respect of our future dividends which are subject to modification (including non-declaration thereof) at our Board's discretion. Investors should not treat the statement as an indication of our Group's future dividend policy. No inference should be made from any of the foregoing statements as to our actual future profitability or our ability to pay dividends in the future. (The rest of this page has been intentionally left blank) 264 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) 11.1 Reporting Accountants' Report on the Pro Forma Consolidated Financial Position KPMGPLT Telephone +60 (3) n21 3388 (LLP001 0081-LCA & AF 0758) Fax +60 (3) n21 3399 Chartered Accountants Website www.kpmg.com.my Level 10, KPMG Tower 8, First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan, Malaysia The Board of Directors InNature Berhad 5, Jalan USJ 10/1 C 47620 UEP Subang Jaya Selangor Darul Ehsan Malaysia 10 January 2020 Dear Sirs, InNature Berhad ("lnNature" or the "Company") and its subsidiaries (collectively, the "Group") Report on the compilation of pro forma consolidated statement of financial position for inclusion in the Company's prospectus in connection with the initial public offering of 177,274,000 ordinary shares in the Company in conjunction with the listing of and quotation for the entire issued and paid up share capital of the Company on the Main Market of Bursa Malaysia Securities Berhad ("Prospectus") ("IPO") We have completed our assurance engagement to report on the compilation of the pro forma consolidated statement of financial position of the Group as at 30 September 2019 ("Pro Forma Financial Position") prepared by the management of the Company. The Pro Forma Financial Position and the related notes as set out in Attachment A have been stamped by us for identification purposes. The applicable criteria in the preparation of the Pro Forma Financial Position is in accordance with Chapter 9 of the Prospectus Guidelines issued by the Securities Commission Malaysia ("Prospectus Guidelines"). The basis on which the Board of Directors of the Company (the "Directors") has compiled the Pro Forma Financial Position is described in the notes of Attachment A to the Pro Forma Financial Position. The Pro Forma Financial Position has been compiled by the Directors for inclusion in the Prospectus solely to illustrate the impact of the transactions as set out in the notes of Attachment A on the Group's consolidated statement of financial position as at 30 September 2019, as if the transactions had taken place as at 30 September 2019. As part of this process, information about the Group's consolidated financial position has been extracted by the Directors from the Group's audited consolidated interim financial statements for the period ended 30 Septem ber 2019, on which an auditors' report dated 27 Novem ber 2019 has been issued. KPMG PLT. a limRed 18I>Irrty partnership established under MalaysIan law and a mentler firm of the KPMG neIwor1< of independent member firms affilialed with KPMG International COOpareliYe ("KPMG International"). a Swiss entily. 265 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cont'd) In Nature Berhad and its subsidiaries (collectively, the "Group") Report on the compilation of Pro Forma Financial Position for inclusion in the Prospectus in connection with the IPO 10 January 2020 Directors' Responsibility for the Pro Forma Financial Position The Directors are responsible for compiling the Pro Forma Financial Position on the basis described in the notes of Attachment A as required by the Prospectus Guidelines. Reporting Accountants' Independence and Quality Control We have complied with the independence and other ethical requirement of the By-Laws (on Professional Ethics, Conduct and Practice) issued by the Malaysian Institute of Accountants and the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Our firm applies International Standard on Quality Control 1 (ISQC 1), Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements and adopted by the Malaysian Institute of Accountants, and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Reporting Accountants' Responsibilities Our responsibility is to express an opinion as required by the Prospectus Guidelines about whether the Pro Forma Financial Position has been compiled, in all material respects, by the Directors on the basis described in the notes of Attachment A. We conducted our engagement in accordance with International Standard on Assurance Engagement (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued by the International Auditing and Assurance Standards Board and adopted by the Malaysian Institute of Accountants. This standard requires that we plan and perform procedures to obtain reasonable assurance about whether the Directors has compiled, in all material respects, the Pro Forma Financial Position on the basis described in the notes of Attachment A. For the purpose of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Pro Forma Financial Position, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Pro Forma Financial Position. 2 266 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) In Nature Berhad and its subsidiaries (collectively. the "Group") Report on the compilation of Pro Forma Financial Position for inclusion in the Prospectus in connection with the IPQ 10 January 2020 Reporting Accountants' Responsibilities (continued)· The purpose of the Pro Forma Financial Position included in the Prospectus is solely to illustrate the impact of significant events or transactions on unadjusted financial information of the Group as if the events had occurred or the transactions had been undertaken at an earlier date selected for purposes of illustration. Accordingly, we do not provide any assurance that the actual outcome of the events or transactions would have been as presented. A reasonable assurance engagement to report on whether the Pro Forma Financial Position has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the Pro Forma Financial Position provide a reasonable basis for presenting the significant effects directly attributable to the events or transactions, and to obtain sufficient appropriate evidence about whether: • the related pro forma adjustments give appropriate effect to those criteria; and • the Pro Forma Financial Position reflects the proper application of those adjustments to the unadjusted financial information. The procedures selected depend on our judgement, having regard to our understanding of the nature of the Group, the events or transactions in respect of which the Pro Forma Financial Position has been compiled, and other relevant engagement circumstances. The engagement also involves evaluating the overall presentation of the Pro Forma Financial Position. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the Pro Forma Financial Position has been compiled, in all material respects, on the basis described in the notes to the Pro Forma Financial Position in Attachment A. 3 267 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) InNature Berhad and its subsidiaries (collectively. the "Group") Report on the compilation of Pro Forma Financial Position for Inclusion in the Prospectus in connection with the IPO 10 January 2020 Other Matters Our report on the Pro. Forma Financial Position has been prepared for inclusion in the Company's Prospectus in connection with the IPO and should not be relied upon for any other purposes. t1;:r KPMG PLT Foong Mun Kong (LLP001 0081-LCA & AF 0758) Approval Number: 02613/12/2020 J Chartered Accountants Chartered Accountant 4 268 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) Attachment A InNature Berhad (the "Company") and its subsidiaries (the "Group") Pro Forma Financial Position and the notes thereon Pro Forma Financial Position The pro forma consolidated statement of financial position of the Group as at 30 September 2019 ("Pro Forma Financial Position") as set out below has been prepared for illustrative purposes only to show the effects of the transactions referred to in Note 2 had these transactions been effected on 30 September 2019, and should be read in conjunction with the said notes to the Pro Forma Financial Position. Pro Forma I Initial After As at Public subsequent 30 September Subsequent Offering events and 2019* events ("IPO") the IPO Notes RM'OOO RM'OOO RM'OOO RM'OOO Assets Property, plant and equipment 3(a) 11,679 34,500 46,179 Right-of-use assets 23,597 23,597 Intangible assets 52,973 52,973 Deferred tax assets 687 687 Receivables and deposits ___---=-6,!..:.1-=-86=__ 6,186 Total non-current assets ·______~?l~_~? ______..___ ~~~?~g ______.1 ?~!~~?_ Inventories 36,463 36,463 Receivables, deposits and prepayments 5,204 5,204 Current tax assets 31 31 Other investments 47 47 Cash and cash equivalents 3(b) ___1_1.:...;.,6...;;..86"-. (8,112) 5,755 9,329 Total current assets ·______~~A~~ ______(~! ~ _1?) ______~! ?~~ ______~1 !9! ~_ Total assets ~_---:1..;.4.;;,:8'.;.55;;.;;3;... (8,112) 40,255 180,696 Equity Share capital 3(c) 2,500 1,888 48,820 53,208 Reserves 3(d) 85,298 (10,000) (7,837) 67,461 Total equity 87,798 (8,112) 40,983 120,669 Liabilities Provision for restoration costs 2,225 2,225 Loans and borrowings 314 314 Lease liabilities ___..:..1=0,-=-96::..::8:.... 10,968 Total non-current liabilities ·______1~!?_Q?" ______..______1_~!?!-l?. Provision for restoration costs 181 181 Loans and borrowings 5,389 5,389 Lease liabilities 13,489 13,489 Contract liabilities 1,401 1,401 Payables and accruals 23,512 (728) 22,784 Current tax liabilities 3,276 3,276 Total current liabilities ---4-"7=,2:':"48=- (728) 46,520 Total liabilities .::::: ::::: j9: ?~~:: ::::::::::::::::::::::::: s???)::::::::::: ~Q:9~( Total equity and liabilities ___1"",,4.=i8,==55=3~ (8,112) 40,255 180,696 No. of ordinary shares ('000) 2,500 631,807 705,881 705,881 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) Attachment A InNature Berhad (the "Company") and its subsidiaries (the "Group") Pro Forma Financial Position and the notes thereon Notes to the Pro Forma Financial Position The pro forma consolidated statement of financial position of the Group as at 30 September 2019 ("Pro Forma Financial Position") has been prepared for inclusion in the prospectus of the Company to be issued in connection with the initial public offering of up to 177,274,000 ordinary shares in the Company in conjunction with the listing of and quotation for the entire enlarged issued share capital of the Company on the Main Market of Bursa Malaysia Securities Berhad ("Bursa Securities") ("Prospectus") ("IPO") and should not be relied upon for any other purposes. 1. Basis of preparation The applicable criteria in the preparation of the Pro Forma Financial Position is in accordance with Chapter 9 of the Prospectus Guidelines issued by the Securities Commission Malaysia ("SC"). The Pro Forma Financial Position has been prepared based on the Group's audited consolidated interim financial statements for the period ended 30 September 2019, which was prepared in accordance with Malaysian Financial Reporting Standards ("MFRSs") and International Financial Reporting Standards ("IFRSs"), and in a manner consistent with the format of the statement of financial position and the accounting policies adopted by the Group, and adjusted for the events and transactions detailed in Note 2. The auditors' report dated 27 November 2019 on the Group's audited consolidated interim financial statements for the period ended 30 September 2019 was not subject to any qualification, modification or disclaimer of opinion. The Pro Forma Financial Position is not necessarily indicative of the financial position that would have been attained had the IPO actually occurred at the respective dates. The Pro Forma Financial Position has been prepared for illustrative purposes only. 2. Pro forma adjustments to the Pro Forma Financial Position The Pro Forma Financial Position illustrates the effects of the following events or transactions: Subsequent events (i) Dividend declaration On 26 November 2019, the Company declared a dividend amounting to RM10,000,000 for the financial year ended 31 December 2019 in cash. The dividends were paid to the entitled shareholders of the Company on 27 December 2019. 6 270 Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cant'd) Attachment A InNature Berhad (the "Company") and its subsidiaries (the "Group") Pro Forma Financial Position and the notes thereon 2. Pro forma adjustments to the Pro Forma Financial Position (continued) Subsequent events (continued) (ii) Internal restructuring On 15 May 2019, Etheco Sdn Bhd ("Etheco") had entered into a share sale agreement with Dato' Foong Choong Heng ("Dato' Simon") and Datin Cheah Kim Choo ("Datin Mina") to acquire their entire shareholdings in the Company, which is in aggregate the entire issued share capital of InNature of RM2,500,000 comprising 2,500,000 ordinary shares ("lnNature Acquisition"). The purchase consideration for the InNature Acquisition was based on the consolidated net asset value of the Group as at 31 December 2018 of RM75,803,000. The purchase consideration was satisfied entirely by the issuance of 2,500,000 ordinary shares in Etheco to Dato' Simon and Datin Mina in equal proportion. The InNature Acquisition shares were transferred to Etheco by share transfer forms dated 25 October 2019, and was completed on 13 December 2019 upon the completion of the stamping and registration of the share transfer pursuant to the Companies Act 2016. Further to the InNature Acquisition, the Company issued new ordinary shares to BluPlanet Sdn Bhd, Pelagos Sdn Bhd and Primarium Sdn Bhd (totalling 1,887,552 ordinary shares) in the following proportions ("Promoters Share Issuance") of 1,593,400 ordinary shares (36.32%), 147,076 ordinary shares (3.35%) and 147,076 ordinary shares (3.35%) respectively at a nominal price of RM1.00 per ordinary share on 20 December 2019. (iii) Subdivision of ordinary shares On 24 December 2019, the Company had carried out a subdivision of the entire issued share capital of RM4,387,552 comprising 4,387,552 ordinary shares into RM4,387,552 comprising 631,807,488 ordinary shares. Pro Forma I - Initial Public Offering {"I PO") (i) Public Issue The Public Issue of 74,074,000 new ordinary shares in the Company ("Issue Shares") at a price of RMO.68 per Issue Share. Upon completion of the IPO, the Company's enlarged issued share capital will increase to RM53,208,000 comprising 705,881,488 ordinary shares. (ii) Offer for Sale The Offer for Sale by BluPlanet Sdn Bhd ("Selling Shareholder") of 103,200,000 ordinary shares in the Company ("Offer Shares") at a price of RMO.68 per Offer Share. Registration No.: 199401034915 (32059B-X) 11. FINANCIAL INFORMATION (cont'd) Attachment A InNature Berhad (the "Company") and its subsidiaries (the "Group") Pro Forma Financial Position and the notes thereon 2. Pro forma adjustments to the Pro Forma Financial Position (continued) Pro Forma I-Initial Public Offering ("I PO") (continued) (iii) Use of proceeds The estimated gross proceeds from the Public Issue of approximately RM50,370,OOO is intended to be used as follows: RM'OOO Capital expenditure(1) 34,500 Working capital 3,800 New business development(1) 5,700 Estimated listing expenses(2) 6,370 50,370 Notes: (1) Paragraph 9. 18(a)(ii) of the Prospectus Guidelines issued by the SC requires that the Pro Forma Financial Position to be adjusted for the use of proceeds to be raised from the Public Issue. As at the latest practicable date of 31 December 2019, the use of proceeds for capital expenditure and new business development are not factually supportable by any purchase orders, sales and purchase agreements or contractual binding arrangements. However, in accordance with Paragraph 9.18(a)(ii) of the Prospectus Guidelines issued by the SC, the Group has illustrated the use of proceeds for capital expenditure and new business development to be raised from the Public Issue in the Pro Forma Financial Position. (2) The breakdown of estimated listing expenses comprises the following: RM'OOO Professional fees 4,162 Fees to authorities 595 Brokerage, underwriting and placement fees 908 Other fees and expenses such as printing, advertising, travel and roadshow expenses incurred in connection with the Public Issue 705 6,370 The total listing expenses to be borne by the Company is estimated to be RM6,370,000. As of 30 September 2019, RM2,683,000 has been charged to the profit or loss of the Group and RM1,955,000 has been paid. Upon completion of the IPO, the estimated listing expenses of RM1,550,000 directly attributable to the Public Issue will be debited against the share capital of the Company and the remaining estimated listing expenses of RM2, 137,000 will be charged to the profit or loss of the Group. 8 272 Registration No.: 199401034915 (320598-X) 11. FINANCIAL INFORMATION (cant'd) Attachment A InNature Berhad (the "Company") and its subsidiaries (the "Group") Pro Forma Financial Position and the notes thereon 3. Effects on the Pro Forma Financial Position (a) Movement in property, plant and equipment RM'OOO Balance as at 30 September 2019 11,679 Effect of the IPO: - Capital expenditure 34,500 Pro Forma I 46,179 (b) Movement in cash and cash equivalents RM'OOO Balance as at 30 September 2019 11,686 Effects of subsequent events: - Dividend payment (10,000) - Promoters Share Issuance 1,888 Effects of the IPO: - Gross proceeds from the Public Issue 50,370 - Use of proceeds, capital expenditure (34,500) - Use of proceeds, new business development (5,700) - Use of proceeds, estimated listing expenses (4,415) Pro Forma I 9,329 (c) Movement in share capital RM'OOO Balance as at 30 September 2019 2,500 Effect of subsequent event: - Promoters Share Issuance 1,888 Effects of the IPO: - Shares issued under the Public Issue 50,370 - Estimated listing expenses (1,550} Pro Forma I 53,208 (d) Movement in reserves Business combination Translation Retained Total reserve reserve earnings reserves RM'OOO RM'OOO RM'OOO RM'OOO Balance as at 30 September 2019 4,636 329 80,333 85,298 Effect of subsequent event: - Dividend payment (10,000) (10,000) Effects of the IPO: - New business development (5,700) (5,700) - Estimated listing expenses Pro Forma I 4,636 329 273 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS'REPORT InNature Berhad (Registration No. 199401034915 (320598-X» (Incorporated in Malaysia) and its subsidiaries Accountants' Report on the Consolidated Financial Statements 274 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 1 InNature Berhad (Registration No. 199401034915 (32059B-X)) (Incorporated in Malaysia) and its subsidiaries Consolidated statements of financial position Note 30.9.2019 31.12.2018 31.12.2017 31.12.2016 Audited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO Assets Property, plant and equipment 3 11,679 6,398 10,186 11,873 Right-of-use assets 4 23,597 23,759 25,608 30,101 Investment properties 5 833 867 Intangible assets 6 52,973 51,275 51,395 51,515 Other investments 7 6,469 Deferred tax assets 8 687 440 704 232 Receivables and deposits 10 6,186 5,808 5,673 5,794 Total non-current assets ___ ~~!1_~?_ .--.??:,-~?Q_. _. __~4!~_~~ .. .. .19_~!?~L Inventories 9 36,463 26,734 24,451 26,154 Receivables, deposits and prepayments 10 5,204 3,271 114,224 98,760 Current tax assets 31 23 Other investments 7 47 2,241 14,554 3,638 Cash and cash equivalents 11 11,686 24,258 11,472 17,656 Total current assets . __ ~~!4_~L . _. _?~'-~??:_. .J_~4XqL .. .1 ~~!?9.~_. Total assets 148,553 144,207 259,100 253,059 Equity Share capital 2,500 2,500 # # Reserves 85,298 72,941 195,173 184,569 Total equity 12 _._~?J~~ __ _. __ !~,_44.1__ . . J_~?!F~_. ._.1?4!~~~ .. Liabilities Provision for restoration costs 13 2,225 2,105 2,030 1,898 Loans and borrowings 14 314 151 Lease liabilities 15 10,968 11,290 11,211 17,315 Total non-current liabilities .. ..1}!?Q?'. . .. .1 ~,_~4_~. ... _1~!?.4L ... ..1_~!?}.~ .. Provision for restoration costs 13 181 125 18 Loans and borrowings 14 5,389 20,354 10,000 12,062 Lease liabilities 15 13,489 12,831 15,354 13,828 Contract liabilities 16 1,401 1,938 1,568 1,531 Payables and accruals 17 23,512 15,688 19,945 18,130 Current tax liabilities 3,276 4,284 3,801 3,726 Total current liabilities .-.~?!?~?. .. --?~,.~?Q. . ___~9!~_~~ .. .- .. ~.~!??.?.. Total liabilities _. _~9! ?~~ __ --- -~~,?:~.~ .. ---.~~! ~-~?-. .. __ ~.~!4~9_. Total equity and liabilities 148,553 144,207 259,100 253,059 # denotes RM2 of issued and fully paid ordinary shares in the consolidated financial statements. 275 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 2 InNature Berhad (Registration No. 199401034915 (320598-X)) (Incorporated in Malaysia) and its subsidiaries Consolidated statements of profit or loss and other comprehensive income 1.1.2019- 1.1.2018 - 1.1.2018- 1.1.2017 - 1.1.2016 - Note 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Revenue 18 138,195 132,322 184,474 171,919 159,902 Other operating income 19 1,233 944 1,606 1,011 2,011 Total operating revenue Operating expenses Changes in inventories (44,966) (44,014) (62,488) (56,424) (53,598) Rental expenses (2,664) (1,142) (1,629) (1,878) (1,341) Employee related expenses (29,762) (27,125) (36,453) (36,778) (31,854) Selling and distribution expenses (3,200) (3,230) (4,744) (4,274) (4,029) Advertising and promotion expenses (3,470) (3,289) (4,716) (3,794) (3,504) Depreciation and amortisation expenses (15,672) (15,660) (20,860) (20,808) (21,042) Other operating expenses (5,576) (4,182) (6,138) (6,097) (7,469) Total operating expenses __ (19_~,_~~_Ql __ J~~1~_4?1 __ O~LQ?_~)j~_~9!9_~~)_ __O??l?~n Profit from operations 34,118 34,624 49,052 42,877 39,076 Finance income 356 1,100 1,277 742 617 Finance costs 20 (1,650) (1,331) (1,809) (2,866) (2,686) Listing-related expenses (2,683) Fair value loss on other investments (4,230) (234) Impairment loss on other investments (2,239) Fair value gain arising from distribution of non-cash assets to owners 10,030 Profit before tax 30,141 34,393 58,550 34,284 36,773 Tax expense 21 (7,900) (8,534) (12,925) (10,184) (9,960) Profit for the period/year 276 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 3 Consolidated statements of profit or loss and other comprehensive income (continued) 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - Note 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Other comprehensive income/ (loss), net of tax Item that is or may be reclassified subsequently to profit or loss Foreign currency translation differences for foreign operation, representing other comprehensive income/(Ioss) for the period/year 116 (83) (349) (1,496) 430 Total comprehensive income for the period/year 22,357 25,776 45,276 22,604 27,243 Profit attributable to: Owners of the Company 22,241 25,859 45,625 24,100 26,813 Non-controlling interests Profit for the period/year 22,241 25,859 45,625 24,100 26,813 Total comprehensive income attributable to: Owners of the Company 22,357 25,776 45,276 22,604 27,243 Non-controlling interests Total comprehensive income for the period/year 22,357 25,776 45,276 22,604 27,243 277 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 4 InNature Berhad (Registration No.1 99401034915 (320598-X)) (Incorporated in Malaysia) and its subsidiaries Consolidated statements of changes in equity Non-distributable Distributable Business Share combination Translation Retained Total Audited Note capital reserve reserve earnings Equity RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO At 1 January 2016 # 17,240 1,668 152,451 171,359 Adjustments on initial application of: - MFRS 15 (1,780) (1,780) - MFRS 16 (40} (213} (253} At 1 January 2016 # 17,240 1,628 150,458 169,326 Profit for the year 26,813 26,813 Foreign currency translation differences for foreign operation, representing total other comprehensive income for the year 430 430 Total comprehensive income for the year 430 26,813 27,243 Transaction with owners Dividends to owners of the Company 22 (12,OOO} (12,OOO}1 Total transaction with owners (12,OOO} (12,OOO} At 31 December 2016/ 1 January 2017 # 17,240 2,058 165,271 184,569 Profit for the year 24,100 24,100 Foreign currency translation differences for foreign operation, representing total other comprehensive loss for the year (1,496) (1,496) Total comprehensive income for the year (1,496) 24,100 22,604 Transaction with owners Dividends to owners of the Company 22 {12,OOO} (12,OOo}1 Total transaction with owners (12,OOO} (12,OOO} At 31 December 2017 # 17,240 562 177,371 195,173 278 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 5 Consolidated statements of changes in equity (continued) Non-distributable Distributable Business Share combination Translation Retained Total Audited Note capital reserve reserve earnings Equity RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO At 1 January 2018 # 17,240 562 177,371 195,173 Profit for the year 45,625 45,625 Foreign currency translation differences for foreign operation, representing total other comprehensive loss for the year (349) (349\ Total comprehensive income for the year (349) 45,625 45,276 Transaction with owners Bonus issue 2,500 (2,500) Dividends to owners of the Company 22 (12,604) (152,404) (165,008\ Total transaction with owners 2,500 (12,604} {154,904} {165,008} At 31 December 20181 1 January 2019 2,500 4,636 213 68,092 75,441 Profit for the period 22,241 22,241 Foreign currency translation differences for foreign operation, representing total other comprehensive income for the period 116 116 Total comprehensive income for the period 116 22,241 22,357 Transaction with owners Dividends to owners of the Company 22 {10,000} Po,ooo}1 Total transaction with owners PO,OOO} {10,OOO} At 30 September 2019 2,500 4,636 329 80,333 87,798 Note 12.1 Note 12.2 Note 12.3 279 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 6 Consolidated statements of changes in equity (continued) Non-distributable Distributable Business Share combination Translation Retained Total Unaudited Note capital reserve reserve earnings Equity RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO At 1 January 2018 # 17,240 562 177,371 195,173 Profit for the period 25,859 25,859 Foreign currency translation differences for foreign operation, representing total other comprehensive loss for the period (83) (83) Total comprehensive income for the period (83) 25,859 25,776 Transaction with owners Dividends to owners of the Company 22 {12,527} (12,527)1 Total transaction with owners (12,527) (12,527) At 30 September 2018 # 4,713 479 203,230 208,422 # denotes RM2 of issued and fully paid ordinary shares in the consolidated financial statements. 280 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 7 InNature Berhad (Registration No. 199401034915 (32059B-X)) (Incorporated in Malaysia) and its subsidiaries Consolidated statements of cash flows 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - Note 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Cash flows from operating activities Profit before tax 30,141 34,393 58,550 34,284 36,773 Adjustments for: Depreciation of: - property, plant and equipment 2,856 2,986 3,772 4,740 5,237 - right-af-use assets 12,675 12,559 16,934 15,914 14,831 - investment properties 25 34 34 34 Amortisation of intangible assets 141 90 120 120 940 Fair value losses on other investments 4,230 234 Impairment loss on other investments 2,239 Fair value gain arising from distribution of non-cash assets to owners (10,030) Gain on disposal of property, plant and equipment (260) (185) (735) Write down of property, plant and equipment 72 90 Finance income (356) (1,100) (1,277) (742) (617) Finance costs 1,650 1,331 1,809 2,866 2,686 Unrealised losses/(gains) on foreign exchange 27 (19) (180) 161 Listing-related expenses 2,683 Operating profit before changes in working capital 49,629 50,099 69,158 63,595 60,279 Changes in working capital: Inventories (9,667) (5,478) (2,282) 1,385 (1,823) Receivables, deposits and prepayments (1,891) (861 ) (403) (247) (284) Payables and accruals and contract liabilities 3,617 (1,383) (3,222) 4,139 (1,256) Provision for restoration costs 170 182 182 171 112 Lease liabilities (13,628} (14,267} (19,226} (18,433} (16,664} Cash generated from operations 28,230 28,292 44,207 50,610 40,364 Income tax paid (9,215} (8,382} (12,202} (10,567} (8,668} Net cash generated from operating activities ....1 ~!9J? ...... 1 ~!~J9 .. . ____ ~?!9_Q?__ . ___ .49!9_4~_ .. ___ .~~ !~_~~__ . 281 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 8 Consolidated statements of cash flows (continued) 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - Note 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Cash flow from investing activities (Advances to )/Repayments from related parties (5,274) 1,832 (15,451) (23,795) (Repayments to)/Advances from Directors (1,035) (1,394) 2,429 Acquisition of plant and equipment (i) (7,473) (1,134) (1,969) (3,188) (3,026) Proceeds from disposal of investment properties and property, plant and equipment 260 185 734 Withdrawall(Placement) of other investments 2,209 4,683 12,305 (11,827) (3,581 ) Interest received 356 615 1,277 742 617 Net cash (used in)/from investing activities . __ j~!?A?}. _____ j§)_~?}. ____1~!~A~ __ . ___(~1 !~_1 ?)_. ___ (~?!~_~?t Cash flows from financing activities Repayment of other borrowings (iii) (262) (114) (200) (62) (102) (Repayment of)/Drawdown from revolving credit (iii) (15,000) (10,000) 10,000 (2,000) 6,500 Change in pledged deposits 434 (13) (13) (13) (13) Interest paid (204) (95) (112) (380) (77) Listing-related expenses (1,511) Dividend paid (10,000} {42,054} {12,000} {12,000} Net cash used in financing activities __ .c~?!?_4~}. __ .c19!?_~?} . . ..c~?!~X§)}. ___ (1~A~?}. ___ j?!?_~?}. Net movement in cash and cash equivalents (12,176) 8,763 12,770 (5,530) (1,352) Effect of exchange rate fluctuations on cash held 38 (81 ) 3 (667) 337 Cash and cash equivalents at the beginning of period/year 23,824 11,051 11,051 17,248 18,263 Cash and cash equivalents at the end of period/year (ii) 11,686 19,733 23,824 11,051 17,248 282 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 9 Consolidated statements of cash flows (continued) Notes to consolidated statements of cash flows Cash outflows for leases as a lessee 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - 30.9.2019 30.9.2018 31 .12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM 'OOO RM'OOO RM'OOO RM'OOO Included in net cash from operating activities: Payment relating to short-term leases (320) (171 ) (312) (283) (5) Payment relating to variable lease payments not included in the measurement of lease liabilities (1,286) (1,117) (1,696) (1,474) (848) Interest paid in relation to lease liabilities (1,446) (1,236) (1,697) (2,486) (2,609) Payment of lease liabilities (12,182) (13,032) (17,529) (15,947} (16,664) Total cash outflows for leases (15,234) (15,556) (21,234) (20,190) (20,126) (i) Acquisition of plant and equipment During the financial periods/years, the Group acquired plant and equipment with an aggregate cost of RM8,181,OOO (30.9.2018 (Unaudited): RM1,839,OOO ; 31.12.2018: RM2,674,000; 31.12.2017: RM3,188,OOO; 31.12.2016: RM3,026,OOO) of which RM460,OOO (30.9.2018 (Unaudited): RM705,OOO; 31.12.2018: RM705,OOO; 31.12.2017: RM Nil; 31 .12.2016: RM Nil) were acquired by means of hire purchase borrowings. (ii) Cash and cash equivalents Cash and cash equivalents included in the consolidated statements of cash flows comprise the following consolidated statements of financial position amounts: 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Cash and bank balances 11 ,686 19,733 23,824 10,695 8,051 Deposits placed with licensed banks 434 434 777 9,605 11,686 20,167 24,258 11,472 17,656 Less: Deposits pledged (434) (434) (421 ) (408) 11 ,686 19,733 23,824 11,051 17,248 283 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 10 Consolidated statements of cash flows (continued) Notes to consolidated statements of cash flows (continued) (iii) Reconciliation of liabilities arising from financing activities The following table illustrated the changes in liabilities arising from financing activities, including changes arising from cash flows and non-cash charges during the financial period and years under review: Net changes New hire At from financing purchase At Audited 1.1.2019 cash flows borrowings 30.9.2019 RM'OOO RM'OOO RM'OOO RM'OOO Other borrowings 505 (262) 460 703 Revolving credit 20,000 (15,OOO} 5,000 20,505 (15,262} 460 5,703 Net changes New hire At from financing purchase At Unaudited 1.1.2018 cash flows borrowings 30.9.2018 RM'OOO RM'OOO RM'OOO RM'OOO Other borrowings (114) 705 591 Revolving credit 10,000 (10,OOO} 10,000 (10,114) 705 591 Net changes New hire At from financing purchase At Audited 1.1.2018 cash flows borrowings 31.12.2018 RM'OOO RM'OOO RM'OOO RM'OOO Other borrowings (200) 705 505 Revolving credit 10,000 10,000 20,000 10,000 9,800 705 20,505 284 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 11 Consolidated statements of cash flows (continued) Notes to consolidated statements of cash flows (continued) (iii) Reconciliation of liabilities arising from financing activities (continued) Net changes New hire At from financing purchase At Audited 1.1.2017 cash flows borrowings 31.12.2017 RM'OOO RM'OOO RM'OOO RM'OOO Other borrowings 62 (62) Revolving credit 12,000 (2,000) 10,000 12,062 (2,062) 10,000 Net changes New hire At from financing purchase At Audited 1.1.2016 cash flows borrowings 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Other borrowings 164 (102) 62 Revolving credit 5,500 6,500 12,000 5,664 6,398 12,062 285 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 12 InNature Berhad (Registration No. 199401034915 (320598-X)) (Incorporated in Malaysia) and its subsidiaries Notes to the consolidated financial statements InNature Berhad (the "Company") is a public limited liability company, incorporated and domiciled in Malaysia. The addresses of the principal place of business and registered office of the Company are as follows: Principal place of business 5, Jalan USJ 10/1 C 47620 UEP Subang Jaya Selangor Darul Ehsan Malaysia Registered office 802, 8th Floor, Block C Kelana Square 17, Jalan SS7/26 47301 Petaling Jaya Selangor Darul Ehsan Malaysia The Company is principally engaged in providing consultancy services and in investment holding, whilst the principal activities of the subsidiaries are set out in Note 28. The consolidated financial statements of the Company and its subsidiaries (together referred to as the "Group" and individually referred to as "Group entities") have been prepared in connection with the listing of and quotation for the entire issued and paid-up share capital of the Company on the Main Market of Bursa Malaysia Securities Berhad ("Bursa Securities") and for no other purposes. 1. Basis of preparation (a) Statement of compliance The consolidated financial statements of the Group for the financial years ended 31 December 2018, 2017 and 2016, and for the financial period ended 30 September 2019, have been prepared in accordance with Malaysian Financial Reporting Standards ("MFRSs"), International Financial Reporting Standards ("IFRSs") and the Prospectus Guidelines - Equity issued by the Securities Commission Malaysia. Changes in accounting policies The Group has adopted MFRS 15, Revenue from Contracts with Customers and MFRS 9, Financial Instruments which are effective for annual periods beginning on or after 1 January 2018 and MFRS 16, Leases which is effective for annual periods beginning on or after 1 January 2019. 286 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 13 1. Basis of preparation (continued) (a) Statement of compliance (continued) Changes in accounting policies (continued) (i) MFRS 15, Revenue from Contracts with Customers MFRS 15 provides a single model for accounting for revenue arising from contracts with customers, focusing on the identification and satisfaction of performance obligation. The standard specifies that the revenue is to be recognised when control over the goods and services is transferred to the customers, moving from the transfer of risks and rewards. The adoption of MFRS 15 has a material financial impact to the consolidated financial statements of the Group. The consolidated comparative figures were restated and the cumulative impact arising from the adoption was recognised in the retained earnings as at 1 January 2016 as disclosed in Note 29. (ii) MFRS 9, Financial Instruments In respect of impairment of financial assets, MFRS 9 replaces the "incurred loss" model in MFRS 139 with an "expected credit loss" ("Eel") model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments measured at fair value through other comprehensive income, but not to investments in equity instruments. The adoption of MFRS 9 does not have a material financial impact to the consolidated financial statements of the Group. (iii) MFRS 16, Leases MFRS 16 replaces the guidance in MFRS 117, Leases, Ie Interpretation 4, Determining whether an Arrangement contains a Lease, Ie Interpretation 115, Operating Leases - Incentives and Ie Interpretation 127, Evaluating' the Substance of Transactions Involving the Legal Form of a Lease. MFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligations to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard which continues to be classified as finance or operating lease. The adoption of MFRS 16 has a material financial impact to the consolidated financial statements of the Group. The consolidated comparative figures were restated and the cumulative impact arising from the adoption was recognised in the retained earnings as at 1 January 2016 as disclosed in Note 30. 287 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 14 1. Basis of preparation (continued) (a) Statement of compliance (continued) Changes in accounting policies (continued) The following are the accounting standards and amendments of the MFRSs that have been issued by the Malaysian Accounting Standards Soard ("MASS") but have not been adopted by the Group: MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2020 • Amendments to MFRS 3, Business Combinations - Definition of a Business • Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Material MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2021 • MFRS 17, Insurance Contracts MFRSs, Interpretations and amendments effective for annual periods beginning on or after a date yet to be confirmed • Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The Group plans to apply the abovementioned amendments from the annual period beginning on 1 January 2020 for those amendments that are effective for annual periods beginning on or after 1 January 2020. The Group does not plan to apply MFRS 17, Insurance Contracts that is effective for annual periods beginning on 1 January 2021 as it is not applicable to the Group. (b) Basis of measurement The financial statements have been prepared on the historical cost basis, unless otherwise disclosed in Note 2. (c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia ("RM"), which is the Company's functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated. 288 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 15 1. Basis of preparation (continued) (d) Use of estimates and judgements The preparation of the financial statements in conformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in Note 4 Right-of-use Assets and Note 6 Intangible Assets. 2. Significant accounting policies The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been applied consistently by the Group entities, unless otherwise stated. Arising from the adoption of MFRS 15, Revenue from Contracts with Customers, MFRS 9, Financial Instruments, and MFRS 16, Leases, there are changes to the accounting policies of: i) financial instruments; ii) revenue recognition; iii) impairment losses of financial instruments; and iv) leases as compared to those adopted in previous years' audited financial statements. The impacts arising from the changes are disclosed in Notes 29 and 30 respectively. (a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee's return. 289 Reg istration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 16 2. Significant accounting policies (continued) (a) Basis of consolidation (continued) (i) Subsidiaries (continued) Investment in a subsidiary is measured in the Company's statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs. (ii) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. For each business combination, the Group elects whether it measures the non controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. (iii) Acquisitions of non-controlling interests The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group's share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves. 290 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 17 2. Significant accounting policies (continued) (a) Basis of consolidation (continued) (iv) Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder's consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity and any resulting gain/loss is recognised directly in equity. (v) Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statements of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as a financial asset depending on the level of influence retained. (vi) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statements of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statements of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and owners of the Company. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. (vii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. 291 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 18 2. Significant accounting policies (continued) (b) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date, except for those that are measured at fair value which are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of equity instruments where they are measured at fair value through other comprehensive income or a financial instrument designated as a cash flow hedge, which are recognised in other comprehensive income. In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the foreign currency translation reserve ("FCTR") in equity. (ii) Operations denominated in functional currencies other than Ringgit Malaysia The assets and liabilities of operations denominated in functional currencies other than RM, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to RM at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR in equity. However, if the operation is a non wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. 292 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 19 2. Significant accounting policies (continued) (c) Financial instruments Unless specifically disclosed below, the Group generally applied the following accounting policies retrospectively. (i) Recognition and initial measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without significant financing component) or a financial liability is initially measured at fair value plus or minus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issuance. A trade receivable without a significant financing component is initially measured at the transaction price. An embedded derivative is recognised separately from the host contract where the host contract is not a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the economic characteristics and risks of the host contract and the host contract is not measured at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract. (ii) Financial instrument categories and subsequent measurement The Group categorises financial instruments as follows: Financial assets Categories of financial assets are determined on initial recognition and are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change of the business model. (a) Amortised cost Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are not designated as fair value through profit or loss. Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. 293 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 20 2. Significant accounting policies (continued) (c) Financial instruments (continued) (ii) Financial instrument categories and subsequent measurement (continued) Financial assets (continued) (a) Amortised cost (continued) Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets (see !\lote 2(k)(i)) where the effective interest rate is applied to the amortised cost. (b) Fair value through profit or loss All financial assets not measured at amortised cost as described above are measured at fair value through profit or loss. This includes derivative financial assets (except for a derivative that is a designated and effective hedging instrument). On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value. Net gains or losses, including any interest or dividend income, are recognised in the profit or loss. All financial assets, except for those measured at fair value through profit or loss are subject to impairment assessment (see Note 2(k)(i)). Financial liabilities Amortised cost Other financial liabilities not categorised as fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in the profit or loss. Any gains or losses on derecognition are also recognised in the profit or loss. (iii) Regular way purchase or sale of financial assets A regular way purchase or sale of financial assets are recognised and derecognised, as applicable, using trade date or settlement date accounting in the current year. 294 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 21 2. Significant accounting policies (continued) (c) Financial instruments (continued) (iii) Regular way purchase or sale of financial assets (continued) Trade date accounting refers to: (a) the recognition of an asset to be received and the liability to pay for it on the trade date, and (b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date. Settlement date accounting refers to: (a) the recognition of an asset on the day it is received by the Group, and (b) derecognition of an asset and recognition of any gain or loss on disposal on the day that is delivered by the Group. Any change in the fair value of the asset to be received during the period between the trade date and the settlement date is accounted in the same way as it accounts for the acquired asset. Generally, the Group applies settlement date accounting unless otherwise stated for the specific class of asset. (iv) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees issued are initially measured at fair value. Subsequently, they are measured at higher of: the amount of the loss allowance; and the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance to the principles of MFRS 15, Revenue from Contracts with Customers. Liabilities arising from financial guarantees are presented together with other provisions. 295 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 22 2. Significant accounting policies (continued) (c) Financial instruments (continued) (v) Derecognition A financial asset or a part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or transferred, or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset is transferred to another party. On derecognition of a financial asset, the difference between the carrying amount of the financial asset and the sum of consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. A financial liability is also derecognised when its terms are modified and the cash flows of the modified liability are substantially different, in which case , a new financial liability based on modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. (vi) Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and liability simultaneously. (d) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self constructed assets also includes the cost of materials and direct labour. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. 296 Registration No.: 199401034915 (32059B -X) 12. ACCOUNTANTS' REPORT (cont'd) 23 2. Significant accounting policies (continued) (d) Property, plant and equipment (continued) (i) Recognition and measurement (continued) When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within "other operating income" and "other operating expenses" respectively in profit or loss. (ii) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment from the date that they are available for use. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use. The estimated useful lives for the current and comparative periods of the assets are as follows: Buildings 50 years Furniture and fittings 2 - 5 years Office equipment 2 - 5 years Renovation 3 - 5 years Electrical fittings 4 years Motor vehicles 5 years Depreciation methods, useful lives and residual values are reviewed at the end of the reporting period, and adjusted as appropriate. 297 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 24 2. Significant accounting policies (continued) (e) Leases The Group has applied MFRS 16 using the full retrospective approach, under which the effect of initial application is recognised as an adjustment to retained earnings at 1 January 2016. Accordingly, the comparative information for 2016,2017 and 2018 have been restated and the impact of the adoption of MFRS 16 has been disclosed in Note 30. (i) Definition of a lease A contract is, or contains, a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: (a) the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; (b) the customer has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and (c) the customer has the right to direct the use of the asset. The customer has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where all the decisions about how and for what purpose the asset is used are predetermined, the customer has the right to direct the use of the asset if either the customer has the right to operate the asset; or the customer has designed the asset in a way that predetermines how and for what purpose it will be used. At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non lease components and account for the lease and non-lease components as a single lease component. (ii) Recognition and initial measurement As a lessee The Group recognises a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. 298 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 25 2. Significant accounting policies (continued) (e) Leases (continued) (ii) Recognition and initial measurement (continued) As a lessee (continued) The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise: (a) fixed payments, including in-substance fixed payments; (b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; (c) amounts expected to be payable under a residual value guarantee; (d) the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an option renewal period of the Group is reasonably certain to exercise an extension option; and (e) penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The Group excludes variable lease payments that are linked to future performance or usage of the underlying asset from the lease liability. Instead, these payments are recognised in profit or loss in the period in which the performance or use occurs. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less or leases of low-value assets less than RM20,OOO . The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (iii) Subsequent measurement As a lessee The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. 299 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 26 2. Significant accounting policies (continued) (e) Leases (continued) (iii) Subsequent measurement (continued) As a lessee (continued) The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a revision of in-substance fixed lease payments, or if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. (f) Investment property (i) Investment property carried at cost Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties initially and subsequently measured at cost are accounted for similarly to property, plant and equipment. Depreciation for building is recognised in profit or loss on a straight-line basis over the estimated useful life of 50 years. Investment property under construction is measured at cost and is not depreciated until the assets are ready for their intended use. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period in which the item is derecognised. 300 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 27 2. Significant accounting policies (continued) (f) Investment property (continued) (ii) Determination of fair value The Directors estimate the fair values of the Group's investment properties without involvement of independent valuers. In the absence of valuation report, the valuations for the investment properties will be prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation . Significant assumptions in arriving at the fair value of investment properties in use are disclosed in Note 5. (g) Intangible assets (i) Goodwill Goodwill arises on business combinations is measured at cost less any accumulated impairment losses. (ii) Franchise rights Franchise rights have finite useful lives and are measured at cost less any accumulated amortisation and accumulated impairment losses. (iii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. (iv) Amortisation Goodwill with indefinite useful lives are not amortised but are tested for impairment annually and whenever there is an indication that they may be impaired. Franchise rights are amortised from the date that they are available for use. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of franchise rights which is estimated to be 10 years. Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate. 301 Registration No.: 199401034915 (32059S-X) 12. ACCOUNTANTS' REPORT (cont'd) 28 2. Significant accounting policies (continued) (h) Inventories Inventories are stated at the lower of cost and net realisable value. Cost of inventories is calculated using the weighted average method, and included expenditure incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition. Allowance is made for obsolete and slow-moving inventories. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (i) Contract liability A contract liability is stated at cost and represents the obligation of the Group to transfer goods or services to a customer for which consideration has been received from the customers. (j) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group in the management of their short term commitments. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits, if any. (k) Impairment (i) Financial assets Unless specifically disclosed below, the Group generally applied the following accounting policies retrospectively. The Group recognises loss allowances for expected credit losses on financial assets measured at amortised cost. Expected credit losses are a probability weighted estimate of credit losses. The Group measures loss allowances at an amount equal to lifetime expected credit loss, except for debt securities that are determined to have low credit risk at the reporting date, cash and bank balances and other debt securities for which credit risk has not increased Significantly since initial recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables, contract assets and lease receivables are always measured at an amount equal to lifetime expected credit loss. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment and including forward-looking information, where available. 302 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 29 2. Significant accou~ting policies (continued) (k) Impairment (continued) (i) Financial assets (continued) Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of the asset, while 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within the 12 months after the reporting date. The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Group is exposed to credit risk. The Group applies the simplified approach for trade receivables that result from transactions that are within the scope of MFRS 15, Revenue from Contracts with Customers, where the Group measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain significant financing component in accordance with MFRS 15. An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account. The gross carrying amount of a financial asset is written off (either partially or full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due. (ii) Other assets The carrying amounts of other assets (except for inventories, current tax assets and deferred tax assets) are reviewed at the· end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. Subject to an operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a cash-generating unit or a group of cash generating units that are expected to benefit from the synergies of the combination. 303 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 30 2. Significant accounting policies (continued) (k) Impairment (continued) (ii) Other assets (continued) The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of cash generating units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (groups of cash-generating units) on a pro rata basis. An impairment foss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised. (I) Equity instruments Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently. (i) Ordinary shares Ordinary shares are classified as equity. (m) Employee benefits (i) Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 304 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 31 2. Significant accounting policies (continued) (m) Employee benefits (continued) (ii) State plans The Group's contributions to statutory contribution plans are charged to profit or loss in the financial year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. (n) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefit will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provision for restoration costs Provision for restoration costs is included in the carrying amounts of renovation. This provision is recognised in respect of the Group's obligation to restore leased stores to its original state upon the end of the tenancy agreements. The restorations costs are recognised as part of the costs of property, plant and equipment. (0) Revenue and other income (i) Revenue Revenue is measured based on the consideration specified in a contract with a customer in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. The Group recognises revenue when (or as) it transfers control over a product or service to customer. An asset is transferred when (or as) the customer obtains control of t.he asset. The Group transfers control of a good or service at a point in time unless one of the following overtime criteria is met: (a) the customer simultaneously receives and consumes the benefits provided as the Group performs; (b) the Group's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the Group's performance does not create an asset with an alternative use and the Group has an enforceable right to payment for performance completed to date. 305 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 32 2. Significant accounting policies (continued) (0) Revenue and other income (continued) (ii) Rental income Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from sub-leased property is recognised as other operating income. (iii) Dividend income Dividend income is recognised in profit or loss on the date that the Group's right to receive payment is established, which in the case of quoted securities is the ex-dividend date. (iv) Interest income Interest income is recognised as it accrues using the effective interest method in profit or loss. (p) Borrowing costs All borrowing costs are recognised in profit or loss using the effective interest method. (q) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and c;my adjustment to tax payable in respect of previous financial years. Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are not discounted. 306 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 33 2. Significant accounting policies (continued) (q) Income tax (continued) Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (r) Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. Operating segment results are reviewed regularly by the chief operating decision maker, which in this case is the Managing Director of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. (s) Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. (t) Fair value measurements Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. 307 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 34 2. Significant accounting policies (continued) (t) Fair value measurements (continued) When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows: Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: unobservable inputs for the asset or liability. The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers. 308 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 35 3. Property, plant and equipment Furniture Office Capital work Electrical Motor Note Buildings and fittings equipment Renovation in progress fittings vehicles Total RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Cost At 1 January 2016 3,816 12,999 4,536 21,171 1,211 5,459 49,192 Additions 559 234 1,687 122 424 3,026 Effect of movements in exchange rates 86 1 1 88 At 31 December 2016/1 January 2017 3,816 13,644 4,771 22,859 1,333 5,883 52,306 Additions 1,109 184 1,585 130 180 3,188 Write off (58) (14) (179) (13) (264) Effect of movements in exchange rates (278} ( 11} (18} (30?} At 31 December 2017/1 January 2018 3,816 14,417 4,930 24,247 1,450 6,063 54,923 Additions 498 307 1,092 3 774 2,674 Disposals (3,816) (2,890) (6,706) Effect of movements in exchange rates 2 2 At 31 December 2018/1 January 2019 14,917 5,237 25,339 1,453 3,947 50,893 Additions 4,657 719 1,695 284 175 651 8,181 Write off 3.2 (6,721 ) (1,789) (11,720) (311 ) (20,541) Disposals (1,313) (1,313) Utilisation of provision of restoration cost (58) (58) Effect of movements in exchange rates 54 3 8 65 At 30 September 2019 12,907 4,170 15,264 284 1,317 3,285 37,227 309 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 36 3. Property, plant and equipment (continued) Furniture Office Capital work Electrical Motor Note Buildings and fittings equipment Renovation in progress fittings vehicles Total RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Accumulated depreciation At 1 January 2016 906 8,940 4,004 16,583 638 4,057 35,128 Depreciation for the year 76 1,652 347 2,236 247 679 5,237 Effect of movements in exchange rates 64 2 2 68 At 31 December 2016/1 January 2017 982 10,656 4,353 18,821 885 4,736 40,433 Depreciation for the year 77 1,357 262 2,243 240 561 4,740 Write off (22) (9) (136) (7) (174) Effect of movements in exchange rates {252} {5} {5} {262} At 31 Decem ber 201711 January 2018 1,059 11,739 4,601 20,923 1,118 5,297 44,737 Depreciation for the year 70 1,135 210 1,734 165 458 3,772 Disposals (1,129) (2,886) (4,015) Effect of movements in exchange rates 1 1 At 31 December 2018/1 January 2019 12,875 4,811 22,657 1,283 2,869 44,495 Depreciation for the period 1,191 213 1,067 105 280 2,856 Write off 3.2 (6,682) (1,788) (11,688) (311 ) (20,469) Disposals (1,313) (1 ,313) Utilisation of provision of restoration cost (58) (58) Effect of movements in exchange rates 32 1 4 37 At 30 September 2019 7,416 3,237 11,982 1,077 1,836 25,548 Carrying amounts At 31 December 2016/1 January 2017 2,834 2,988 418 4,038 448 1,147 11 ,873 At 31 December 2017/1 January 2018 2,757 2,678 329 3,324 332 766 10,186 At 31 December 2018/1 January 2019 2,042 426 2,682 170 1,078 6,398 At 30 September 2019 5,491 933 3,282 284 240 1,449 11,679 310 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 37 3. Property, plant and equipment (continued) 3.1 Property, plant and equipment acquired under hire purchase borrowings Included in property, plant and equipment of the Group are motor vehicles acquired under hire purchase borrowing agreements with carrying amounts of RM1 ,208,OOO (2018: RM684,OOO; 2017: RM Nil; 2016: RM Nil). 3.2 Property, plant and equipment written off During the financial period ended 30 September 2019, the Group reassessed the use of some of its plant and equipment. Consequently, plant and equipment with a carrying amount of RM72,OOO was written off. Included in the plant and equipment written off are fully depreciated plant and equipment with original cost of RM20,232,OOO. 4. Right-of-use assets 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Cost At the beginning of the financial period/year 33,266 32,929 30,741 22,994 Additions 12,449 15,081 11,997 21,795 Expiration of lease contracts (18,576) (14,746) (9,328) (14,171) Effect of movement in exchange rates 184 2 {481 } 123 At the end of the financial period/year 27,323 33,266 32,929 30,741 Accumulated depreciation At the beginning of the financial period/year 9,507 7,321 640 Depreciation for the period/year 12,675 16,934 15,914 14,831 Expiration of lease contracts (18,576) (14,746) (9,328) (14,171) Effect of movement in exchange rates 120 {2} 95 (20} At the end of the financial period/year 3,726 9,507 7,321 640 Carrying amounts 23,597 23,759 25,608 30,101 The Group leases buildings for its office spaces and retail stores. The lease typically run for a period of 1 to 7 years. The leases expire upon the expiry of the initial term. 4.1 Significant judgements and assumptions in relation to leases The Group applies judgement and assumptions in determining the incremental borrowing rate of the respective leases. Group entities first determine the closest available borrowing rates before using judgement to determine the adjustments required to reflect the term, security, value or economic environment of the respective leases. 311 Registration No. : 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 38 5. Investment properties 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Cost At the beginning of the financial 1,678 1,678 1,678 period/year Disposal {1,678} At the end of the financial period/year 1,678 1,678 Accumulated depreciation At the beginning of the financial 845 811 777 period/year Depreciation charge for the financial 34 34 34 period/year Disposal {879} At the end of the financial period/year 845 811 Carrying amounts 833 867 The following are recognised in profit or loss in respect of investment properties: 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - 30.9.2019 30.9.2018 31 .12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Rental income 159 216 158 239 Direct operating expenses (18) (18) (13) {13) 5.1 Fair value information Fair value of investment properties are categorised as follows: 30.9.2019 31.12.2018 31.12.2017 31.12.2016 Level 3 Level 3 Level 3 Level 3 RM'OOO RM'OOO RM'OOO RM'OOO Buildings 6,169 7,263 Level 3 fair value Level 3 fair value is estimated using unobservable inputs for the investment properties. The following table shows the valuation technique used in the determination of fair values within Level 3, as well as the significant unobservable inputs used in the valuation models. 312 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 39 5. Investment properties (continued) 5.1 Fair value information (continued) Level 3 fair value (continued) Inter-relati ons hip Description of between significant valuation technique Significant unobservable inputs and and inputs used unobservable inputs fair value measurement Discounted cash flows: The Rental yields (2019: Nil; The estimated fair value valuation method considers 2018: Nil; 2017: 2.40% would increase (decrease) the present value of net cash to 3.07%; 2016: 2.40% if: flows to be generated from to 3.07%) • expected annual rental the property, taking into is higher (lower); account expected annual • range of yield is higher rental to be received from (lower); or the letting of the property. • number of years is The expected net cash flows longer (shorter). are discounted by applying a range of yields up to 50 years. 6. Intangible assets Franchise Goodwill rights Total RM'OOO RM'OOO RM'OOO Cost At 1 January 2016/31 December 20161 1 January 2017/31 December 20171 1 January 2018/31 December 20181 1 January 2019 50,435 9,400 59,835 Addition 1,831 1,831 Effect of movement in exchange rates 8 8 At 30 September 2019 50,435 11,239 61,674 Accumulated amortisation At 1 January 2016 7,380 7,380 Amortisation for the financial year 940 940 At 31 December 2016/1 January 2017 8,320 8,320 Amortisation for the financial year 120 120 At 31 December 2017/1 January 2018 8,440 8,440 Amortisation for the financial year 120 120 At 31 December 2018/1 January 2019 8,560 8,560 Amortisation for the financial period 141 141 Effect of movement in exchange rates At 30 September 2019 8,701 8,701 313 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 40 6. Intangible assets (continued) Franchise Goodwill rights Total RM'OOO RM'OOO RM'OOO Carrying amounts At 31 December 2016/1 January 2017 50,435 1,080 51,515 At 31 December 2017/1 January 2018 50,435 960 51,395 At 31 December 2018/1 January 2019 50,435 840 51,275 At 30 September 2019 50,435 2,538 52,973 Goodwill Goodwill arose from the Group's acquisition of its operations in West Malaysia, Sabah and Labuan in the previous financial years. Franchise rights Franchise rights represent exclusive rights acquired by the Group through franchise agreements with The Body Shop International to market and distribute The Body Shop products. The amortisation period of 10 years is determined by the management based on the terms of the franchise agreement. Franchise rights as at 1 January 2019 arise from the Group's previous franchise agreements with The Body Shop International on its distribution territories in West Malaysia, Sabah and Labuan. On 19 June 2019, the Group signed new franchise agreements with The Body Shop International in respect of its distribution territories in West Malaysia, Sabah, Labuan and Vietnam to replace the existing franchise agreements of the Group. Additionally, the Group entered into a franchise agreement with The Body Shop International in respect of its franchise right in Cambodia. These franchise agreements entail the payment of initial franchise fees amounting to RM1,831 ,000, and are amortised over the 1O-year tenure of the franchise agreements. Impairment testing for cash-generating units containing goodwill For the purpose of impairment testing, goodwill is allocated to a subsidiary acquired at which the cash generating units ("CGUs") are identified and the goodwill is monitored for internal management purposes. Goodwill impairment testing is based on value in use determined by the management. Value in use is derived from the subsidiary's future financial budgets. Key assumptions used in preparing the financial budgets represent management's assessment of future trends in the subsidiary's principal activity with certain reference made to internal sources (historical data). 314 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 41 6. Intangible assets (continued) Impairment testing for cash-generating units containing goodwill (continued) Value in use is determined by discounting the pre-tax cash flows to be generated from the continuing use of the units and is based on the following key assumptions: • 4% revenue growth per annum for the operation in West Malaysia; • No revenue growth is expected for the operation in Sa bah and Labuan; • Discount rate of 7.5% per annum; • Based on past experience and actual operating results attained in previous years, and an increase of 4% to 10% in operating expenses; and • Projected profit margins based on historical profit margins achieved. Based on the assessments, there was no indication of impairment on goodwill during the financial period and years under review. In addition, there were also assessments on the key assumptions used and sensitivity of such assumptions to impairment losses and the results are as follows: (i) Change of discount rate from 7.5% to 10% would not result in impairment losses; or (ii) Increase of operating expenses by 1% would not result in impairment losses. 7. Other investments Note 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Non-current Quoted equity investment outside of Ma/aysia At the beginning of the financial period/year 6,469 6,703 Less: Fair value loss (4,230) (234) Less: Impairment loss {2,239} At the end of the financial period/year 7.1 6,469 Current Fixed deposits more than three months but less than twelve months 7.2 47 2,241 14,554 3,638 315 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 42 7. Other investments (continued) 7.1 Quoted equity investment outside of Malaysia is a financial asset measured at fair value through profit or loss. It was disposed of in March 2018 at a consideration/gain of RM1. 7.2 Fixed deposits placed with licensed banks more than three months but less than twelve months are financial assets measured at amortised costs. 8. Deferred tax assets Recognised deferred tax assets Deferred tax assets are attributable to the following: Assets 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Property, plant and equipment 41 Provisions 678 544 653 259 Other items 48 10 44 Net tax assets 726 544 704 303 Liabilities 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Property, plant and equipment (38) (70) (71) Provisions Other items {1 } {34} Net tax liabilities (39} (104} (71} Net 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO · RM'OOO Property, plant and equipment (38) (70) 41 (71) Provisions 678 544 653 259 Other items 47 (34} 10 44 I\let tax assets 687 440 704 232 316 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 43 8. Deferred tax assets (continued) Recognised deferred tax assets (continued) Movement in temporary differences during the year Recognised Recognised Recognised Recognised in profit or At in profit or At in profit or At in profit or At loss 31.12.2016/ loss 31.12.2017/ loss 31.12.2018/ loss At 1.1.2016 (Note 21) 1.1.2017 (Note 21) 1.1.2018 (Note 21) 1.1.2019 (Note 21) 30.9.2019 RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Property, plant and equipment (71) (71) 112 41 (111) (70) 32 (38) Provisions 230 29 259 394 653 (109) 544 134 678 Other items (24) 68 44 (34) 10 (44) (34) 81 47 135 97 232 472 704 (264) 440 247 687 317 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 44 9. Inventories 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Trading goods 36,463 26,734 24,451 26,154 Recognised in profit or loss: Inventories recognised as changes in inventories 44,966 62,488 56,424 53,598 10. Receivables, deposits and prepayments Note 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Non-current Other receivable 89 217 239 Deposits 6,186 5,719 5,456 5,555 ._ ...~1).~~ _. .----~&Q?------~'-~?~-- ___ ,?,,? ~_4 __ Current Trade receivables 2,745 1,964 2,480 2,297 Other receivables and deposits 10.1 705 407 111,395 96,193 3,450 2,371 113,875 98,490 Prepayments 1,754 900 349 270 .. ___ ~l?'Q~_ . ___ _ _ ~ !?X) __ . J.1~,_??~__ ___ ~?..x~_Q __ 11,390 9,079 119,897 104,554 10.1 Included in other receivables and deposits of the Group are: a) Amounts due from companies in which certain Directors have interests totalling RM Nil (2018: RM20,000; 2017: RM111 ,224,000; 2016: RM95,975,OOO). The amounts represent advances and payments made on behalf, which are unsecured, interest-free and repayable on demand. b) Deposits . totalling RM Nil (2018: RM188,000; 2017: RM22,000; 2016: RM107,000) were paid to suppliers for procurement of packaging materials. 11. Cash and cash equivalents 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Cash and bank balances 11 ,686 23,824 10,695 8,051 Deposits placed with licensed banks 434 777 9,605 11,686 24,258 11,472 17,656 Included in cash and cash equivalents of the Group are deposits placed with licensed banks totalling RM Nil (2018: RM434,OOO ; 2017: RM421 ,000; 2016: RM408 ,000) pledged to licensed banks for credit facilities granted to the Group. 318 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 45 12. Capital and reserve 12.1 Share capital Number Number Number Number Amount of shares Amount of shares Amount of shares Amount of shares 30.9.2019 30.9.2019 31.12.201831.12.2018 31.12.201731.12.2017 31.12.201631.12.2016 RM'OOO '000 RM'OOO '000 RM'OOO '000 RM'OOO '000 Ordinary share of RM1 each: Authorised # Issued and fully paid: At the beginning of the financial period/year 2,500 2,500 # * # # * Bonus issue 2,500 2,500 At the end of the financial period/year 2,500 2,500 2,500 2,500 # # # denotes RM2 of issued and fully paid ordinary shares in the consolidated financial statements. * denotes 2 issued and fully paid ordinary shares in the consolidated financial statements. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company and rank equally with regard to the Company's residual assets. The Companies Act 2016 which came into effect on 31 January 2017 abolished the concept of authorised share capital and par value of share capital. There is no impact to the number of ordinary shares in the issue or entitlement of the member as a result of this transition. In 2018, the Company issued 2,499,998 new ordinary shares on the basis of 1,249,999 new ordinary shares for each existing ordinary share at the issue price of RM1 per share, by way of capitalisation of retained earnings of the Company. 12.2 Business combination reserve Business combination reserve represents the difference between the consideration paid and net assets acquired in the acquisition of a subsidiary under common control. 12.3 Translation reserve Translation reserve represents foreign currency differences arising from the translation of the financial statements of the Group entities with functional currencies other than RM. 319 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 46 13. Provision for restoration costs 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO At the beginning of the financial period/year 2,230 2,048 1,898 1,779 Provisions made during the financial period/year 234 182 150 119 Utilisation during the financial period/year (58) At the end of the financial period/year 2,406 2,230 2,048 1,898 Non-current 2,225 2,105 2,030 1,898 Current 181 125 18 2,406 2,230 2,048 1,898 Provisions were made during the financial period and years under review in respect of the Group's obligation to restore the leased stores at the end of their tenancy agreements. 14. Loans and borrowings Note 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Non-current Other borrowings 314 151 ._------_. ------. ------Current Other borrowings 389 354 62 Revolving credit 14.1 5,000 20,000 10,000 12,000 .----~}-~~- . ---?_Q!~-~~- ___ ~_Q!9_QQ_ __J~LQ~?__ 5,703 20,505 10,000 12,062 14.1 SecUrity The revolving credit is secured by way of: i) letter of negative pledge issued by a subsidiary; ii) letter of undertaking by certain Directors of the Group; and iii) deposits placed with licensed banks amounting to RM Nil (2018: RM434,OOO, 2017: RM421 ,000; 2016: RM408,OOO). 320 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 47 15. Lease liabilities 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Non-current Lease liabilities 10,968 11,290 11,211 17,315 Current Lease liabilities 13,489 12,831 15,354 13,828 24,457 24,121 26,565 31,143 1.1 .2019 - 1.1.2018· 1.1.2018 - 1.1 .2017 - 1.1.2016 - 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Amounts recognised in profit or loss: Interest expense on lease liabilities 1,446 1,236 1,697 2,486 2,609 Variable lease payments not included in the measurement of lease liabilities 3,895 2,734 4,414 2,557 848 Income from sub-leasing right-of-use asset 27 Expenses relating to short-term leases 320 171 312 283 5 16. Contract liabilities The following table provides information about contract liabilities from contracts with customers: 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Contract liabilities 1,401 1,938 1,568 1,531 The contract liabilities are in relation to unredeemed discounts of eligible members who purchased goods at The Body Shop outlets in West Malaysia, Sabah, Labuan and Vietnam via the "Love Your Body" membership programme. 321 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 48 17. Payables and accruals Note 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Current Trade Trade payables .... 1~,.?~r ...... ?'.~?.?. ....1~Jn~ ...... ~l~?! . Non-trade Other payables 17.1 5,376 6,885 5,258 6,997 Accrued expenses 5,839 226 3,668 2,206 ....tl.,.?).~. .... J,J.1J. . c .•• ?-'.~?~ ...... ~l?Q~ . 23,512 15,688 19,945 18,130 17.1 Included in other payables of the Group are: a) Amounts due to companies in which certain Directors have interest totalling RM1,936,OOO (2018: RM2,009,OOO; 2017: RM1,967,OOO; 2016: RM2,169,OOO) which are unsecured, interest-free and repayable on demand. b) Amounts due to certain Directors totalling RM Nil (2018: RM Nil, 2017: RM1,035,OOO; 2016: RM2,429,OOO) which are unsecured, interest-free and repayable on demand. 18. Revenue 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Revenue from contracts with customers Sale of goods 138,150 132,307 184,450 171,887 159,822 Consultancy fees 45 15 24 32 80 138,195 132,322 184,474 171,919 159,902 322 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 49 18. Revenue (continued) 18.1 Disaggregation of revenue Disaggregation of the Group's revenue from contracts with customers: 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited Malaysia Vietnam Malaysia Vietnam Malaysia Vietnam Malaysia Vietnam Malaysia Vietnam RM'OOO RM'OOO RM'OOO RM'OOO RM 'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Sale of goods 117,829 20,321 117,289 15,018 162,927 21 ,523 153,483 18,404143,278 16,544 Consultancy fees 45 15 24 32 80 Total revenue ",;1",;,1d7 ' .,;,,82;;.9~.,;;2;,;;;.0.l,;,3..;;.6 .;;.6 ..;1 ..;.17~',;;;28;;.;9~1;.;5.:.;,0;..;3..;;,3_1.;..;6;.;;;2;.:.;'9;,;;;2 ;.;,.7....,;;.2.;,.:1 '.;.54..;..7~15;";3~,4=8_3_1;.;;;8.:..,4;.;;;3..;;.6 _1;..;4..;;,3!,;;;,2=78~1=6;b, 6;;;;2;;,,,;.,4 18.2 Nature of goods sold and services The following information reflects the typical transactions of the Group: Obligations Nature of Timing of Payment Variable element in for returns goods recognition terms consideration or refunds "The Body Revenue is Due upon Discounts are given The Group Shop" recognised delivery of to eligible members allows returns products at a point in goods. of "Love Your Body" or refunds for time when membership a period of 14 the goods programme, and to days from the are delivered all walk-in customers invoice date. to during promotional customers. period. Consultancy Revenue is Due upon Not applicable. Not services recognised invoice applicable. over time as date. and when the consultancy services are performed using the cost incurred method. 323 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 50 19. Other operating income 1.1.2019· 1.1.2018· 1.1.2018 - 1.1.2017 • 1.1.2016· 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM 'OOO Gains on foreign exchange - realised 479 596 631 539 1,434 - unrealised 26 20 185 Rental income on buildings 27 159 216 158 239 Other income 441 4 4 129 338 Gain on disposal of property, plant and equipment 260 185 735 1,233 944 1,606 1,011 2,011 20. Finance costs 1.1.2019· 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1 .2016· 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Interest expense - other borrowings 13 9 15 6 - revolving credit 191 86 97 379 71 - lease liabilities 1,446 1,236 1,697 2,486 2,609 1,650 1,331 1,809 2,866 2,686 21. Tax expense Recognised in profit or loss 1.1.2019· 1.1.2018 - 1.1.2018· 1.1.2017 - 1.1.2016 - 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Income tax - current year expense 8,367 8,313 12,161 10,740 9,962 • (over)/under provision in prior years (220) 33 (2) (84) 95 Real property gain tax 502 . ____ ~,_14L ._ ____ ~~~4_~ __ . ___ 1?_,!5.~} ______.:1_Q~~?'~ ______.19_,9_~!'_ Deferred tax expense · origination and reversal of temporary differences 125 350 (508) (416) · (over)/under provision in prior years (372) (162) 264 36 319 .______(~4n .______!?_~ __ ..______~~~ ______(4!?L ______(~?J Tax expense 7,900 8,534 12,925 10,184 9,960 324 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 51 21. Tax expense (continued) Recognised in profit or loss 1.1.2019 - 1.1.2018· 1.1.2018 - 1.1.2017 - 1.1.2016 - 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Reconciliation of tax expense Profit before tax 30,141 34,393 58,550 34,284 36,773 Jncome tax using Malaysian tax rate at 24% 7,234 8,254 14,052 8,228 8,825 Non-deductible expenses 1,407 608 657 2,213 974 Effect of foreign jurisdiction tax rates (127) (101 ) (140) (152) (126) Non-taxable income (22) (98) (2,408) (57) (127) Real property gain tax 502 Tax expense 8,492 8,663 12,663 10,232 9,546 (Over)/Under provision in prior years - current tax (220) 33 (2) (84) 95 - deferred tax {372} (162} 264 36 319 ...... (~~~L ..... j}.~~J ...... ?~.~ ...... J4?J. _...... 4:t.4 ... Tax expense 7,900 8,534 12,925 10,184 9,960 22. Dividends Dividends recognised by the Group: RM per Total share amount Date of payment RM RM'OOO 2019 In respect of the financial year ended 31 December 2018: - Second single tier ordinary dividend 4.00 10,000 30 August 2019 2018 In respect of the financial years prior to the acquisition of TBS Vietnam Company Limited: - First single tier ordinary dividend @ 4,582 22 November 2018 - Second single tier ordinary dividend @ 4,163 3 December 2018 - Third single tier ordinary dividend @ 3,859 6 December 2018 12,604 325 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 52 22. Dividends (continued) RM per Total share amount Date of payment RM RM'OOO 2018 (continued) In respect of the financial year ended 31 December 2018: - First single tier ordinary dividend 55,553* 138,884 31 December 2018 - Dividend-in-specie distributed # 13,520 31 December 2018 152,404 2017 In respect of the financial year ended 31 December 2017: - Interim single tier ordinary dividend 6,000,000 12,000 23 October 2017 2016 In respect of the financial year ended 31 December 2016: - Interim single tier ordinary dividend 6,000,000 12,000 9 December 2016 @ A subsidiary acquired by the Group (see Note 27) declared and paid dividends totalling RM12,604,000 to its existing owner in relation to the financial years prior to the acquisition. Accordingly, the dividends were offset against the business combination reserve. A portion of dividends totalling RM12,527,000 was declared and payable as at 30 September 2018. * The declared dividends totalling RM29,450,000 was credited on 31 December 2018 and subsequently cleared on 28 January 2019. The remaining dividends totalling RM109,434,000 was settled in the form of offsetting with existing amounts due from companies in which certain Directors have interests on 31 December 2018. # The Group distributed the dividend-in-specie in the form of properties which was completed on 31 December 2018. A fair value gain of RM1 0,030,000 arising from the distribution of non-cash assets to owners is recognised in the consolidated statements of profit or loss. 326 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 53 23. Operating segments The Group does not have reportable segments as the principal activities of entities within the Group are similar, and essentially relate to the marketing of products under the franchise of "The Body Shop" and products of "Natura". The internal management reports consist of performance from respective entities and classified into geographical segments of Malaysia, Vietnam and Cambodia. The Managing Director reviews internal management reports on a monthly basis. The following summary describes the geographical segments results: • Segment 1: Includes West Malaysia, Sabah and Labuan. • Segment 2: Includes Vietnam. • Segment 3: Includes Cambodia. Performance is measured based on segment profit before tax as included in the internal management reports that are reviewed by the Managing Director. Segment profit is used to measure performance as management believes that such information is relevant in evaluating the results of certain segments relative to other entities that operate within the industry. Segment assets The total of segment assets is measured based on all assets (including intangible assets) of a segment, as included in the internal management reports that are reviewed by the Managing Director. Segment total assets is used to measure the return on assets of each segment. Segment liabilities The total of segment liabilities is measured based on all liabilities of a segment, as included in the internal management reports that are reviewed by the Managing Director. Segment total liabilities is used to measure the gearing of each segment. Geographical segments In presenting information on the basis of geographical segments, segment profit is based on geographical location of customers. Segment assets and liabilities are based on the geographical location of the assets and liabilities. 327 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 54 23. Operating segments (continued) Geographical segments (continued) 1.1.2019 -30.9.2019 1.1.2018 -30.9.2018 1.1.2018 -31.12.2018 1.1 .2017 -31.12.2017 1.1 .2016 -31.12.2016 Audited Unaudited Audited Audited Audited Malaysia Vietnam Cambodia Total Malaysia Vietnam Total Malaysia Vietnam Total Malaysia Vietnam Total Malaysia Vietnam Total RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOORM'OOO RM'OOO RM'OOO RM'OOO Revenue from external customers 117,829 20,366 138,195117,289 15,033 132,322 162,927 21,547 184,474 153,483 18,436 171,919 143,278 16,624 159,902 Segment gross profit 79,451 13,778 93,229 78,084 10,224 88,308 107,417 14,569 121,986 102,962 12,533 115,495 94,971 11,333 106,304 Segment profit 30,253 3,395 (237) 33,411 32,255 2,541 34,796 45,552 3,537 49,089 37,852 2,491 40,343 35,669 1,694 37,363 Included in the measure of segment profit are: Finance income 277 79 356 178 922 1,100 294 983 1,277 206 536 742 182 435 617 Rental expenses (2,208) (452) (4) (2,664) (862) (280) (1,142) (1,308) (321) (1,629) (1,652) (226) (1,878) (1,175) (166) (1,341) Employee related expenses (24,905) (4,309) (8) (29,222) (23,380) (3,424) (26,804) (31,588) (4,437) (36,025) (32,134) (4,201) (36,335) (28,102) (3,302) (31,404) Depreciation and amortisation (13,227) (2,437) (8) (15,672) (13,596) (2,064) (15,660) (18,052) (2,808) (20,860) (18,463) (2,345) (20,808) (18,338) (2,704) (21,042) Finance costs (1 ,230) (420) (1 ,650) (905) (426) (1,331) _(1,215) (594) (1,8~ (2,142) (724) (2,866) (1,946) (740) (2,686) 328 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 55 23. Operating segments (continued) Geographical segments (continued) 1.1.2019 -30.9~2019 1.1.2018 -30.9.2018 1.1.2018 -31.12.2018 1.1.2017 -31.12.2017 1.1.2016 -31.12.2016 Audited Unaudited Audited Audited Audited Malaysia Vietnam Cambodia Total Malaysia Vietnam Total Malaysia Vietnam Total Malaysia Vietnam Total Malaysia Vietnam Total RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOORM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Not included in the measure of segment profit is: Tax expense (7,284) (616) (7,900) (8,033) (503) (8,536) (12,567) (862) (13,429) (9,653) (450) (10,103) (9,565) (302) (9,867) Segment assets 126,451 19,904 905 147,260 121,819 29,269 151 ,088 124,845 18,060 142,905 121,583 26,245 147,828 123,528 27,014 150,542 Included in the measure of segment assets are: Right-of-use assets 19,325 4,272 23,597 14,847 5,459 20,306 17,889 5,870 23,759 20,593 5,015 25,608 23,614 6,487 30,101 Goodwill 50,435 50,435 50,435 50,435 50,435 50,435 50,435 50,435 50,435 50,435 Other intangible asset 1,771 499 268 2,538 870 870 840 840 960 960 1,080 1,080 Segment liabilities (48,499) (10,704) (356) (59,559) (35,432) (23,528) (58,960) (57,061) (11,668) (68,729) (52,910) (9,925) (62,835) (54,869) (11,124) (65,993) Included in the measure of segment liabilities is: Lease liabilities (19,856) (4,601) - (24,457) (14,851) (5,936) (20,787) (17,773) (6,348) (24,121) (21,043) (5,522) (26,565) (24,133) (7,010) (31.143) 329 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 56 23. Operating segments (continued) Geographical segments (continued) Major customers There were no major customers with revenue equal or more than 10% of the Group's total revenue for the financial periods and years under review. Reconciliations of reportable segment revenues, profit or loss, assets and other material items Profit Profit Total Total Revenue before tax after tax assets liabilities RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO 30.9.2019 (Audited) Total reportable segments 138,195 33,411 25,511 147,260 (59,559) Listing-related expenses (2,683) (2,683) Other non-reportable segment (58?} (58?} 1,293 (1,196) Consolidated total 138,195 30,141 22,241 148,553 (60,755) 30.9.2018 (Unaudited) Total reportable segments 132,322 34,796 26,260 151,088 (58,960) Other non-reportable segment (403) (401 ) 117,370 (1,076) Consolidated total 132,322 34,393 25,859 268,458 (60,036) 31.12.2018 (Audited) Total reportable segments 184,474 49,089 35,660 142,905 (68,729) Fair value gain arising from distribution of non-cash assets to owners 10,030 10,030 Real property gain tax 502 Other non-reportable segment (569) (56?} 1,302 (3?} Consolidated total 184,474 58,550 45,625 144,207 (68,766) 31.12.2017 (Audited) Total reportable segments 171,919 40,343 30,240 147,828 (62,835) Other non-reportable segment (6,059) (6,140) 111,272 (1,092) Consolidated total 171,919 34,284 24, roo 259,100 (63,927) 31.12.2016 (Audited) Total reportable segments 159,902 37,363 27,496 150,542 (65,993) Other non-reportable segment (590) (683) 102,517 (2,497) Consolidated total 159,902 36,773 26,813 253,059 (68,490) 330 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 57 24. Financial instruments 24.1 Categories of financial instruments The table below provides an analysis of financial instruments categorised as follows: (a) Amortised cost (HAC"); and (b) Fair value through profit or loss (HFVTPL"). Carrying amount AC FVTPL RM'OOO RM'OOO RM'OOO 30.9.2019 Financial assets Other investments 47 47 Receivables and deposits 9,636 9,636 Cash and cash equivalents 11,686 11,686 21,369 21,369 Financial liabilities Loans and borrowings (5,703) (5,703) Payables and accruals (23,512) (23,512) Lease liabilities (24,457) (24,457) {53,672} {53,672} 31.12.2018 Financial assets Other investments 2,241 2,241 Receivables and deposits 8,179 8,179 Cash and cash equivalents 24,258 24,258 34,678 34,678 Financial liabilities Loans and borrowings (20,505) (20,505) Payables and accruals (15,688) (15,688) Lease liabilities (24,121) (24,121 ) (60,314) (60,314) 331 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 58 24. Financial instruments (continued) 24.1 Categories of financial instruments (continued) Carrying amount AC FVTPL RM'OOO RM'OOO RM'OOO 31.12.2017 Financial assets Other investments 14,554 14,554 Receivables and deposits 119,548 119,548 Cash and cash equivalents 11,472 11,472 145,574 145,574 Financial liabilities Loans and borrowings (10,000) (10,000) Payables and accruals (19,945) (19,945) Lease liabilities {26,565} (26,565} (56,510} (56,510) 31.12.2016 Financial assets Other investments 10,107 3,638 6,469 Receivables and deposits 104,284 · 104,284 Cash and cash equivaJents 17,656 17,656 132,047 125,578 6,469 Financial liabilities Loans and borrowings (12,062) (12,062) Payables and accruals (18,130) (18,130) Lease liabilities {31,143} (31,143} (61,335) (61,335) 24.2 Net gains and (losses) arising from financial instruments 1.1.2019 - 1.1.2018· 1.1.2018 - 1.1.2017 - 1.1.2016 - 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Net (losses )/gains arising on: Finance assets at amortised cost 356 1,100 1,277 742 617 Fair value through profit or loss (6,469) (234) Financial liabilities at amortised cost (1,198) (735) (1,159) (2,147) (1,413) (842) 365 118 (7,874) (1 ,030) 332 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 59 24. Financial instruments (continued) 24.3 Financial risk management The Group has exposure to the following risks from its use of financial instruments: • Cred it risk • Liquidity risk • Market risk 24.4 Credit risk Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group's exposure to credit risk ·arises principally from its receivables from customers and amounts due from its related parties. Receivables Risk management objectives, policies and processes for managing the risk Management has an informal credit policy in place and the exposure to credit risk is monitored by the management on an ongoing basis. At each reporting date, the Group assesses whether any of the trade receivables are credit impaired. The gross carrying amounts of credit impaired trade receivables are written off (either partially or full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables that are written off could still be subject to debt recovery activities. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to creditrisk arising from receivables is represented by the carrying amounts in the statements of financial position. Concentration of credit risk The exposure of credit risk for trade receivables as at the end of the reporting period by geographic region was: 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Malaysia 1,170 1,222 2,153 1,694 Vietnam 1,575 742 327 603 2,745 1,964 2,480 2,297 333 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 60 24. Financial instruments (continued) 24.4 Credit risk (continued) Receivables (continued) Recognition and measurement of impairment loss In managing credit risk of trade receivables, the Group manages its debtors and takes appropriate actions (including but not limited to legal actions) to recover long overdue balances. Generally, the trade receivables of the Group are mainly the outstanding balances held with banks which have low credit risk. The ageing of trade receivables as at the end of reporting period was: Loss Gross allowance Net RM'OOO RM'OOO RM'OOO 30.9.2019 Not past due 2,190 2,190 Past due 1-180 days 555 555 2,745 2,745 31.12.2018 Not past due 901 901 Past due 1-180 days 1,063 1,063 1,964 1,964 31.12.2017 Not past due 1,059 1,059 Past due 1-180 days 1,421 1,421 2,480 2,480 31.12.2016 Not past due 892 892 Past due 1-180 days 1,405 1,405 2,297 2,297 Related parties' balances Risk management objectives, policies and processes for managing the risk The Group provides unsecured advances to companies in which certain Directors of the Company have interests. The Group monitors the results of the companies in which certain Directors of the Company have interests. 334 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 61 24. Financial instruments (continued) 24_4 Credit risk (continued) Related parties' balances (continued) Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. Advances provided are not secured by any collateral or supported by any other credit enhancements. Recognition and measurement of impairment loss Generally, the Group considers advances to the related parties that have low credit risk. The Group assumes that there is a significant increase in credit risk when a related party's financial position deteriorates significantly. The Group considers the advances to be in default when the related parties are not able to pay the advances when demanded. The Group considers the related party's advance to be credit impaired when: • The related party is unlikely to repay its advance to the Group in full; or • The related party is continuously loss making and is having a deficit shareholders' fund. The Group determines the probability of default for the advances individually using internal information available. As at the end of the reporting period, the Group did not recognise any allowance for impairment losses. Financial guarantees Risk management objectives, policies and processes for managing the risk The Group provides financial guarantees to banks in respect of banking facilities granted to a related party and a company in which certain Directors of the Company have financial interest. The Group monitors on an ongoing basis the results of the related parties and repayments made by the related parties. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk as represented by the outstanding banking and credit facilities of the related parties are as follows: 335 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 62 24. Financial instruments (continued) 24.4 Credit risk (continued) Financial guarantees (continued) 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Corporate guarantees for credit facilities granted to a subsidiary 1,000 1,000 1,000 1,000 Corporate guarantees given to a bank for credit facilities granted to a company in which certain Directors of the Company have financial interest 4,697 4,697 Bank guarantees granted to a subsidiary for tenancy agreements 953 953 1,166 1,217 1,953 1,953 6,863 6,914 Recognition and measurement of impairment loss The Group assumes that there is a significant increase in credit risk when a related party's financial position deteriorates significantly. The Group considers a financial guarantee to be credit impaired when: • The related party is unlikely to repay its credit obligation to the bank in full; or • The related party is continuously loss making and is having a deficit shareholders' fund. The Group determines the probability of default of the guaranteed amounts individually using internal information available. . As at the end of the reporting period, there was no indication that any related party would default on repayment. Accordingly, the financial guarantees have not been recognised since the fair value on initial recognition was not material. Cash and cash equivalents The cash and cash equivalents are held with banks and financial institutions. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. These banks and financial institutions have low credit risks. In addition, some of the bank balances are insured by government agencies. Consequently, the Group is of the view that the loss allowance is not material and hence, it is not provided for. 336 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 63 24. Financial instruments (continued) 24.4 Credit risk (continued) Other receivables Credit risks on other receivables mainly arise from deposits paid for leased outlets. These deposits will be received at the end of lease terms of the outlets. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. As at the end of the reporting period, the Group did not recognise any allowance for impairment losses. 24.5 Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group's exposure to liquidity risk arises principally from its various payables, loans and borrowings and lease liabilities. The Group monitors and maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities as and when they fall due. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts. Maturity analysis The table below summarises the maturity profile of the Group's financial liabilities as at the end of the reporting period based on undiscounted contractual payments: 337 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 64 24. Financial instruments (continued) 24.5 Liquidity risk (continued) Maturity analysis Contractual More Carrying interest rate/Contractual Under 1 1 - 2 2-5 than 5 amount coupon cash flow year years years years RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO 30.09.2019 Other borrowings 703 1.22%-4.47% 735 408 327 Revolving credit 5,000 1.60%+ 5,000 5,000 1 month KLiBOR Payables and accruals 23,512 23,512 23,512 Lease liabilities 24,457 4.80%-9.34% 31,989 16,335 10,657 4,997 Corporate guarantees 1,000 1,000 Bank guarantees 953 953 53,672 63,189 47,208 10,984 4,997 31.12.2018 Other borrowings 505 1.22%-4.47% 520 367 153 Revolving credit 20,000 1.60%+ 20,000 20,000 1 month KLIBOR Payables and accruals 15,688 15,688 15,688 Lease liabilities 24,121 5.03%-9.34% 27,839 14,393 8,663 4,783 Corporate guarantees 1,000 1,000 Bank guarantees 953 953 60,314 66,000 52,401 8,816 4,783 31.12.2017 Revolving credit 10,000 1.60% + 10,000 10,000 1 month KLIBOR Payables and accruals 19,945 19,945 19,945 Lease liabilities 26,565 5.03% -9.34% 29,401 16,662 8,271 4,043 425 Corporate guarantees 5,697 5,697 Bank guarantees 1,166 1,166 56,510 66,209 53,470 8,271 4,043 425 31.12.2016 Other borrowings 62 2.44% 63 63 Revolving credit 12,000 1.60%+ 12,000 12,000 1 month KLiBOR Payables and accruals 18,130 18,130 18,130 Lease liabilities 31,143 5.03%-9.34% 35,336 15,767 11,597 6,990 982 Corporate guarantees 5,697 5,697 Bank guarantees 1,217 1,217 61 ,335 72,443 52,874 11,597 6,990 982 338 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 65 24. Financial instruments (continued) 24.6 Market risk Market risk is the risk that changes in market prices, such as interest and foreign exchange rates that will affect the Group's financial position or cash flows. 24.6.1 Interest rate risk The Group's exposure to interest rate risk relates to its loans and borrowings, lease liabilities and interest-earning financial assets from deposits placed with financial institutions. Risk management objectives, policies and processes for managing the risk The management monitors closely the prevailing interest rates at regular intervals and ensures that the Group obtains competitive rates for its banking facilities, interest earning deposits and loans and borrowings. Exposure to interest rate risk The interest rate profile of the Group's significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period were: 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Fixed rate instruments Financial assets Other investments 47 2,241 14,554 3,638 Cash and cash equivalents 434 777 9,605 ------47 _. .... ?,~?~ .. .. J.~l;3.~.1.. ..J ;3."~~~" Financial liabilities Other borrowings (703) (505) (62) Revolving credit (5,000) (20,000) (10,000) (12,000) Lease liabilities (24,457) (24,121) (26,565) {31,143) .. ($.Q! ~.~~·U J.~~.,~?~L . j~.~l?~?..} . .(~;3."~~~)' {30,113) (41,951 ) (21,234) (29,962) Interest rate risk sensitivity analysis Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss. 339 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 66 24. Financial instruments (continued) 24.6 Market risk (continued) 24.6.2 Currency risk The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than its functional currency. The currency giving rise to this risk is primarily Great Britain Pound ("GBP"). Risk management objectives, policies and processes for managing the risk The Group's exposure to foreign currency risk is monitored on an ongoing basis and will use forward exchange contracts to hedge its foreign currency risk when necessary. Forward exchange contracts, if any, would have maturities of less than one year. Where necessary, the forward exchange contracts are rolled over at maturity. The Group's primary exposure to foreign currency (a currency which is other than the functional currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period was: Denominated in 30.9.2019 31.12.2018 31 .12.2017 31.12.2016 GBP GBP GBP GBP RM'OOO RM'OOO RM'OOO RM'OOO Cash and bank balances 951 Trade payables (12,297) (8,577) (11,019) (8,927) Other payables (466) Exposure in the statements of financial position (11,812) (8,577) (11,019) (8,927) Currency risk sensitivity analysis A 10% (2018: 10%,2017: 10%; 2016: 10%) strengthening of the RM against the following currencies at the end of the reporting period would have increased post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular profit rates, remain constant. Profit or loss 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO GBP 898 652 837 678 A 10% (2018: 10%; 2017: 10%; 2016: 10%) weakening of RM against the above currencies at the end of the reporting period would have had an equal but opposite effect on the post-tax profit or loss, on the basis that all other variables remained constant. 340 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 67 24. Financial instruments (continued) 24.7 Fair value information The carrying amounts of short term other investments, cash and cash equivalents, short term receivables, short term borrowings and payables reasonably approximate their fair values due to the relatively short term nature of these financial instruments. The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statements of financial position. Fair value of financial instruments Fair value of financial instruments carried at fair value not carried at fair value Total Carrying Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total fair value amount RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO 30.9.2019 Financial liabilities Other borrowings (703) (703) (703) (703) Revolving credit (5,000) (5,000) (5,000) (5,000) (5,703) (5,703) (5,703) (5,703) 31.12.2018 Financial liabilities Other borrowings (505) (505) (505) (505) Revolving credit (20,000) (20,000) (20,000) (20,000) (20,505) (20,505) (20,505) (20,505) 341 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 68 24. Financial instruments (continued) 24.7 Fair value information (continued) Fair value of financial instruments Fair value of financial instruments carried at fair value not carried at fair value Total Carrying Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total fair value amount RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO 31.12.2017 Financial liabilities Revolving credit (10,000) (10,000) (10,000) (10,000) 31.12.2016 Financial asset Other investments 6,469 6,469 6,469 6,469 Financial liabilities Other borrowings (62) (62) (62) (62) Revolving credit (12,000) (12,000) (12,000) (12,000) (12,062) (12,062) (12,062) (12,062) 342 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 69 24. Financial instruments (continued) 24.7 Fair value information (continued) Policy on transfer between levels The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. Level 1 fair value Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Transfers between Level 1 and Level 2 fair values There has been no transfer between Level 1 and 2 fair values during the financial period (2018, 2017 and 2016: no transfer in either direction). Level 3 fair value The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the key unobservable inputs used in the valuation models. Financial instruments not carried at fair value Type Description of valuation technique and inputs used Other borrowings Discounted cash flows using a rate based on the current and revolving market rate of borrowing at the reporting date. credit The estimated fair value would decrease if the interest rates were higher. 25. Capital management The Group's objectives when managing capital is to maintain a strong capital base and to safeguard the Group's ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. A subsidiary of the Group is required to comply with the following covenants: (i) Maintains a gearing ratio (defined as total external borrowings divided by the sum of tangible net worth, where tangible net worth represents equity attributable to owners of the company less intangibles) not more than 1 time; and (ii) Does not declare or pay dividends in excess of 50% of its profit after tax in any financial year. In respect of (i), the gearing ratios of the subsidiary as at 30 September 2019, 31 December 2018, 31 December 2017 and 31 December 2016 were 0.67 times, 2.38 times, 0.54 times and 0.61 times respectively. The subsidiary exceeded its gearing ratio as at 31 December 2018, and obtained a waiver to comply with the covenant from the bank on 19 March 2019. 343 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 70 25. Capital management (continued) In respect of (ii), the subsidiary declared dividends in excess of 50% of its profit after tax for financial year 2018 and 2017. Waivers have been obtained from the bank on 17 December 2018 and 12 March 2018 respectively. 26. Related parties Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include the Managing Director of the Group. Significant related transactions Related party transactions have been entered into in the normal course of business under negotiated trade terms. The significant related party transactions of the Group are shown below. The balances related to the below transactions are shown in Notes 10 and 17. 1.1.2019 - 1.1.2018 - 1.1.2018 - 1.1.2017 - 1.1.2016 - Note 30.9.2019 30.9.2018 31.12.2018 31.12.2017 31.12.2016 Audited Unaudited Audited Audited Audited RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Companies in which certain Directors of the Company have interests Professional fees a 60 60 Disposal of buildings b 13,520 Rental paid and payable for properties c 371 Key management personnel d Directors' emoluments: - Directors' fees 140 - Directors' remuneration 845 287 382 384 384 985 287 382 384 384 Other emoluments 350 51 68 83 90 1,335 338 450 467 474 344 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 71 26. Related parties (continued) Significant related transactions (continued) Note a From time to time, the Group may provide professional services to an entity in which certain Directors of the Company have interests. These professional services are on the same terms and conditions as those entered into by other customers of the Group. Note b The Group disposed of buildings to an entity in which certain Directors of the Company have interests. The transactions were carried out under normal commercial terms and conditions. Note c The Group entered into rental agreements with an entity in which certain Directors of the Company have interests, for the letting of properties. The rental terms are based on negotiated terms and amounts are receivable or payable on monthly basis for the duration of the agreements. Note d Key management personnel are the Directors of the Group whereby the authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly lies. 27. Acquisition of a subsidiary Year ended 31 December 2018 Acquisition of TBS Vietnam Company Limited In October 2018, the Group acquired the entire issued and paid-up share capital ofTBS Vietnam Company Limited for a total consideration of USD350,OOO which is equivalent to RM1,447,000. The principal activities of the subsidiary are to provide consultancy services and to market products under the franchise of "The Body Shop". The following summarises the recognised amounts of assets acquired and liabilities assumed at the acquisition date: RM'OOO Fair value of consideration transferred 1,447 Identifiable assets acquired and liabilities assumed Property, plant and equipment 462 Inventories 3,914 Trade and other receivables 2,025 Cash and cash equivalents 16,906 Deferred tax assets 9 Trade and other payables (5,050) Total identifiable net assets 18,266 345 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) 72 27. Acquisition of a subsidiary (continued) Year ended 31 December 2018 (continued) RM'OOO Identifiable assets acquired and liabilities assumed (continued) Net assets assumed 18,266 Purchase consideration (1,447) Effect of exchange rate fluctuations on share capital 421 Excess of net assets assumed 17,240 The acquisition of the subsidiary has been accounted for using the pooling-of-interests method of accounting as the acquisition is deemed as a common control transaction. Amounts are restated as if the combination had taken place at the beginning of the earliest comparative period presented. Accordingly, the net cash flow arising from the acquisition of the subsidiary is not presented in the consolidated statements of cash flows on the Group for the year ended 31 December 2018. The difference between the purchase consideration and net assets acquired, amounting to RM17,240,000 has been accounted for as a business combination reserve. The Company distributed dividends totalling RM12,604,000 (see Note 22) to its existing owner in relation to the financial years prior to the acquisition which were offset against the business combination reserve. Accordingly, the business combination reserve has decreased from RM17,240,000 to RM4,636,000 as at 31 December 2018. 28. Investments in subsidiaries Details of the subsidiaries are as follows: Effective ownership interest 30.9.2019 31.12.2018 31.12.2017 31.12.2016 Name of Country of subsidiary incorporation Principal activities % % % % Rampai-Niaga Malaysia Marketing of products 100 100 100 100 Sdn. Bhd.1 under the franchise of "The Body Shop" TBS Vietnam Vietnam Provision of 100 100 100 100 Company consultancy services Limited 2 and marketing of products under the franchise of "The Body Shop" Green Cosmetics Cambodia Marketing of products 100 100 (Cambodia) under the franchise of Company "The Body Shop" Limited3 346 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 73 28. Investments in subsidiaries (continued) Effective ownership interest 30.9.2019 31.12.2018 31.12.201731.12.2016 Name of Country of subsidiary incorporation Principal activities % % % % Hello Natural Malaysia Investment holding 100 Sdn. Bhd . (f.k.a. Ola Natura Sdn . Bhd.)4 Ola Beleza Sdn. Malaysia Marketing of products 100 Bhd. (f.k.a. of "Natura" Natura Beauty Sdn. Bhd.)4 Audited by KPMG PL T for the financial period ended 30 September 2019 and for the financial year ended 31 December 2018. For the purpose of the initial public offering of the Group, the financial information for the financial years ended 31 December 2017 and 2016 have been re-audited by KPMG PL T. 2 Not audited by KPMG PL T for the financial periods ended 30 September 2019 and 30 September 2018, and for the financial years ended 31 December 2018, 31 December 2017 and 31 December 2016. 3 Not audited by KPMG PLT for the financial period ended 30 September 2019 and for the financial year ended 31 December 2018. The subsidiary was incorporated in October 2018. The financial information of the subsidiary was consolidated based on its management accounts for the period ended 30 September 2019. The financial information was insignificant and was not consolidated for the year ended 31 December 2018. 4 Not audited by KPMG PL T for the financial period ended 30 September 2019. Hello Natural Sdn. Bhd. and Ola Beleza Sdn. Bhd. were incorporated in February 2019 and consolidated based on their management accounts for the period ended 30 September 2019. 29. Adjustments to previous years' financial statements The tables below illustrate the effects of the material adjustments against the previous years' audited financial statements. The restated amounts do not take into the consideration the effects arising from the business combination (see Note 27), and accordingly, will not agree directly to this set of financial statements. i) MFRS 15, Revenue from Contracts with Customer Upon adoption of MFRS 15, Revenue from Contracts with Customer, contract liabilities representing the performance obligation arising from unredeemed discounts of eligible members who purchased goods at The Body Shop outlets in West Malaysia, Sabah and Labuan via the "Love Your Body" membership programme which have been retrospectively adjusted for. 347 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 74 29. Adjustments to previous years' financial statements (continued) ii) Intangible assets In the previous financial years, franchise rights were recorded as indefinite useful life intangible assets instead of as finite useful life intangible assets. iii) Provision for restoration costs In the previous financial years, provision for restoration costs was understated in the financial statements. These have been retrospectively adjusted for. iv) Reclassification of deposits In the previous financial years, deposits expected to be realised beyond twelve months were disclosed as current assets in the financial statements. These have been retrospectively adjusted for. v) Other investment Other investment recognised as fair value through profit or loss was understated as at 31 December 2016. This has been retrospectively adjusted for. 348 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 75 29. Adjustments to previous years' financial statements (continued) The effects of the adjustments are disclosed below: As previously Adjustment Adjustment Adjustment Adjustment Adjustment Other As stated* (i) (ii) (iii) (iv) (v) adjustment restated# RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Consolidated statements of financial position as at 31 December 2017 Non-current assets Property, plant and equipment 9,556 138 9,694 Intangible assets 52,991 (1,596) 51,395 Receivables and deposits 4,930 4,930 Current assets Receivables, deposits and prepayments 119,630 (4,930) 114,700 Equity Reserves 184,980 (1,327) (1,880) (1,643) 285 180,415 Liabilities Provision for restoration costs 1,780 1,780 Contract liabilities 1,327 1,327 Consolidated statements of profit or loss and other comprehensive income for the year ended 31 December 2017 Revenue 153,510 (27) 153,483 Other operating expenses (9,825) (120) (192) (959) (11,096) * As stated in the audited financial statements for the year ended 31 December 2017. # As restated in the Accountants' Report before the adoption of MFRS 16, Leases as disclosed in Note 30. 349 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 76 29. Adjustments to previous years' financial statements (continued) The effects of the adjustments are disclosed below: As previously Adjustment Adjustment Adjustment Adjustment Adjustment Other As stated* (i) (ii) (iii) (iv) (v) adjustment restated# RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO Consolidated statements of financial position as at 31 December 2016 Non-current assets Property, plant and equipment 11,198 290 11,488 Intangible assets 52,991 (1,476) 51,515 Other investments 5,510 959 6,469 Receivables and deposits 5,030 5,030 Current assets Receivables, deposits and prepayments 104,138 (5,030) 99,108 Equity Reserves 173,694 (1,300) (1,760) (1,452) 959 285 170,426 Liabilities Provision for restoration costs 1,740 1,740 Contract liabilities 1,300 1,300 Consolidated statements of profit or loss and other comprehensive income for the year ended 31 December 2016 Revenue 143,046 232 143,278 Other operating expenses (5,984) (940) (241 ) 1,214 (5,951 ) .. As stated in the audited financial statements for the year ended 31 December 2017 . # As restated in the Accountants' Report before the adoption of MFRS 16, Leases as disclosed in Note 30. 350 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 77 30. Adoption of M FRS 16, Leases Upon the adoption of MFRS 16, Leases, the Group recognises right-of-use assets representing its right to use the underlying assets, and the lease liabilities representing its obligations to make lease payments. The tables below show the effects of the adoption of IVIFRS 16 to the consolidated financial statements in this accountants' report. The tax effects of the adjustments affecting consolidated statements of profit or loss and other comprehensive income have not been incorporated as it is deemed insignificant. 30.9.2019 As per unaudited Effects Changes management of after the account MFRS16 adoption RM'OOO RM'OOO RM'OOO Consolidated statements of financial position Non-current asset Right-of-use assets 23,597 23,597 Equity Retained earnings 81,187 (854) Translation reserve 335 II (6} Reserves 81,522 (860) Non-current liability Lease liabilities 10,968 10,968 Current liability Lease liabilities 13,489 13,489 Consolidated statements of profit or loss and other comprehensive income Rental expenses (16,292) 13,628 (2,664) Depreciation and amortisation expenses (2,997) (12,675) (15,672) Finance costs (204) (1,446) (1,650) (19,493) (493) (19,986) 351 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 78 30. Adoption of MFRS 16, Leases (continued) 30.9.2018 Unaudited As per unaudited Effects Changes management of after the account MFRS16 adoption RM'OOO RM'OOO RM'OOO Consolidated statements of financial position Non-current asset Right-of-use assets 20,306 20,306 Equity Retained earnings 203,713 (483) Translation reserve 477 II 2 Reserves 204,190 (481 ) Non-current liability Lease liabilities 8,232 8,232 Current liability Lease liabilities 12,555 12,555 Consolidated statements of profit or loss and other comprehensive income Rental expenses (15,410) 14,268 (1,142) Depreciation and amortisation expenses (3,101) (12,559) (15,660) Finance costs (95) (1,236) (1,331) (18,606) 473 (18,133) 352 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 79 30. Adoption of MFRS 16, Leases (continued) 31.12.2018 As Effects Changes previously of after the stated MFRS16 adoption RM'OOO RM'OOO RM'OOO Consolidated statements of financial position Non-current asset Right-of-use assets 23,759 23,759 Equity Retained earnings 68,453 (361 ) Translation reserve 214 (1 ) Reserves 68,667 (362) Non-current liability Lease liabilities 11,290 11,290 Current liability Lease liabilities 12,831 12,831 Consolidated statements of profit or loss and other comprehensive income Rental expenses (20,855) 19,226 (1,629) Depreciation and amortisation expenses (3,926) (16,934) (20,860) Finance costs (112) 11,6971 (1,809) (24,893) 595 (24,298) 353 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) 80 30. Adoption of MFRS 16, Leases (continued) 31.12.2017 As Effects Changes previously of after the stated MFRS 16 adoption RM'OOO RM'OOO RM'OOO Consolidated statements of financial position Non-current asset Right-of-use assets 25,608 25,608 Equity Retained earnings 178,327 (956) Translation reserve 563 {1 } Reserves 178,890 (957) Non-current liability Lease liabilities 11,211 11,211 Current liability Lease liabilities 15,354 15,354 Consolidated statements of profit or loss and other comprehensive income Rental expenses (20,311 ) 18,433 (1,878) Depreciation and amortisation expenses (4,894) (15,914) (20,808) Finance costs (380) (2,486) (2,866) (25,585) 33 (25,552) 354 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) 81 30. Adoption of MFRS 16, Leases (continued) 31.12.2016 As Effects Changes previously of after the stated MFRS16 adoption RM'OOO RM'OOO RM'OOO Consolidated statements of financial position Non-current asset Right-of-use assets 30,101 30,101 Equity Retained earnings 166,260 (989) Translation reserve 2,111 (53} Reserves 168,371 (1,042) Non-current liability Lease liabilities 17,315 17,315 Current liability Lease liabilities 13,828 13,828 Consolidated statements of profit or loss and other comprehensive income Rental expenses (18,005) 16,664 (1,341 ) Depreciation and amortisation expenses (6,211 ) (14,831 ) (21,042) Finance costs (77) (2,609) (2,686) (24,293) (776) (25,069) 31. Capital commitments 30.9.2019 31.12.2018 31.12.2017 31.12.2016 RM'OOO RM'OOO RM'OOO RM'OOO Approved but not contracted for Property, plant and equipment 34,500 36,700 3,136 3,645 32. Comparative figures The nine months comparatives for the consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity, consolidated statements of cash flows and their related explanatory information for the financial period ended 30 September 2018 have not been audited. 355 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cant'd) 82 33. Subsequent event (i) Dividend declaration On 26 November 2019, the Company declared a dividend amounting to RM10 million for the financial year ended 31 December 2019 in cash. The dividends were paid to the entitled shareholders of the Company on 27 December 2019. (ii) Internal restructuring On 15 May 2019, Etheco Sdn Bhd ("Etheco") had entered into a share sale agreement with Dato' Foong Choong Heng ("Dato' Simon") and Datin Cheah Kim Choo ("Datin Mina") to acquire their entire shareholdings in the Company, which is in aggregate the entire issued share capital of the Company of RM2,500,OOO comprising 2,500,000 ordinary shares ("In Nature Acquisition"). The purchase consideration for the InNature Acquisition was based on the consolidated net asset value of the Group as at 31 December 2018 of RM75,803,000. The purchase consideration was satisfied entirely by the issuance of 2,500,000 ordinary shares in Etheco to Dato' Simon and Datin Mina in equal proportion. The InNature Acquisition shares were transferred to Etheco by share transfer forms dated 25 October 2019, and was completed on 13 December 2019 upon the completion of the stamping and registration of the share transfer pursuant to the Companies Act 2016. Further to the InNature Acquisition, the Company issued new ordinary shares to BluPlanet Sdn Bhd, Pelagos Sdn Bhd and Primarium Sdn Bhd (totalling 1,887,552 ordinary shares) in the following proportions of 1,593,400 ordinary shares (36.32%),147,076 ordinary shares (3.35%) and 147,076 ordinary shares (3.35%) respectively at a nominal price of RM1.00 per ordinary share on 20 December 2019. (iii) Subdivision of ordinary shares On 24 December 2019, the Company had carried out a subdivision of the entire issued share capital of RM4,387,552 comprising 4,387,552 ordinary shares into RM4,387,552 comprising 631,807,488 ordinary shares. 356 Registration No.: 199401034915 (32059B-X) 12. ACCOUNTANTS' REPORT (cont'd) KPMGPLT Telephone +60 (3) 7721 3388 (LLP001 0081-LCA & AF 0758) Fax +60 (3) 7721 3399 Chartered A=untants Website www.kpmg.com.my Level 10, KPMG Tower 8, FirstAvenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan, Malaysia The Board of Directors 'nNature Berhad 5, Jalan USJ 1011 c 47620 UEP Subang Jaya Selangor Darul Ehsan Malaysia 10 January 2020 Dear Sirs, Reporting Accountants' opinion on the consolidated financial statements contained in the accountants' report of 'nNature Berhad Opinion We have audited the consolidated financial statements of InNature Berhad (UlnNature" or the "Company") and its subsidiaries (the "Group"), which comprise the consolidated statements of financial position as at 30 Septem ber 2019, 31 December 2018,31 December 2017 and 31 December 2016, and the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the period and years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, as set out on pages 1 to 82. The consolidated financial statements of the Group have been prepared for inclusion in the prospectus of InNature Berhad in connection with the listing of and quotation for the entire issued and paid-up share capital of the Company on the Main Market of Bursa Malaysia Securities Berhad ("Bursa Securities") and for no other purposes. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial positions of the Group as of 30 September 2019, 31 December 2018, 31 December 2017 and 31 December 2016 and of its consolidated financial performances and consolidated cash flows for the period and years then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. 83 KPMG PLT, a I l m~ed liabiftty partnership established under MalayslBll/aw and • member fmn of the KPMG networ1< of indepandant member firms .ffilialed with KPMG International Cooperative rKPMG Inlem.tionar). a Swiss entity. 357 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cont'd) InNature Berhad Accountants' Report on the Consolidated Financial Statements Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Reporting Accountants' Responsibilities for the Audit of the Consolidated Financial Statements section of our reporting accountants' report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ("By-Laws") and the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (UIESBA Code"), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Responsibilities of the Directors for the Consolidated Financial Statements The Directors of the Company are responsible for the preparation of consolidated financial statements of the Group that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements of the Group that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements of the Group, the Directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Reporting Accountants' Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements of the Group as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. 84 358 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) InNature Berhad Accountants' Report on the Consolidated Financial Statements Reporting Accountants' Responsibilities for the Audit of the Consolidated Financial Statements (continued) As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements of the Group, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit 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 internal control of the Group. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. • Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our reporting accountants' report to the related disclosures in the consolidated financial statements of the Group or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements of the Group, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in the internal controls that we identify during our audit. 85 359 Registration No.: 199401034915 (320598-X) 12. ACCOUNTANTS' REPORT (cant'd) InNature Berhad Accountants'Report on the Consolidated Financial Statements Other Reporting Responsibility The comparative information for the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows, and notes to the consolidated financial statements for the financial period ended 30 September 2018 has not been audited. In accordance with paragraph 10.05 of Chapter 10, Part \I Division 1: Equity of the Prospectus Guidelines as issued by the Securities Commission Malaysia, we also report that the significant subsequent event identified by the Group since 30 September 2019, to the date of this report, are as disclosed in Note 33 to the consolidated financial statements. Restriction on Distribution and Use This report has been prepared solely to comply with the Prospectus Guidelines Equity issued by the Securities Commission Malaysia and for inclusion in the prospectus of InNature Berhad in connection with the listing of and quotation for the entire issued and paid-up share capital of the Company on the Main Market of Bursa Securities and should not be relied upon for any other purposes. We do not assume responsibility to any other person for the content of this report. KPMG PLT Foong Mun Kong (LLP0010081-LCA & AF 0758) Approval Number: 02613/12/2020 J Chartered Accountants Chartered Accountant 86 360 Registration No.: 199401034915 (320598-X) 13. ADDITIONAL INFORMATION 13.1 Share capital (i) No Shares will be allotted or issued on the basis of this Prospectus later than 6 months after the date of issue of this Prospectus. (ii) We have only one class of shares in our Company, namely ordinary shares, all of which rank equally with one another. There are no special rights attached to our Shares. (iii) None of our Group's capital is under option, or agreed conditionally or unconditionally to be put under any option as at the date of this Prospectus. (iv) Save as disclosed in this Prospectus, no shares, debentures, warrants, options, convertible securities or uncalled capital of our Company or our Subsidiaries have been issued or are proposed to be issued as fully or partly paid-up, in cash or otherwise than in cash, within 3 years immediately preceding the date of this Prospectus. (v) Other than the 2,000,000 Pink Form Shares reserved for the Eligible Persons as disclosed in Section 2.3.2(ii) of this Prospectus: (a) no person including the Directors or employees of our Group has been or is entitled to be given or has exercised any option to subscribe for any shares or debentures, warrants, options, convertible securities or uncalled capital of our Company or our Subsidiaries; and (b) we do not have any other scheme involving our Directors and employees of our Group, in the share capital of our Company or our Subsidiaries. (vi) As at the date of this Prospectus, we do not have any convertible debt securities. 13.2 Extracts of our Constitution The following provisions are reproduced from our Constitution and are qualified in its entirety by the provisions of our Constitution and by applicable law. Terms defined in our Constitution shall have the same meaning when used below unless they are otherwise defined or the context otherwise requires. (i) Transfer of securities Clause 37 Subject to this Constitution, there shall be no restriction on the transfer of fully paid -up shares except where required by law. The transfer of any securities or class of securities of the Company shall be by way of book entry by the Bursa Depository in accordance with the Rules of the Bursa Depository and notwithstanding sections 105, 106 or 110 of the Act but subject to section 148(2) of the Act and any exemption that may be made from the compliance with section 148(1) of the Act, the Company shall be precluded from registering and effecting any transfer of securities. 361 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cont'd) (ii) Remuneration of Directors Clause 101 (1) The fees of the Directors and any benefits payable to the Directors shall from time to time be determined by the Company in Meeting of Members. Such fees and any benefits payable to the Directors shall be subject to annual approval at annual general meeting and shall not be increased except pursuant to a resolution passed at a Meeting of Members where notice of the proposed increase shall have been given in the notice convening the meeting. Such fees shall, so far as a Director who is not an executive Director is concerned, be by way of a fixed sum and not by way of a commission on or percentage of profit or turnover. The fees of the Directors shall be divisible among the Directors in such proportions and manner as they may agree (or failing agreement, equally). (2) Salaries and other remuneration including benefits payable to executive Directors pursuant to a contract of service need not be determined by the Company in Meetings of Members and it may not include a commission on or a percentage of turnover. In this Clause, the expression "executive director" shall mean and include a managing director. Clause 103 (1) If by arrangement with the Directors, any Director may perform or render any special duties outside his ordinary duties as a Director in particular without limiting to the generality of the foregoing and if any Director being willing shall be called upon to petiorm extra services or to make any special arrangements in going or residing away from his country of domicile or residence for any of the purposes of the Company or in giving special attention to the business of the Company as a member of a committee of Directors, the Company may pay him special remuneration, in addition to his Director's fees, and such special remuneration may be by way of a fixed sum, or otherwise as may be arranged provided that the special remuneration payable to non-executive Director shall not by way of a commission on or percentage of profits or turnover. (2) Any Director may act by himself or his firm in a professional capacity for the Company and he and his firm shall be entitled to remuneration for his or his firm's professional services as if he was not a Director, provided that nothing herein contained shall authorise a Director or his firm to act as auditor of the Company and provided further that such shall be at normal commercial terms. Clause 132 A Director of the Company may be or become a director or other officer of or otherwise interested in any corporation promoted by the Company or in which the Company may be interested as shareholder or otherwise and no such Director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of or from his interest in such corporation unless the Company otherwise directs at the time of his appointment. 362 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cont'd) (iii) Voting and borrowing powers of Directors Clause 118 The Directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit and determine the quorum necessary for the transaction of business. Unless otherwise determined three (3) shall form a quorum. Clause 120 Questions arising at any meeting shall be decided by a majority of votes, each Director having one (1) vote. For the avoidance of doubt, in case of an equality of votes the Chairman shall not have a second or casting vote. Clause 123 A Director may at any time summon a meeting of the Directors, and the Secretary, upon the request of the Chairman or anyone (1) Director, shall convene a meeting of the Directors. Clause 129 A Director who is in any way, whether directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of this interest in accordance with the provisions of the Act. A Director shall not vote in respect of any contract or proposed contract or arrangement in which he has directly or indirectly, an interest, and if he does so vote, his vote shall not be counted. Clause 131 A Director notwithstanding his interest may be counted in the quorum present at any meeting whereat he or any other Director is appointed to hold any executive office or other office or place of profit under the Company or whereat the Directors resolve to exercise any of the rights of the Company (whether by the exercise of voting rights or otherwise) to appoint or concur in the appointment of a Director to hold any office or place of profit under any other company or whereat the terms of any such appointment are considered and he may vote on any such matter other than in respect of his own appointment or the arrangement of the terms thereof. Clause 133 All acts bona fide done by any meeting of Directors, or of a committee of Directors, or by any person acting as a Director, shall notwithstanding it be afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified be as valid as if every such person had been fully appointed and was qualified to be a Director. 363 Registration No.: 199401034915 (320598-X) 13. ADDITIONAL INFORMATION (cont'd) Clause 140 (1) Subject to (2) below, the Directors may from time to time at their discretion exercise all the powers of the Company to raise or borrow for the purpose of the Company such sums of money as they think proper and may also raise or secure the payment of such money in such manner and upon such terms and conditions in all respects as they think fit, and in particular by the issue of debentures or debenture stock of the Company, charged upon all or any part of the property of the Company (both present and future) including uncalled capital, or by means of charges, mortgage, bonds and dispositions in security or bonds or cash deposit, with or without power of sale, and upon such other terms and conditions as the Directors shall think fit. The directors may exercise all the powers of the Company to guarantee and give guarantees or indemnities for the payment of money, the performance of contracts or obligations or for the benefit or interest of the Company or its subsidiaries. (2) The Directors shall not borrow any money or mortgage or charge any of the Company or subsidiaries' undertaking, property, or any uncalled capital, or to issue debentures and other securities whether outright or as security for any debt, liability or obligation of an unrelated third party unless is permitted by the Listing Requirements. (3) Debentures, debenture stock or other securities may be made assignable free from any equities between the Company and the person to whom the same may be issued. (4) If the Directors or any of them, or any other persons, shall become personally liable for the payment of any sum primarily due from the Company, the Directors may execute or cause to be executed any mortgage, charge or security over or affecting the whole or any part of the assets of the Company by way of indemnity to secure the Directors or persons so becoming liable as aforesaid from any loss in respect of such liability. (iv) Changes in capital and variation of class rights Clause 6 Without prejudice to any special rights previously conferred on the holder of any share or class of shares for the time being issued, and subject to the provisions of the Act and to this Constitution and to the provisions of any resolution of the Company, the shares in the Company shall be under the control of the Directors who may issue, allot, place under option or otherwise deal with or dispose of them to such persons on such terms and conditions with such preferred, deferred or other special rights or such restrictions whether in regard to dividend, voting or return of capital and at such time or times as they think fit. Provided that: (a) The Company shall not issue shares so as to transfer a controlling interest in the Company without the prior approval of the Members duly signified at a Meeting of Members called for that purpose. (b) Every issue of shares pursuant to a share option granted to employees and/or Directors shall be approved by Members in Meetings of Members and such approval shall specifically detail the amount of shares or options to be issued to each Director. (c) The rights attaching to shares of a class other than ordinary shares shall be expressed in the resolution creating the same. 364 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cont'd) (d) The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not unless otherwise expressly provided by the terms of the issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith but in no respect in priority thereto. Clause 11 The Company must ensure that all new issues of Securities for which listing is sought are made by way of crediting the Securities Accounts of the Allottees with such Securities save and except where it is specifically exempted from compliance with Section 38 of the Securities Industry (Central Depositories) Act, 1991, in which event it shall so similarly be exempted from compliance with this requirement. Forthis purpose, the Company must notify the Bursa Depository of the names of the Allottees and all such particulars required by the Bursa Depository, to enable the Bursa Depository to make the appropriate entries in the Securities Accounts of such Allottees. Clause 52 (1) The Company may from time to time by ordinary resolution: (a) consolidate and divide all or any part of its share capital, the proportion between the amount paid and the amount, if any, unpaid on each subdivided share shall be the same as it was in the case of the share from which the subdivided share is derived; or (b) sub-divide its shares or any of the shares, whatever is in the subdivision, the proportion between the amount paid and the amount, if any, unpaid on each subdivided share shall be the same as it was in the case of the share from which the subdivided share is derived. (2) Anything done in pursuance of this Clause shall be done in the manner provided by and subject to any conditions imposed by the Act or so far as the Act shall not be applicable then in accordance with the terms of the resolution authorising the same or so far as such resolution shall not be applicable then in such manner as the Directors deem most expedient. Clause 53 Subject to this Constitution, the new shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as the Meetings of Members resolving upon the creation thereof shall direct and, in default of such direction, as the Directors may determine and in particular such shares may be issued with a preferential or qualified right to dividends and in the distribution of assets of the Company and with a special or without any right of voting. Clause 54 Except so far as otherwise provided by the conditions of issue or by this Constitution any capital raised by the issuance and allotment of new shares shall be considered part of the original share capital of the Company and shall be subject to the provisions herein contained with reference to the payment of calls and instalments, transfer and transmission, forfeiture, lien, surrender, voting and otherwise. 365 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cant'd) Clause 57 The Company may by special resolution reduce its share capital in any manner and with, and subject to, any authorisation and consent required by law. Clause 58 If at any time the share capital is divided into different classes of shares, the rights attached to shares in a class of shares of the Company may only be varied with the consent of shareholders in that class given in accordance with the provisions in the Act. Clause 72 No business shall be transacted at any Meeting of Members unless the quorum is present at the commencement of the business. Save as herein otherwise provided, two (2) Members personally present shall form a quorum. For the purposes of this Clause, "Member" includes a person attending by proxy or represented by attorney (or in the case of corporations which are Members, present by their representatives appointed pursuant to the provisions of this Constitution and entitled to vote). Clause 87 Where the capital of the Company consists of shares of different monetary denominations, voting rights shall be prescribed in such manner that a unit of capital in each class, when reduced to a common denominator, shall carry the same voting power when such right is exercisable. 13.3 Limitation on the right to own securities and/or exercise voting rights As our Shares are proposed for quotation on the Official List, such Shares must be prescribed as shares required to be deposited with Bursa Depository. Upon such prescription, a holder of our Shares must deposit his Shares with Bursa Depository on or before the date fixed, failing which our share registrar will be required to transfer his Shares to the Minister of Finance and such Shares may not be traded on Bursa Securities. Dealing in our Shares deposited with Bursa Depository may only be effected by a person having a securities account with Bursa Depository ("Depositor") by means of entries in the securities account of that Depositor. A Depositor whose name appears in the Record of Depositors maintained by Bursa Depository in respect of our Shares shall be deemed to be our shareholder and shall be entitled to all rights, benefits, powers and privileges and be subject to all liabilities, duties and obligations in respect of, or arising from, such Shares. Save for Clause 89 which has been reproduced below from our Constitution, there is no limitation on the right to own securities of our Company including limitation on the right of non residents or foreign shareholders to hold or exercise their voting rights on the securities of our Company imposed by law or by our Constitution: Clause 89 No Member shall be entitled to be present or to vote on any question either personally or otherwise in respect of any shares upon which calls are due and unpaid. 366 Registration No. : 199401034915 (320598-X) 13. ADDITIONAL INFORMATION (cont'd) 13.4 Repatriation of capital, remittance of profit and taxation (i) Vietnam There are no restrictions on the repatriation of capital and the remittance of profits by TBS Vietnam so long as all financial obligations owed to the government of Vietnam have been satisfied. There are no withholding taxes or remittance taxes imposed on profits paid by TBS Vietnam to InNature as foreign corporate shareholder. TBS Vietnam is permitted to use revenue in VND from its direct investment in Vietnam to buy foreign currency and to remit it overseas. (ii) Cambodia The Law on Foreign Exchange (No. CS/RKM/0897/03 dated 22 August 1997) governs foreign exchange operations in Cambodia. Such law imposes no restrictions on foreign exchange operations through book entries including purchases and sales of foreign exchange on the foreign exchange market, transfers, all kinds of international settlements, and capital flows in foreign or domestic currency between Cambodia and other countries or between residents and non-residents. This includes remittances of dividends in foreign currency to their foreign shareholders overseas and repatriation of fund or investment back to home country provided that all relevant applicable taxes are cleared first. However, Cambodian law requires that such operations to be undertaken only through authorised intermediaries, which are banks permanently established and licensed in Cambodia; and a prior declaration be made to the National Bank of Cambodia for any investment of an amount equalling or exceeding USD1 00,000 made abroad by a Cambodian resident. There is no restriction on Green Cosmetics, after paying necessary withholding taxes at a rate of 14% for the remittance of dividends and interest payment to InNature so long as such remittance is performed only through authorised intermediaries as mentioned above. 13.5 Material contracts Save as disclosed below, we have not entered into any material contracts not being contracts in the ordinary course of business, within the FYE 2016, FYE 2017, FYE 2018, FPE 2019, and for the period of 1 October 2019 up to the date of this Prospectus: Our Company and our Malaysian Subsidiaries (i) A share sale agreement dated 24 September 2018 ("Share Sale Agreement") entered into between our Company and Feliz Natur for our Company to acquire the entire charter capital of TBS Vietnam from Feliz Natur for a purchase consideration of USD3S0,000 (equivalent to VNDS.6 billion or RM1,447,000) satisfied in cash. The Share Sale Agreement was completed on 24 September 2018. (ii) 6 sale and purchase agreements each dated 26 December 2018 ("SPAs") entered into between Rampai-Niaga as the seller and Steady Property as the buyer for the transfer of the following properties by Rampai-Niaga to Steady Property pursuant to the Internal Restructuring Exercise as set out below: Consideration No. Purchaser Details of property in cash (RM) (1) Steady Property A unit of commercial retail lot known as Lot No. 950,000 LG 20J, Lower Ground Floor, Subang Parade, erected on the Master Title HS(D) 2227, Lot No. PT 9120, Lot 014193, Mukim Damansara, Daerah Petaling , Negeri Selangor Darul Ehsan 367 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cant'd) Consideration No. Purchaser Details of property in cash (RM) (2) Steady Property A unit of commercial shoplot known as Parcel No. 1,160,000 Lot No. G41, Ground Floor, Mahkota Parade, erected on Master Title Plot Perdagangan 1, being part of PN 6528, Lot No.2, and Plot Perdagangan 5, being part of PN 6517 Lot No.4, both in Bandar XLII (42), Daerah Melaka Tengah, Negeri Melaka (3) Steady Property A unit of commercial shoplot known as LG03A, 1,250,000 Summit City, erected on the Master Title HS(D) 59989 PT 12201 and HS(D) 59990 PT 12202, both in Mukim Damansara, Daerah Petaling, Negeri Selangor Darul Ehsan (4) Steady Property Unit 44, Ground Floor, Central Square Complex, 360,000 Sungai Petani, Kedah held under Strata Title No. Hakmilik Strata G 145068/M1/1/0000044, No. Bangunan M1, No. Tingkat 1, No. Petak 0000044, Lot 134, Seksyen 56, Bandar Sungai Petani, Daerah Kuala Muda, Negeri Kedah Darul Aman (5) Steady Property A 3-storey shop office known as No.3, USJ 4,900,000 1011 C, 47620 UEP Subang Jaya, Selangor held under the individual title no. Geran 285215 Lot 37212, Pekan Subang Jaya, Daerah Petaling, Negeri Selangor Darul Ehsan (6) Steady Property A 3-storey shop office known as No.5, USJ 4,900,000 1011 C, 47620 UEP Subang Jaya, Selangor held under the individual title no. Geran 285214, Lot 37211, Pekan Subang Jaya, Daerah Petaling, Negeri Selangor Darul Ehsan The beneficial ownership of the 6 properties above had been transferred to Steady Property with effect on 31 December 2018. As at the LPD, the formal registration of the property transfers in relation to items (5) and (6) above have been completed whilst the formal registration of the property transfers for the rest of the properties are pending completion. (iii) the Natura MOU and the Natura Supply Agreement. Please refer to Section 5.15.4 of this Prospectus for further details and salient terms of the Natura MOU and the Natura Supply Agreement; and (iv) the Retail Underwriting Agreement. 368 Registration No. : 199401034915 (320598-X) 13. ADDITIONAL INFORMATION (cant'd) Vietnamese Subsidiary (v) the Master Agency Agreement in relation to our business agency arrangement in Vietnam set out in Section 5.3.4.1 (ii) of this Prospectus further detailed below. In Vietnam, we have established a business agency arrangement with one of our employees, Ms. Nga through her locally incorporated company, GC Vietnam, to accelerate the process of opening new points-of-sale. As at the LPD, there are 14 outlets, included in our total points-of-sale for Vietnam, for which GC Vietnam acts as our agent. For the FYE 2018, the revenue contribution of these outlets under this business agency arrangement was Vt\ID 10.5 billion (approximately RM1 .9 million), approXimately 1.0% of our Group's total revenue for the FYE 2018. For the FPE 2019, the revenue contribution of such outlets was VND 22.9 billion (approximately RM4.1 million), approximately 3.0% of our Group's total revenue for the FPE 2019. GC Vietnam, as our agent, retails TBS products that it purchases from TBS Vietnam and receives an agent commission pursuant to TBS Vietnam's Master Agency Agreement with GC Vietnam. The Master Agency Agreement is dated 1 October 2016 (supplemented by appendices dated 1 October 2016,30 August 2017,31 December 2017, 20 March 2018, 25 March 2018, 15 November 2018, 10 December 2018, 10 April 2019, 10 May 2019, 21 May 2019,24 May 2019,10 July 2019, 15 July 2019, 16 July 2019,2 August 2019,27 August2019 and 12 September 2019, ) ("Master Agency Agreement"). Under the Master Agency Agreement, GC Vietnam retails TBS products to the customers at its retail outlets at the price as determined by TBS Vietnam. The tenure, termination events and the consideration under the Master Agency Agreement are as follows: • Tenure of master agency: 1 October 2016 to any time upon occurring of a termination event pursuant to the Master Agency Agreement ("Agency Period"). • Termination: The Master Agency Agreement may terminate among others if: (a) the termination is for compliance with regulations of the prevailing laws; (b) either party commits a material breach and fails to remedy such breach within 30 days from the date of receipt of the written default notice from the party not in breach; (c) either party becomes insolvent or subject to dissolution, liquidation or bankruptcy proceedings; (d) either party fails to resume the performance of any of its material obligations under the Master Agency Agreement within 7 days after the date of termination of force majeure event; (e) the Master Agency Agreement is terminated upon the expiry of a 45 days prior written notice sent by either party to the other in respect of termination ; or (f) the termination is mutually agreed in writing by the parties. 369 Registration No.: 199401034915 (320598-X) 13. ADDITIONAL INFORMATION (cont'd) • Agent Commission: From time to time within the Agency Period, TBS Vietnam and GC Vietnam will enter into supplemental appendices for each retail outlet that GC Vietnam acts as agent for TBS Vietnam to agree on the agency tenure as well as the agency commission for the particular retail outlet. The agency commission payable is based on a fixed monthly commission sum and a percentage of monthly turnover of the retail outlet. (vi) the Master Trust Agreement, Buy-back Agreement, Convertible Loan Agreement, Trilateral Agreement and Master Management Agreement (as defined below) entered into to secure the principal-agent relationship between TBS Vietnam and GC Vietnam. Given the role of GC Vietnam as TBS Vietnam's agent and in order for TBS Vietnam as franchisee ofTBSI to ensure that it has control overthe sale ofTBS products through GC Vietnam, the following agreements, in addition to the Master Agency Agreement set out in item (vi) above, were signed between TBS Vietnam, Ms. Nga and/or GC Vietnam to protect TBS Vietnam and secure the principal-agent relationship between TBS Vietnam and GC Vietnam, including: (a) trust agreements which provide that Ms. Nga sets up GC Vietnam and retail outlets, manages the retail business engaged by GC Vietnam and manages the retail outlet chains pursuant to directions from TBS Vietnam; (b) a buy-back agreement which allows TBS Vietnam to buyout GC Vietnam under circumstances such as Ms. Nga and/or GC Vietnam violates the mutual agreements on the principal-agent relationship; (c) a convertible loan agreement under which TBS Vietnam will finance GC Vietnam and the retail business engaged by GC Vietnam; and the loan can be converted to capital owned by TBS Vietnam subject to terms and conditions provided therein; and (d) a management agreement which allows TBS Vietnam to exclusively and comprehensively supeNise GC Vietnam and the retail outlets. Further details of the agreements entered into are as set out below: Parties Agreement Tenure and Consideration TBS Trust agreement dated • Tenure of master trust: 6 September 2013 to 31 Vietnam 6 September 2013 August 2018 and extended to 31 August 2023 (Trustor) (supplemented by ("Trust Period"). and Ms. appendices dated 1 Nga January 2016, 30. Termination: The Master Trust Agreement may (Trustee) August 2018 and 24 be terminated among others if: May 2019) ("Master Trust Agreement"), to (a) TBS Vietnam sends a written set up GC Vietnam and termination notice to Ms. Nga at least TBS retail outlets in 30 days prior to the proposed Vietnam, manage the termination date; retail business engaged by GC Vietnam and (b) Upon the expiry of a 45 days prior manage the retail outlet written notice, sent by either party to chains pursuant to the other, in respect of the termination directions from TBS of either the (i) Convertible Loan Vietnam. Agreement; (ii) Management Agreement; (iii) Master Agency Agreement; or (iv) the labour contract between TBS Vietnam and Ms. Nga; 370 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cant'd) Parties Agreement Tenure and Consideration (c) either party commits a breach under the Master Trust Agreement capable of remedy and fails to remedy such breach within 30 days from the receipt of the written remedy notice from the party not in breach; or (d) the termination is mutually agreed by the parties. • Trust service fee: A net yearly fee of VND64 million under the Master Trust Agreement. In addition, from time to time within the Trust Period, TBS Vietnam and Ms. Nga will enter into separate trust agreements for each particular retail outlet that GC Vietnam acts as agent for TBS Vietnam, to record the mutual understanding for Ms . Nga to act as head of the retail outlet and agree on the trust period and trust service fee for the particular retail outlet. The trust service fee payable is usually a net yearly fee based on a percentage of the particular outlet's yearly turnover subject to a cap of VND60.0 million per year. As at the LPD, TBS Vietnam has entered into 14 separate trust agreements with Ms. Nga, dated 30 August 2017, 28 April 2018, 20 November 2018,20 December 2018,20 April 2019, 10 May 2019, 21 May 2019, 24 May 2019, 10 _Iuly 2019, 15 July 2019, 16 July 2019, 2 August 2019, 27 August 2019 and 12 September 2019, in relation to the 14 outlets for which GC Vietnam acts as our agent. TBS Buy-Back Agreement • Tenure: From 19 September 2013 with no expiry Vietnam and dated 19 September date. Ms. Nga 2013 ("Buy-Back Agreement") which • Termination: There are no termination allows TBS Vietnam to conditions under the Buy-Back Agreement. buyout GC Vietnam under circumstances • Consideration: None. such as Ms. Nga and/or GC Vietnam violates the mutual agreements on the principal-agent relationship. 371 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cont'd) Parties Agreement Tenure and Consideration TBS Convertible loan • Tenure: 19 September 2013 to 31 August 2018 Vietnam agreement dated 19 and extended to 31 August 2023. (Lender) September 2013 and GC (supplemented by • Termination: The Convertible Loan Agreement Vietnam annexes dated 20 may be terminated among others if: (Borrower) September 2013 and 30 August 2018) (a) TBS Vietnam sends a written ("Convertible Loan termination notice to GC Vietnam at Agreement") under least 45 days prior to the proposed which TBS Vietnam will termination date; finance GC Vietnam and the retail business (b) Upon expiry of the tenure or its engaged by GC renewal; Vietnam; and the Joan can be converted to (c) The loan is lawfully converted to equity capital owned by TBS ofTBS Vietnam, or its designee, in GC Vietnam subject to Vietnam; and TBS Vietnam, or its terms and conditions designee, is lawfully registered as the provided in the owner of GC Vietnam; Convertible Loan Agreement. (d) GC Vietnam breaches a condition under the Convertible Loan Agreement and fails to remedy such breach within 30 days from the receipt of the written remedy notice from TBS Vietnam; (e) Any party becomes insolvent or is subject to dissolution, liquidation or bankruptcy proceedings; (f) Upon expiry of a 45 days prior written notice sent by a party of the Master Trust Agreement, Master Management Agreement and Master Agency Agreement to the other to terminate the Master Trust Agreement, Master Management Agreement and Master Agency Agreement; (g) The other party fails to resume its performance of obligations which is prevented by force majeure event within 7 days as from the termination of the same; or (h) The termination is mutually agreed by the parties . • Interest rate: 5.0% of total loan amount which is paid annually. • Credit limit: Up to VND1 ,305 million, but can be increased upon demand of GC Vietnam and agreement between GC Vietnam and TBS Vietnam. As at the LPD, there are no outstanding loan sums under this agreement. 372 Registration No.: 199401034915 (320598-X) 13. ADDITIONAL INFORMATION (cant'd) Parties Agreement Tenure and Consideration TBS Trilateral Agreement • Tenure: 13 September 2016 to 31 August 2018 Vietnam, dated 13 September and extended to 31 August 2023. GC Vietnam 2016 (supplemented by and Ms. Nga annexure dated 14 • Termination: The Trilateral Agreement will be September 2016) terminated upon expiration of the tenure without ("Trilateral renewal. There are no termination conditions Agreement") under under the Trilateral Agreement. which TBS Vietnam assigns a part of a loan • Consideration: None. which had been granted to GC Vietnam under the Convertible Loan Agreement to Ms. Nga; and Ms. Nga shall convert such assigned loan into her contributed capital in GC Vietnam . TBS Management • Tenure of master management: 1 October 2016 Vietnam agreement dated 1 to any time upon occurring of a termination event (Manager) October 2016 pursuant to the Master Management Agreement and GC (supplemented by ("Management Period") and renewable with 1 Vietnam appendices dated 1 month's prior written notice by either party October 2016, 30 subject to mutual agreement. August 2017,20 March 2018, 25 March 2018, • Termination: The Master Management 15 November 2018, 10 Agreement may terminate among others if: December 2018, 10 April 2019, 10 May (a) either party commits a material breach 2019, 21 May 2019, 24 and fails to remedy such breach within May 2019, 10 July 2019, 30 days from the date of receipt of the 15 July 2019, 16 July default notice from the party not in 2019, 2 August 2019, breach; 27 August 2019 and 12 September 2019,) (b) either party becomes insolvent or is ("Master Management subject to dissolution, liquidation or Agreement") which bankruptcy proceedings; allow TBS Vietnam to exclusively and (c) either party fails to resume the comprehensively performance of any of its material manage and operate obligations under the Master GC Vietnam and the Management Agreement within 7 days retail outlets. after the date of termination of the force majeure event; (d) upon the expiry of a 45 days prior written notice, sent by either party to the other, in respect of the termination; or (e) the termination is mutually agreed by the parties. • Management fee: From time to time within the Management Period, TBS Vietnam and GC Vietnam will enter into supplemental appendices for each retail outlet that GC Vietnam acts as agent for TBS Vietnam, to agree on the management period as well as the management fee for the particular retail outlet. The management fee payable is usually based on a percentage of the particular outlet's turnover subject to a cap of VND60.0 million a year per outlet. 373 Registration No.: 199401034915 (320598-X) 13. ADDITIONAL INFORMATION (cant'd) Our legal counsel for Vietnamese laws has opined that: (i) The principal-agency arrangement (arising from the Master Agency Agreement) is legal and recognised under the Law on Commerce No. 36/2005/QH 11 of Vietnam. Also, the prevailing laws do not prohibit the principal and the agent to execute other agreements (including the trust agreements, management agreement, buy-back agreement, and convertible loan agreement such as set out above) to protect the legitimate rights of the principal. (ii) GC Vietnam is not considered a subsidiary of TBS Vietnam given that, in Vietnam: (a) the parent company-subsidiaries relationship is ascertained mainly based upon the ownership of shares and shares of capital contribution; (b) GC Vietnam and TBS Vietnam do not have any relations with each other through ownership of shares and shares of capital contribution as: • GC Vietnam has been solely owned by Ms. Nga from the date of its establishment; • TBS Vietnam does not own the charter capital of GC Vietnam; and • TBS Vietnam has not enforced its rights under the Buy-Back Agreement and the Convertible Loan Agreement as a result of which it will become an owner of GC Vietnam; (c) the right to make decisions on the appointment of the director of GC Vietnam belongs to its chairman under the Law on Enterprises (who can be either the individual owner of the company or another individual appointed by the owner of the company); TBS Vietnam is not assigned with this right under the agreements with GC Vietnam set out above and the charter of GC Vietnam; and (d) the right to make decisions on any amendment and addition to the charter of the GC Vietnam belongs to its owner under the Law on Enterprises and the charter of GC Vietnam; TBS Vietnam is not assigned with this right under the agreements with GC Vietnam set out above and the charter of GC Vietnam. 13.6 Material litigation As at the LPD, our Group is not engaged in any litigation or arbitration, either as plaintiff or defendant, which has a material effect on the financial position of our Group, and our Directors have no knowledge of any proceedings, pending or threatened, or of any fact likely to give rise to any proceedings which may materially and adversely affect the business or financial position of our Group. 374 Registration No.: 199401034915 (320598-X) 13. ADDITIONAL INFORMATION (cont'd) 13.7 Public take-overs None of the following has occurred during the last financial year up to the LPD: (i) public take-over offers by third parties in respect of our Shares; and (ii) public take-over offers by us in respect of other company's shares. 13.8 Consents (i) The written consents of the Principal Adviser, Managing Underwriter, Joint Underwriters, Sole Bookrunner, Company Secretaries, Solicitors to our Company, Solicitors to the Managing Underwriter, Joint Underwriters and Sole Bookrunner, Issuing House, and Share Registrar, for the inclusion in this Prospectus of their names and all references in the form and context in which such names appear have been given before the issue of this Prospectus, and have not subsequently been withdrawn. (ii) The written consent of KPMG PL T, the Auditors and Reporting Accountants for the inclusion in this Prospectus of its name, Accountants' Report and Reporting Accountants' Letter on the Pro Forma Consolidated Statements of Financial Position as at 30 September 2019 and all references thereto in the form and context in which they are contained in this Prospectus have been given before the issue of this Prospectus, and has not subsequently been withdrawn. (iii) The written consent of Frost & Sullivan GIC Malaysia Sdn Bhd, the Independent Market Research Consultants for the inclusion in this Prospectus of its name, the IMR Report and all references thereto in the form and context in which they are contained in this Prospectus has been given before the issue of this Prospectus, and has not subsequently been withdrawn. (iv) The written consents of RHTLaw Vietnam (formerly known as RHTLaw Taylor Wessing Vietnam) and R&T Sok & Heng Law Office for the inclusion in this Prospectus of their respective names and their legal opinions and all references thereto in the form and context in which such names appear have been given before the issue of this Prospectus, and have not subsequently been withdrawn. 13.9 Documents available for inspection Copies of the following documents may be inspected at our registered office at 802, 8th Floor, Block C Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia during office hours for a period of 6 months from the date of this Prospectus: (I) our Constitution; (ii) commercial contracts which our Group is materially dependent on and our material contracts referred to in Section 5.15 and Section 13.5 of this Prospectus, respectively; (iii) our audited consolidated financial statements for the FYE 2018 and FPE 2019; (iv) the audited financial statements of Rampai-Niaga for the FYE 2018 and TBS Vietnam for the past 3 FYEs 2016 to 2018; (v) the Reporting Accountants' Letter on the Pro Forma Consolidated Statements of Financial Position as included in Section 11.11 of this Prospectus; (vi) the Accountants' Report as included in Section 12 of this Prospectus; 375 Registration No.: 199401034915 (32059B-X) 13. ADDITIONAL INFORMATION (cont'd) (vii) the 1M R Report as included in Section 6 of this Prospectus; and (viii) the letters of consent referred to in Section 13.8 of this Prospectus. 13.10 Responsibility statements (i) Our Directors, the Promoters and Selling Shareholder have seen and approved this Prospectus, and they collectively and individually accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, after having made all reasonable enquiries, that to the best of their knowledge and belief, there are no false or misleading statements or other facts, if omitted, which would make any statement in this Prospectus false or misleading. (ii) eIMB, being the Principal Adviser, Managing Underwriter, Joint Underwriter, and Sole Bookrunner acknowledges that, based on all available information, and to the best of its knowledge and belief, this Prospectus constitutes a full and true disclosure of all material facts concerning our IPO. (The rest of this page is intentionally left blank) 376 Registration No.: 199401034915 (320598-X) 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE THIS SUMMARY OF PROCEDURES FOR APPLICATION AND ACCEPTANCE DOES NOT CONTAIN THE DETAILED PROCEDURES AND FULL TERMS AND CONDITIONS AND YOU CANNOT RELY ON THIS SUMMARY FOR PURPOSES OF ANY APPLICATION FOR OUR IPO SHARES. YOU MUST REFER TO THE DETAILED PROCEDURES AND TERMS AND CONDITIONS AS SET OUT IN THE "DETAILED PROCEDURES FOR APPLICATION AND ACCEPTANCE" ACCOMPANYING THE ELECTRONIC COPY OF OUR PROSPECTUS ON THE WEBSITE OF BURSA SECURITIES. YOU SHOULD ALSO CONTACT THE ISSUING HOUSE FOR FURTHER ENQUIRIES. Unless otherwise defined, all words and expressions used here shall carry the same meaning as ascribed to them in this Prospectus. Unless the context otherwise requires, words used in the singular include the plural, and vice versa. 14.1 Opening and closing of application OPENING OF THE RETAIL OFFERING: 10.00 A.M., 29 January 2020 CLOSING OF THE RETAIL OFFERING: 5.00 P.M., 6 February 2020 Applications for the IPO Shares offered under the Retail Offering will open and close at the time and dates stated above. In the event there is any change to the timetable, we will advertise the notice of changes in a widely circulated Bahasa Malaysia and English daily newspaper within Malaysia. Late applications will not be accepted. Copies of the Application Forms together with this Prospectus may be obtained, subject to availability, from the Issuing House and ADAs which are registered members of Bursa Securities. 14.2 Methods of application 14.2.1 Retail Offering Application must accord with this Prospectus and our Constitution. The submission of an Application Form does not mean that the application will succeed. Types of application and category of investors Application method (i) Malaysian Public - Applications for the 14,131,500 Issue Shares made available for applications by : (a) Malaysian Public - individuals • White Application Form; or • Electronic Share Application; or • Internet Share Application (b) Malaysian Public - non individuals White Application Form only (ii) Eligible Persons - Application for the Pink Application Form only 2,000,000 Issue Shares made available for applications by Directors and eligible employees 377 Registration No. : 199401034915 (320598-X) 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE (cant'd) 14.2.2 Institutional Offering Types of application and category of investors Application method Bumiputera investors - Applications for the Bumiputera Investors approved by 81,600,000 IPO Shares to be made available for MITI will be contacted directly by MITI application by way of private placement to Bumiputera and should follow the instructions as investors approved by MITI communicated through NIITI Selected investors - Applications for the 79,542,500 A letter of invitation shall be delivered IPO Shares to be allocated to placees via private to the respective identified investors placement 14.3 Eligibility 14.3.1 General You must have a CDS Account and a correspondence address in Malaysia. If you do not have a CDS Account, you may open a CDS Account by contacting any of the ADAs as stated in the list of ADAs set out in Section 12 of the Detailed Procedures for Application and Acceptance accompanying the electronic copy of this Prospectus on the website of Bursa Securities. The CDS Account must be in your own name. Invalid, nominee or third party CDS Accounts will not be accepted for the applications. Only ONE Application Form for each category from each Applicant will be considered and APPLICATIONS MUST BE FOR AT LEAST 100 IPO SHARES OR MULTIPLES OF 100 IPO SHARES. MULTIPLE APPLICATIONS WILL NOT BE ACCEPTED UNLESS EXPRESSLY ALLOWED IN THESE TERMS AND CONDITIONS. AN APPLICANT WHO SUBMITS MULTIPLE APPLICATIONS IN HIS OWN NAME OR BY USING THE NAME OF OTHERS, WITH OR WITHOUT THEIR CONSENT, COMMITS AN OFFENCE UNDER SECTION 179 OF THE CMSA AND IF CONVICTED, MAY BE PUNISHED WITH A MINIMUM FINE OF RM1,000,000 AND A JAIL TERM OF UP TO 10 YEARS UNDER SECTION 182 OF THE CMSA. AN APPLICANT IS NOT ALLOWED TO SUBMIT MULTIPLE APPLICATIONS IN THE SAME CATEGORY OF APPLICATION. 14.3.2 Application by the Malaysian Public You can only apply for our IPO Shares if you fulfill all of the following : (i) You must be one of the following: (a) a Malaysian citizen who is at least 18 years old as at the date of the application for our IPO Shares; or (b) a corporation/institution incorporated in Malaysia with a majority of Malaysian citizens on your board of directors/trustees and if you have a share capital, more than half of the issued share capital, excluding preference share capital, is held by Malaysian citizens; or (c) a superannuation, co-operative, foundation , provident, pension fund established or operating in Malaysia. 378 Registration No.: 199401034915 (320598-X) 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE (cant'd) (ii) You must not be a director or employee of the Issuing House or an immediate family member of a director or employee of the Issuing House; and (iii) You must submit applications by using only one of the following methods: (a) White Application Form; or (b) Electronic Share Application; or (c) Internet Share Application. 14.3.3 Application by Directors and eligible employees The Directors and eligible employees will be provided with Pink Application Forms and letters from us detailing their respective allocation. Applicants provided with Pink Application Forms may also apply for our IPO Shares offered to the Malaysian Public. 14.4 Applications by way of Application Forms The Application Form must be completed in accordance with the notes and instructions contained in the respective category of the Application Form. Applications made on the incorrect type of Application Form or which do not conform STRICTLY to the terms of this Prospectus or the respective category of Application Form or notes and instructions or which are illegible will not be accepted. The FULL amount payable is RMO.68 for each IPO Share. Payment must be made out in favour of "MIH SHARE ISSUE ACCOUNT NO. 601" and crossed "AlC PAYEE ONLY" and endorsed on the reverse side with your name and address. Each completed Application Form, accompanied by the appropriate remittance and legible photocopy of the relevant documents may be submitted using one of the following methods: (i) despatched by ORDINARY POST in the official envelopes provided, to the following address: Malaysian Issuing House Sdn Bhd (Registration No. : 199301003608 (258345-X)) 11 th Floor, Menara Symphony No. 5, Jalan Prof. Khoo Kay Kim Seksyen 13 46200 Petaling Jaya Selangor Darul Ehsan or P.O Box 00010 Pejabat Pos Jalan Sultan 46700 Petaling Jaya Selangor Darul Ehsan (ii) or DELIVERED BY HAND AND DEPOSITED in the drop-in boxes provided at the front portion of Menara Symphony, No.5, Jalan Prof. Khoo Kay Kim , Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, so as to arrive not later than 5.00 p.m. on 6 February 2020 or by such other time and date specified in any change to the date or time for closing. 379 Registration No. : 199401034915 (32059B-X) 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE (cont'd) We, together with the Issuing House, will not issue any acknowledgement of the receipt of your Application Forms or application monies. Please direct all enquiries in respect of the White Application Form to the Issuing House. 14.5 Applications by way of Electronic Share Applications Only Malaysian individuals may apply for our IPO Shares offered to the Malaysian Public by way of Electronic Share Application. Electronic Share Applications may be made through the ATM of the following Participating Financial Institutions and their branches, namely, Aftin Bank Berhad, Alliance Bank Malaysia Berhad, AmBank (M) Berhad, CIMB Bank Berhad, HSBC Bank Malaysia Berhad, Malayan Banking Berhad, Public Bank Berhad, RHB Bank Berhad and Standard Chartered Bank Malaysia Berhad (at selected branches only). A processing fee will be charged by the respective Participating Financial Institutions (unless waived) for each Electronic Share Application. 14.6 Applications by way of Internet Share Applications Only Malaysian individuals may use the Internet Share Application to apply for our IPO Shares offered to the Malaysian Public. Internet Share Applications may be made through an internet financial services website of the Internet Participating Financial Institutions, namely, Aftin Bank Berhad, Alliance Bank Malaysia Berhad, CIMB Bank Berhad, CGS-CIMB Securities Sdn Bhd, Malayan Banking Berhad, Public Bank Berhad and RHB Bank Berhad. A processing fee will be charged by the respective Internet Participating Financial Institutions (unless waived) for each Internet Share Application. The exact procedures, terms and conditions for Internet Share Application are set out on the internet financial services website of the respective Internet Participating Financial Institutions. 14.7 Authority of our Board and the Issuing House The Issuing House, on the authority of our Board reserves the right to: (i) reject applications which : (a) do not conform to the instructions of this Prospectus, Application Forms, Electronic Share Application and Internet Share Application (where applicable); or (b) are illegible, incomplete or inaccurate; or (c) are accompanied by an improperly drawn up, or improper form of, remittance. (ii) reject or accept any application, in whole or in part, on a non-discriminatory basis without the need to give any reason; and (iii) bank in all application monies (including those from unsuccessful/partially successful applicants) which would subsequently be refunded, where applicable (without interest), in accordance with Section 14.8 below. 380 Registration No.: 199401034915 (320598-X) 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE (cont'd) If you are successful in your application , our Board reserves the right to require you to appear in person at the registered office of the Issuing House at anytime within 14 days of the date of the notice issued to you to ascertain that your application is genuine and valid. Our Board shall not be responsible for any loss or non-receipt of the said notice nor will it be accountable for any expenses incurred or to be incurred by you for the purpose of complying with this provision . 14.8 Over/Under-Subscription In the event of over-subscription, the Issuing House will conduct a ballot in the manner approved by our Directors to determine the acceptance of Applications in a fair and equitable manner. In determining the manner of balloting , our Directors will consider the desirability of allotting and allocating our IPO Shares to a reasonable number of applicants for the purpose of broadening the shareholding base of our Company and establishing a liquid and adequate market for our Shares. The basis of allocation of shares and the balloting results in connection therewith will be furnished by the Issuing House to the SC, Bursa Securities, all major Bahasa Malaysia and English newspapers as well as posted on the Issuing House's website (www.mih .com.my) within 1 business day after the balloting event. Pursuant to the Listing Requirements we are required to have a minimum of 25.0% of our Company's issued share capital to be held by at least 1,000 publ ic shareholders holding not less than 100 Shares each upon Listing and completion of our IPO. We expect to achieve this at the point of Listing . In the event the above requirement is not met, we may not be allowed to proceed with our Listing . In the event thereof, monies paid in respect of all Applications will be returned in full (without interest). In the event of an under-subscription of our IPO Shares by the Malaysian Public and/or eligible Directors and employees of our Group, subject to the underwriting arrangements and reallocation as set out in Section 2.10 of our Prospectus, any of the abovementioned IPO Shares not applied for will then be subscribed by the Joint Underwriters based on the terms of the Retail Underwriting Agreement. 14.9 Unsuccessful/partially successful applicants If you are unsuccessful/partially successful in your application, your application monies (without interest) will be refunded to you in the following manner. 14.9.1 For applications by way of Application Forms (i) The application monies or the balance of it, as the case may be, will be returned to you through the self-addressed and stamped Official "AU envelope you provided by ordinary post (for fully unsuccessful applications) or by crediting into your bank account (the same bank account you have provided to Bursa Depository for the purposes of cash dividend/distribution) or if you have not provided such bank account information to Bursa Depository, the balance of application monies will be refunded via banker's draft sent by ordinary/ registered post to your last address maintained with Bursa Depository (for partially successful applications) within 10 Market Days from the date of the final ballot at your own risk. (ii) If your application is rejected because you did not provide a CDS Account number, your application monies will be refunded via banker's draft sent by ordinary/registered post to your address as stated in the NRIC or any official valid temporary identity document issued by the relevant authorities from time to time or the authority card (if you are a member of the armed forces or police) at your own risk. 381 Registration No.: 199401034915 (32059B-X) 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE (cont'd) (iii) A number of applications will be reserved to replace any successfully balloted applications that are subsequently rejected . The application monies relating to these applications which are subsequently rejected or unsuccessful or only partly successful will be refunded (without interest) by the Issuing House as per items (i) or (ii) above (as the case may be) . (iv) The Issuing House reserves the right to bank into its bank account all application monies from unsuccessful applicants. These monies will be refunded (without interest) within 10 Market Days from the date of the final ballot by crediting into your bank account (the same bank account you have provided to Bursa Depository for the purposes of cash dividend/distribution) or by issuance of banker's draft sent by ordinary/registered post to your last address maintained with Bursa Depository if you have not provided such bank account information to Bursa Depository or as per item (ii) above (as the case may be). 14.9.2 For applications by way of Electronic Share Application and Internet Share Application (i) The Issuing House shall inform the Participating Financial Institutions or Internet Participating Financial Institutions of the unsuccessful or partially successful applications within 2 Market Days after the balloting date. The full amount of the application monies or the balance of it will be credited without interest into your account with the Participating Financial Institution or Internet Participating Financial Institution (or arranged with the Authorised Financial Institutions) within 2 Market Days after the receipt of confirmation from the Issuing House. (ii) You may check your account on the 5th Market Day from the balloting date. (iii) A number of applications will be reserved to replace any successfully balloted applications that are subsequently rejected. The application monies relating to these applications which are subsequently rejected will be refunded (without interest) by the Issuing House by crediting into your account with the Participating Financial Institution or Internet Participating Financial Institutions (or arranged with the Authorised Financial Institutions) not later than 10 Market Days from the date of the final ballot. For applications that are held in reserve and which are subsequently unsuccessful or partially successful, the relevant Participating Financial Institution or Internet Participating Financial Institutions will be informed of the unsuccessful or partially successful applications within 2 Market Days after the final balloting date. The Participating Financial Institution or Internet Participating Financial Institutions will credit the application monies or any part thereof (without interest) within 2 Market Days after the receipt of confirmation from the Issuing House. 14.10 Successful applicants If you are successful in your application: (i) Our IPO Shares allotted to you will be credited into your CDS Account. (ii) A notice of allotment will be despatched to you at your last address maintained with the Bursa Depository, at your own risk, before our Listing. This is your only acknowledgement of acceptance of your application. 382 Registration No.: 199401034915 (320598-X) 14. PROCEDURES FOR APPLICATION AND ACCEPTANCE (cant'd) (iii) In accordance with Section 14(1) of the SIGDA, Bursa Securities has prescribed our Shares as prescribed securities. As such, our IPQ Shares issued/offered through this Prospectus will be deposited directly with Bursa Depository and any dealings in these Shares will be carried out in accordance with the SIGDA and rules of Bursa Depository. (iv) In accordance with Section 29 of the SIGDA, all dealings in our Shares will be by book entries through GDS Accounts. No physical share certificates will be issued to you and you shall not be entitled to withdraw any deposited securities held jointly with Bursa Depository or its nominee as long as our Shares are listed on Bursa Securities. (v) In the event that the Final Retail Price is lower than the Retail Price, the difference will be refunded to you without any interest thereon. The refund will be credited into your bank account for purposes of cash dividendI distribution if you have provided such bank account information to Bursa Depository or despatched, in the form of cheques, by ordinary post to your address maintained with Bursa Directory if you have not provided such bank account information to Bursa Depository, or by crediting into your account with the Electronic Participating Financial Institutions for applications made via the Electronic Share Application or by crediting into your account with the Internet Participating Financial Institutions for applications made via the Internet Share Application, within 10 Market Days from the date of final ballot of application, at your own risk. 14.11 Enquiries Enquiries in respect of the applications may be directed as follows: Mode of application Parties to direct the enquiries Application Form Issuing House at telephone no. +603-78904700 Electronic Share Application Participating Financial Institution Internet Share Application Internet Participating Financial Institution and Authorised Financial Institution You may also check the status of your application by calling your respective ADA during office hours at the telephone number as stated in the list of ADAs set out in Section 12 of the Detailed Procedures for Application and Acceptance accompanying the electronic copy of this Prospectus on the website of Bursa Securities. 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