Read osimipo.pdf text version

Osim International Ltd

"regional player...going global"

We have made an application to the Singapore Exchange Securities Trading Limited (the ``SGX-ST'') for permission to deal in and for quotation of our ordinary shares of $0.05 each (``Shares'') already issued and the new Shares which are the subject of the Invitation. Such permission will be granted when we have been admitted to the Official List of the SGX-ST. Acceptance of applications will be conditional upon permission being granted to deal in and for quotation of all the issued Shares and the new Shares which are the subject of the Invitation. If the said permission is not granted, monies paid in respect of any application accepted will be returned without interest or any share of revenue or other benefit arising therefrom and at the applicant's risk. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, the Company, its subsidiaries, associated company or the Shares. The SGX-ST assumes no responsibility for the correctness of any of the statements made, reports set out or opinions expressed in this Prospectus. A copy of this Prospectus has been lodged with and registered by the Registrar of Companies and Businesses in Singapore who takes no responsibility for its contents.

OSIM INTERNATIONAL LTD

(Incorporated in the Republic of Singapore on 27 August 1983)

INVITATION IN RESPECT OF 58,000,000 ORDINARY SHARES OF $0.05 EACH (``INVITATION SHARES'') COMPRISING 38,000,000 NEW SHARES AND 20,000,000 VENDOR SHARES AS FOLLOWS:­ (A) 5,800,000 OFFER SHARES AT $0.52 FOR EACH OFFER SHARE BY WAY OF PUBLIC OFFER; AND (B) 52,200,000 PLACEMENT SHARES BY WAY OF PLACEMENT, COMPRISING:­ (I) 46,400,000 PLACEMENT SHARES AT $0.52 FOR EACH PLACEMENT SHARE; AND (II) 5,800,000 RESERVED SHARES AT $0.47 FOR EACH RESERVED SHARE RESERVED FOR DIRECTORS AND EMPLOYEES OF THE GROUP, PAYABLE IN FULL ON APPLICATION

Manager, Underwriter and Placement Agent

Oversea-Chinese Banking Corporation Limited

(Incorporated in Singapore)

Applications should be received by 12.00 noon on 27 July 2000 or such later date and time as the Company and the Vendor may, in their absolute discretion, decide.

our global presence

(as of May 31, 2000)

USA: 11 UAE: 1

PRC: 44 Hong Kong: 40 Taiwan: 30

Thailand: 5 Malaysia: 21 Singapore: 37 Indonesia: 14

Total Number of Outlets: 203

A leading marketer, distributor and franchisor of home health-care, health-check and healthy lifestyle products in Asia, we have more than 200 point-of-sales outlets around the world.

We aim to increase our point-of-sales outlets worldwide to 300 by 2001, 500 by 2003 and 1,000 by 2008.

2001E 2003E 2008E

300 500 1000

No. of outlets

financial highlights

1995 1996 1997 1998 1999 103.1 60.8 69.7 3.2 10.8 42.9 31.4 1.6 3.7 4.4

Turnover Profit Before Taxation (S$ million)

Growth strategies

our vision: to be a global leader in home health-care & healthy lifestyle products

A) Expansion of Business Penetrate new geographical markets · Increase point-of-sales outlets · Appoint franchisees in Australia, the Philippines, United Kingdom, South Africa and Korea Introduce new product lines · Fitness equipment · Health supplements Expand wholesale distribution · Target hospitals, pharmacies, Chinese medical halls, health clubs, beauty centers and fitness centers Expand coverage of the consumer market · Develop our "NORO" brand · Lower-priced products to target different market segment

B) Upgrading of IT Infrastructure · Enhance our Enterprise Resource Planning and Customer Relationship Management systems C) Venturing into E-Commerce Activities D) New Corporate Headquarters

Core business and products

We provide a comprehensive range of home health-care products which are broadly categorised under: Healthy Lifestyle Health Care Health Check

Millennium Chair

Pro-Reflexologist

eHuman Logic Blood Pressure Monitor

Competitive strengths

Operate & Control our Supply Chain · Design · Procurement · Distribution Established Brand Name · Well-known brand name in Singapore & Hong Kong Strong Marketing Capabilities · Strategic marketing focus · Niche business concept Extensive Distribution Network · More than 200 point-of-sales outlets covering Asia & USA · Stores are located in major departmental stores and suburban shopping malls · Ability to dictate what to sell & how to sell Experienced, Hands-on Management Team · Executive Directors have more than 40 years of combined experience

Management Team

CONTENTS

Page CORPORATE INFORMATION .................................................................................................... DEFINITIONS .............................................................................................................................. DETAILS OF THE INVITATION Listing on the SGX-ST ................................................................................................................. Tentative Timetable for Listing ..................................................................................................... PROSPECTUS SUMMARY ......................................................................................................... RISK FACTORS .......................................................................................................................... INVITATION STATISTICS ............................................................................................................ SUMMARY OF FINANCIAL INFORMATION Results ......................................................................................................................................... Financial Position ......................................................................................................................... INFORMATION ON THE COMPANY AND THE GROUP Share Capital ............................................................................................................................... Our Shareholders ......................................................................................................................... Moratorium ................................................................................................................................... Restructuring Exercise ................................................................................................................. Group Structure ........................................................................................................................... History .......................................................................................................................................... Business ....................................................................................................................................... Franchise Model .......................................................................................................................... Intellectual Property Rights .......................................................................................................... Product And Service Quality Control ........................................................................................... New Products/Activities ............................................................................................................... Research and Development ........................................................................................................ Year 2000 Compliance ................................................................................................................. Insurance ..................................................................................................................................... Group Training Policy .................................................................................................................. Analysis of Turnover and Profits .................................................................................................. Review of Past Earnings Performance ........................................................................................ Prospects and Future Plans ........................................................................................................ Review of Financial Position ........................................................................................................ Dividends ..................................................................................................................................... Foreign Exchange Exposure ....................................................................................................... 22 24 25 25 27 27 29 35 36 37 38 38 38 38 39 39 41 45 47 50 50 19 20 8 9 10 12 17 3 4

1

Page Competition .................................................................................................................................. Competitive Strengths .................................................................................................................. Major Suppliers and Customers .................................................................................................. Properties and Fixed Assets ........................................................................................................ Directors, Management and Staff ................................................................................................ Osim Share Option Scheme ........................................................................................................ Corporate Governance ................................................................................................................ Interest of Management and Others in Certain Transactions ..................................................... Potential Conflicts of Interest ....................................................................................................... DIRECTORS' REPORT ............................................................................................................... ACCOUNTANTS' REPORT ......................................................................................................... GENERAL AND STATUTORY INFORMATION .......................................................................... APPENDIX A -- SUMMARY OF THE PRINCIPAL TERMS OF OSIM SHARE OPTION SCHEME (THE ``SCHEME'') .................................................................... -- RULES OF THE OSIM SHARE OPTION SCHEME ................................... APPENDIX B -- TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS . 50 51 52 53 53 59 61 62 70 71 72 95

113 118 136

2

CORPORATE INFORMATION

Board of Directors : Dr Ron Sim Chye Hock (Chairman & Chief Executive Officer) Teo Chay Lee (Chief Operating Officer) Leow Lian Soon (Regional General Manager) Teo Sway Heong (Non-executive Director) Khor Peng Soon (Non-executive Director) Michael Kan Yuet Yun, PBM (Independent Director) Ong Kian Min (Independent Director) Company Secretary Registered Office and Principal Office : : Juliet Ang, LLB (Hons) 57 Genting Lane Osim Industrial Building Singapore 349564 B.A.C.S. Private Limited 63 Cantonment Road Singapore 089758 Oversea-Chinese Banking Corporation Limited 65 Chulia Street #29-02/04 OCBC Centre Singapore 049513 Arthur Andersen Certified Public Accountants 10 Hoe Chiang Road #18-00 Keppel Towers Singapore 089315 Wong Partnership 80 Raffles Place #58-01 UOB Plaza 1 Singapore 048624 Oversea-Chinese Banking Corporation Limited 65 Chulia Street #29-02/04 OCBC Centre Singapore 049513 The Development Bank of Singapore Ltd 6 Shenton Way DBS Building Tower One Singapore 068809

Registrar and Share Transfer Office

:

Manager, Underwriter and Placement Agent

:

Auditors and Reporting Accountants

:

Solicitors to the Invitation

:

Principal Bankers

:

3

DEFINITIONS

In this Prospectus, the accompanying Application Forms and in relation to Electronic Applications, the instructions appearing on the screens of the ATMs of Participating Banks, the following definitions apply throughout where the context so admits:­ ``Act'' ``Application Forms'' : : Companies Act, Chapter 50 of Singapore Official printed application forms for the Invitation Shares which are the subject of the Invitation and which form part of this Prospectus List for the application to subscribe for the Invitation Shares Automated teller machine The Central Depository (Pte) Limited Osim International Ltd A Shareholder exercising control over the Company and unless rebutted, a person who controls directly or indirectly a shareholding of fifteen (15) per cent. or more of our issued share capital shall be presumed to be a Controlling Shareholder of the Company The Directors of the Company as at the date of this Prospectus Applications for the Invitation Shares made through an ATM of one of the Participating Banks in accordance with the terms and conditions of this Prospectus Earnings per Share Electronic commerce Financial year ended or ending 31 December Century Private Equity Holdings (S) Pte Ltd, a wholly-owned subsidiary of Temasek Holdings (Private) Limited Invitation in respect of the Invitation Shares, subject to and on the terms and conditions of this Prospectus 58,000,000 Shares comprising 38,000,000 New Shares and 20,000,000 Vendor Shares A day on which the SGX-ST is open for trading in securities 38,000,000 new Shares for which the Company invites applications to subscribe pursuant to the Invitation, subject to and on the terms and conditions of this Prospectus Net tangible assets Oversea-Chinese Banking Corporation Limited

``Application List'' ``ATM'' ``CDP'' ``Company'' or ``Osim (S)'' ``Controlling Shareholder''

: : : : :

``Directors'' ``Electronic Applications''

: :

``EPS'' ``e-commerce'' ``FY'' ``Investor'' ``Invitation'' ``Invitation Shares'' ``Market Day'' ``New Shares''

: : : : : : : :

``NTA'' ``OCBC Bank'', ``Manager'', ``Underwriter'' or ``Placement Agent''

: :

4

``Offer''

:

Invitation in respect of the Offer Shares to the public at the Offer Price, subject to and on the terms and conditions of this Prospectus $0.52 for each Offer Share 5,800,000 Invitation Shares which are the subject of the Offer OCBC Bank group (comprising OCBC Bank and Bank of Singapore Limited), The Development Bank of Singapore Ltd (``DBS Bank'') including its POSBank Services division, Keppel TatLee Bank Limited (``KTB''), Overseas Union Bank Limited, and United Overseas Bank Limited (``UOB'') group (comprising UOB, Far Eastern Bank Ltd and Industrial & Commercial Bank Limited) Price earnings ratio People's Republic of China Placement of the Placement Shares at the Placement Price, subject to and on the terms and conditions of this Prospectus OCBC Bank as placement agent who shall subscribe for and/or purchase, or procure subscription for and/or purchase of, the Placement Shares $0.52 for each Placement Share and $0.47 for each Reserved Share 52,200,000 Invitation Shares which are the subject of the Placement (including the Reserved Shares) The Company and its subsidiaries assuming that the group structure had been in place since 1 January 1995 5,800,000 Placement Shares reserved for the Directors and employees of the Group at the price of $0.47 for each Reserved Share The restructuring exercise of the Group undertaken in connection with the Invitation as described on pages 25 and 26 of this Prospectus Securities account maintained by a Depositor with CDP Singapore Exchange Securities Trading Limited Ordinary shares of $0.05 each in the capital of the Company Shareholder holding shares in the capital of the Company Agreement dated 17 July 2000 between Investor, Dr Ron Sim Chye Hock and the Company under which Investor agreed to subscribe for 11,600,000 new Shares, representing approximately 5 per cent. of the post-Invitation enlarged share capital of the Company, at $0.47 per Share (``Investor Subscription'') Dr Ron Sim Chye Hock

``Offer Price'' ``Offer Shares'' ``Participating Banks''

: : :

``PER'' ``PRC'' ``Placement''

: : :

``Placement Agent''

:

``Placement Price'' ``Placement Shares'' ``Proforma Group'' or ``Group'' ``Reserved Shares''

: : : :

``Restructuring Exercise''

:

``Securities Account'' ``SGX-ST'' ``Shares'' ``Shareholder'' ``Subscription Agreement''

: : : : :

``Vendor''

:

5

``Vendor Shares''

:

20,000,000 issued and fully-paid Shares for which the Vendor invites applications to purchase pursuant to the Invitation United States of America Square metres Singapore dollars and cents, respectively, unless otherwise stated Hong Kong dollars New Taiwan dollars Malaysian Ringgit Renminbi, the lawful currency of the People's Republic of China United States dollars Japanese Yen

``USA'' or ``United States'' ``sq m'' ``$'' or ``S$'' and ``cents'' ``HK$'' ``NT$'' ``RM'' ``RMB'' ``US$'' ``Yen'' Group Companies Osim (M'sia) Osim (HK) Osim (Shanghai) Osim (Taiwan) Daito-Osim (Suzhou) Non-Group Companies HCC (Langfang)

: : : : : : : : :

: : : : :

Osim (M) Sdn Bhd Osim (HK) Company Limited Osim International Trading (Shanghai) Co., Ltd. Osim GHC (Taiwan) Co., Ltd Daito-Osim Healthcare Appliance (Suzhou) Co., Ltd.

:

Health Check and Care (Langfang) Co., Ltd (has since 12 May 2000 been renamed as Osim GHC (Langfang) Co., Ltd) Osim Distribution Centre (S) Pte Ltd Osim (Beijing) Co., Ltd Osim GHC (Shanghai) Co., Ltd Osim GHC (Thailand) Co., Ltd Osim (USA) Inc. PT Sharon Samaru R.S.H. (Middle East) L.L.C.

ODCPL Osim (Beijing) Osim GHC (SH) Osim (Thai) Osim (USA) PT Sharon RSH

: : : : : : :

6

The exchange rates used to translate the accounts of foreign subsidiaries, as applied in this Prospectus are as follows:­

FY1995 Profit and Loss RM1 : S$ 0.564 0.183 0.054 -- 0.558 0.182 0.052 0.170 0.528 0.193 0.053 0.184 0.428 0.215 0.050 0.202 0.447 0.219 0.052 0.205 FY1996 FY1997 FY1998 FY1999

HK$1 : S$ NT$1 : S$ RMB1 : S$ Balance Sheet RM1 : S$

0.555 0.182 0.052 --

0.552 0.180 0.051 0.168

0.431 0.216 0.053 0.206

0.436 0.214 0.051 0.200

0.439 0.215 0.052 0.201

HK$1 : S$ NT$1 : S$ RMB1 : S$

The terms ``Depositor'', ``Depository Agent'' and ``Depository Register'' shall have the meanings ascribed to them respectively in Section 130A of the Act. The term ``associate'' shall have the meaning ascribed to it by the Singapore Exchange Securities Trading Limited's Listing Manual, which is defined to include an immediate family member (that is, the spouse, child, adopted child, step-child, sibling or parent) of such director, chief executive officer or substantial shareholder, the trustees, acting in their capacity as such trustees, of any trust of which the director, chief executive officer or substantial shareholder or his immediate family is a beneficiary or, in the case of a discretionary trust, is a discretionary subject and any company in which the director/his immediate family, the chief executive officer/his immediate family or substantial shareholder/his immediate family has an aggregate interest (directly or indirectly) of 25 per cent. or more, and, where a substantial shareholder is a corporation, its subsidiary or holding company or fellow subsidiary or a company in which it and/or they have (directly or indirectly) an interest of 25 per cent. or more. Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. Any reference in this Prospectus and the Application Forms to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined in the Act, or any statutory modification thereof and used in this Prospectus and the Application Forms shall have the meaning assigned to it in the Act, or such statutory modification, as the case may be. A reference to a time of day in this Prospectus shall be a reference to Singapore time unless otherwise stated.

7

DETAILS OF THE INVITATION

1. LISTING ON THE SGX-ST We have applied to the SGX-ST for permission to deal in and for quotation of all our Shares already issued (including Vendor Shares) and the New Shares. Such permission will be granted when the Company has been admitted to the Official List of the SGX-ST. Acceptance of applications will be conditional upon permission being granted to deal in and for quotation of all the issued Shares (including Vendor Shares) and the New Shares. If the said permission is not granted, moneys paid in respect of any application accepted will be returned without interest or any share of revenue or other benefit arising therefrom and at the applicant's risk. The SGX-ST assumes no responsibility for the correctness of any statements made, reports set out or opinions expressed or reports contained in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, the Company, its subsidiaries, associated company or the Shares. Our Directors and the Vendor collectively and individually accept full responsibility for the accuracy of the information given in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and opinions expressed in this Prospectus are fair and accurate in all material respects as at the date of this Prospectus and that there are no other material facts the omission of which would make any statement in this Prospectus misleading. No person is authorised to give any information or to make any representation not contained in this Prospectus in connection with the Invitation and, if given or made, such information or representation must not be relied upon as having been authorised by us, the Vendor or OCBC Bank. Neither the delivery of this Prospectus and the Application Forms nor the Invitation shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in our affairs or any statement of fact or information contained in this Prospectus since the date of this Prospectus. Where such changes occur, we may make an announcement of the same to the SGX-ST. All applicants should take note of any such announcement and, upon release of such an announcement, shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies. This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon by any persons other than the applicants in connection with their application for Invitation Shares or for any other purpose. This Prospectus does not constitute an offer of, or invitation to subscribe for, the Invitation Shares in any jurisdiction in which such offer or invitation is unauthorised or unlawful or to any person to whom it is unlawful to make such offer or invitation. Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability, during office hours from:­ Oversea-Chinese Banking Corporation Limited 65 Chulia Street OCBC Centre Singapore 049513 and from selected branches of OCBC Bank, members of the Association of Banks in Singapore, merchant banks in Singapore and members of the SGX-ST. The Application List will open at 10.00 a.m. on 27 July 2000 and will remain open until 12.00 noon on 27 July 2000, or such later date and time as the Company and the Vendor may, in their absolute discretion, decide.

8

2.

TENTATIVE TIMETABLE FOR LISTING In accordance with the SGX-ST's News Release of 28 May 1993 on the trading of initial public offering shares on a ``when issued'' basis, an indicative timetable is set out below for the reference of applicants:­ Indicative Time and Date 27 July 2000, 12.00 noon 28 July 2000 31 July 2000, 9.00 a.m. 10 August 2000 11 August 2000, 9.00 a.m. 16 August 2000 Event Close of Application List Balloting of applications, if necessary Commence trading on a ``when issued'' basis Last day for trading on a ``when issued'' basis Commence trading on a ``ready'' basis Settlement date for all trades done on a ``when issued'' basis and for all trades done on a ``ready'' basis on 11 August 2000

The above timetable is only indicative and is subject to the closing date for the Invitation being 27 July 2000, the date of our admission to the Official List of the SGX-ST being 11 August 2000, the SGX-ST's shareholding spread requirement being complied with and the New Shares being issued and fully paid up prior to 11 August 2000. The actual date on which the Shares will commence trading on a ``when issued'' basis will be announced when it is confirmed by the SGX-ST. The above timetable and procedure may be subject to such modifications as the SGX-ST may in its discretion decide, including the decision to permit trading on a ``when issued'' basis and the commencement date of such trading. All persons trading in the Shares on a ``when issued'' basis, if implemented, do so at their own risk. In particular, persons trading in the Shares before their Securities Accounts with CDP are credited with the relevant number of Shares do so at the risk of selling Shares which neither they nor their nominees have been allotted and/or allocated or are otherwise beneficially entitled to. Such persons are exposed to the risk of having to cover their net sell positions earlier if trading on a ``when issued'' basis ends sooner than the indicative date set out above. Persons who have net sell positions traded on a ``when issued'' basis should close their positions on or before the first day of trading on a ``ready'' basis. Investors should consult the SGX-ST announcement on ``ready'' trading date on the Internet (at SGX-ST website http://www.singaporeexchange.com), INTV or the newspapers or enquire from their brokers the date on which trading on a ``ready'' basis will commence.

9

PROSPECTUS SUMMARY

The information contained in this summary is derived from and should be read in conjunction with the full text of this Prospectus. In addition to this summary, we urge you to read the entire Prospectus carefully, especially the discussion on ``Risk Factors'', before buying our Shares. References in this Prospectus to ``Osim (S)'', ``Company'', ``we'', ``our'' and ``us'' refer to Osim International Ltd or, where the context admits, the Group. The Company We were incorporated in the Republic of Singapore on 27 August 1983 as a limited exempt private company under the name of R. Sim Trading Co. Pte Ltd. Subsequently, we changed our name firstly, to R. Sim & Company Pte Ltd and then, to Osim International (S) Pte Ltd on 24 November 1988 and 2 September 1996 respectively. On 4 July 2000, we were converted to a public limited company, and the name of the Company was changed to Osim International Ltd. We are in the business of marketing, distributing and franchising of a comprehensive range of home health care, health check and healthy lifestyle products. Other than Daito-Osim (Suzhou), all the Group's production needs are out-sourced to contract manufacturers in Japan and Taiwan as we believe in focusing on our strengths in marketing and brand management. As at 31 May 2000, our Group had 128 point-of-sales outlets in Singapore, Malaysia, Hong Kong and Taiwan, and through our franchisees, another 75 point-of-sales outlets in Thailand, Indonesia, PRC, United Arab Emirates and the United States. Barring unforeseen circumstances, we aim to increase the number of point-of-sales outlets worldwide to 300 by 2001, 500 by 2003 and 1,000 by 2008. In order for us to achieve this rate of growth, we will be gradually moving away from being a retailer and are beginning to position ourselves as a franchisor of our OSIM products. We believe that over time this will lower the capital risk in penetrating new geographical markets and enable our management to concentrate on strategic marketing and brand cultivation which are our main strengths. In the next phase of our future growth, we intend to expand our business by marketing and distributing other related home health-care products like health food and supplements, and fitness equipment. We also intend to increase our wholesale distribution sales by looking into, inter alia, wholesale distribution to hospitals, pharmacies, Chinese medical halls, health clubs, beauty centres and fitness centres. The Invitation Size : 58,000,000 Shares comprising 38,000,000 New Shares and 20,000,000 Vendor Shares. The Vendor Shares and the New Shares, will, upon issue, rank pari passu in all respects with the then existing issued Shares. $0.52 for each Offer Share and Placement Share and $0.47 for each Reserved Share. We consider that the listing and quotation of the Shares on the SGX-ST will enhance the public image of the Group and will enable us to tap the capital markets for the expansion of our business. It will also give the general public, employees, Directors and business associates of the Group an opportunity to participate in the equity of the Company. The Invitation will enlarge our capital base for continued expansion of our businesses.

Offer Price and Placement Price

:

Purpose of the Invitation

:

10

Use of Proceeds

:

The net proceeds of the issue of New Shares will amount to approximately $18 million. We propose to utilise the net proceeds of the Invitation as follows:­ (i) approximately $1.5 million to enhance and upgrade our Group's information technology systems in order to facilitate our enterprise resource planning (``ERP'') and customer relationship management (``CRM'') (as more particularly described under ``PROSPECTS AND FUTURE PLANS -- Upgrading of IT Infrastructure'' on pages 46 and 47 of this Prospectus); approximately $6 million for the expansion of our point-of-sales outlets in existing and new geographic markets, the development of new product lines and for strategic investments in e-commerce initiatives (as more particularly described under ``PROSPECTS AND FUTURE PLANS -- Expansion of Business and E-Commerce'' on pages 45, 46 and 47 of this Prospectus respectively); approximately $8 million to partially finance the acquisition of land and construction costs of a new corporate headquarters in Singapore at Ubi Avenue 1 (as more particularly described under ``PROSPECTS AND FUTURE PLANS -- New Corporate Headquarters'' on page 45 of this Prospectus); and the balance of approximately $2.5 million for additional working capital for our Group.

(ii)

(iii)

(iv)

Pending the deployment of the net proceeds from the New Shares for the above purposes, we may place the net proceeds in deposits with financial institutions, invest them in short-term money market instruments, and/or add to our working capital as our Directors, may in their absolute discretion, deem appropriate. Reserved Shares : Of the Placement Shares, 5,800,000 Shares will be reserved for our Directors and employees of the Group. In the event that any of the Reserved Shares are not taken up, they will be made available to satisfy applications made for the Placement Shares or, in the event of an under-subscription for the Placement Shares, to satisfy applications made by members of the public for the Offer Shares. The Shares will, on admission of the Company to the Official List of SGX-ST and permission for dealing in and for quotation of the Shares being granted by the SGX-ST, be quoted on the SGX-ST.

Listing Status

:

11

RISK FACTORS

Investing in our Shares involves certain risks and you should consider carefully all the information contained in this Prospectus, especially the following, in evaluating whether to purchase our Shares. To the best of our belief and knowledge, all risk factors that are material to investors in making an informed judgement on our Group are set out below. Any of the following factors, depending upon the severity and circumstances of a particular occurrence, could result in a material adverse effect on our business, prospects, financial condition and results of operations. Industry Specific Risks (a) Changes in Consumer Tastes As with all other consumer products, sales of our products are dependent on consumers' demand for our products and are susceptible to changes in consumer tastes. There is no assurance that in the future we will continue to be successful in keeping ourselves ahead of, and being up-to-date with, the latest health-care trends through constant market research and sourcing of feed-back from our customers. We can give no assurance that our intensive efforts in strategic marketing and product innovation will continue to enable us to satisfy the evolving consumer tastes. If we are not able to do so, our sales to consumers would be reduced and this will have a material adverse impact on our Group's turnover and profitability. (b) Health Regulations in New Markets We do not consider ourselves to be in the medical or para-medical field. While our business is currently not subject to any governmental health regulations in our major geographical markets, the regulatory environment in new geographical markets may pose an obstacle to our plans to expand our geographical presence (our expansion plans are more particularly described under the section on ``PROSPECTS AND FUTURE PLANS -- Expansion of Business'' on pages 45 and 46 of this Prospectus). Furthermore, we cannot discount the possibility that new health regulations that apply to our products may come into force in our existing major markets. If we are unable to comply with any such health regulations in any particular country, we may be prevented from effectively marketing our products in that country. This will have a material adverse impact on our overall turnover and profitability. (c) Exposure to Product Liability Laws As with other consumer product manufacturers, we are exposed to product liability laws in the countries where our products are marketed and may face lawsuits arising from alleged injuries to users caused by any alleged defects in our products. We may have to do substantial product recalls in respect of a product if there are allegations of that product being found to be unsafe in the future. We are also exposed to the product liability laws of the United States which, we believe, may impose much higher quantum of damages, whether compensatory or punitive, compared to the laws on product liability in other countries where we market our products. To mitigate this risk, we have obtained product liability insurance in the United States and Canada. The details of the insurance coverage are more particularly described under the section on ``INSURANCE'' on page 38 of this Prospectus. As we are not insured for product liability in any other jurisdictions, if we are ever unsuccessful in defending a product liability suit in one of these jurisdictions, we may have to pay substantial monetary damages which would have an adverse impact on our reputation and profitability. We have begun marketing our products in the United States since late 1997. To date, we have not encountered any legal suit, or threat of a legal suit, involving product liability in the United States or any other jurisdictions. (d) High Susceptibility to Downturns in Economic Cycles The nature of our home health-care products make us more susceptible to reduced demand in times of economic downturn than other kinds of businesses because our products may not be considered as essential medical or health products. Our profitability will therefore be adversely affected by downturns in economic cycles in any of our significant markets. 12

(e) Prohibitive National Laws on Foreign Ownership Under the franchise business model which we have adopted (as more particularly described under the section on ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus), it is not our business strategy to acquire equity interests in our franchisees. Nevertheless, where having an equity interest in a certain franchisee would enable us to have a share in their profits, we may decide to acquire ownership of that franchisee. However, this may be difficult, if not impossible, in certain jurisdictions. Currently we face prohibitive or restrictive laws in PRC, Indonesia and Thailand which do not permit us to have ownership or full ownership of our franchisees. As we expand our franchise network to more countries in the future, we may face similar prohibitive national laws that would affect our ability to acquire equity interests in our franchisees. In Malaysia, under the ``Guidelines for the Regulation of Acquisition of Assets, Mergers and Take-overs'' (the ``Guidelines'') established by The Foreign Investment Committee of Malaysia (``FIC''), the approval of the FIC is required for a foreign company to own more than a 15 per cent. interest in a Malaysian company. Foreign involvement in Malaysian companies engaging in the business of specialty stores is also subject to ``Guidelines on Wholesale and Retail Trade'' (the ``GWRT''). The GWRT stipulates that the foreign ownership of such Malaysian company should be restricted to 30 per cent., with another 30 per cent. of the equity to be held by bumiputeras. The GWRT also requires the capitalisation of such Malaysian company to be at least RM1,000,000. We are of the view that the Guidelines and GWRT are not established under any statutory laws in Malaysia and non-compliance with the Guidelines and GWRT does not have any statutory implications. Therefore, we have not made any application to the FIC or the Committee of Wholesale and Retail Trade (the ``Committee'') for us to hold our 60 per cent. interest in the equity of Osim (M'sia). In the future, we may face the possibility of being directed by the FIC and/or the Committee to comply with the Guidelines and GWRT respectively. If so directed, we will seek consultations with the FIC and/or the Committee, as the case may be, for the appropriate compliance. Our non-compliance with the Guidelines and GWRT may lead to the non-renewal of our business premise licences in Malaysia which would result in a disruption or cessation of our operations. In such event, we would have to either dilute our shareholdings to comply with the Guidelines and/or the GWRT, or appoint a franchisee who is qualified to undertake the business in Malaysia. If the operations of Osim (M'sia) are not taken into account in preparing our financial statements, our Group's profit after taxation and minority interests for FY1997, FY1998 and FY1999 would have been increased by 4.1 per cent. and reduced by 1.0 per cent. and 5.9 per cent. respectively, and our Group's NTA as at 31 December 1997, 31 December 1998 and 31 December 1999 would have been reduced by 0.8 per cent., 1.1 per cent. and 5.9 per cent. respectively. Company Specific Risks (a) Dependence on Key Personnel Our continued success is dependent to a very large extent on our ability to retain key management personnel. The loss of the services of a substantial number of our key management personnel without adequate replacements, or the inability to attract or retain qualified personnel would have an unfavourable and material impact on our business. Furthermore, in connection with our future plans (as more particularly described under the section on ``PROSPECTS AND FUTURE PLANS -- Future Plans'' on pages 45 to 47 of this Prospectus), we may need to recruit a greater number of experienced personnel in the future. Dr Ron Sim Chye Hock, our founder, has been the main contributor to our success and provides strategic leadership and vision for our Group. He will also hold, as direct and deemed interests, 69.0 per cent. of our share capital after the Invitation. The loss of Dr Ron Sim Chye Hock's services as our Chairman and Chief Executive Officer would adversely affect our business and future plans.

13

(b) Reliance on Key Suppliers We are highly dependent on 3 suppliers (as disclosed in the section on ``MAJOR SUPPLIERS AND CUSTOMERS -- Major Suppliers'' on pages 52 and 53 of this Prospectus) who are our suppliers or contract manufacturers for products contributing 75.5 per cent., 60.4 per cent. and 78.7 per cent. of our purchases for FY1997, FY1998 and FY1999 respectively. The involuntary or unexpected loss of any of our key suppliers/contract manufacturers will temporarily disrupt our supplies and have a material adverse impact on our Group's turnover and profitability. Furthermore, there can be no assurance that the 3 key suppliers/contract manufacturers will continue to fulfil our needs and expectations in terms of cost and product quality although to date, we have not experienced any significant problems with our 3 key suppliers/contract manufacturers in these areas since we began our business relationship. In the event that the 3 key suppliers/ contract manufacturers are not able to fulfil our requirements, we will incur costs in switching to new suppliers which would result in disruption to our business and profitability in the short term. (c) Failure of Franchising as a Business Model We have only recently since the last quarter of 1999 begun to adopt franchising group-wide (except for our Singapore and PRC operations) as a business model. Therefore, the results of our franchise business model have not been time-tested for long. More details on our franchise business model are set out in the section on ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus. Our franchise business model is dependent on the quality of our franchisees, their financial strength and ability to penetrate new markets. Presently, of our 7 franchisees, 3 are our subsidiaries, 3 are our affiliated companies controlled by our Controlling Shareholders and the remaining 1 is an unrelated company. We cannot give any assurance that we will be able to attract suitable non-related companies as our franchisees or that such franchisees will continue with our franchise. The loss of our franchisee in any particular market will result in a decrease of our revenues in that market while we seek alternative franchisee or undertake to carry on the business ourselves if the domestic regulations permit. The loss of our franchisee may also present an opportunity to competitors to increase their market share in that market at our expense. We have not experienced any loss of franchisee in any particular market since the implementation of our franchise business model. (d) Increased Competition Currently, in our major markets such as Hong Kong, Singapore and Taiwan, we do not consider ourselves to have a major competitor as most of the distributors and manufacturers of home health-care products do not have a comparable distribution network where the distributor or manufacturer directly controls the supply chain from the design of the products to the marketing of these products. However, we cannot give any assurance that no competitor will arise in the future who has the marketing expertise or a comparable distribution network to pose a significant competitive threat. As we expand into new geographical markets or new product lines (as more particularly described under the section on ``PROSPECTS AND FUTURE PLANS -- Expansion of Business'' on pages 45 and 46 of this Prospectus), we may face significant competition in these new markets which will erode or eliminate our profit margins. We face competitive pressures from manufacturers of low-priced products, especially in PRC. To handle these competitive pressures, we have developed NORO as a secondary brand to sell lower-priced massage chairs and kneading massagers in PRC to the segment of the consumer market which is sensitive to pricing. Our Directors believe that e-commerce is emerging as a very major marketing and distribution channel for businesses although the extent of the impact of e-commerce cannot be conclusively assessed today. We have the intention of tapping into the vast potential of e-commerce and other health-care retailers may also follow. We cannot give any assurance that the expansion of e-commerce initiatives by other distributors or contract manufacturers will not result in us losing market share.

14

(e) Difficulty of Expanding Distribution Network It is our business strategy to expand our network of `brick-and-mortar' point-of-sales outlets in the region and eventually, the world. Our franchisees and we, in the event that we establish our own outlets to penetrate and/or establish ourselves in new markets, may face considerable difficulties or high costs in securing suitable retail locations to expand our distribution network. Rental is one of our major operating expenses and is subject to inflationary pressure if property prices increase. In the event that we are unable to improve our revenue per square foot on our rented premises, any increase in rentals will adversely affect our net operating profit margins. (f) Intellectual Property Rights Disputes Unauthorised use of our trademarks, brand names and other intellectual property may damage the brand and name recognition, and reputation of our Group. We have as at 31 May 2000, filed trademark applications for the registration of ``OSIM'' and ``NORO'' in 26 jurisdictions. The details of the trademark registrations are more particularly described in the section on ``INTELLECTUAL PROPERTY RIGHTS'' on pages 36 and 37 of this Prospectus. Although we have registered OSIM as a trademark in the countries where our products are marketed and where we intend to expand our business to, it may be possible for third parties to unlawfully pass-off their products as ours or to counterfeit our products. In certain jurisdictions which do not have clear laws protecting intellectual property rights or a consistent record of protecting intellectual property rights, we may face considerable difficulties and costly litigation in order to enforce our intellectual property rights. In the event that we are not able to protect our intellectual property rights, we cannot discount the possibility of our brand reputation or sales volume being adversely affected by passing-off or counterfeiting. This will have a material adverse impact on our turnover and profitability. (g) Exposure to the Emerging Markets of Malaysia, Thailand, Indonesia and PRC Our sales in the emerging markets of Malaysia, Thailand, Indonesia and PRC accounted for 18.4 per cent. of our Group's revenues in FY1997, 7.7 per cent. in FY1998 and 12.3 per cent. in FY1999. Our Directors expect the contribution from these 4 countries to our Group's revenues to increase in the future. Therefore, to a certain extent, our business may be affected by economic conditions in these emerging markets. The economies of these emerging markets have only recently begun to recover from the Asian financial crisis and the recovery may not be sustainable. If the high interest rate environment and drastic devaluation of regional currencies seen in the Asian financial crisis were to recur in the future, this will have an adverse effect on the financial performance of our Group's business in these countries. It will also greatly magnify the risk to us from our foreign exchange exposure (as described in paragraph (h) below). (h) Foreign Exchange Risks In line with the country of incorporation, the accounts of our overseas subsidiaries are prepared in the local currency (i.e. RM, HK$, RMB and NT$). This represents a translation risk in that any material fluctuation in the relevant currency rates against the S$ will have an effect on our consolidated financial statements which are presented in S$. While our sales are mainly denominated in the respective local currencies in which the sales arise, namely the S$, RM, HK$, RMB and NT$, our costs of procurement of products from our contract manufacturers are incurred mainly in US$ and Yen, which accounted for 33% and 64% of our total purchases respectively for FY1999. (i) Country Risks Our business is conducted in many countries outside Singapore, including Indonesia and PRC, through our franchise network and our foreign-based business activities are subject to the particular risks of the country in which they operate.

15

Indonesia and PRC are countries which have experienced significant political, social and economic uncertainties in recent years. Our performance may be adversely affected by political, social, economic and regulatory uncertainties in these regions. For example, changes in policies by the respective government authorities of these regions may materially affect us through (i) changes in laws and regulations; (ii) changes in customs and import tariffs; (iii) restrictions on currency conversions and remittances; and (iv) instability of the banking system. Under current Indonesian and PRC laws, we are prohibited from owning companies that engage in retailing. As disclosed earlier under ``Industry Specific Risks'', this precludes us from acquiring our franchisees in these countries in order to have a share in their profits. In addition, in PRC, there can be no assurance that exchange rates of the RMB against the US$ or S$ will not become volatile or that the RMB will not be devalued against the US$ or S$. Our PRC licensees will be adversely affected by a RMB devaluation as their purchase costs are denominated in US$ while their sales are denominated in RMB. If the financial condition of any of our PRC licensees deteriorates, this would affect the level of their purchases from us and our business with our PRC licensees will be adversely affected. (j) Expansion of Business As described under the section on ``PROSPECTS AND FUTURE PLANS -- Expansion of Business'' on pages 45 and 46 of this Prospectus, we intend to penetrate deeper into the consumer markets, expand to new geographical markets, diversify into new product lines and venture into wholesale distribution. If we are unsuccessful in the above business expansion, our long-term growth prospects will be adversely affected. (k) E-commerce Despite the enthusiasm among many merchants to embrace e-commerce, we cannot give any assurance that there will be a market for our home health-care products on the Internet. The Internet has yet to evolve as an important and widespread means of buying and selling products and services. Furthermore, e-commerce business models remain largely untested and yet to be proven to be profitable. Because on-line procurement of business products and services is still in its growth stage, it is difficult for us to estimate the size of the home health-care products market on the Internet and its growth rate, if any. By nature of the industry, any e-commerce venture that we may enter into would be highly capital intensive and would have a high `burn rate' for capital in the early stages of the venture. We cannot give any assurance that the capital we invest in e-commerce which will come from the proceeds of the Invitation, would not be quickly used up without yielding any financial gain for us. (l) Conflicts of Interest Between Us and Our Controlling Shareholders Companies owned and/or controlled by our Controlling Shareholders (the ``Controlled Companies'') are our franchisees. These arrangements will give rise to situations where there are potential conflicts of interests between us and our Controlling Shareholders, which are set out in the sections on ``INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS'' and ``POTENTIAL CONFLICTS OF INTERESTS'' on pages 62 to 69 of this Prospectus respectively. The Audit Committee of our Board of Directors will review the implementation of the franchise agreements between us and the Controlled Companies to ensure that they are entered into on arms' length basis and are on normal commercial terms. If the franchise agreements are not entered into on arms' length basis and their terms are less favourable to us than what we would have offered to independent third party franchisees, we will suffer financial loss and this will have a significant adverse impact on our turnover and profitability. Had we been able to charge our affiliated companies the franchise fee, royalties (in the case of Controlled Companies which are our franchisees) or licensing fee (in the case of Controlled Companies which are our licensees) at rates similar to those charged to our subsidiaries and RSH (our unrelated franchisee), and had we been able to sell certain of our main products at prices similar to those sold to our subsidiaries and RSH, we would not have to suffer a reduction in income. For FY1999, the impact to our Group was a reduction in income of approximately $471,000 which represented 4.3 per cent. of our PBT.

16

INVITATION STATISTICS

Offer Price(1) Placement Price for Placement Shares Placement Price for Reserved Shares NTA NTA per Share based on:­ (a) the audited NTA of the Group as at 31 December 1999 before adjusting for the proceeds from the Investor Subscription and the estimated net proceeds of the New Shares and based on the pre-Investor Subscription and pre-Invitation issued share capital of 180,984,000 Shares (the ``Pre-Adjusted NTA per Share'') after adjusting for the proceeds from the Investor Subscription and the estimated net proceeds of the New Shares and based on the postInvestor Subscription and post-Invitation issued share capital of 230,584,000 Shares (the ``Adjusted NTA per Share'') : 5.67 cents : : : $0.52 $0.52 $0.47

(b)

:

14.57 cents

Premium of the Offer Price over:­ (a) (b) the Pre-Adjusted NTA per Share as at 31 December 1999 of 5.67 cents the Adjusted NTA per Share of 14.57 cents : : 817 per cent. 257 per cent.

Earnings Historical EPS based on the audited results of the Proforma Group for FY1999 and the pre-Investor Subscription and pre-Invitation issued share capital of 180,984,000 Shares Historical EPS had the Service Agreements as set out under the section on ``DIRECTORS, MANAGEMENT AND STAFF -- Service Agreements'' on pages 55 and 56 of this Prospectus been in effect for FY1999 and based on the pre-Investor Subscription and pre-Invitation issued share capital of 180,984,000 Shares PER Historical PER based on the Offer Price and the historical EPS of 4.11 cents for FY1999 Historical PER based on Offer Price and the historical EPS had the Service Agreements as set out under the section on ``DIRECTORS, MANAGEMENT AND STAFF -- Service Agreements'' on pages 55 and 56 of this Prospectus been in effect for FY1999 Net Operating Cash Flow(2) Historical net operating cash flow per Share for FY1999 based on the pre-Investor Subscription and pre-Invitation share capital of 180,984,000 Shares : 5.31 cents : : 12.65 times 13.44 times : 4.11 cents

:

3.87 cents

17

Price to Net Operating Cash Flow Ratio Ratio of Offer Price to historical net operating cash flow per Share for FY1999 based on the pre-Investor Subscription and pre-Invitation share capital of 180,984,000 Shares Market Capitalisation Market capitalisation of our Company based on the Offer Price of $0.52 and based on the post-Investor Subscription and post-Invitation share capital of 230,584,000 Shares

Notes:­ (1) (2) The Offer Price of $0.52 has been used for the purpose of presenting the Invitation Statistics. Net operating cash flow is defined as profit attributable to the members of the Company with depreciation added back.

:

9.79 times

:

$119.90 million

18

SUMMARY OF FINANCIAL INFORMATION

The following selected financial information should be read in conjunction with the Accountants' Report and the full text of this Prospectus. RESULTS The audited consolidated profit and loss statements of the Proforma Group for the past five financial years ended 31 December 1999, including EPS, are set out below:­

-------------- Year ended 31 December -------------- 1995 1996 1997 1998 1999 $'000 $'000 $'000 $'000 $'000 Turnover Other income

(1)

31,432 2

42,897 12

60,837 18

69,747 46

103,138 28

Earnings before depreciation, interest expense and taxation Depreciation Interest expense Operating profit Share of (loss)/profit of associated company Profit before taxation and minority interests Taxation Profit after taxation Minority interests Profit after taxation, minority interests but before extraordinary item Extraordinary item(2) Profit attributable to Shareholders Earnings per Share(3) (cents)

Notes:­ (1) (2) (3) Other income relates to interest income.

2,841 (313) (896) 1,632 -- 1,632 (541) 1,091 (49) 1,042 -- 1,042 0.58

5,104 (406) (839) 3,859 (191) 3,668 (1,177) 2,491 (61) 2,430 1,759(2) 4,189 1.34

5,917 (569) (929) 4,419 (17) 4,402 (1,156) 3,246 84 3,330 -- 3,330 1.84

5,411 (1,440)

(4)

14,148 (2,166)(4) (1,468) 10,514 334 10,848 (3,123) 7,725 (284) 7,441 -- 7,441(5) 4.11

(1,355) 2,616 583 3,199 (912) 2,287 (28) 2,259 -- 2,259 1.25

The extraordinary item relates to net gain on disposal of leasehold properties. For comparative purposes, the historical EPS for FY1995 to FY1999 have been computed based on the profit after taxation and minority interests but before extraordinary item divided by the pre-Investor Subscription and pre-Invitation issued share capital of 180,984,000 Shares. During FY1998, we had revised the estimated useful lives of certain fixed assets for depreciation purposes to more accurately reflect the economic useful lives of these fixed assets. The impact of the change in the accounting estimate is to decrease profit before taxation for FY1998 and FY1999 by approximately $182,000 and $68,000 respectively. During FY1999, a subsidiary, Osim (M'sia), had revised the estimated useful lives of certain fixed assets for depreciation purposes to be consistent with the Group's accounting policy. The impact of the change in the accounting estimate is to decrease profit before taxation for FY1999 by approximately $105,000.

(4)

(5)

Had the Service Agreements referred to in the section on ``DIRECTORS, MANAGEMENT AND STAFF -- Service Agreements'' on pages 55 and 56 of this Prospectus been in place for FY1999, the profit attributable to Shareholders for FY1999 would have been $7.0 million.

19

FINANCIAL POSITION The audited consolidated balance sheets of the Proforma Group as at the end of each of the past five financial years ended 31 December 1999, including NTA per Share, are set out below:­

------------------ As at 31 December ------------------ 1995 1996 1997 1998 1999 $'000 $'000 $'000 $'000 $'000 Fixed assets Investment in associated company Current assets Stocks Trade debtors Other debtors, deposits and prepayments Due from affiliated companies -- trade -- non-trade Due from directors Fixed deposits Cash and bank balances 3,236 380 -- -- 227 10,901 Current liabilities Trade creditors Bills payable to banks (secured) Other creditors and accruals Due to an associated company -- trade Due to affiliated companies -- trade -- non-trade Due to directors Term loans, current portion Short term bank loans Hire purchase liabilities, current portion Proposed dividend Provision for taxation Bank overdrafts (secured) -- -- 2,112 1,279 1,489 -- -- 1,044 1,992 (12,036) Net current (liabilities)/assets (1,135) 4 559 -- 2,123 1,207 36 370 1,620 1,203 (18,210) 2,913 321 -- 2,361 537 1,497 118 370 2,461 630 (26,950) 7,174 260 -- 830 660 379 112 370 2,291 -- (18,434) 6,255 -- 46(2) 1,600(2) 646 760 115 75 4,022 3,297 (36,522) 85 -- -- -- 15 361 2,462 259 1,399 6,633 2,870 1,585 2,228 11,381 5,046 3,222 8,328 1,967 4,658 12,017 8,925 3,300 1,040 2,776 558 2,311 21,123 7,039 288 3,436 -- 5,668 34,124 4,634 -- 3,345 -- 3,080 24,689 8,587 10(2) -- 236 4,265 36,607 3,750 2,168 1,140 5,808 3,204 2,126 7,706 6,094 3,893 5,452 5,818 2,360 12,089 8,846 2,574 17,272 -- 12,349 303 13,455 333 16,607 905 18,276 1,068

20

------------------ As at 31 December ------------------ 1995 1996 1997 1998 1999 $'000 $'000 $'000 $'000 $'000 Less: Non-current liabilities Hire purchase liabilities, non-current portion Term loans, non-current portion Provision for pension benefits Deferred taxation -- (8,837) -- (102) (8,939) 7,198 Proforma shareholders' equity Share capital Revenue reserves Enterprise expansion fund Capital reserve Translation reserves 3,000 3,571 -- -- (154) 6,417 Minority interests 781 7,198 NTA per Share(1) (cents)

Notes:­ (1) (2) For comparative purposes, the historical NTA per Share as at 31 December 1995 to 1999 have been computed based on the pre-Investor Subscription and pre-Invitation issued share capital of 180,984,000 Shares. Subsequent to the year ended 31 December 1999, these amounts have been repaid in June 2000.

(80) (4,175) -- (294) (4,549) 11,016

(169) (6,886) -- (147) (7,202) 13,760

(145) (7,820) -- (38) (8,003) 15,764

(240) (7,255) (157) (369) (8,021) 11,408

3,000 7,343 31 16 (204) 10,186 830 11,016 5.63

3,000 9,508 114 91 294 13,007 753 13,760 7.19

3,100 11,157 125 347 208 14,937 827 15,764 8.25

3,100 6,375 149 466 179 10,269 1,139 11,408 5.67

3.55

21

INFORMATION ON THE COMPANY AND THE GROUP

SHARE CAPITAL We were incorporated on 27 August 1983 in the Republic of Singapore under the Act, as a limited exempt private company. We have only one class of shares. As at 31 December 1999, our authorised share capital was $5,000,000 divided into 5,000,000 ordinary shares of $1.00 each and our issued and paid-up share capital was $3,100,000 divided into 3,100,000 ordinary shares of $1.00 each. At the extraordinary general meeting held on 26 June 2000, our Shareholders approved, inter alia, the following:­ (a) (b) the increase of our authorised share capital from $5,000,000 divided into 5,000,000 ordinary shares of $1.00 each to $50,000,000 divided into 50,000,000 ordinary shares of $1.00 each; the capitalisation of $5,921,000 from our revenue reserves for a bonus issue of 5,921,000 ordinary shares of $1.00 each in our capital, credited as fully paid, to the Shareholders of the Company on the basis of 1,910 new ordinary shares for every 1,000 ordinary shares held (the ``Bonus Issue''); the subdivision of each of the existing ordinary shares of $1.00 each in the authorised share capital and issued and paid-up share capital of the Company into 20 shares of $0.05 each (the ``Stock Split''); our conversion to a public limited company and the change of our name to Osim International Ltd; the adoption of a set of new Articles of Association; the issue of 564,000 new ordinary shares of $0.05 each to Mr Chen Chuan I and Ms Ho Jui Mei as consideration for the acquisition of their aggregate 10 per cent. equity in Osim (Taiwan) pursuant to the Restructuring Exercise; the issue of 11,600,000 new ordinary shares of $0.05 each to Investor pursuant to the Subscription Agreement; the issue of the New Shares which form part of the Invitation; a shareholders' mandate authorising Osim (S) to enter into recurrent transactions of a revenue and/or trading nature firstly, in the form of sales of our products to Osim (Thai), Osim (USA), PT Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang) and secondly, warehousing and freight forwarding contracts with ODCPL (these transactions are more particularly described on pages 62 to 69 of this Prospectus under ``INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS''); the Osim Share Option Scheme (the ``Scheme'') (details of which are set out on pages 59 to 61 of this Prospectus and in Appendix A on pages 113 to 136 of this Prospectus) and the authorisation to our Board of Directors to implement and administer the Scheme, to modify and/or amend the Scheme, to offer and grant options and to allot and issue new Shares pursuant to the exercise of options granted pursuant to the Scheme subject to the rules of the Scheme; and the authorisation of the Directors, pursuant to Section 161 of the Act and the provisions of the new Articles of Association becoming effective, to allot and issue such further shares in the Company at any time to such persons, upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued shall not exceed 50 per cent. of the issued share capital of the Company immediately prior to the proposed issue, provided that the aggregate number of shares to be issued other than on a pro-rata basis to the then existing Shareholders of the Company shall not exceed 20 per cent. of the issued share capital of the Company immediately prior to the proposed issue, and, unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. 22

(c)

(d) (e) (f)

(g) (h) (i)

(j)

(k)

As at the date of this Prospectus, we have only one class of shares, being ordinary shares of $0.05 each. The rights and privileges of these Shares are stated in our Articles of Association. There are no founder, management or deferred shares reserved for issuance for any purpose. Our Company's present and paid-up share capital is $9,629,200 comprising 192,584,000 Shares. Upon the allotment of the New Shares, our resultant issued and paid-up share capital will be increased to $11,529,200 comprising 230,584,000 Shares. The details of our Company's issued and paid-up capital since 31 December 1999, being the date of our last audited accounts, and our issued and paid-up share capital immediately after the Invitation are as follows:­

Number of Shares Issued and fully paid ordinary shares of $1.00 each as at 31 December 1999 Bonus Issue 3,100,000 5,921,000 9,021,000 Stock Split Shares issued pursuant to the Restructuring Exercise Shares issued pursuant to the Subscription Agreement Pre-Invitation issued share capital Issue of New Shares Post-Invitation issued share capital 180,420,000 564,000 11,600,000 192,584,000 38,000,000 230,584,000 $ 3,100,000 5,921,000 9,021,000 9,021,000 28,200 580,000 9,629,200 1,900,000 11,529,200

Our Company's authorised share capital and shareholders' funds as at 31 December 1999, before and after adjustments to reflect the increase in authorised share capital, the Bonus Issue, the Stock Split, the issue of Shares pursuant to the Restructuring Exercise and the Subscription Agreement, and the issue of the New Shares are set out below. This should be read in conjunction with the Accountants' Report set out on pages 72 to 94 of this Prospectus.

As at 31 December 1999 $'000 Authorised Share Capital Ordinary shares of $1.00 each Ordinary shares of $0.05 each Shareholders' Funds Issued and fully paid Shares Share premium Accumulated profits Total shareholders' funds 3,100 -- 17,423 20,523 11,529 21,107 11,502 44,138 5,000 -- -- 50,000 As adjusted $'000

23

OUR SHAREHOLDERS Our Shareholders and their respective direct shareholdings immediately before and after the Invitation are as follows:­

Immediately -- Before Invitation -- Number of Shares Shareholders Directors Ron Sim Chye Hock(1) Teo Sway Heong Teo Chay Lee

(2) (2)

Immediately -- After Invitation -- Number of Shares(4) %

%

178,615,800 1,804,200 -- -- -- -- --

92.7 0.9 -- -- -- -- --

157,315,800 1,804,200 500,000 500,000 -- -- --

(3) (3)

68.2 0.8 0.2 0.2 -- -- --

Leow Lian Soon

Khor Peng Soon Michael Kan Yuet Yun(2) Ong Kian Min

(2)

Substantial Shareholders (other than Directors) Investor Other Shareholders (of less than 5% who are related to Directors or substantial Shareholders) Chiang See Thong Other Shareholders (of less than 5% who are not related to Directors or substantial Shareholders) Others(4) Public (including Reserved Shares) 564,000 -- 192,584,000 0.3 -- 100.0* 764,000 58,000,000 230,584,000 0.3 25.2 100.0* -- -- 100,000 ** 11,600,000 6.0 11,600,000 5.0

Notes:­ (1) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo Chay Lee and Mr Leow Lian Soon (our executive Directors), Ms Lim Choon Hui (our Executive Officer) and Mr Chiang See Thong (Dr Ron Sim Chye Hock's brother-in-law, who provided corporate secretarial services to us from 1993 to 1999) respectively by way of a gift as a token of his appreciation of their contributions to our Group. These transfers will be completed immediately after the Invitation is completed. Mr Teo Chay Lee and Mr Leow Lian Soon, both executive Directors, have each been allocated 500,000 Reserved Shares in recognition of their substantial contributions to the Group in their past 11 and 13 years of service to us respectively. The Reserved Shares are offered at $0.47 for each Reserved Share, representing approximately 10 per cent. discount to the Offer Price. Mr Michael Kan Yuet Yun and Mr Ong Kian Min, our independent Directors, have each been allocated 100,000 Reserved Shares. The Reserved Shares are offered at $0.47 for each Reserved Share, representing approximately 10 per cent. discount to the Offer Price in recognition of their future contributions to our Group as members of the Audit Committee. The above executive and independent Directors have no present intention of selling their Reserved Shares within 6 months after the Invitation. (3) The shareholdings of Mr Teo Chay Lee and Mr Leow Lian Soon do not include the Reserved Shares allocated to them. In addition, the shareholding of Mr Leow Lian Soon does not include 30,000 Reserved Shares allocated to his wife, Ms Tao Dong Mei, in recognition of her past and continuing contributions to the Group as a consultant. The shareholding held by Others include the Shares issued to the minority shareholders of Osim (Taiwan) pursuant to the Restructuring Exercise and the 200,000 Shares held by Ms Lim Choon Hui after the Invitation.

(2)

(4)

*The total may not add up to 100 per cent. due to rounding. **Less than 0.1 per cent.

None of our Directors or substantial Shareholders is related to each other except that Ms Teo Sway Heong is the wife of Dr Ron Sim Chye Hock.

24

MORATORIUM As evidence of their commitment to the Group, Dr Ron Sim Chye Hock and Ms Teo Sway Heong, who will in aggregate own or have an interest in 159,120,000 Shares representing 69.0 per cent. of our issued and paid-up capital immediately after the Invitation, do not intend to dispose of or transfer any part of their respective shareholdings for a period of 6 months commencing from the date of our admission to the Official List of the SGX-ST. In addition, Investor has given an undertaking not to dispose of or transfer any part of its shareholding for a period of 6 months commencing from the date of our admission to the Official List of the SGX-ST. In the subsequent 6 months thereafter, Dr Ron Sim Chye Hock and Ms Teo Sway Heong do not intend to reduce their aggregate shareholdings to below 51.0 per cent. of our enlarged share capital.

RESTRUCTURING EXERCISE In connection with the Invitation, we undertook a Restructuring Exercise which consisted of a series of reconstruction agreements entered with our Directors and substantial Shareholders, Dr Ron Sim Chye Hock and Ms Teo Sway Heong. To complete the Restructuring Exercise, we entered into 4 separate share sale agreements with Mr Leow Lian Soon, Ms Tan Poh Khim, Mr Chen Chuan I and Ms Ho Jui Mei respectively. Save for Mr Leow Lian Soon who is one of our Directors, Ms Tan Poh Khim, Mr Chen Chuan I and Ms Ho Jui Mei are not related to any of our Directors or substantial Shareholders. Prior to the Restructuring Exercise, we were the holding company of Osim (Shanghai) and the owner of 30 per cent. of the total registered capital of Daito-Osim (Suzhou), our associated company. Osim (Shanghai) is a trading company that imports our products in PRC for wholesale distribution and we are not prohibited by PRC laws to have full ownership of Osim (Shanghai). Resulting from the Restructuring Exercise, Osim (HK), Osim (M'sia) and Osim (Taiwan) became our subsidiaries. The rationale of carrying out the Restructuring Exercise was to reorganise all the various companies under a single holding company. The Restructuring Exercise involved the following steps:­ (a) Acquisition of Osim (M'sia) Pursuant to a reconstruction agreement dated 25 February 2000, we acquired from Dr Ron Sim Chye Hock all the issued and paid up shares owned by Dr Ron Sim Chye Hock in Osim (M'sia) that represented 60 per cent. of the issued and paid up share capital of Osim (M'sia). The transfer of these shares was stated to be effective as of 31 December 1999. The purchase consideration paid by us was $2,500,000 and was arrived at on a willing buyer-willing seller basis. When calculated with reference to the audited profits after taxation of Osim (M'sia) for FY1999, the purchase consideration was equivalent to a PER of approximately 5.6 times. We believe that the purchase consideration is reasonable given the established business and customer base of Osim (M'sia). The purchase consideration was satisfied by off-setting an amount of $2,500,000 from a director's loan owed by Dr Ron Sim Chye Hock to us. The remaining 40 per cent. of the issued and paid up capital of Osim (M'sia) are held by Mr Tay Sim Kim who holds 35 per cent. and Ms Ho Yoke Wah who holds 5 per cent., both of whom are not related to any of our Directors or substantial Shareholders. Mr Tay Sim Kim and Ms Ho Yoke Wah are husband and wife, and are the general manager and assistant general manager of Osim (M'sia) respectively. They are also directors of Osim (M'sia). (b) Acquisition of Osim (HK) In accordance with reconstruction agreements dated 31 December 1999, we acquired from Dr Ron Sim Chye Hock and Ms Teo Sway Heong all their issued and paid up shares in Osim (HK), representing in aggregate 95.1 per cent. of the issued and paid up share capital of Osim (HK). The aggregate purchase consideration was $10,770,000 which was arrived at on a willing buyer-willing seller basis. When calculated with reference to the audited profits after taxation of Osim (HK) for FY1999 and adding back the 3 per cent. royalty fees paid by Osim (HK) to Osim (S) in FY1999, the aggregate purchase consideration was equivalent to a PER of approximately 5.6 times. We believe that the above basis is reasonable given the established business and customer base of Osim (HK). The aggregate purchase consideration was satisfied by off-setting an amount of $10,770,000 from a loan owed by Dr Ron Sim Chye Hock to us. 25

We have also entered into a share sale agreement dated 20 March 2000 with Ms Tan Poh Khim to purchase the entire remaining minority interest in Osim (HK) which then became our wholly-owned subsidiary. The purchase consideration for Ms Tan Poh Khim's shares was $1,300,000 payable in cash which was arrived at on a willing buyer-willing seller basis, and was equivalent to a PER of approximately 13 times. We were prepared to pay a higher PER valuation for the acquisition of the above remaining minority interest so that Osim (HK) would become our wholly-owned subsidiary. We also believe that the above basis is reasonable as the acquisition gave us full management control of Osim (HK) which will enable us to formulate business plans and chart strategic directions of Osim (HK) expeditiously and exploit business opportunities as and when they arise. Our Directors believe having total management control of Osim (HK) is highly desirable to our Group as Hong Kong is one of our major markets. (c) Acquisition of Osim (Taiwan) Pursuant to a reconstruction agreement dated 9 December 1999, we acquired from Dr Ron Sim Chye Hock all his issued and paid up shares in Osim (Taiwan) representing 58 per cent. of the issued and paid up share capital of Osim (Taiwan). The purchase consideration was $230,000 which was arrived at on a willing buyer-willing seller basis. When calculated with reference to the audited profits after taxation of Osim (Taiwan) for FY1999, the purchase consideration was equivalent to a PER of approximately 5.6 times. We believe that the purchase consideration is reasonable given the established business and customer base of Osim (Taiwan). The purchase consideration was satisfied by off-setting an amount of $230,000 from a loan owed by Dr Ron Sim Chye Hock to us. Concurrently, we also entered into 3 share sale agreements with Mr Leow Lian Soon, Mr Chen Chuan I and Ms Ho Jui Mei and purchased from them 2 per cent., 5 per cent. and 5 per cent. respectively of the issued and paid up share capital of Osim (Taiwan). The purchase consideration we paid for Mr Leow Lian Soon's interest was $8,000 which was arrived at on a willing buyer-willing seller basis, and was satisfied in cash. The purchase consideration is equivalent to the consideration paid for Dr Ron Sim Chye Hock's interest on a price per share basis. The purchase consideration we paid for Mr Chen Chuan I's and Ms Ho Jui Mei's shares was $146,500 each which was arrived at on a willing buyer-willing seller basis, and which was satisfied by the allotment and issue of 282,000 Shares based on the Offer Price credited as fully paid up to each of them respectively. The purchase consideration represents a premium of approximately 13 per cent. above the audited NTA of Osim (Taiwan) as at 31 December 1999. The remaining 30 per cent. of the equity interest in Osim (Taiwan) are held by Mr Chen Chuan I (13 per cent.), Mr Teng Seng Sung (10 per cent.), Ms Ho Jui Mei (5 per cent.), Mr Liu Shih Wen (1 per cent.), Ms Chen Shin Chen (0.5 per cent.) and Ms Huang Chi Jane (0.5 per cent.). None of them is related to any of our Directors or substantial Shareholders. Mr Chen Chuan I and Ms Huang Chi Jane are husband and wife, and are the general manager and finance manager of Osim (Taiwan) respectively. Ms Chen Shin Chen is the daughter of Mr Chen Chuan I and Ms Huang Chi Jane. Mr Chen Chuan I is also a director of Osim (Taiwan).

26

GROUP STRUCTURE The structure of our Group immediately after the Invitation is set out below:­

Dr Ron Sim Chye Hock and Ms Teo Sway Heong

Investor

Others

Public (including Reserved Shares)

69.0%

5.0%

0.8%

25.2%

Osim International Ltd

100%

70%

60%

100%

30%

Osim (HK)

Osim (Taiwan)

Osim (M'sia)

Osim (Shanghai)

Daito-Osim (Suzhou)

Our subsidiaries and our associated company are not listed on any stock exchange.

HISTORY The origins of our business began in November 1980 when Dr Ron Sim Chye Hock commenced his sole proprietor business of retailing an array of household goods such as knives, knife-sharpeners and mobile drying rods under R. Sim Trading Co. We were subsequently incorporated in 1983 under the name ``R. Sim Trading Co. Pte Ltd'' to take over the sole proprietorship. Operating from our first premises at a shop at Peoples' Park, we were then only selling 2 health-care related products, namely, hand-held massagers and foot reflexology rollers. By 1987, we had created a distribution network of 10 outlets in Singapore, Hong Kong and Taiwan marketing household goods and health-care related products. Our founder, Dr Ron Sim Chye Hock then felt that there was market potential for specialty home health care products in an increasingly affluent Asia. As early as 1987, we saw that the home healthcare products sector was dominated by a disparate group of equipment manufacturers with little or no emphasis on marketing and as a result there was a lack of brand consciousness among consumers. Hence, in 1989 we decided to bring together different home health-care products from different equipment manufacturers and market them using specialty branding. For this purpose, we created the brand ``Health Check & Care'' to build and exploit a niche market in home health-care products. Our business grew rapidly and by 1994 we had approximately 60 point-of-sales outlets in Asia. In our business strategy we believe that marketing and strengthening our brand equity is of vital importance. As ``Health Check & Care'' was a generic name and was difficult to be registered as a trademark in many countries, in 1996 we officially launched our ``OSIM'' brand name which we had been using since the early 1990s. ``OSIM'' is a combination of our founder's surname and the letter ``O'' which symbolises our vision to become a globally recognised brand. As at 31 May 2000, we have registered the name ``OSIM'' as a trademark in 26 countries spanning Asia (including Australia), Europe, North and South America, South Africa and Israel. We have also made trademark applications for ``OSIM'' in 10 other countries. 27

A major tenet of our marketing strategy is to have an extensive point-of-sales network and geographical coverage in our markets. Presently, we have point-of-sales outlets in Singapore located in all major departmental stores and suburban shopping malls. We began developing our overseas distribution network in 1986 when we ventured into Hong Kong and in the following year, into Taiwan. To ride on the rapid development of the Asian economies in the early 1990s, we expanded our operations to Thailand in 1990, Malaysia in 1992, Indonesia and Beijing in 1993, and Shanghai in 1994 by opening point-of-sales outlets in these countries either directly or through our franchisees and distributors. We expanded our markets to the United States in 1997 and Dubai in 1999 through the appointment of franchisees/licensees to market and sell our products in these countries. At present, of our 10 franchisees/licensees, 3 are our subsidiaries, 6 are affiliated companies controlled by our Controlling Shareholders and the remaining 1 is an unrelated company. Our point-of-sales outlets in Singapore, Hong Kong, Taiwan and Malaysia are operated by our Company and our subsidiaries. The rest of our point-of-sales outlets are franchised outlets with the exception of outlets in the PRC for which we have trademark and licensing agreements with the owners. It is our business strategy that future expansion of our point-of-sales network will be substantially undertaken by franchising. We have begun to gradually move away from being a retailer to being a franchisor and, in furtherance of this strategy, we have also entered into franchise agreements with our subsidiaries, Osim (HK), Osim (Taiwan) and Osim (M'sia). We believe that franchising gives us the ability to focus our attention on conceptualising and developing new products, improving existing products and brand management. Further, franchising will allow us to expand and multiply our point-of-sales outlets to more geographical markets at a faster pace with significantly less capital exposure. Franchising is also less taxing on our management's time than operating self-owned outlets in penetrating new markets. A more detailed description of our business model as a franchisor is given under the section on ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus. To diversify our sources of revenue, in 1998 we ventured into wholesale distribution of health-check and health-care products such as blood pressure monitors, thermometers and pulse massagers, in Singapore to hospitals like Tan Tock Seng Hospital and Kandang Kerbau Women's and Children's Hospital, pharmacies like the Apex Pharmacy and the Guardian Pharmacy chains, and Chinese medical halls. While wholesale distribution is currently only carried out in Singapore which contributes between 1 and 2 per cent. to our turnover in Singapore, we intend to develop this business and carry out wholesale distribution in all our principal markets eventually. As part of our business strategy to extend our control over our business process and to exercise greater involvement and participation in the source of supply for our products, in 1995 we entered into a joint venture with Daito Electric Machine Industry Company Limited (``Daito''), a Japanese supplier to our Group, to take up a 30 per cent interest in Daito-Osim (Suzhou) with Daito taking up the remaining 70 per cent.. Presently, Daito-Osim (Suzhou) has a plant in the Singapore-Suzhou Industrial Park in Jiangsu, PRC that manufactures products like hand-held massagers and foot reflexology rollers mainly for re-export and distribution to the markets in Japan and USA. Under the joint venture agreement, Daito has the right to appoint 3 directors of Daito-Osim (Suzhou) while we have the right to appoint 2 directors as we are the minority shareholder. However, Daito-Osim (Suzhou) shall not change the scope of its business activities from that as described in the aforegoing, without the consent of Daito and us. Any material financial commitment which is above US$100,000 or material contract to be entered by Daito-Osim (Suzhou) also requires the consent of Daito and us. The joint venture agreement is of unlimited duration but may be terminated with the consent of Daito and us. Neither Daito nor us can transfer an interest in the shares in Daito-Osim (Suzhou) without first making an offer to sell the interest to the other shareholder. On 28 March 2000, our founder Dr Ron Sim Chye Hock was conferred an honorary doctorate in business administration by the Wisconsin International University in recognition of his prominent achievements in business.

28

In July 2000, pursuant to the Subscription Agreement, Investor, a wholly-owned subsidiary of Temasek Holdings (Private) Limited, subscribed for 11,600,000 new Shares, representing approximately 5 per cent. of the post-Investor Subscription and post-Invitation enlarged share capital of the Company, at the price of $0.47 per Share, representing a discount of approximately 10 per cent. to the Offer Price. We believe that the investment by Investor is a milestone in our corporate development and an endorsement of our Group. Investor has given an undertaking not to dispose of or transfer any part of its respective shareholding for a period of 6 months commencing from the date of our admission to the Official List of the SGX-ST. Mr Khor Peng Soon, a nominee of Investor, was appointed as our non-executive Director in June 2000.

BUSINESS Range of Products We are in the business of marketing, distributing and franchising of a comprehensive range of home health-care, health-check and healthy lifestyle products. We have in the last quarter of FY1999 adopted franchising as a business model, the details of which are set out in the section on ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus. Other than Daito-Osim (Suzhou), all the Group's production needs are out-sourced to contract manufacturers in Japan and Taiwan as we believe in focusing on our strengths in marketing and brand management. Our products can be broadly classified into 3 categories:­ Healthy Lifestyle To cater to the needs of an increasingly affluent society, we market massage chairs, massage mattresses, personal home saunas, slimming belts and fitness equipment like bicycles and riders, which are aimed at providing customers with relaxation techniques and luxurious comfort. Health Care To help relieve muscular and stress-induced strains, we provide foot reflexology rollers, pulse massagers, hand-held massagers, eye massagers, massaging hairbrushes, and hot and cold gel packs. We also market mechanical rotary toothbrushes and hearing aids. Health Check We also market a range of diagnostic equipment like blood pressure monitors, pedometers which are used for measuring calories burned during exercise, glucometers which are used for monitoring blood sugar levels for diabetics, electronic weight and height measuring machines, digital thermometers and ear scan thermometers. The ear scan thermometer is popular for use in paediatric care (i.e. child care) as the device consists of a short probe which can be gently inserted into the outer ear canal to take an accurate reading of the body temperature. Apart from the above products, we plan over the next 2 years to market in Singapore, posters, literature, music compact discs and tapes on the theme of health and healthy living to provide a total health experience to our customers. If this is well received in Singapore, we may extend the sale of these products to our overseas outlets.

29

Business Process We operate a comprehensive business process which can be schematically represented below:-

w

Design

w

Procurement & Supply

w

Advertising & Promotion Product Development and Innovation

w

Distribution & Sales

w

After-Sales Service & Customers' Feedback

(a) Design We internally conceptualise features and design outlooks for products such as portable hand massagers, pulse massagers and foot reflexology rollers which we believe can be marketed in our primary markets of Singapore, Hong Kong and Taiwan. We then invite design professionals and contract manufacturers with whom we have close relationships to submit designs in respect of these new products. Following a review process with the design professionals and contract manufacturers, we will approve designs and submit them to the contract manufacturers for the manufacture of the products. We have an understanding with these design professionals and contract manufacturers that they will not use these designs in the manufacture of competing products by other customers without our consent. In the past, we have consented to the use of these designs for other customers for markets in which we have no presence, e.g. Japan and Europe. In light of the above, we did not see a need to claim ownership rights over the designs.

30

w

(b) Procurement and Supply Substantially all of our products, representing 99 per cent. of our turnover in FY1999, are sold under our own brand names, including major products like massage chairs, blood pressure monitors and slimming belts. Other than Daito-Osim (Suzhou), all the Group's production needs are out-sourced to contract manufacturers in Japan and Taiwan as we believe in focusing on our strengths in marketing and brand management. In order to exercise more control over the source and quality of products, we may enter into joint venture arrangements with our contract manufacturers to take up an equity stake in their operations. Currently, as disclosed in the section on ``HISTORY'' on pages 27 to 29 of this Prospectus, we have a joint venture agreement with Daito Electric Machine Industry Company Limited under which we took up a 30 per cent. equity interest in Daito-Osim (Suzhou). (c) Advertising and Promotion We promote and market our brand name aggressively as we recognise that we are tapping into a consumer-oriented market. We do direct advertising through television commercials, printed advertisements and product launches and other more indirect marketing through sponsoring of television programmes and health documentaries, and participating in exhibitions. We expended $4.5 million, $7.1 million and $10.5 million on advertising and promotion in FY1997, FY1998 and FY1999 respectively, representing 7.4 per cent., 10.2 per cent. and 10.2 per cent. of our Group's turnover in those financial years respectively. (d) Distribution and Sales We believe that we have one of the largest distribution networks of home health-care products retail stores in Asia. As at 31 May 2000, we had 37 point-of-sales outlets in Singapore, 21 in Malaysia, 40 in Hong Kong, 30 in Taiwan, and through our franchisees and business partners, our products are also sold in 5 point-of-sales outlets in Thailand, 14 in Indonesia and 44 in PRC. We have also established access points in the Middle East and United States markets with 1 franchised outlet in Dubai and 11 franchised outlets in Los Angeles, San Diego and Orange County, California. (e) After-Sales Service and Customers' Feedback Our point-of-sales outlets strive to achieve the one-stop shop concept. Not only do our outlets carry our entire comprehensive range of home health-care products, they also provide servicing and repair services to customers, except for bulky products like massage chairs for which we provide on-site servicing. We also have in our organisation a customer management system which captures our customers' data in key markets at our point-of-sales outlets mainly through the warranty cards returned by our customers and comments given by our customers through Internet e-mails and product hotlines. The customers' data is compiled to form a customer data-base and then `datamined' by our management feeding valuable information to our various functional divisions like marketing, sales and order fulfilment, and service and support. (f) Product Development and Innovation We add value to the supply-to-sales chain by constantly innovating new product concepts such as by improving the aesthetic features (such as the colours, designs, finishings, functions and fabric) of our products. We also continuously seek feed-back from our customers in order to better understand their needs and modify our existing products accordingly. In line with our emphasis on marketing, we constantly seek creative marketing approaches to promote our new products. Currently, we are in the process of obtaining ISO 9002 certification of our business processes and are targeting to complete by the third quarter of 2000. The purpose of obtaining ISO 9002 certification is to obtain an external endorsement of our business processes and practices.

31

Strategic Marketing Through taglines like ``Health is An Attitude To Life'' and ``Good Health Begins With Care'', we encourage consumers to be pro-active and to enhance the quality of life by leading a healthy lifestyle and cultivating a healthy mindset. Our strategic marketing efforts focus on the above. To build the image of the OSIM brand among the general public, we engage popular television and movie artistes like Carina Lau, Lydia Sum and Moses Lim who have a strong following among the Chinese population in Asian countries to endorse our products. To enhance public awareness of our name, we also sponsor or participate in popular Hong Kong television entertainment programmes, special events and charities like for instance, in Singapore, The President Star Charity, Star Search, the Health Tips documentary series and the National Healthy Lifestyle Campaign. Ultimately, the aim of our marketing efforts is to strengthen the positioning of our OSIM brand in the markets we operate. To help us further enhance the value of our OSIM brand through wider recognition, and to assist us in positioning ourselves for further growth, we commissioned the services of Interbrand Pte Ltd in early 1999. Interbrand Pte Ltd is a global brand consultant whose clientele includes leading consumer multi-nationals like IBM, British Airways, Proctor & Gamble and Philips, and the Singapore Tourism Board and Singapore Trade Development Board. To handle competitive pressures from manufacturers of low-priced products, we have developed NORO as a secondary brand to sell lower-priced massage chairs and kneading massagers to cater to the segment of consumers in PRC which is sensitive to pricing. With the assistance of Interbrand Pte Ltd, we have unveiled a new corporate logo in April 2000 to replace our previous logo. The new logo seeks to portray a more international and forward-looking image. The tri-colours of the arcs around our name in the new logo symbolise our quest for global expansion through blue which signifies the blue sky, green which signifies the green land and orange which signifies the vibrancy of light and spirit. We have made applications to register our new corporate logo as a trademark in the countries where required under the law, the details of which are more particularly set out in the section on ``INTELLECTUAL PROPERTY RIGHTS'' on pages 36 and 37 of this Prospectus. Under the new modern image, we are working towards adopting a new shop layout concept by re-classifying the products that we currently market under the themes of `relaxation', `healthy living', `beauty/fitness' and `spirit'. This will be carried out gradually and in tandem with new product lines that we intend to introduce (as more particularly described under the section on ``PROSPECTS AND FUTURE PLANS'' on pages 45 to 47 of this Prospectus).

32

Organisational Management We have moved away from the conventional hierarchical form of management which emphasises central command and control to one which is predicated on an open and interactive management style. Our management concept can be schematically represented as follows:­

Establishing the vision

w

Communicating the vision

w

Goal-setting and strategising

establishing the vision

We have established a vision for ourselves to be a global leader in home health-care and healthy lifestyle products. Guided by this vision, our management has steered the Group from being a retailer of household products to being one of the leading brand names in Asia today in home health-care products. To achieve the status as a global player, barring unforeseen circumstances, we plan to have worldwide, 300 point-of-sales outlets by the year 2001, 500 point-of-sales outlets by the year 2003 and 1,000 point-of-sales outlets by the year 2008. This would be in addition to our intention to build a significant presence on the Internet by engaging in e-commerce.

communicating the vision

We strive to communicate our vision to every employee in the Group and to get the employees to appreciate how their individual actions support our corporate objective to be a global leader in home health-care products. To emphasise the importance of our strategies to achieve our corporate vision, senior management adopt a pro-active, `hands-on' and `lead by example' style of management. We also communicate our vision and business strategies through holding regular sales talks with our marketing staff and annual group conferences that involve all senior executives and managers in our organisation.

33

w

w

Feedback and re-learning

goal-setting and strategising To realise our vision, each functional division in our organisation is involved in the following process:­ (i) (ii) (iii) benchmarking targets; identifying strategic measures to improve the division's performance and efficiency that are in line with our overall corporate strategy and direction; and allocating our resources towards achieving our benchmarked targets and investing in strategic initiatives.

feedback and re-learning As a marketing-oriented company, we believe that our business environment is complex and we strive to be a learning organisation in order to apply the most effective business strategies. Our management believes that the development of our business strategies is a process to which all employees can contribute. We actively seek feedback from our staff at all levels to test the assumptions made in our strategies and to see if they are consistent with the practical experience and observations of our front line staff. Distribution Network We have developed, and will continue to further develop, an extensive distribution network in order to have control over our point-of-sales outlets. This is because we believe that the quality of sales service and strategic marketing are as important as the quality of our products. Our franchisees are obliged under our franchise agreements to follow our retail concept and advertising guidelines rigorously. More details on our franchise model are given in the section ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus. We also believe our extensive distribution channels give us an important competitive edge as we reap economies-of-scale in procurement of products, product development, and brand and service quality developments. Our present distribution network consists of point-of-sales outlets in retail locations. In addition, in Singapore, our distribution network also consists of wholesale distribution channels through hospitals like Tan Tock Seng Hospital and Kandang Kerbau Women's and Children's Hospital, pharmacies like the Apex Pharmacy and the Guardian Pharmacy chains, and Chinese medical halls. The point-of-sales outlets in Singapore, Hong Kong, Taiwan and Malaysia are operated by us predominantly out of rented premises. Our point-of-sales outlets in USA, Indonesia, Thailand and Dubai are operated by our franchisees for which more details are set out in the section on ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus. Our point-of-sales outlets in PRC are operated by PRC companies, namely, Osim (Beijing), Osim GHC (SH) and HCC (Langfang) which are not members of our Group and with which we have entered into licensing and distribution agreements (the ``Licensing and Distribution Agreements'') as present PRC laws do not permit foreign companies to grant franchises in the country. We do not own the point-of-sales outlets in USA, Indonesia, Thailand, Dubai and PRC. Under the Licensing and Distribution Agreements, we charge Osim (Beijing), Osim GHC (SH) and HCC (Langfang) a licensing fee of between 0.25 and 5 per cent. of their turnover for use of our trademarks. The licensees are contractually bound to distribute our products exclusively and must purchase the products from us directly and not through any third parties. They are not permitted to distribute the products outside PRC. We presently sell our products at cost plus a mark-up to Osim (Beijing), Osim GHC (SH) and HCC (Langfang). Therefore, under the Licensing and Distribution Agreements, we have 2 revenue sources, namely, (i) the licensing fees and (ii) the sale of our products. The Licensing and Distribution Agreements are of 5 years duration each and may be renewed with the consent of the licensees and us.

34

FRANCHISE MODEL Our long-term growth strategy is to position ourselves as a franchisor. We believe that through franchising we can expand and multiply our point-of-sales outlets to cover more geographical markets at a more rapid rate than we have ever experienced. We have, since the last quarter of FY1999, adopted the franchise business model to allow us to focus on our marketing strengths. In line with our new business model, we had, in May 2000 entered into franchising arrangements with Osim (HK), Osim (Taiwan) and Osim (M'sia) notwithstanding that they are our subsidiaries. Our other franchisees are Osim (USA), Osim (Thai) and PT Sharon (who are not members of our Group but are controlled by our Controlling Shareholders) and RSH in Dubai who is not a member of our Group and is an independent third party. As described in the section on ``BUSINESS -- Distribution Network'' on page 34 of this Prospectus, for the PRC market, we did not appoint any franchisees because of PRC laws but we had, in May 2000, licensed Osim (Beijing), Osim GHC (SH) and HCC (Langfang) to be our distributors under the Licensing and Distribution Agreements. The shareholders of Osim (Beijing), Osim GHC (SH) and HCC (Langfang) are disclosed under the section on ``INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS'' on pages 62 to 69 of this Prospectus. The advantages of adopting franchising as a business model, in our opinion, are that it will entail less capital risk in penetrating new geographical markets and will consume less management resources as compared to operating self-owned outlets. It will also allow us to concentrate on what we believe are our main strengths which are strategic marketing and brand enhancement. Franchising is also widely recognised as a business model which has been capitalised by major consumer brands like BodyshopTM, McDonaldsTM, Pizza HutTM and Guess?TM to attain penetration in major global markets. Under the terms of our standard franchise agreement (which may be subject to modifications depending on the circumstances of the franchisee and the markets concerned), we charge our franchisee a one-time franchise fee. As in all franchise agreements, we also charge royalties (as more described in the paragraphs below) for use of our brand name. Our franchisees must purchase the franchised products from us directly and not through any third parties. We presently sell our products at cost plus a mark-up to our franchisees. Our franchisees are contractually bound to market our products exclusively and follow our retail concept and store lay-out in their point-of-sales outlets. The franchises we have awarded are all currently restricted to the country in which the franchisee is incorporated, save for the franchise to RSH which covers Kuwait as well as United Arab Emirates where RSH is incorporated. Presently, our franchise agreements are each of 5 years' duration and may be renewed with the consent of the franchisee and us. The revenue sources under our franchise model are as follows:­ (a) franchise fee In our standard franchise agreement, our current franchise fee ranges from US$10,000 to US$100,000. For our subsidiaries who have been appointed as our franchisees, i.e. Osim (M'sia), Osim (Taiwan) and Osim (HK), we have not levied the franchise fee. For franchisees who are previously our distributors and are appointed as our franchisees when we adopted the franchise business model, we have not charged them the franchise fee either. For the above reasons, the contribution of franchise fees to our profit before taxation was insignificant in FY1999. Moving forward, we intend to charge new franchisees the franchise fee. However, depending on our assessment of the market conditions and the difficulty of market penetration, we are prepared to waive or suspend the franchise fee. (b) royalties We currently collect royalties based on the sales made by the franchisees of between 0.25 per cent. and 5 per cent., depending on the size of the potential markets they operate in for our products. In order to assist our franchisees to obtain a foothold in the market and lower the start-up costs, we are prepared to impose a graduated scale for royalty payments until such time as the franchisees' businesses have achieved performance targets set by us. The performance targets, which will be based on turnover, will be determined on a case-by-case basis, depending on the size and maturity of the markets in which the franchisees operate.

35

(c) management fees For providing technical assistance, management and consultancy services to our franchisees, we are entitled to be reimbursed for all costs incurred by us such as travel costs, accommodation, time-costs charged for the services of our employees and overseas allowances paid to our employees. (d) sale of products We sell our products at cost plus a mark-up to the franchisees, thereby generating additional profits for us. Brand management and strategic marketing of our brand and concept are crucial for our franchising business. As the franchisor, we control the type and quality of promotion and marketing to be undertaken by our franchisees. Our present franchisees are obliged to allocate from 2 to 10 per cent. (depending on the market in which they operate) of the value of the total sales made by them for their advertising and promotion budget every year. We reserve the right to review the amount allocated from time to time. Presently, none of our franchisees are allowed to sub-franchise. In future, for large markets like the United States, we may appoint master-franchisees who will have the right to sub-franchise. In such large territories, it may be preferable for us to appoint an entity which has a substantial distribution network and knowledge of the domestic markets.

INTELLECTUAL PROPERTY RIGHTS We regard our trademarks and other intellectual property as being a significant factor of the brand recognition of our products. To protect our trademarks and brand names, we have, as at 31 May 2000, obtained trademark registrations for ``OSIM'' and ``NORO'' in the following jurisdictions:­ ``OSIM'' trademark ASIA · Australia · Brunei · · · · · · · · · · PRC Hong Kong Indonesia Malaysia Philippines Singapore South Korea Taiwan Thailand Vietnam AMERICA · United States of America · Argentina EUROPE · · · · · · · · · · Belgium Netherlands Luxembourg Denmark Norway Russia Spain United Kingdom France Turkey MIDDLE EAST · Israel

AFRICA · South Africa ``NORO'' trademark · · · PRC Indonesia Hong Kong

36

As described earlier in the section on ``BUSINESS -- Strategic Marketing'' on page 32 of this Prospectus, we have made applications to register our new corporate logo as a trademark in PRC, USA and Canada as the laws of these countries require us to do so. The trademark applications in these countries are pending. We do not have to apply to register our new corporate logo as a new trademark in the other countries where we already had registered ``OSIM'' as a trademark. Pursuant to the Licensing and Distribution Agreements, we have granted Osim (Beijing), Osim GHC (SH) and HCC (Langfang) rights to use our trademarks. Pursuant to the franchise agreements, we have granted our franchisees rights to use our trademarks. More details of the Licensing and Distribution Agreements and the franchise agreements are set out under the sections on ``BUSINESS -- Distribution Network'' and ``FRANCHISE MODEL'' on pages 34 to 36 of this Prospectus respectively. As disclosed in the section on ``BUSINESS -- Business Process -- (a) Design'' on page 30 of this Prospectus, at present we do not have ownership rights over the designs of the products for which we are involved in the designing process. Based on our mutual understanding with the design professionals and contract manufacturers, they have sought our consent whenever they wish to use such designs for other customers. Save as disclosed in the above paragraphs of this section, our business is not dependent on any trademarks, copyrights, registered designs, patents or other intellectual property rights. PRODUCT AND SERVICE QUALITY CONTROL We have the following quality controls:­ (a) Product Quality Assurance We subject the prototype of any product to be marketed under our brand to a review by our in-house quality engineer to ensure high material quality and functionality. Our Product Development & Procurement (``PDP'') department provides feed-back to the contract manufacturer like suggesting ways to improve the aesthetic design or to make the product more user-friendly. In addition, we conduct quarterly visits to the factories of our key contract manufacturers in Japan, Taiwan and PRC as part of a process of close consultation with them to ensure maintenance of quality standards. We also conduct batch testing of the new products we order from our contract manufacturers to ensure the products measure up to our quality standards. If the quality does not measure up to our standards, we will not accept the products for delivery. While we have required minor modifications or repairs to be made, we have not encountered any significant faults with the products manufactured by our contract manufacturers. As a reflection of our confidence in the quality of our products, all our products are covered by product warranties given by us. The warranty period for massage chairs is 2 years while the warranty period for other major products we sell like hand-held massagers, pulse massagers, foot reflexology rollers and blood pressure monitors, is 1 year. Our costs of repairing products covered under warranty have been insignificant so far, and we have obtained replacement parts from our contract manufacturers at no additional cost to us. (b) Service Quality Assurance We emphasise marketing and quality service. Our service-oriented culture is adopted at all levels of our organisation. To incentivise our staff to achieve service quality excellence, we have monthly staff recognition awards for deserving employees. To instil our service mindset and oversee our service quality initiatives, we have an in-house service quality (``SQ'') manager to conduct SQ training for both our sales team and back-end office staff. Our front-line staff are trained to provide courteous, efficient and knowledgeable service to customers and to encourage customers to have hands-on experience with our comprehensive range of home health-care products. By doing so, we strive to make shopping at our point-of-sales outlets an informative and satisfying experience.

37

NEW PRODUCTS/ACTIVITIES As described under the section on ``BUSINESS -- Business Process -- (f) Product Development and Innovation'' on page 31 of this Prospectus, we are constantly engaged in product development and innovation by regularly introducing to the market improved and newer models of our products with better aesthetic or more sophisticated features such as touch button controls. We have the intention to introduce new product lines under our OSIM brand. In the future, we may also engage in an extension of our current business activities. These proposed new product lines and activities are described in greater detail under the section on ``PROSPECTS AND FUTURE PLANS -- Expansion of Business'' on pages 45 and 46 of this Prospectus.

RESEARCH AND DEVELOPMENT To date, we have not engaged in any significant research and development activities.

YEAR 2000 COMPLIANCE We understand ``Year 2000 Compliance'' or ``Y2K Compliance'' to mean that neither the performance nor functionality of critical computerised equipment or systems will be affected by information relating to dates prior to, during and after the year 2000. Our computer system is used internally for accounting, processing of purchasing and sales orders, and managing of stocks. Our computers are Y2K compliant and should not be materially affected by the Y2K issue. We do not link our computer system to any external system of our suppliers or customers, hence reducing our exposure to the Y2K problem. We have also received Y2K compliant assurances from majority of our Group's major contract manufacturers and suppliers, and other business associates such as freight forwarders. We have incurred approximately $30,000 for expenses related to the Group's Y2K compliance exercise which had been completed before 31 December 1999. Presently, to the best of our knowledge and based on the information currently available, we do not anticipate the Y2K issue to have a significant impact on our operations, costs and revenue. As at the date of this Prospectus, we have not experienced any problems relating to the Y2K issue.

INSURANCE As disclosed under the section on ``RISK FACTORS -- Industry Specific Risks -- (c) Exposure to Product Liability Laws'', we are exposed to the product liability laws of the United States which, we believe, may impose much higher quantum of damages in the form of punitive damages compared to the product liability laws in the other countries where our products are marketed. Our USA franchisee, Osim (USA), has taken out product liability insurance in California, USA to cover the risks of paying damages arising out of a breach of product liability laws of the USA. Pursuant to the franchise agreement entered with Osim (USA), Osim (USA) has undertaken to indemnify us of any product liability which we may suffer as its products supplier and to hold the product liability insurance for our benefit as well. The premia for the product liability insurance are borne by Osim (USA) and the insurance covers any sum of damages which the insured becomes legally obligated to pay by reason of liability imposed by law provided that the responsibility to pay damages is determined in a law suit brought in the USA, its territories or possessions, Canada or Puerto Rico.

38

GROUP TRAINING POLICY We provide in-house training for our employees in Singapore and our overseas subsidiaries by our in-house SQ manager. In addition, our sales force undergoes a training programme as described below:­ (a) Product Training We have 2 in-house trainers dedicated to train our sales force on our range of home health-care products to meet the needs of our customers. (b) Salesmanship Training We engage external professionals to conduct customised salesmanship training to impart marketing skills to our sales staff. We also send our staff for external courses on general salesmanship training. (b) On-the-Job Training As practical experience is very important in training our sales staff, all newly-recruited sales personnel at our outlets will understudy the shop managers to learn the finer points of the job. Apart from the above training, we organise talks by health-care professionals in our corporate headquarters for our sales staff. Periodically, we also send senior management staff overseas to attend seminars and exhibitions. Our Group's training expenses for FY1999 amounted to $72,000, representing 0.5 per cent. of our payroll costs in FY1999.

ANALYSIS OF TURNOVER AND PROFITS Overview Our revenue from FY1995 to FY1999 was generated:­ (1) Through the Group's distribution network comprising mainly point-of-sales outlets operated by us in Hong Kong, Taiwan, Singapore and Malaysia. Our subsidiaries in Hong Kong, Taiwan and Malaysia are also appointed as our franchisees. In addition, since FY1998, we have sold our products through wholesale distribution in Singapore to hospitals, pharmacies and Chinese medical halls. While wholesale distribution in Singapore currently contributes less than 1 per cent. to our Group's turnover, we intend to develop this business and carry out wholesale distribution in all our principal markets eventually; From sales to affiliated companies (who are our franchisees/licensees in PRC, Thailand, Indonesia and USA) and to third party distributors (who are our franchisees). The affiliated companies are companies in which our Controlling Shareholders have an equity interest, namely Osim (USA) and Osim (Thai), or over which our Controlling Shareholders could exercise management control, namely, PT Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang); and Through franchise fees. Since the last quarter of FY1999, our Group has adopted the franchising model and has been collecting franchise fees. In FY1999, the franchise fees were in relation to amounts collected from third party franchisees and were insignificant.

(2)

(3)

Geographically, our turnover can be classified under:­ (1) (2) (3) North Asia, where our primary markets are Hong Kong, PRC and Taiwan; South Asia, where our primary markets are Singapore, Indonesia, Thailand and Malaysia; and Others which represents principally USA.

39

All our products are purchased directly from our suppliers and/or contract manufacturers. Almost all of our products sold are sourced through our Singapore headquarters. Further details on our major suppliers are set out in the section on ``MAJOR SUPPLIERS AND CUSTOMERS -- Major Suppliers'' on pages 52 and 53 of this Prospectus. Our main management, marketing, product development, administration and other support functions are also centralized in Singapore. Hence, a breakdown of profit before taxation (``PBT'') by geographical region and activities is not meaningful. In general, our most popular Healthy Lifestyle products are our massage chairs which have higher unit selling prices, while pulse and hand-held massagers in our Health Care products category have lower unit selling prices but yield higher margins. Our sales are dependent, to a large extent, on the number of point-of-sales outlets and our advertising and promotion efforts, and may be affected by consumer demand for our products in the various markets that we operate in, which may be brought about by political, economic and social changes. In general, sales through the Group's distribution network yield higher gross profit margins than sales to affiliated companies and third party distributors as products sold through the Group's distribution network are sold directly to end consumers. However, for sales through the Group's distribution network, we have to bear the operating and overhead expenses. Besides our cost of sales (represented entirely by purchases from our suppliers and/or contract manufacturers), our main operating expenses are payroll expenses (which represented an average of 27.5 per cent of total operating expenses from FY1997 to FY1999), advertising and promotion expenses (17.9 per cent), counter commissions i.e. commissions we pay to departmental stores on sales made at our point-of-sales outlets at these stores (22.5 per cent) and rental expenses (12.3 per cent). By Activities The breakdown of the Proforma Group's turnover, and profit before taxation by activities for the past five financial years ended 31 December 1999 is set out below:­

---------- Year ended 31 December ---------- 1995 1996 1997 1998 1999 $'000 $'000 $'000 $'000 $'000 Turnover Sales of goods -- Through the Group's distribution network -- To affiliated companies and third party distributors(1) Franchise fees 25,799 5,633 -- 31,432 33,767 9,130 -- 42,897 50,747 10,090 -- 60,837 65,908 3,839 -- 69,747 93,798 9,323 17 103,138

-------------------------- Year ended 31 December -------------------------- ---- 1995 ---- ---- 1996 ---- ---- 1997 ---- ---- 1998 ---- ---- 1999 ---- $'000 % $'000 % $'000 % $'000 % $'000 % Gross profit/Gross profit margin Sales of goods -- Through the Group's distribution network -- To affiliated companies and third party distributors 15,531 1,617 60.2 28.7 20,902 2,474 61.9 27.1 32,833 2,734 64.7 27.1 40,731 683 61.8 17.8 62,563 1,659 66.7 17.8

Note:- (1) For FY1995 to FY1999, over 90 per cent. of our sales to affiliated companies and third party distributors consisted of sales to affiliated companies.

40

---------- Year ended 31 December ---------- 1995 1996 1997 1998 1999 PBT ($'000) PBT margin 1,632 5.2% 3,668 8.6% 4,402 7.2% 3,199 4.6% 10,848 10.5%

By Geographical Region The contribution by geographical region to the Proforma Group's turnover for the past five financial years ended 31 December 1999 is set out below:­

---------------------------- Year ended 31 December ---------------------------- ---- 1995 ---- ---- 1996 ---- ---- 1997 ---- ---- 1998 ---- ---- 1999 ---- $'000 % $'000 % $'000 % $'000 % $'000 % Turnover North Asia South Asia Others 22,789 8,643 -- 31,432 72.5 27.5 -- 100.0 30,581 12,316 -- 42,897 71.3 28.7 -- 100.0 47,444 12,941 452 60,837 78.0 21.3 0.7 100.0 53,081 16,446 220 69,747 76.1 23.6 0.3 100.0 72,871 28,150 2,117 103,138 70.7 27.3 2.0 100.0

REVIEW OF PAST EARNINGS PERFORMANCE A review of the year to year earnings performance of the Company and its major subsidiaries for the past three financial years ended 31 December 1999 is set out below:­ FY1996 to FY1997 Turnover Sales of goods through our Group's distribution network increased by $16.9 million or 50.0 per cent. from $33.8 million in FY1996 to $50.7 million in FY1997. Prior to FY1997, we had minimal advertising campaigns for our products. In FY1997, we carried out an aggressive advertising campaign to launch our new model massage chair in Hong Kong and Singapore. The sale of approximately 5,000 units of the above new model massage chair contributed mainly to the increase in our sales during the year through the Group's distribution network. Similarly, as a result of the above aggressive advertising campaign in FY1997, our sales of goods to our affiliated companies and third party distributors increased by $1.0 million or 11.0 per cent from $9.1 million in FY1996 to $10.1 million in FY1997. Turnover in North Asia increased by $16.8 million or 54.9 per cent. from $30.6 million in FY1996 to $47.4 million in FY1997. This was mainly attributed to an increase in sales in Hong Kong from $17.1 million in FY1996 to $31.0 million in FY1997 and sales in Taiwan from $6.0 million in FY1996 to $8.4 million in FY1997. The increase in turnover of $0.6 million or 4.9 per cent. in South Asia from $12.3 million in FY1996 to $12.9 million in FY1997 was mainly attributed to increase in sales in Singapore from $9.3 million in FY1996 to $9.8 million in FY1997. The above increase in turnover in our primary markets (of Singapore, Hong Kong and Taiwan) was the result of our aggressive advertising campaign for our new model massage chair and the increase in the number of our Group-owned point-of-sales outlets from approximately 60 to 80. We also achieved new sales of $0.5 million under `Others' due mainly to sales to our affiliated company in the USA which commenced operations in FY1997.

41

Profit Before Taxation PBT increased by 18.9 per cent. from $3.7 million to $4.4 million in line with the increase in turnover. However, while we achieved higher profit contribution from higher sales during the year, our operating expenses increased substantially by $11.6 million or 59.5 per cent. from $19.5 million in FY1996 to $31.1 million in FY1997. This resulted in the decrease in PBT margin from 8.6 per cent. in FY1996 to 7.2 per cent. in FY1997. Our higher profit contribution achieved during the year was due mainly to higher gross profit (``GP'') margin for sales through our Group's distribution network from 61.9 per cent. in FY1996 to 64.7 per cent. in FY1997 while we maintained our GP margin of 27.1 per cent. in FY1997 for sales to our Group's affiliated companies and third party distributors. The higher GP margin of 64.7 per cent. in FY1997 for sales through our Group's distribution network was due mainly to the launch of our new model massage chair which yielded higher gross profit margin. The increase in operating expenses was due mainly to:­ (i) an increase in advertising and promotion expenses by $1.7 million from $2.8 million in FY1996 to $4.5 million in FY1997. This increase was due mainly to the aggressive advertising campaigns to launch the new model of our OSIM massage chair; the increase in counter commission by $3.0 million from $4.3 million in FY1996 to $7.3 million in FY1997. This increase was in line with the increased volume of counter sales at departmental stores; a $3.3 million increase in directors' remuneration, fees and payroll-related expenses from $5.9 million in FY1996 to $9.2 million in FY1997. This increase is attributed to the increase in directors' remuneration and fees ($1.1 million), and payroll-related expenses ($2.2 million). The higher payroll-related expenses were due to an increase in salesmen's commission resulting from increase in turnover, as well as an increased number of employees due to expansion of our Group's operations; provision for stock obsolescence of $0.5 million. In FY1997, we decided to concentrate on selling OSIM brand products and hence, we made a provision for non-OSIM brand products left in our stocks in FY1997; an increase in rental expenses by $1.0 million from $2.5 million in FY1996 to $3.5 million in FY1997 due to the addition of approximately 20 point-of-sale outlets; and write-off of fixed assets, amounting to $0.6 million, incurred when we shifted from our former headquarters at Pines Industrial Building to our current premises at Genting Lane.

(ii)

(iii)

(iv)

(v) (vi)

The increase in operating expenses was offset, to some extent, by a net foreign exchange gain of $0.9 million in FY1997 against a net foreign exchange loss of $93,000 in FY1996. This was mainly a result of the strengthening of the US dollar against the Singapore dollar during FY1997 attributable to our export sales which were billed in US dollars. FY1997 to FY1998 Turnover Sales of goods through our Group's distribution network comprising point-of-sales outlets operated by us and wholesale distribution in Singapore increased by $15.2 million or 30.0 per cent. from $50.7 million in FY1997 to $65.9 million in FY1998. This was due mainly to additional sales of 2,300 units of this new model massage chair and the additional sales of 5,600 units of the pulse massager during the year through the Group's distribution network. Sales of goods to our affiliated companies and third party distributors decreased significantly in FY1998 by $6.3 million or 62.4 per cent. from $10.1 million in FY1997 to $3.8 million in FY1998. This decrease was due mainly to the lower sales by us to the PRC licensees who were affected by the regional economic crisis and the effect of overstocking of goods by the PRC licensees in FY1997. This resulted in lower sales orders from them as they were selling down their existing stocks during FY1998.

42

Turnover in North Asia increased by $5.7 million or 12.0 per cent. from $47.4 million in FY1997 to $53.1 million in FY1998. This was due mainly to an increase in sales in Hong Kong from $31.0 million in FY1997 to $33.9 million in FY1998. Another new model of our OSIM massage chair was launched in Taiwan in the third quarter of FY1998, resulting in an increase in sales in Taiwan from $8.4 million in FY1997 to $16.1 million in FY1998 . These increases were partially offset by the decrease in sales in PRC by $5.0 million from $8.0 million in FY1997 to $3.0 million in FY1998, as a result of the regional economic crisis and the effect of overstocking of goods by the PRC licensees in FY1997 as mentioned above. The increase of $3.5 million or 27.1 per cent. in South Asia sales from $12.9 million in FY1997 to $16.4 million in FY1998 was mainly attributed to increased sales of our pulse massagers and massage chairs. The above increases in turnover in our primary markets (of Singapore, Hong Kong and Taiwan) were the result of our continuing aggressive advertising campaign for our products and the increase in the number of our Group-owned point-of-sales outlets from approximately 80 to approximately 100. Profit Before Taxation PBT decreased from $4.4 million in FY1997 to $3.2 million in FY1998. PBT margins also declined from 7.2 per cent in FY1997 to 4.6 per cent in FY1998. This was due mainly to the decrease in GP margins for sales through our Group's distribution network and sales to affiliated companies, third party distributors and franchisees. GP margins for sales through our Group's distribution network declined from 64.7 per cent. in FY1997 to 61.8 per cent. in FY1998. This decline was largely due to the increase in our cost of sales. A substantial part of our purchases from our major suppliers are denominated in Yen which had strengthened against the regional currencies. The GP margin for our sales to our affiliated companies and third party distributors declined from 27.1 per cent. in FY1997 to 17.8 per cent. in FY1998 for the above reasons. The increase in operating expenses of $7.7 million, from $31.1 million in FY1997 to $38.8 million in FY1998, was due mainly to:­ (i) an increase of $2.6 million in advertising and promotion expenses from $4.5 million in FY1997 to $7.1 million in FY1998. This was due mainly to the higher advertisement production cost and new advertisement for our OSIM massage chair which was first launched in Taiwan in FY1998; a $1.7 million increase in counter commissions from $7.3 million in FY1997 to $9.0 million in FY1998. This increase was in line with the higher counter sales at departmental stores; an increase in payroll and related expenses of $1.4 million from $7.3 million in FY1997 to $8.7 million in FY1998. This increase was due to the increase in salesmen's commission resulting from increase in turnover, as well as an increased number of employees to cater to our expanding Group operations; and variance in the foreign exchange differences (from a gain of $1.0 million in FY1997 to a loss of $0.6 million in FY1998). The foreign exchange loss in FY1998 was due mainly to the Japanese Yen strengthening against the Hong Kong dollar during the year. Approximately 60 per cent. of our total purchases were denominated in Japanese Yen.

(ii) (iii)

(iv)

FY1998 to FY1999 Turnover Sales of goods through our Group's distribution network increased by $27.9 million or 42.3 per cent. from $65.9 million in FY1998 to $93.8 million in FY1999. This was due mainly to the additional sales of approximately 48,000 units of the pulse massagers which were officially launched in FY1999 and approximately 3,500 units of massage chairs due to our aggressive advertising through media (like TV, newspapers and magazines), promotion fairs held at shopping centres and an increase in the number of our Group-owned point-of-sales outlets from approximately 100 to approximately 120.

43

Sales to our affiliated companies and third party distributors and franchisees increased significantly by $5.5 million or 144.7 per cent from $3.8 million in FY1998 to $9.3 million in FY1999. The increase was attributed to increased sales to PT Sharon ($1.3 million), Osim (USA) ($1.7 million) and PRC licensees ($2.1 million). The increase was due mainly to more intensive effort in marketing the massage chairs as evidenced by the additional 2,300 units sold from FY1998 to FY1999. In addition, the economic recovery in the region contributed to the increase in sales, particularly in the second half of FY1999. Turnover in North Asia increased by $19.8 million or 37.3 per cent from $53.1 million in FY1998 to $72.9 million in FY1999. This was mainly attributed to an increase in sales in Hong Kong from $33.9 million to $49.7 million, sales in Taiwan from $16.1 million to $18.0 million and sales in PRC from $3.0 million to $5.1 million during the year. The increase was mainly due to the additional sales of our OSIM massage chair and the pulse massager. Sales in South Asia increased by $11.8 million or 72.0 per cent. from $16.4 million in FY1998 to $28.2 million in FY1999. This increase was mainly attributable to increase in sales in Singapore from $14.1 million to $20.5 million, sales in Malaysia from $1.9 million to $5.8 million, and sales to Indonesia from $0.4 million to $1.7 million during the year supported by the economic recovery in the region. Overall, the above increase in our sales was a result of our aggressive advertising campaign for our products through media (like TV, newspapers and magazines), promotion fairs held at shopping centres, and an increase in the number of our Group-owned point-of-sales outlets from approximately 100 to approximately 120. Increase in sales of S$1.9 million under ``Others'' was due mainly to the increased sales to the USA from $0.2 million in FY1998 to $1.9 million in FY1999 as the business of our affiliated distributor in the USA improved. Profit Before Taxation PBT increased by $7.6 million from $3.2 million to $10.8 million in line with the increase in turnover. PBT margin also increased from 4.6 per cent in FY1998 to 10.5 per cent. in FY1999. This was due mainly to the 42.3 per cent. increase in turnover, higher GP margin from sales through the Group's distribution network and a lower increase of 39.2 per cent. in operating expenses. The operating expenses increased by $15.2 million from $38.8 million in FY1998 to $54.0 million in FY1999. Our higher profit contribution achieved during the year was due mainly to higher GP margin for sales through our Group's distribution network from 61.8 per cent. in FY1998 to 66.7 per cent. in FY1999 while we maintained our GP margin at 17.8 per cent. in FY1999 for sales to our Group's affiliated companies and third party distributors. The higher GP margin of 66.7 per cent. in FY1999 for sales through our Group's distribution network was due mainly to a change in sales mix, with a higher proportion of sales achieved on our pulse and hand-held massagers, which yielded higher margins. The increase in operating expenses was due mainly to:­ (i) (ii) increase in advertising and promotion expenses of $3.4 million from $7.1 million in FY1998 to $10.5 million in FY1999 in our key markets of Singapore, Hong Kong, Taiwan and Malaysia; increase in rental by $3.8 million from $4.2 million in FY1998 to $8 million in FY1999, mainly due to the increased number of our Group-owned point-of-sales outlets from approximately 100 in FY1998 to approximately 120 in FY1999; higher payroll expenses, which increased by $4.3 million, from $8.7 million in FY1998 to $13.0 million in FY1999, due mainly to increase in salesmen's commission resulting from the significant increase in turnover, as well as an increase in the number of employees to cater to the expanding operations; higher counter commissions of $1.3 million, from $9.0 million in FY1998 to $10.3 million in FY1999, attributed to the higher counter sales at departmental stores; and

(iii)

(iv)

44

(v)

higher foreign exchange losses, from $0.6 million in FY1998 to $1.9 million in FY1999. The higher foreign exchange loss was due mainly to the strengthening of the Japanese Yen against the Singapore, Hong Kong and Taiwan dollars during the year. We procured approximately 64 per cent. of our products from our Japanese contract manufacturers in Yen and sold them in the respective outlets in local currencies.

PROSPECTS AND FUTURE PLANS Prospects Our Directors believe that the economic recovery of Asian economies which began in 1999 will continue in 2000. We feel that it is an opportune time to further expand our distribution network in Singapore and the rest of Asia as consumer sentiment is expected to improve in tandem with the economic recovery. To achieve the status as a global player and barring unforeseen circumstances, we plan to have worldwide, 300 point-of-sales outlets by the year 2001, 500 point-of-sales outlets by the year 2003 and 1,000 point-of-sales outlets by the year 2008. In view of the above, we believe that, barring any unforeseen circumstances, the growth prospects of our Group are good. Future Plans To enhance our future growth, our Directors intend to embark on the following initiatives:- (1) move to a new corporate headquarters, (2) embark on business expansion plans, (3) upgrade our IT infrastructure and (4) engage in e-commerce by marketing and distributing our products on the Internet. New Corporate Headquarters We intend to move our corporate headquarters from 57 Genting Lane, Singapore which has a gross floor area (``GFA'') of 2,610 sq m to a larger complex at Ubi Avenue 1, Singapore with GFA of approximately 18,000 sq m. We have, on 12 May 2000, signed an agreement with GBI Realty Pte Ltd of 63 Ubi Avenue 1, #06-01, Boustead House, Singapore 408937, to sell to us the land and construct the building on a turnkey project basis at a total cost of $36.3 million. We have earmarked $8 million from the proceeds of the New Shares to finance the acquisition of the new corporate headquarters and intend to use bank borrowings to finance the balance. Our new corporate headquarters will continue to centralise our corporate functions. In addition, the increased facilities in the new corporate headquarters such as classrooms and auditorium will facilitate our training program for our staff and franchisees' staff. This is in line with our vision to expand our distribution network through our franchise model (as described under the section on ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus). Expansion of Business We believe that there are opportunities for us to expand our existing business in the following areas:­ (a) New Geographical Markets We intend to extend our geographical reach by appointing franchisees in Australia, the Philippines, United Kingdom, South Africa and Korea. Discussions are underway on these arrangements and we hope to appoint a franchisee in the Philippines in the last quarter of FY2000. When discussions are more advanced, we will appoint legal counsel to advise on regulatory compliance issues in these jurisdictions. For the potentially bigger markets like the United States, we may appoint master-franchisees who have the right to sub-franchise to others to build up our distribution network more rapidly. A wide distribution network will remain a cornerstone of our business strategy as we believe that it gives us an important competitive edge as we reap economies-of-scale in procurement of products, product development, and brand and service quality developments. Barring unforeseen circumstances, we plan to have worldwide, 300 point-of-sales outlets by the year 2001, 500 point-of-sales outlets by the year 2003 and 1,000 point-of-sales outlets by the year 2008.

45

(b) New Product Lines We intend to diversify our range of home health-care products by branching into the marketing of related products like fitness equipment and health supplements like vitamins. We have identified potential sources of supply for these products and plan to introduce them in our primary markets. Barring any unforeseen circumstances, we hope to launch them over the next 2 years. (c) Wholesale Distribution As mentioned under the section on ``HISTORY'' on pages 27 to 29 of this Prospectus, we have already ventured into wholesale distribution in Singapore to hospitals, the Apex Pharmacy and Guardian Pharmacy chains and Chinese medical halls. Our intention is for the entire Group to undertake wholesale distribution more extensively in our other primary markets of Hong Kong and Taiwan through the following channels:­ (1) (2) (3) (4) (5) (6) hospitals; pharmacies; Chinese medical halls; health clubs; beauty centres; and fitness centres.

We believe that wholesale distribution will also enhance our marketing presence substantially as it is a relatively new market for us. (d) Deeper Penetration of Consumer Markets Over the years, we have targeted the middle to high end of the product price range in the consumer market in order to achieve higher profit margins and as part of our marketing efforts to build a global brand. We believe that we can expand our coverage of the consumer market while maintaining the position of the OSIM brand by developing a secondary brand called ``NORO'' to sell lower-priced products to serve a different segment of the consumer market who are more sensitive to pricing. However, we will be careful to differentiate the products marketed under the NORO brand to prevent cannibalising the sales of our main OSIM brand. We intend to differentiate NORO brand products by having less complex designs and fewer features. We currently retail lower-priced massage chairs and kneading massagers under the NORO brand. As at this date, we have registered NORO as a trademark in PRC, Hong Kong and Indonesia, and have trademark applications pending in Singapore and Malaysia. Upgrading of IT Infrastructure As disclosed in the section on ``Use of Proceeds'' on page 11 of this Prospectus, we intend to use approximately $1.5 million from the proceeds of the New Shares to enhance and upgrade our Group's information technology systems in order to facilitate our enterprise resource planning (``ERP'') and customer relationship management (``CRM''). We are currently conducting evaluation studies on our needs for ERP and CRM. Through ERP we aim to strengthen the use of our resources in the following ways:­ Area Forecasting and Planning Purchasing and Material Management Warehousing and Inventory Management Objective Optimise levels of service and logistic support Improve links to point-of-sales outlets Shift to demand-driven management from a stock-driven approach

46

Area Product Distribution Accounting and Finance departments

Objective Standardise reporting of sales by marketing outlets Improve internal reporting

Through CRM we hope to attract more repeat sales from existing customers as well as to win new customers through the strengthening of the following areas:­ Area Sales Service Marketing E-commerce We believe that e-commerce will be an important avenue of doing business in the new millennium and our Directors believe that the expansion of our presence to the Internet is a logical extension of our business and will enhance our brand name in the global market. We have registered a website ``www.osim.com.sg'' to market ourselves on the Internet. E-commerce is a new and developing business and we are in the process of drawing up a definitive e-commerce strategy under which we may undertake, among other things, any or all of the following activities:­ dissemination of information on our products on the Internet marketing and sale of our products to consumers through Business-to-Consumer e-commerce wholesale distribution of our products through Business-to-Business e-commerce establishing a presence on Internet medical and health-care portals or web communities by forming synergistic alliances with other related health-care players like medical information providers and alternative medicine providers Objective Provide real-time access to customer profiles and history to sales staff Improve customer service Create new sales opportunities

We intend for our e-commerce business to complement and augment our existing `brick-and-mortar' distribution network. We envisage that high visibility on the Internet would also lead to wider customer base. While we are in the process of having discussions with a leading Japanese investment bank, presently we have no understanding, commitments or agreements to make any acquisitions or investments or enter into any joint ventures for e-commerce. As and when such strategic initiatives are identified and crystallised, we intend to use part of the proceeds of this Invitation to substantially finance our strategic investments as disclosed in the section on ``PROSPECTUS SUMMARY -- Use of Proceeds'' on page 11 of this Prospectus.

REVIEW OF FINANCIAL POSITION Shareholders' equity Shareholders' equity increased from $10.2 million in FY1996 to $13.0 million in FY1997 and to $14.9 million in FY1998. This was in line with the retention of our Group's profit after taxation in each financial year, less net dividend and translation reserve. A net dividend of $0.4 million per year was declared in FY1996, FY1997 and FY1998. In FY1999, shareholders' equity was reduced to $10.3 million. This was a result of the retained profit for that year amounting to $7.4 million being offset by the write-off of goodwill amounting to $12.4 million arising from the difference between the NTA of the subsidiaries and the actual cost of investment in the subsidiaries in connection with the Restructuring Exercise.

47

Fixed assets Fixed assets comprise mainly freehold land and buildings, leasehold buildings, and shop renovations and fittings. Fixed assets increased from $12.3 million in FY1996 to $13.5 million in FY1997 mainly due to the construction of our present headquarters at Genting Lane. In FY 1997, fixed assets increased further to $16.6 million in FY1998 due to the final completion of the above headquarters as well as renovation costs of the additional shop outlets of approximately $1.0 million each in Hong Kong and Singapore during the financial year. In FY1999, fixed assets further increased to $18.3 million due primarily to the costs associated with renovating additional outlets. The net book value of shop renovations increased by $1.2 million in FY1999. In line with the increase in fixed assets, depreciation expenses were $0.6 million, $1.4 million and $2.2 million in FY1997, FY1998 and FY1999 respectively. Investment in associated company This refers to our investment in Daito-Osim. Our investment increased from $303,000 in FY1996 to $333,000 in FY1997, to $905,000 in FY1998, and to $1.07 million in FY1999. The increase of $767,000 over the past 3 years was due to our share of post-acquisition reserves of Daito-Osim. Current assets Current assets consist mainly of stocks, trade debtors and amount due from affiliated companies which are trade in nature, other debtors, cash and bank balances. Current assets increased from $21.1 million in FY1996 to $34.1 million in FY1997 due to increase in stocks by $1.9 million from $5.8 million in FY1996 to $7.7 million in FY1997. This increase is in line with the expanded operation evidenced by the increase in number of outlets and higher turnover. In addition, trade debtors and trade amount due from affiliated companies increased by $6.6 million from $6.5 million in FY1996 to $13.1 million in FY1997, largely due to slow debt collections from the PRC affiliated companies as a result of lower than expected sales performance. Fixed deposits, cash and bank balance increased by $2.8 million from $2.9 million in FY1996 to $5.7 million in FY1997 due to cash generated from operating profits and proceeds from term loans. Current assets reduced by $9.4 million from $34.1 million in FY1997 to $24.7 million in FY1998. This was attributed mainly to decrease in the stock balance by $2.2 million from $7.7 million in FY1997 to $5.5 million in FY1998 due to our gradual effort in reducing the average stock holding period. Trade debtors and trade amount due from affiliated companies decreased from $13.1 million in FY1997 to $10.5 million in FY1998 despite an increase in sales turnover in the corresponding period. This was the result of an improvement in debt collection largely from the PRC market as their sales performance picked up towards the end of the year. Our average stock holding and debtors turnover period are approximately 3 months and 2 months respectively. Cash and bank balance also decreased from $5.7 million in FY1997 to $3.1 million in FY1998 due to higher investment in fixed assets. In FY1999, current assets increased by $11.9 million or 48.2 per cent. to $36.6 million, mainly in line with the increase in sales turnover and expansion of the operations. The increase was contributed mainly by increase in stocks from $5.5 million in FY1998 to $12.1 million in FY1999, and trade debtors and trade amount due from affiliated companies from $10.5 million in FY1998 to $17.4 million in FY1999. The increase in trade debtors and trade balances from affiliated companies were in line with our increased sales through the Group's distribution network from $65.9 million in FY1998 to $93.8 million in FY1999 and sales to affiliated companies from $3.8 million in FY1998 to $9.3 million in FY1999. In spite of the above increases in stocks and trade balances, the stocks and debtors turnover periods remained substantially the same in FY1999 versus FY1998 which were approximately 3 months and 2 months respectively. Cash and bank balance rose by $1.2 million to $4.3 million in FY1999 pursuant to significant improvement in the Group's profitability in FY1999 when it recorded profit after taxation but before minority interest of $7.7 million. The above increase in current assets were offset, to some extent, by the full repayment of amounts due from directors of $3.3 million by the end of FY1999.

48

Current liabilities Current liabilities comprise mainly creditors, bills payable, bank borrowings and provision for taxation. Current liabilities increased by $8.8 million from $18.2 million in FY1996 to $27.0 million in FY1997. This was due primarily to increase in bills payable by $8.5 million from $2.9 million in FY1996 to $11.4 million in FY1997, offset by decrease in trade creditors by $4.4 million from $6.6 million in FY1996 to $2.2 million in FY1997. The overall net increase in trade payable was in line with the increased purchase of stocks and the expansion of operations. Other creditors increased by $3.4 million from $1.6 million in FY1996 to $5.0 million in FY1997 mainly due to higher accrued operating expenses in line with the expanded operations. Increase in provision of taxation by $0.9 million from $1.6 million in FY1996 to $2.5 million in FY1997 was due to higher net profits for FY1997. Amount due to directors of $2.4 million in FY1997 from nil in FY1996 further contributed to the overall increase in current liabilities. These increases were offset by a decrease in bank overdraft and bank borrowings of $1.8 million from $4.5 million in FY1996 to $2.7 million in FY1997. Current liabilities fell from $27.0 million in FY1997 to $18.4 million in FY1998, representing a decrease of $8.6 million. This was due largely to a decrease in trade and other creditors from $7.6 million in FY1997 to $5.5 million in FY1998, and bills payable from $11.4 million in FY1997 to $8.3 million in FY1998, representing a decrease of $2.1 million and $3.1 million respectively. This was in line with lower purchase of stocks at the end of the financial year. Bank overdrafts and short-term portion of borrowings also decreased from $2.7 million in FY1997 to $ 1.0 million in FY1998. This was due mainly to repayment of short-term bank loan and clearance of bank overdraft by end of FY1998. In FY1999, current liabilities increased by $18.1 million, or 98.4 per cent., to $36.5 million. The increase was attributable mainly to increase in creditors of $8.5 million or a 156 per cent. increase. Bills payable also increased by $3.6 million to $12.0 million. Creditors' payment period reduced from 165 days in FY1998 to 135 days in FY1999 due to the improved cash flow of the Group. The increase in creditors and bills payable was in line with the increase in stock balances as at the end of FY1999 to support the Group's sales. Accordingly, bank overdraft and borrowings increased to $4.7 million in FY1999 with an increase by $3.3 million in bank overdraft. This was required to provide additional working capital for the expanded operations of the Group. Amount due to directors increased to $1.6 million in FY1999. Such amount was fully repaid in June 2000. With the improved profit before taxation from $3.2 million in FY1998 to $10.8 million in FY1999, provision for taxation increased correspondingly from $2.3 million to $4.0 million. Non-current liabilities Non-current liabilities consist mainly of hire purchase creditors, term loans and deferred taxation. Non-current liabilities increased by $2.7 million from $4.5 million in FY1996 to $7.2 million in FY1997 attributed to net increase in term loans. From FY1997 to FY1998, non-current liabilities increased from $7.2 million to $8.0 million. This was due mainly to the increase in bank borrowings from $6.9 million in FY1997 to $7.8 million in FY1998 for additional working capital. In FY1999, non-current liabilities remained at $8.0 million. Commitments and contingent liabilities Non-cancellable operating lease commitments refer to lease agreements that the Group has entered into in respect of the shop units leased by the Group for its point-of-sales outlets. As at 31 December 1999, our non-cancellable operating lease commitments due within 1 year and due within 2 to 5 years were $9.7 million and $8.1 million respectively as disclosed in the Accountants' Report on page 92 of this Prospectus. As at 31 May 2000, our non-cancellable operating lease commitments due within 1 year and due within 2 to 5 years were $8.8 million and $5.3 million respectively. As at 31 December 1999, we had outstanding letters of credit totalling $0.3 million and bank guarantees amounting to $0.7 million. The letters of credit were issued in relation to our purchases and the bank guarantees were in lieu of rental deposits for our point-of-sales outlets. Details of these securities are disclosed in the Accountants' Report on page 92 of this Prospectus. As at 31 May 2000, we had outstanding letters of credit totalling $0.3 million and bank guarantees amounting to $0.8 million. 49

Bank borrowings As at 31 December 1999, our Group had secured bank borrowings, hire purchase liabilities and bills payable amounting in aggregate to approximately $24.3 million. Details of the securities provided for these bank borrowings are disclosed in the Accountants' Report on pages 90 and 91 of this Prospectus. As at 31 May 2000, our Group had secured bank borrowings, hire purchase liabilities and bills payable amounting in aggregate to approximately $29.0 million.

DIVIDENDS Our Company declared net dividends of $74,500 for the year ended 31 December 1999. No dividends were paid by the subsidiaries in that year. For the year ended 31 August 1996, we declared net dividends of $370,000. The same amount was declared in each of the years ended 31 December 1997 and 31 December 1998. We currently do not have a dividend policy. Our past dividend payments should not be taken as an indication of dividends to be paid by us in future. In future, the amount of dividend payable will be determined by the Directors and is dependent upon the aggregate distributable profits and the Group's capital requirements for the ensuing year.

FOREIGN EXCHANGE EXPOSURE The accounts of some of our subsidiaries are prepared in RM, HK$, RMB and NT$. This represents a translation risk in that any material fluctuation in the relevant currency rates against the S$ will have an effect on our consolidated financial statements which are presented in S$. While our sales are denominated mainly in the respective local currencies in which the sales arise, namely the S$, RM, HK$, RMB and NT$, our costs of procurement of products from our contract manufacturers are incurred mainly in US$ and Yen which accounted for 33 per cent. and 64 per cent. of our total purchases respectively for FY1999. This has resulted in us reporting the following net foreign exchange gains/(losses) for the last three financial years:­

FY1997 Net foreign exchange gains/(losses) ($'000) Percentage of Group's PBT (%) 968 22.0 FY1998 (647) 20.2 FY1999 (1,893) 17.5

We are therefore vulnerable to currency risks arising from the fluctuations of the foreign currencies against S$. In the past, we did not adopt a hedging policy but since May 2000, we have begun hedging our foreign exchange exposure by entering into forward contracts to cover up to 70 per cent. of our Group's purchases in Yen and US$ up to 3 months prior to the date of payment. Between May and June 2000, we had entered into 1-month forward contracts with financial institutions to hedge our Yen and US$ purchases amounting to approximately S$2.6 million.

COMPETITION Our Directors are of the view that currently, in our primary markets of Singapore, Hong Kong and Taiwan, no company poses a significant threat to us as a major competitor. We believe that we currently have a competitive edge over our competitors in our primary markets as our extensive distribution network of outlets is dedicated to home health-care products. We exercise full control over our point-of-sales network and dictate to our distribution chain `how' to sell and not only `what' to sell. We also control our supply chain, from the design of the products to the marketing of the products. In general, we regard National, Sanyo and Omron to be our competitors. Singapore, Hong Kong and Taiwan are our largest markets and their aggregate domestic sales accounted for 85.6 per cent. of our Group's revenues in FY1999. In Singapore, IPS Brothers Enterprise Pte Ltd and Goh Joo Hin Pte Ltd market similar home health-care products under the brands of Oto and Lifestyle respectively. In Hong Kong, National and Omron are our competitors. In Taiwan, there are many retailers in the home health-care products industry and we do not believe that any company is a major competitor to us.

50

Currently, as there are no published statistics or official sources of information on companies engaged in the retail and distribution of home health-care products in our primary markets, we are unable to determine our market share. However, we believe that we are one of the leaders in Asia in this business based on 2 market surveys in 1999 which we had commissioned international survey firms, The Gallup Organisation and ACNielsen (China) Ltd (``ACNielsen''), to undertake to determine our market positions in Singapore and Hong Kong respectively. The Gallup Organisation's survey revealed that in Singapore, we are the number 1 brand for electronic home health-care products when compared to other brands like National, Omron, Oto and Lifestyle, in terms of the following:­ brand awareness; market share; and perceived image in terms of quality, trustworthiness, brand preference, technology, designs and features, range of products, customer service and value for money.

The ACNielsen's survey revealed that in Hong Kong we are number 1 in terms of overall brand preference for massage chairs, foot reflexology rollers, pulse massagers and pulse monitors. In the ACNielsen's survey, we were compared with brands like National, Oto, Sharp and Philips. To handle competitive pressures from manufacturers of low-priced products in the PRC market, we have developed ``NORO'' as a secondary brand to sell lower-priced massage chairs and kneading massagers to the segment of the consumer market which are more sensitive to pricing. While the barriers to entry into the home health-care products industry are not prohibitive, new entrants may face high start-up costs and will have to compete against established brands. New entrants may also lack the knowledge of `how' to sell and `where' to sell. We are convinced that in this industry, strategic marketing and branding are crucial. Furthermore, new entrants might find it more difficult to establish a distribution network. For example, owners of strategic departmental stores and suburban shopping malls normally prefer the more well-established names.

COMPETITIVE STRENGTHS We regard the following to be our main competitive strengths:­ (a) We operate and control our supply chain We operate and control our supply chain from the design and sourcing of our products to the distribution of our products. Our influence and control in the supply-side and more importantly, our distribution network through our point-of-sales outlets allows us to plan future product launches with a horizon of as far as 1 to 2 years. This, to some extent, buffers us from the impact of cyclical changes in business cycles. In fact, in the recent Asian financial crisis, our business has managed to grow in revenue and remain profitable. (b) We have an established brandname Through our efforts in strategic marketing, we have emerged as one of the more recognisable brands in the home health-care industry, especially in our primary markets of Singapore, Hong Kong and Taiwan. This is demonstrated by the results of the market surveys we have commissioned The Gallup Organization and ACNielsen (China) Ltd to undertake in Singapore in August 1999 and in Hong Kong in January 1999 respectively. The surveys are described in more detail in the section on ``COMPETITION'' on pages 50 and 51 of this Prospectus. Brand preference among consumers is valuable to us in our industry as the products in the industry are not highly differentiated. (c) We have an established strategic marketing focus and niche business concept We have an established strategic marketing focus and niche business concept which have been the main thrusts of our growth, enabling us to increase our turnover from $31 million in FY1995 to $103 million in FY1999, control a distribution network of more than 200 point-of-sales outlets today and build our own home grown OSIM brand. 51

(d) We have an extensive regional distribution network At present, we have more than 200 point-of-sales outlets spanning Asia, the Middle East and the United States. Our extensive distribution network enhances our competitiveness as it gives us extensive marketing presence and economies-of-scale in procurement of products, product development, and brand and service quality developments. In addition, our distribution network is dedicated to the sale of our products and is controlled by us through franchise agreements or, in the case of the PRC market, through licensing and distribution agreements. This allows us to dictate `what' to sell and `how' to sell. (e) We have an experienced management team Dr Ron Sim Chye Hock, our Chairman and Chief Executive Officer, has 17 years' experience in the home health-care products industry. Our executive Directors have been with us since the formative years of our business and have witnessed the growth of the home health-care products industry in Asia from its infancy to the present phase. The 41 years of combined experience and in-depth knowledge of the industry of Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon give us an advantage in planning strategies and charting future directions. (f) We provide good customer service We train our sales staff to provide courteous, knowledgeable, efficient and prompt service to our customers. We have an in-house Service Quality Manager to provide such training to our frontline staff and our franchisees' sales staff. In the survey by The Gallup Organisation (as more particularly described in the section on ``COMPETITION'' on pages 50 and 51 of this Prospectus), we emerged as the No. 1 brand that offers ``good customer service''.

MAJOR SUPPLIERS AND CUSTOMERS Major Suppliers The suppliers which accounted for 5 per cent. or more of our Proforma Group's purchases for the past three financial years ended 31 December 1997 to 1999 are as follows:­

---- Year ended 31 December ---- 1997 1998 1999 % % % Oriental Export & Import Co. Ltd (``OEI'') Daito-Electric Machine Industry Company Ltd. (``DEMI'') Red Time Trading Ltd (``RT'') 51.8 10.3 13.4 44.5 5.1 10.8 55.9 11.6 11.2

OEI is a privately-owned Japanese trading company based in Tokyo which supplies us with massage chairs manufactured by Family Company Limited, another privately-owned Japanese company which operates out of Osaka. DEMI is a privately-owned Japanese company and is our contract manufacturer for pulse massagers. DEMI is also our joint venture partner in Daito-Osim (Suzhou) (the joint venture is more particularly described in the section on ``HISTORY'' on page 28 of this Prospectus). RT is a privately-owned Taiwanese company and is our contract manufacturer for foot reflexology rollers. Our association with each of OEI, DEMI and RT goes back 15 years, 18 years and 13 years respectively. To date, we have never experienced any involuntary loss of our suppliers or contract manufacturers. Nonetheless, to reduce our vulnerability from this dependency, we are taking the following measures:­ sourcing for new contract manufacturers; having more than 1 contract manufacturer for our key products; and entering into joint ventures with our contract manufacturer to buttress our business relationship.

52

Most of our purchases from our suppliers and contract manufacturers are settled on payment upon delivery basis except for purchases from DEMI which are settled on 60 days' credit terms. Where payment is settled upon delivery basis, we have utilised our trust receipts banking facilities which gives us up to 150 days' credit terms. None of the Directors or substantial Shareholders have any interest, direct or indirect, in OEI, DEMI and RT, or any of our other suppliers and contract manufacturers. Major Customers We do not have any single customer accounting for 5 per cent. or more of our turnover. Overall, approximately 70 per cent. of sales are on credit terms of 30 to 90 days while the balance is on cash terms. To date, we have not encountered any significant difficulties in collecting receivables from our customers. For the last 3 financial years, our provision for doubtful debts/bad debts written off was nil in FY1997, $194,000 in FY1998 and $32,000 in FY1999. PROPERTIES AND FIXED ASSETS We own the following major properties, the details of which are set out below:­

Unexpired Term Annual Rental Net Book Value (as at 31 December 1999)

No.

Location

Description

Area

Tenure

1

57 Genting Lane Singapore 349564 Rochor Canal Road #01-08 and #01-41 Sim Lim Square Singapore 188504 6 Xuanwumenwai Street, Junefield Plaza Tower 1 15th Floor, unit 1526 and 1527 Beijing, PRC Unit 8C, 1523-2 Dong Fang Road, Pudong New Development Zone, Shanghai, PRC 25F-2 and B2-B4, No. 508, Section 5, Chung Hsiao E. Road, Taipei, Taiwan Third subsection, Fu-De section, Hsin-Yi district, Taipei, Taiwan(1)

11-storey industrial building

2,657 sq m (gross floor area)

Freehold

NA

NA

$9.5 million

2

Strata units in commercial building

86 sq m

99 years

82 years

NA

$1.6 million

3

Strata units in commercial building

186.1 sq m

50 years

45 years

NA

S1.1 million

4

Residential condominium

165.40 sq m

68 years

63 years

NA

NA(2)

5

Strata units in commercial building

244.83 sq m

Freehold

NA

NA

$0.9 million

6

Land

(82/10000 share of 2,275 sq m)

Freehold

NA

NA

$0.5 million

Notes:­ (1) (2) This is the land on which the building at 25F-2 and B2-B4, No. 508, Section 5, Chung Hsiao E. Road was constructed on. We purchased the property on 3 March 2000 at a cost of RMB790,000.

The net book value of other fixed assets of the Group as at 31 December 1999 (as more particularly set out in the Accountants' Report on page 86 of this Prospectus) was $4.7 million.

53

DIRECTORS, MANAGEMENT AND STAFF Directors The names, addresses, ages and principal occupations of our Directors are as follows:­ Name Dr Ron Sim Chye Hock Teo Chay Lee Leow Lian Soon Teo Sway Heong Khor Peng Soon Michael Kan Yuet Yun Ong Kian Min Address 55 Jalan Kampong Chantek Singapore 588627 Blk 222 Loyang Avenue #01-06 Singapore 509068 Blk 210 Loyang Avenue #01-05 Singapore 509063 55 Jalan Kampong Chantek Singapore 588627 20J East Coast Avenue Singapore 459219 48 Poole Road Singapore 437535 16-D Chatsworth Road Singapore 249778 Age 41 41 40 37 50 61 39 Position Chairman & Chief Executive Officer Chief Operating Officer Regional General Manager Non-executive Director Non-executive Director Independent Director Independent Director

The business and working experience of each of the Directors are as follows:­ Dr Ron Sim Chye Hock is our founder, Chairman and Chief Executive Officer and has been instrumental in our success. He is responsible for the overall strategic and marketing direction, and management policies of our Group. Dr Sim has 17 years of experience in the home health-care industry as he has founded the Group's home health-care business in 1983. The Wisconsin International University conferred on him on 28 March 2000 an honorary doctorate in business administration in recognition of his prominent achievements in business. Mr Teo Chay Lee joined us in 1989 as a sales personnel, advancing to Assistant General Manager in 1993 and Chief Operating Officer in February 2000. He was appointed to the Board in June 2000. Mr Teo is also responsible for managing the operations in Singapore and South Asian countries including Malaysia, Thailand and Indonesia. Mr Teo was instrumental in establishing our Singapore headquarters as a role model for our subsidiaries. From 1979 to 1988, Mr Teo was working with Smith Corona as a production supervisor. Mr Leow Lian Soon has been our Regional General Manager for the last 7 years and is in charge of our operations in countries in North Asia including Taiwan, PRC and Hong Kong. He was appointed to the Board in June 2000. Mr Leow had spearheaded our foray into these 3 countries and was responsible for building up our established operations there. Prior to joining us in 1987, he worked in the retail industry as a sales supervisor from 1983 to 1986. Ms Teo Sway Heong is the wife of our founder, Dr Ron Sim Chye Hock, and has made valuable contributions to us in the formative stages of our business. From 1987 to February 2000, she was one of our executive Directors with responsibility for our administrative and human resource management functions of the Group. Ms Teo assumed the role of a non-executive Director since March 2000.

54

Mr Khor Peng Soon was appointed as our director in June 2000. He has held the position of Vice-President, Direct Investments in Temasek Holdings (Private) Limited since March 1999 and was Director, Special Projects in Investor from November 1997 to February 1999. Mr Khor was also managing director of Sembawang Aviation Pte Ltd where he worked from August 1991 to November 1997 and group corporate planning director of Sembawang Holdings Pte Ltd where he worked from November 1990 to February 1992. Prior to that date, he had held positions in Ernst & Young, Economic Development Board and Telecoms Malaysia (October 1973 to June 1979). Mr Khor was awarded the Colombo Plan Scholarship in 1969 and was conferred a Bachelor of Engineering (First Class Honours) (Mechanical) by the University of Auckland, New Zealand in 1972 and a Masters of Engineering Science (Industrial Engineering) from the University of New South Wales, Australia in 1981. Mr Michael Kan Yuet Yun was appointed our independent Director in June 2000. Mr Kan was previously the finance director of British-American Tobacco Co (Singapore) Ltd and Singapore Tobacco Co (Pte) Ltd (``BAT group''). He was with the BAT group from 1969 to October 1999. Mr Kan graduated with a Bachelor of Economics (Honours) from University of Sydney and is a member of the Institute of Chartered Accountants in England and Wales and the Institute of Certified Public Accountants of Singapore. For his community work, Mr Kan is the chairman of the management committee of the Tanjong Pagar Community Club, a member of Tanjong Pagar Citizens Consultative Committee and the Silver Jubilee Fund committee of management. He is also the Vice-Chairman of the Children's Aid Society. Mr Kan was conferred The Pingkat Bakti Masyarakat (PBM) in the 1998 National Day Awards. Mr Ong Kian Min was appointed our independent Director in June 2000. He is an Advocate and Solicitor and a partner in Shook Lin & Bok where he practises corporate law. He has been with Shook Lin & Bok since 1993. Mr Ong is also a Member of Parliament for Pasir Ris Group Representation Constituency (GRC). Mr Ong was awarded the President's Scholarship and Police Force Scholarship in 1979. He graduated with a Bachelor of Science (Honours) degree from the Imperial College of Science and Technology, London in 1982. Thereafter, he read law and obtained a Bachelor of Laws (Honours) degree from the University of London. He was called to the Bar of England and Wales in 1988 and to the Singapore Bar the following year. Audit Committee The Audit Committee comprises Mr Michael Kan Yuet Yun, Mr Ong Kian Min and Mr Teo Chay Lee. The Audit Committee will be chaired by Mr Michael Kan Yuet Yun. Mr Teo Chay Lee is our executive Director, and Mr Michael Kan Yuet Yun and Mr Ong Kian Min are our independent Directors. Service Agreements In June 2000, we entered into separate service agreements (``Service Agreements'') with the executive Directors, Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon (collectively, the ``Appointees''). The Service Agreements are each for a duration of 2 years but may be terminated by either party giving the other at least six months' notice and shall be automatically renewed thereafter on an annual basis unless either party indicates otherwise. The Service Agreements took effect from 1 January 2000. We may summarily terminate the Service Agreement if the Appointee commits a breach of the Service Agreement, such as being convicted of an offence involving fraud or dishonesty or being adjudicated bankrupt. Each Appointee has covenanted that in the event the Service Agreement is terminated for whatever reason, he shall not within the following 1 year engage in any capacity in any business that competes with our businesses. Under the terms of the Service Agreements, the basic monthly remuneration of Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon are $80,000, $15,000 and $15,000 respectively. We shall provide a motor car to Dr Ron Sim Chye Hock and pay for all related running expenses during his employment. We shall also acquire a country club membership for Dr Ron Sim Chye Hock and pay for his monthly subscription expenses.

55

Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon shall be entitled to participate in an Executive Profit Sharing Scheme (``EPSS'') for the financial years beginning from FY2000. The amount we are setting aside for the EPSS is set at 4.5 per cent. of the audited consolidated profit before taxation, minority interests, extraordinary items and the sum set aside for the EPSS. The entitlements of Dr Ron Sim Chye Hock, Mr Teo Chay Lee and Mr Leow Lian Soon under the EPSS are 4 per cent., 0.25 per cent. and 0.25 per cent. respectively. The total remuneration packages of the Appointees under the Service Agreements will be annually reviewed by the Compensation Committee. We will renew the Service Agreements only with the recommendation of the Compensation Committee. Had the service agreements provided to the Appointees been in place for FY1999, the aggregate remuneration (including contributions to CPF and other benefits) paid or provided to the Appointees would be approximately $1.9 million instead of approximately $1.3 million and our profit before taxation for FY1999 would have been approximately $10.2 million instead of approximately $10.8 million. Directors' Remuneration Details of the remuneration (including salary, bonus, profit sharing and other benefits in kind) paid by our Group to Dr Ron Sim Chye Hock and Ms Teo Sway Heong, our Directors in FY1998 and FY1999, for each of the past two financial years ended 31 December 1999 are set out below:­

------------------ FY1998 ------------------ Executive Directors $'000 1,524 Non-executive Directors $'000 -- Total $'000 1,524 ------------------ FY1999 ------------------ Executive Directors $'000 1,317 Non-executive Directors $'000 -- Total $'000 1,317

Number of Directors in Remuneration Bands

-------------- FY1998 -------------- Executive Directors $500,000 and above $250,000 to $499,999 Below $250,000 Total 1 1 -- 2 Non-executive Directors -- -- -- -- Total 1 1 -- 2 -------------- FY1999 -------------- Executive Directors 1 1 -- 2 Non-executive Directors -- -- -- -- Total 1 1 -- 2

Remuneration of employees related to our Directors, substantial Shareholders and Executive Officers For FY1997 to FY1999, the aggregate remuneration (including CPF contributions and benefits) of employees who are related to our Directors and substantial Shareholders amounted to approximately $55,000, $70,000 and $160,000 respectively. These represent approximately 1.3 per cent., 2.2 per cent. and 1.5 per cent. respectively of our profit before taxation for FY1997 to FY1999. These employees are Mr Teo Yeong Ann, Ms Tao Dong Mei, Mr Leow Lian Teck, Mr Leow Lian Cheong and Mr Heah Hwee Meng.

56

Mr Teo Yeong Ann is our Executive Officer and is the brother of Ms Teo Sway Heong and the brother-in-law of Dr Ron Sim Chye Hock. Mr Teo Yeong Ann who joined us in April 1999, is our Corporate Planning Manager and his remuneration is in line with other employees of the same level. Ms Tao Dong Mei is the wife of Mr Leow Lian Soon and is employed as a business consultant to our Group since July 1999. Mr Leow Lian Teck and Mr Leow Lian Cheong are Mr Leow Lian Soon's brothers. Mr Leow Lian Teck assists the business development manager and Mr Leow Lian Cheong is a sales executive, and they have been employed by us since October 1995 and January 1999 respectively. Mr Heah Hwee Meng is Dr Ron Sim Chye Hock's nephew and joined us in June 1997 as a sales executive. The remuneration of Ms Tao Dong Mei, Mr Leow Lian Teck, Mr Leow Lian Cheong and Mr Heah Hwee Meng are in line with other employees of the same level. The remuneration of the executive Directors, and Executive Officers and employees who are related to the Directors and substantial Shareholders will be reviewed annually by the Compensation Committee and subject to approval by the independent Directors to ensure that their remuneration packages are in line with our prevailing remuneration levels and commensurate with their respective job scope and level of responsibility. The total remuneration paid to these persons will be disclosed in our annual reports. Had the service agreements provided to the Appointees been in place for FY1999, the aggregate remuneration (including contributions to CPF and other benefits) paid or provided to the executive Directors, and Executive Officers and employees who are related to the Directors, substantial Shareholders and Executive Officers in FY1999 would be approximately $2.4 million and would represent 22.2 per cent. of the profit before taxation of the Group in FY1999. Management The day-to-day operations of our Group are entrusted to our team of Executive Officers whose names, addresses, ages and designations are set out below:­ Name Lim Choon Hui Address 5 West Coast Walk #06-04 Westpeak Singapore 127146 Blk 148 Bedok Reservoir #13-1687 Singapore 470148 Blk 455 Sin Ming Avenue #02-481 Singapore 570455 Blk 129 Lorong Ah Soo #09-340 Singapore 530129 Blk 59 Circuit Road #06-169 Singapore 370059 Blk 117 Pasir Ris Street 11 #06-519 Singapore 510117 Blk 665 Choa Chu Kang Crescent #08-279 Singapore 680665 Blk 108 Bukit Purmei Road #08-103 Singapore 090108 Age 48 Position Financial Controller

Teo Yeong Ann

32

Corporate Planning Manager

Lim Ching Chye

44

Business Development Manager

Cha Mui Hwang

33

Merchandising Manager

Chee Fook Curn Tang Sheh Yow

32 40

MIS Manager Project Manager

Yeo Khee Chye

31

Assistant Operations Manager

Soh Eng Ann

28

Regional Accountant

57

Name Lie Heu Cheng

Address Blk 211 Tampines Street 23 #12-105 Singapore 520211

Age 26

Position Regional Accountant

The business and working experience of each of the Executive Officers are as follows:­ Ms Lim Choon Hui joined us in 1995 as Financial Controller. She oversees the implementation of financial and accounting policy, computerization of point-of-sales and accounting system for our Group. Prior to joining us, Ms Lim worked in various business industries including retail, trading, manufacturing, hospital health care and government body. Her last held positions before joining us was Finance Manager of Balestier Medical Centre for 1 year, Finance Manager of Hwa Kay Thai (S) Pte Ltd for 1 year and Administration and Financial Controller of Telemecanique Manufacturing Singapore Pte Ltd for 4 years. Altogether, Ms Lim has more than 25 years of finance, administration and IT applications experience. She holds a Bachelor of Commerce, Accountancy degree from Nanyang University in Singapore and is a Certified Public Accountant. Mr Teo Yeong Ann joined us in April 1999 as Corporate Planning Manager. He is responsible for streamlining our support operations, including re-engineering of work processes, and setting up system policy and procedure. Mr Teo is also our ISO project quality management representative. Prior to joining us, Mr Teo was with the Defence Science Organisation as an R&D engineer for 31/2 years. He holds a first class honours degree in Mechanical Engineering from National University of Singapore and a MBA from Australian Graduate School of Management, University of New South Wales. Mr Lim Ching Chye is our Business Development Manager and spearheads our franchise development overseas. He first joined us as an Operations Manager in 1992 and was responsible for formulating and developing our franchising system. In 1995, Mr Lim was appointed our Marketing Manager to oversee sales performance and outlets expansion in Singapore. Mr Lim's prior working experience was with Middle Curtain and Carpet Supplier Pte Ltd where he was an operations manager for 2 years. Ms Cha Mui Hwang joined us in 1995. She is presently our Merchandising Manager and is responsible for centralised purchasing as well as design and development of our products and packaging. Ms Cha has been instrumental in the development of our products for the past few years. Prior to joining us, Ms Cha worked as a purchaser in Lee-Ila Traders Pte Ltd, an import/export local firm, for 3 years. Mr Chee Fook Curn joined us recently in January 2000 as our MIS Manager and is responsible for the alignment of the use of information technology with our Group's business development. Mr Chee has over 7 years of IT experience with Lotus Development (Asia Pacific) Pte Ltd, Wafer Systems Pte Ltd and Netband Pte Ltd. He holds a Bachelor of Engineering from Nanyang Technological University and a MBA from National University of Singapore. Mr Tang Sheh Yow joined us in 1985 and presently is our project manager handling our business operations in Malaysia. Through his 15 years of service with us, Mr Tang has accumulated extensive experience in sales and marketing. His contributions have led to a strong growth of our Malaysian operations in the past 2 years. Mr Yeo Khee Chye joined us in November 1999 as Assistant Operations Manager with responsibility for warehousing and delivery, technical service, customer service and shipping. Mr Yeo has 6 years of experience in warehousing and distribution with CWT Distribution Limited. He graduated from National University of Singapore with an honours degree in Business Administration in 1994. Mr Soh Eng Ann joined us in 1998 as a Regional Accountant for our Hong Kong, Taiwan and PRC operations. Prior to joining us, Mr Soh had 2 years of audit experience with Ernst & Young. He graduated from Nanyang Technological University in 1996 with a Bachelor degree in Accountancy. Ms Lie Heu Cheng joined us in October 1999 as a Regional Accountant. Prior to joining us, Ms Lie had 31/2 years of audit experience with Ernst & Young. Ms Lie graduated from Nanyang Technological University in 1996 with a Bachelor of Accountancy (Honours). She is a Certified Public Accountant. 58

Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Mr Teo Yeong Ann, our Executive Officer is the brother of Ms Teo Sway Heong and the brother-in-law of Dr Ron Sim Chye Hock. Save as disclosed, none of our Directors and Executive Officers are related to one another or to any of our substantial Shareholders. Staff As at 31 May 2000, our Group had a total of 588 full-time employees. Relations between the management and the staff are good and we have not suffered any major work stoppages as a result of industrial action in the past three years.

OSIM SHARE OPTION SCHEME The Osim Share Option Scheme (the ``Scheme'') was approved by our Shareholders at an Extraordinary General Meeting held on 26 June 2000. This Scheme will provide an opportunity for our employees, executive and non-executive Directors, other than Dr Ron Sim Chye Hock and Ms Teo Sway Heong, to participate in our equity. Purpose of the Scheme Our Directors believe that our human resources are critical to us. The recruitment and retention of experienced employees and the motivation of such employees are paramount to our operations. We believe that with this Scheme in place, it can be used as an effective incentive tool to attract, recruit, retain and motivate employees. We hope to use the Scheme as an incentive to recruit and retain qualified personnel to grow with the business. Size of the Scheme We are of the view that the size of the Scheme of 15 per cent. of our issued share capital is reasonable, after taking into account the nature of the industry, the contributions to the Group made by the Directors and employees of the Group, the number of executive employees in the Group and the size of the share capital of the Company. In order for the Scheme to achieve its objective, the Scheme must be of sufficient size to allow adequate options to be issued to existing and new hires in the Group and sufficiently attractive in comparison with schemes offered by other companies. Eligibility Rationale for participation by employees and non-executive Directors In addition to executive Directors and employees of the Group, we are proposing to allow our non-executive Directors, to participate in the Scheme. It is not proposed for Dr Ron Sim Chye Hock or Ms Teo Sway Heong to participate in the Scheme as Controlling Shareholders and their associates are not eligible to participate in the Scheme. It is our long term objective to pursue continuous growth and expansion in our business and operations. At the same time, conscious efforts are directed towards streamlining and rationalisation of our objective to preserve financial strength for future business developments as well as for difficult times. Consequently, we are constantly striving to contain remuneration for our key employees which forms one of the major components of our operating cost. In order to maintain the quality of service of our key employees, it is necessary for us to formulate incentive plans with features that may reduce the impact of the strict salary controls adopted by us, encourage staff retention and allow us to remain attractive and competitive as an employer. It is therefore desired that the Scheme, by allowing all eligible employees and non-executive Directors (other than Ms Teo Sway Heong) to participate, be implemented so as to give us the flexibility to use options as a means of promoting long term staff retention and also to make our remuneration for these employees and non-executive Directors more flexible, building a variable component into their remuneration package in the form of stock options so that we can better manage our fixed overhead costs without compromising their performance, standard and efficiency.

59

Our non-executive Directors, although not involved in the day to day running of our business, can also play an invaluable role in the success of the Company by contributing the wealth of their experience and expertise to our Board of Directors for the benefit of the Group. Currently, 2 of our non-executive Directors are also members of the Audit Committee of the Board of Directors and 1 non-executive Director is also a member of the Compensation Committee of the Board of Directors. The audit committee is an important function of our corporate governance and the duties and responsibilities of the audit committee are included in the Companies Act. It is therefore desirable that they be allowed to participate in the Scheme as well. The Compensation Committee also plays an important role in ensuring that the executive Directors are competitively and fairly remunerated for their services to us. Through the participation of the non-executive Directors in the Scheme, we may acknowledge and give recognition to outstanding services and contributions made by a non-executive director of the Company. Through this way, it will also allow us to continue to attract directors of great ability and aptitude onto our Board. This will help enhance the growth and long term profitability of our business. We are of the view that our executive Directors' remuneration package (including the profit sharing and the share options that they will be granted under the Scheme) is fair given the value which they have contributed to the Group. Our executive Directors provide leadership, management skills, business networks, market contacts and strategic directions and vision to us, and are able to bring the Group into the global health-care market. Furthermore, because some of our executive Directors have nurtured the Group from conception, the executive Directors have forgone other opportunities and have committed themselves to our future. Accordingly, we consider that the remuneration packages offered to them are fair and not excessive. The cost to us of granting options under the Scheme Any options granted for Shares (whether or not the exercise price is set at a discount to the market price) have a fair market value. Where such options are granted at a consideration which is less than fair value, there will be a cost to us, the amount of which will depend on whether the options are granted at a market price or at a discount. Our cost of granting options, with or without a discounted exercise price under the Scheme, would be as follows:­ (i) the effect of the issue of new Shares upon the exercise of options on our net tangible asset per share is accretive if the exercise price is above the net tangible asset per share, but dilutive otherwise. The dilutive effect is even greater if the exercise price is at a discount to the market price; if the options were granted with a discounted exercise price, the exercise of an option at a discounted exercise price would translate into a reduction of the proceeds from the exercise of such option, as compared to the proceeds that we would have received from such exercise had the exercise been made at the prevailing market price of the Shares. Such reduction of the exercise proceeds would represent the monetary cost to us of granting options with a discounted exercise price; and as the monetary cost of granting options with a discounted exercise price is borne by us, our earnings would effectively be reduced by an amount corresponding to the reduced interest earnings that we would have received from the difference in proceeds from exercise price with no discount versus the discounted exercise price. Such reduction would, accordingly, result in the dilution of our earnings per share.

(ii)

(iii)

It should be noted that the costs discussed in (i), (ii) and (iii) above would materialise only upon the exercise of the relevant options. Measured against these costs would be the desirable effect of the Scheme to attract, recruit, retain and motivate directors and employees which could, in the long term, yield greater returns for us and our shareholders.

60

Issue Price Under the Osim Share Option Plan, we may issue option shares at a discount of up of 20 per cent. to the market price at the time of grant of the option, as presently prescribed by the SGX-ST listing rules. Factors which will be taken into consideration in determining the quantum of such discount include, but are not limited to, our performance, the individual performance of the participant and the contribution of the participant to the success and development of our Group. The ability to offer options at a discount to the prevailing market price of the Shares may be utilised as a means to recognise participants for their outstanding performance as well as to motivate them to continue to excel while encouraging them to have greater dedication and loyalty to us through a longer vesting period before the option may be exercised. Such a discretion was requested in view of the following:­ (a) An additional method of compensating employees other than through salary, salary increments, cash bonuses and wage supplements would be available to us. This would enable us to introduce an effective manner of motivating participants to maximise their performance, which we believe would in turn create better value for our shareholders. Share options are like cashless bonuses and would not have an immediate direct financial impact on our profitability as no cash outlay would be expended by us in the grant of such options. However, when share options are exercised, the share capital base of the Company will increase. Share options granted with a discount would be subject to a longer vesting period of up to 2 years as presently prescribed by the SGX-ST listing rules than those granted at the prevailing market price. Therefore holders of such options would be encouraged to have a longer term view of us, thereby promoting staff retention and reinforcing their ties to us. It is not possible for us to grant options only when share prices are low and not grant options when share prices are high. For a share option scheme to function effectively as an incentive tool, options should be granted on a regular basis throughout the duration of the scheme based on the participants performance for the period under review and on our expectations of their, and our, future performance. However, it is not always the case that the share price would correlate with our financial performance as measured by financial parameters such as return on equity and/or earnings growth. Having the discretion to grant options at a discount to the market price will make us less vulnerable to market sentiments which affect the share price and/or stock market volatility at the time that offers of the grant of options are to be made to participants.

(b)

(c)

Conclusion While the Scheme is structured such that we have the discretion to make the appropriate allotments depending on the prevailing circumstances of the Group, the Scheme conforms with the requirements as set out in the Practice Note of the SGX-ST listing rules. In-principle approval has been obtained from the SGX-ST for the listing and quotation for the new Shares to be issued pursuant to the Scheme. Such in-principle approval is not to be taken as an indication of the merits of the Scheme, the Company, its subsidiaries, associated company or the Option Shares. The principal terms of the Scheme are summarised in Appendix A of this Prospectus. The rules of the Scheme are also set out in Appendix A of this Prospectus. Details of the number of options granted, the number of options exercised and the subscription price (as well as the discount involved, if any) will be disclosed in our annual report. A committee of the Board of Directors, the Osim Share Option Scheme Committee will implement and administer the Scheme. As at the date of this Prospectus, no options have been granted under the Scheme.

CORPORATE GOVERNANCE Our Directors and management are committed to high standards of corporate governance in order to protect the interests of our Shareholders, and will follow closely the best practices outlined in the Best Practices Guide issued by the SGX-ST.

61

Board of Directors Our Board of Directors, comprising seven members at the time of listing, is made up of 3 executive Directors and 4 non-executive Directors. The Board will meet periodically throughout the year. To assist the Board of Directors to discharge its responsibilities, we have the following Committees:- (i) the Executive Committee which shall comprise the 3 executive Directors and the Financial Controller. The Committee will assist the Board to strengthen our management culture and direct the Group towards fulfilling our vision of being a global brand name in home health-care products. The Committee will also assist the Board to allocate resources of the Group after considering the risks and returns associated with our operations, including business and financial risks; the Audit Committee which shall comprise 2 independent Directors and 1 executive Director. The Committee will meet periodically to review: (a) with the assistance of the external auditors, the audit plan, their evaluation of our internal accounting controls and audit report; (b) the assistance given by our officers to the external auditors; (c) the scope and results of the internal audit procedures; (d) the financial statements of the Group, including the half year and full year results; (e) our compliance with such functions and duties as may be required under the relevant laws or the Listing Manual; and (f) all interested person transactions to ensure that they are carried out on normal commercial terms and are not prejudicial to the interest of our Shareholders; the Compensation Committee shall comprise 2 independent Directors and 3 executive Directors. The Committee will annually review and the independent Directors shall approve the remuneration packages and terms of employment of each executive Director and each employee who is related to the executive Directors, substantial Shareholders or Executive Officers (see ``Service Agreements'' and ``Remuneration of Employees Related to Directors, substantial Shareholders and Executive Officer'' on pages 55 to 57 of this Prospectus); and the Osim Share Option Scheme Committee shall comprise 2 independent Directors and 2 executive Directors. The Committee will administer the Scheme in accordance with the Rules of the Scheme as set out in Appendix A of this Prospectus.

(ii)

(iii)

(iv)

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS Ongoing and Past Related Party Transactions Save as disclosed below and on pages 25 and 26 of this Prospectus under ``Restructuring Exercise'', none of our Directors, substantial Shareholders and Executive Officers have any interest in any material transactions undertaken by our Group in the past three financial years:­ (a) Purchase of Property from Director On 3 March 2000, we entered into a sale and purchase agreement with Dr Ron Sim Chye Hock, our Director, to purchase a residential condominium in Shanghai, PRC owned by him for RMB790,000 (approximately S$164,000). We decided to acquire this property at Unit 8C, 1523-2 Dong Fang Road, Pudong New Development Zone as we have been using it as accommodation for our senior management personnel based in Shanghai since 1995 rent-free. The purchase consideration was supported by a desk-top valuation of the property of RMB790,000 as at 3 February 2000 done by First Pacific Davies Integrated Property Services (Shanghai) Company Limited. (b) Transactions with Related Companies In relation to affiliated companies which are Osim (USA), Osim (Thai), PT Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang), Dr Ron Sim Chye Hock has an equity interest in, or could exercise management control over or direct the transfer of the shares to him in certain circumstances in these companies. Mr Teo Chay Lee, our Director, is the registered owner of 1 per cent. of the equity in Osim (Thai). Mr Leow Lian Soon, our Director, has a deemed interest in Osim (Beijing), Osim GHC (SH) and HCC (Langfang) as his wife, Ms Tao Dong Mei holds 90 per cent. in Osim GHC (SH) and HCC (Langfang). These 2 companies are in turn the shareholders of Osim (Beijing). Therefore, the affiliated companies are companies related to the Group.

62

Osim (USA) is not included as part of the Group as part of the Restructuring Exercise because it is presently a loss-making company. As stated in the section on ``RISK FACTORS -- Industry Specific Risks -- (e) Prohibitive National Laws on Foreign Ownership'' on page 13 of this Prospectus, due to restrictive laws in Thailand, Indonesia and PRC, we are not permitted to include Osim (Thai), PT Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang) as members of the Group. We have in May 2000 entered into franchise agreements with Osim (USA), Osim (Thai) and PT Sharon (the ``Related Franchisees'') on materially the same terms and conditions as those we have entered with Osim (M'sia), Osim (HK) and Osim (Taiwan) which are our subsidiaries and RSH which is our third party franchisee in Dubai. None of our Directors or substantial Shareholders has any interest in RSH. The franchising arrangements with the Related Franchisees are consistent with our franchise business model as described under the section on ``FRANCHISE MODEL'' on pages 35 and 36 of this Prospectus. As with Osim (M'sia), Osim (HK) and Osim (Taiwan), the Related Franchisees pay us a royalty fee. We have waived the payment of the one-time franchise fee from the Related Franchisees on the same ground as that for waiving the franchise fee for Osim (M'sia), Osim (HK) and Osim (Taiwan) as the Related Franchisees were our existing distributors prior to being appointed as our franchisees. The franchise agreements entered with the Related Franchisees are of 5-year duration and may be renewed with the consent of the Related Franchisees and us, as the case with the franchise agreements entered with Osim (M'sia), Osim (HK) and Osim (Taiwan). The royalties and the prices at which we sell certain of our main products to Osim (USA) are lower than the royalties and prices of certain main products sold to Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH because firstly, our brand name is not that established in the United States and secondly, Osim (USA) operates in a higher-cost environment. These reasons translate to a higher break-even sales level for Osim (USA) and therefore, we charge a royalty rate which is approximately 92% lower than the royalty rates charged to Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH and we sell certain of our main products to Osim (USA) at prices averaging 20 to 28 per cent. lower than the prices of similar product items sold to Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH. Currently, Osim (USA) is making losses in its operations due to high start-up costs and the inability to reap economies of scale. For these reasons, we believe our franchise agreement with Osim (USA) and our sale transactions with Osim (USA) are on arms' length basis notwithstanding the lower royalty rate and sale prices of certain main products. We have in May 2000 entered into a licensing and distribution agreement each with Osim (Beijing), Osim GHC (SH) and HCC (Langfang) (the ``PRC Related Companies''). Existing PRC laws do not permit us to appoint the PRC Related Companies to be our franchisees in the PRC market. The licensing fees charged and the prices at which we sell certain of our main products to the PRC Related Companies are lower than the royalties charged to and prices of those certain main products sold to Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH because firstly, the PRC Related Companies face hefty customs duties and consumption taxes and secondly, due to the lower disposable income of consumers in PRC. These reasons translate to a higher break-even sales level for the PRC Related Companies. The PRC Related Companies are incurring losses in their operations as their retail prices are reduced following the Asian financial crisis. For these reasons, we believe our licensing and distribution agreements with the PRC Related Companies and our sale transactions with the PRC Related Companies are on arms' length basis notwithstanding the licensing fees charged to the PRC Related Companies is approximately 92% lower than the royalty rates charged to Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH and notwithstanding the prices of certain of our main products sold to the PRC Related Companies average 20 to 25 per cent. lower than the prices of similar product items sold to RSH. In our opinion, RSH is not in a comparable situation as Osim (USA) or the PRC Related Companies as it has a retail business in sporting goods which was established since 1995 with 38 point-of-sales outlets in the United Arab Emirates. RSH does not face start-up costs unlike Osim (USA) and the PRC Related Companies. It does not face operating costs as high as for instance, manpower costs as in Osim (USA) or customs duties as heavy as the PRC Related Companies.

63

We charge the same royalty rate to PT Sharon as Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH. Our products are also sold to PT Sharon with the same mark-up margin as those sold to Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH. PT Sharon is currently profitable in its operations. Osim (Thai) is presently a dormant company. Once it commences business, we may charge a lower royalty rate and sell our products at prices lower than those sold to Osim (M'sia), Osim (HK), Osim (Taiwan) and RSH because firstly, Osim (Thai) would face high start-up costs and is expected to be unprofitable and secondly, in view of the lower disposable income of consumers in Thailand. We recognise that the markets our franchisees/licensees operate in are different due to differences in operating costs like manpower and rental costs, tax structure and consumers' purchasing power. Therefore, in the long term, although we would strive to charge the same royalty rates to Osim (USA), Osim (Thai) and the PRC Related Companies, once they are firmly established and are all profitable in their operations, as those charged to our subsidiaries and RSH, it may not be commercially possible to charge a uniform royalty rate to all our franchisees/licensees or sell our products to them at uniform sale prices. At the time of our entering into the franchise agreements with our subsidiaries, we are able to charge our subsidiaries royalty rates which are 12 times higher than the royalty and licensing rates charged to Osim (USA) and the PRC Related Companies respectively as our subsidiaries have been our established distributors and they do not face the high operating-cost environment as in the case of Osim (USA) or the hefty customs duties and consumption taxes as in the case of the PRC Related Companies. The amount of sales which we have transacted with the Related Franchisees and PRC Related Companies for the past three financial years and the extent of these sales as a percentage of our Group's turnover are shown below:­

FY1997 FY1998 FY1999 ------ sales amount ($'000) ------ Osim (USA) Osim (Thai) PT Sharon PRC Related Companies 452 Nil 1,524 8,011 220 Nil 369 3,036 1,875 Nil 1,659 5,113

as a percentage of our Group's turnover Osim (USA) Osim (Thai) PT Sharon PRC Related Companies 0.7% Nil 2.5% 13.2% 0.3% Nil 0.5% 4.4% 1.8% Nil 1.6% 5.0%

We have entered into the following arrangements whereby we are given options to purchase the interest of our executive Directors in the Related Franchisees and the PRC Related Companies. Although it is our general strategy not to acquire equity stakes in our franchisees, we have taken the options in order to mitigate the conflicts of interest between ourselves and our executive Directors, and to prevent such conflicts-of-interest from prejudicing the interest of the minority Shareholders. Such arrangements will still be in line with our overall long-term strategy to franchise as we will exercise the options only when it is in our interest to do so, for instance, where having an equity interest in the Related Franchisees and/or the PRC Related Companies would enable us to have a share in their profits. Going forward, we intend to expand our distribution network through independent third-party franchisee arrangements and it is not our present intention to take up equity interest in third-party franchisees. However, from time to time, we may acquire equity stakes in our third-party franchisees if it is to our benefit to do so.

64

(1) Osim (USA) The entire share capital of Osim (USA) is beneficially owned by Dr Ron Sim Chye Hock. The business of Osim (USA) which began in 1997 has not been profitable and our sales to Osim (USA) is insignificant when compared to our Group's turnover for the past 3 financial years. Dr Ron Sim Chye Hock had granted to us in May 2000 a call option (the ``US Call Option'') whereby in the event that Osim (USA)'s business becomes profitable in the future, we may require Dr Ron Sim Chye Hock to transfer all his shares in Osim (USA) to us at a price (the ``Option Price'') to be determined by Dr Ron Sim Chye Hock and us, and approved by our Audit Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the SGX-ST. To assist Osim (USA) to obtain a foothold in the market and lower its start-up costs, we have imposed in the franchise agreement a graduated scale for royalty payments until such time as the business of Osim (USA) achieves performance targets set by us. Eventually, we expect the royalty payments charged to Osim (USA) to be comparable to those charged to our independent third party franchisee after the different maturity of the target markets and consumers' purchasing power are factored in. We gauge the maturity of the target markets and consumers' purchasing power by comparing the sales achieved by the franchisee against the break even sales level. (2) Osim (Thai) Currently, Osim (Thai) is a dormant company. 51 per cent. of the share capital of Osim (Thai) is owned by Thai nationals who are not related to any of our Directors or substantial Shareholders. Dr Ron Sim Chye Hock and Mr Teo Chay Lee own 48 per cent. and 1 per cent. of the share capital of Osim (Thai) respectively. Dr Ron Sim Chye Hock had in May 2000 granted a call option (the ``First Thai Call Option'') to us whereby in the event that Osim (Thai)'s business turns out to be profitable in the future, we may acquire his aggregate 48 per cent. interest at a price be determined by Dr Ron Sim Chye Hock and us, and approved by our Audit Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the SGX-ST. Mr Teo Chay Lee had also in May 2000 given us a call option (the ``Second Thai Call Option'') over his shares on materially the same terms. Mr Krit Suktachan, one of the above Thai shareholders in Osim (Thai) had in June 2000 granted us a call option (the ``Third Thai Call Option'') over his shares whereby we have the right to require Mr Krit Suktachan to transfer his entire 6 per cent. interest in Osim (Thai) to us in the event that Thai laws are revised to allow majority ownership of Osim (Thai) by foreign persons. The option price payable under the Third Thai Call Option is on the same basis as the First and Second Thai Call Option. As in the case of Osim (USA), to assist Osim (Thai) to obtain a foothold in the market and lower its start-up costs, we have imposed in the franchise agreement a graduated scale for royalty payments until such time as the business of Osim (Thai) achieves performance targets set by us. Eventually, we expect the royalty payments charged to Osim (Thai) to be comparable to those charged to our independent third party franchisee after the different maturity of the target markets and consumers' purchasing power are factored in. Our present business in Thailand is undertaken by Health Check and Care (Thailand) Co., Ltd (``HCC (Thai)'') which is not owned by any of our Directors or substantial Shareholders. None of our Directors is a director of HCC (Thai). Our sales to HCC (Thai) have been insignificant for the past 3 years and amounted to an average of approximately 0.17 per cent. of our Group's turnover in each of our past 3 financial years. Going forward, we intend to grow our business in Thailand and, in line with this plan, it is intended that the undertaking of HCC (Thai) will be transferred to Osim (Thai). We envisage that Osim (Thai) will become our sole franchisee in Thailand and the franchise agreement signed with Osim (Thai) in May 2000 will take effect upon the injection of the assets of HCC (Thai) into Osim (Thai).

65

(3) PT Sharon Our franchisee for the Indonesian market is PT Sharon which commenced business in 1993. Currently, the operations of PT Sharon are profitable. Under existing Indonesian laws, we are not permitted to own any equity interest in PT Sharon. None of our Directors or substantial Shareholders owns any share or is a director of PT Sharon. However, Dr Ron Sim Chye Hock is deemed to have an interest in PT Sharon because he has an oral agreement with Mr Chandra Makmuri, who owns 51 per cent. of PT Sharon, for Mr Chandra Makmuri to transfer 10 per cent. of the share capital of PT Sharon owned by him to Dr Ron Sim Chye Hock in the event that Indonesian laws are revised to permit foreign shareholding in PT Sharon. To eliminate any perceived conflicts of interest between us and Dr Ron Sim Chye Hock, in consideration of Dr Ron Sim Chye Hock relinquishing his right under the oral agreement, we have procured Mr Chandra Makmuri to grant us in May 2000 a call option (the ``Indonesian Call Option'') whereby we have the right to require Mr Chandra Makmuri to transfer 10 per cent. of the share capital of PT Sharon owned by him to us in the event that Indonesian laws are revised to allow foreign shareholding in PT Sharon. The option price under the Indonesian Call Option is to be determined by Mr Chandra Makmuri and us, and approved by our Audit Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the SGX-ST. (4) PRC Related Companies As set out in the section on ``BUSINESS -- Distribution Network'' on page 34 of this Prospectus, we have in May 2000 entered into a licensing and distribution agreement with each of the PRC Related Companies, namely, Osim (Beijing), Osim GHC (SH) and HCC (Langfang). They have commenced business in PRC since 1995 but their operations have resulted in losses for the past 2 years. Under existing PRC laws, we are not permitted to own any equity interest in the PRC Related Companies as they are engaged in retailing. However, we can own Osim (Shanghai) under existing PRC laws as it is a trading company which imports our products into PRC for distribution to the PRC Related Companies. There is therefore no conflict of interest in us owning Osim (Shanghai) and not the PRC Related Companies. The shareholders of Osim (Beijing) are Osim GHC (SH) (owning 50 per cent.) and HCC (Langfang) (owning 50 per cent.). Ms Tao Dong Mei (owning 90 per cent.) and Ms Han Shu Nong (owning 10 per cent.) are the shareholders of HCC (Langfang). Mr Wang Bang Zhi (owning 10 per cent.) and Ms Tao Dong Mei (owning 90 per cent.) are the shareholders of Osim GHC (SH). Dr Ron Sim Chye Hock is deemed to have an interest in the PRC Related Companies because he has an oral agreement with the shareholders of the PRC Related Companies whereby they have agreed to transfer the entire share capital of the PRC Related Companies to Dr Ron Sim Chye Hock in the event that PRC laws are revised to permit foreign ownership of the companies. Mr Leow Lian Soon is deemed to have an 90 per cent. interest in each of HCC (Langfang), Osim GHC (SH) and Osim (Beijing) through the direct and indirect interests of his wife, Ms Tao Dong Mei. To eliminate any perceived conflicts of interest between us, and Dr Ron Sim Chye Hock and Mr Leow Lian Soon, the following measures have been taken. In consideration of Dr Ron Sim Chye Hock relinquishing his right under the oral agreement, the shareholders in the Related PRC Companies have in May 2000 granted us call options (the ``PRC Call Options'') whereby we have the right to require them to transfer the entire share capital of the PRC Related Companies to us in the event that PRC laws are revised to allow foreign ownership of the PRC Related Companies. The option price under each of the PRC Call Options is to be determined by the shareholders of the PRC Related Companies and us, and approved by our Audit Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the SGX-ST.

66

As in the case for Osim (USA) and Osim (Thai), to assist the PRC Related Companies to obtain a foothold in the PRC market and lower their start-up costs, we have imposed in the licensing and distribution agreements a graduated scale for royalty payments until such time as the businesses of the PRC Related Companies achieve performance targets set by us. Eventually, we expect the royalty payments charged to them to be comparable to those charged to our independent third party franchisee after the different maturity of the target markets and consumers' purchasing power are factored in. The Audit Committee will continuously monitor our transactions with the Related Franchisees and the PRC Related Companies on a quarterly basis to ensure that our sales to them and the fees and royalties charged to them are on arms' length basis and on normal commercial terms. The Audit Committee will review the financial and operating performance of and the sales achieved by (as against the break-even sales level necessary to cover all operating costs and overheads) our respective Related Franchisees and the PRC Related Companies so as to determine firstly, whether our sales to them and the royalties rates/licensing fees charged to them are on arms' length basis and secondly, whether the royalty rates/licensing fees and the selling prices should be adjusted to the levels and prices comparable to those charged to our subsidiaries or our third party distributor. Had we, in FY1999, been able to charge the Related Franchisees and the PRC Related Companies the same franchise fee and royalty rate presently charged to RSH and had we been able to sell certain of our main products at prices similar to those sold to RSH, we would not have to suffer a reduction in income of approximately $471,000, representing 4.3 per cent. of PBT in FY1999. (c) Lease to Related Company With effect from 1 January 2000, our property at 6 Xuanwumenwai Street, Junefield Plaza Tower 1, 15th Floor, unit 1526 and 1527, Beijing, PRC has been leased to Osim (Beijing) for 2 years at a monthly rental of RMB18,000 (the ``Lease''). As disclosed under sub-section (b) above, Dr Ron Sim Chye Hock and Mr Leow Lian Soon are deemed to have an interest in Osim (Beijing) and the Lease is a related party transaction. However, our Directors are of the opinion that the rentals received by us under the Lease is reasonable and on arms' length basis based on the assessment of market rental value of the leased property by Beijing C.Y. Leung Property Service & Consultancy Co., Ltd. In the future, we may renew the Lease if it is in our interest to do so, subject to the review of the Audit Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the SGX-ST. (d) Transaction with Osim Distribution Centre Pte Ltd (``ODCPL'') Since FY1998, we have used the services of ODCPL to warehouse our products and handle our freight forwarding. ODCPL is 70 per cent. owned by Dr Ron Sim Chye Hock and the remaining equity is owned by Dr Ron Sim Chye Hock's brother, Mr Sim Chye Choon. The warehouse rentals and freight forwarding fees paid by us to ODCPL since FY1998 and as a percentage of our Group's operating expenses are shown below:­

FY1998 Rentals and Fees % of our Group's operating expenses $124,000 0.3% FY1999 $272,000 0.5%

Our Directors are of the opinion that the commercial terms of the services provided by ODCPL to us are fair and on arms' length basis. It is our intention to continue with this arrangement subject to the review of the Audit Committee in accordance with the requirements of Chapter 9A of the Listing Manual of the SGX-ST. (e) Previous Related Party Transactions Dr Ron Sim Chye Hock and Ms Teo Sway Heong are the owners of Global Health Pte Ltd (``GHPL'') and Health Check & Care Company Limited (``HCCCL'') which are now dormant. In the last 3 financial years, we have sold products to GHPL and HCCCL totalling $233,000 in FY1997. In the same year, we have also purchased the fixed assets of GHPL and HCCCPL for $179,000.

67

In addition, Dr Ron Sim Chye Hock was a director and shareholder of HCC (Thai) (owning 30 per cent. of the share capital) before September 1998. He has since ceased to be a director and shareholder of HCC (Thai). In FY1997 and FY1998, we sold products to HCC (Thai) totalling $213,000. In the last 3 financial years, amount owing to or from directors or affiliated companies as disclosed in the Financial Position on page 20 of this Prospectus are as follows:­

FY1997 $'000 Due from affiliated companies -- trade -- non-trade Due from directors Due to affiliated companies -- trade -- non-trade Due to directors Net amount owing from/(to) directors/affiliated companies

Note:­ (1) These were fully repaid in June 2000.

FY1998 $'000 4,634 -- 3,345 (260) -- (830) 6,889

FY1999 $'000 8,587 10(1) -- -- (46)(1) (1,600)(1) 6,951

7,039 288 3,436 (321) -- (2,361) 8,081

The trade amount due to/from affiliated companies are in relation to the purchase and sale of our products from/to them. We sell to our affiliated companies on credit periods of 60 to 90 days, similar to the credit periods extended to our subsidiaries and third-party distributor. Trade balances due from affiliated companies decreased from $7.0 million at end of FY1997 to $4.6 million at end of FY1998 mainly due to the decrease in sales to the PRC Related Companies from $8.0 million in FY1997 to $3.0 million in FY1998 and the PRC Related Companies selling down their existing stockholdings during FY1998. Further details are disclosed on page 42 of the Prospectus. However trade balances due from affiliated companies increased from $4.6 million at end of FY1998 to $8.6 million at end of FY1999 as a result of an overall increase in sales to PRC and South Asia following the economic recovery in the region and increase in sales to Osim (USA) as a result of its improved business. Further details are disclosed on page 44 of the Prospectus. For FY1999, approximately 68.7 per cent. and 27.5 per cent. of the trade amount due from affiliated companies were due from the PRC Related Companies and Osim (USA) respectively for the sale of mainly massage chairs and foot reflexology rollers to them. Non-trade amount due to/from affiliated companies are in relation to expenses incurred on our/their behalf. Amount due to/from directors are in relation to cash advances to/from us and we do not intend to have any of such transactions in the future. Future Related Party Transactions Our Directors envisage that our Group, in our ordinary course of business, will enter into interested party transactions with interested persons of the Company in the future. Pursuant to this, a shareholders' mandate (the ``Shareholders' Mandate'') was granted by our Shareholders at an extraordinary general meeting held on 26 June 2000 whereby authority was given to Osim (S) to firstly, enter into recurrent transactions of revenue and trading nature in order to sell our products to Osim (Thai), Osim (USA), PT Sharon, Osim (Beijing), Osim GHC (SH) and HCC (Langfang), and secondly, to enter into warehousing and freight forwarding contracts with ODCPL.

68

The grant of the Shareholders' Mandate and its renewal on an annual basis would eliminate the need to convene separate general meetings from time to time to seek shareholders' approval as and when potential interested person transactions with a specified class of interested persons arise, thereby reducing substantial administrative time and expenses in convening such meetings, without compromising our corporate objectives and adversely affecting the business opportunities available to our Group. The Shareholders' Mandate is intended to facilitate transactions in the normal course of business of our Group which are transacted from time to time with the specified classes of interested persons, provided that they are carried out at arm's length and on normal commercial terms and are not prejudicial to our Shareholders. The terms of the Shareholders' Mandate stipulate that the methods of determining the purchase price of the trading transactions and the commercial terms of the warehousing and freight forwarding contracts shall be subject to the review of the Audit Committee who must be satisfied that they are on arms' length basis, taking into consideration the different maturity of the target markets and consumers' purchasing power where appropriate, and on normal commercial terms and will not be prejudicial to the interests of our Shareholders. Unless renewed, the Shareholders' Mandate shall lapse after the impending annual general meeting of our Shareholders. The renewal of the Shareholders' Mandate shall be subject to the requirements in Chapter 9A10(2) of the Listing Manual of the SGX-ST. This means, among other things, that we shall disclose in our annual report, the aggregate value of transactions conducted pursuant to the Shareholders' Mandate during the preceding financial year. Besides the transactions conducted pursuant to the Shareholders' Mandate, the Audit Committee will review all other future related party transactions to ensure that they are carried out on an arms' length basis and on normal commercial terms and will not be prejudicial to us or our Shareholders. To enable the Audit Committee to do so, the following procedures will be undertaken:­ (a) market rates will be used as benchmarks for interested party transactions like rental of properties, and warehousing and freight forwarding charges. Where possible, 2 or 3 quotations will be obtained from unrelated third parties for the purpose of comparison; all interested party transactions will be reviewed at least annually by the Audit Committee (excluding interested parties) or as and when the Audit Committee deems necessary; and the financial performance of the Related Franchisees and Related PRC Companies will be reviewed by the Audit Committee to ensure that the terms of the franchise agreements and the licensing and distribution agreements respectively are not prejudicial to us or our shareholders.

(b) (c)

Each interested party transaction will be properly documented and submitted to the Audit Committee which will periodically review such transactions to ensure that they are carried out on normal arms' length and commercial terms. In the event that a member of the Audit Committee is interested in any interested party transaction, he will abstain from reviewing that particular transaction. The Audit Committee will include the review of interested party transactions as part of its standard procedures while examining the adequacy of internal controls of our Group. It will also ensure that all disclosure requirements on interested party transactions, including those required by prevailing legislation, SGX-ST listing rules and accounting standards are complied with. If required under the SGX-ST's Listing Manual or the Act, we will seek Shareholders' approval for such transactions. In addition, if during the periodic reviews by the Audit Committee, the Audit Committee is of the view that the established guidelines and procedures are not sufficient to ensure that the interested person transactions will be on normal commercial terms and will not be prejudicial to the interests of our Shareholders, we will revert to our Shareholders for a fresh mandate based on new guidelines and procedures for transactions with interested persons.

69

POTENTIAL CONFLICTS OF INTEREST Save as disclosed in the section on ``INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS'' on pages 62 to 69 of this Prospectus, none of our Directors, substantial Shareholders and Executive Officers have any interest, direct or indirect, in any company carrying on the same business or similar trade as the Group. None of our Directors, substantial Shareholders and Executive Officers have any interest, direct or indirect, in any company which is our major supplier, contract manufacturer or customer.

70

DIRECTORS' REPORT

19 July 2000 The Shareholders Osim International Ltd 57 Genting Lane Osim Industrial Building Singapore 349564 Dear Sirs This report has been prepared for inclusion in the prospectus to be dated 19 July 2000 (the ``Prospectus'') in connection with the invitation in respect of 58,000,000 ordinary shares of $0.05 each (``Shares'') in the capital of Osim International Ltd (the ``Company'') comprising 38,000,000 new Shares and 20,000,000 existing Shares. On behalf of the Directors of the Company, I report that, having made due inquiry in relation to the period between 31 December 1999, the date to which the last audited consolidated accounts of the Company and its subsidiaries were made up, and the date hereof, being a date not earlier than 14 days before the issue of the Prospectus:­ (a) (b) the business of the Company and its subsidiaries has, in the opinion of the Directors, been satisfactorily maintained; since the last Annual General Meeting of the Company, no circumstances have arisen which, in the opinion of the Directors, would adversely affect the trading or the value of the assets of the Company or any of its subsidiaries; the current assets of the Company and its subsidiaries appear in the books at values which are believed to be realisable in the ordinary course of business; no contingent liabilities have arisen by reason of any guarantees given by the Company or any of its subsidiaries; and save as disclosed on pages 12 to 16, 23, 93 and 94 of this Prospectus there has been no change in the published reserves or any unusual factors affecting the profits of the Company and its subsidiaries since the last audited accounts.

(c) (d) (e)

Yours faithfully for and on behalf of the Board of Directors

Dr Ron Sim Chye Hock Chairman & Chief Executive Officer Osim International Ltd

71

ACCOUNTANTS' REPORT

19 July 2000 The Board of Directors Osim International Ltd 57 Genting Lane Osim Industrial Building Singapore 349564 Dear Sirs A. INTRODUCTION This report has been prepared for inclusion in the Prospectus of Osim International Ltd (``the Company'') to be dated 19 July 2000 in connection with the Invitation in respect of 58,000,000 ordinary shares of S$0.05 each comprising 38,000,000 New Shares and 20,000,000 Vendor Shares in the capital of the Company, payable in full on application.

B.

THE COMPANY The Company was incorporated in Singapore on 27 August 1983 as a limited exempt private company under the name of R. Sim Trading Co Pte Ltd. On 24 November 1988, the Company changed its name to R. Sim & Company Pte Ltd. On 2 September 1996, the Company changed its name to Osim International (S) Pte Ltd. On 4 July 2000, the Company was converted to a public limited company and changed its name to Osim International Ltd. The principal activities of the Company are those of marketing, distributing and franchising of home health check, health care and healthy lifestyle products. The Company was incorporated with an authorised share capital of S$1,000,000 comprising 1,000,000 ordinary shares of S$1 each and 2 initial subscriber shares of S$1 each. The movements in authorised and paid-up share capital thereafter were as follows:-

Date 9 January 1984 15 August 1988 16 May 1990 4 October 1994 17 February 1995 Authorised share capital S$1,000,000 S$1,000,000 S$1,000,000 S$1,000,000 S$5,000,000 Issued and paid-up capital S$100,000 S$200,000 S$500,000 S$1,000,000 S$3,000,000 Shares issued and consideration Issue of 99,998 ordinary shares of S$1 each at par for cash. Issue of 100,000 ordinary shares of S$1 each at par for cash. Issue of 300,000 ordinary shares of S$1 each at par for cash. Issue of 500,000 ordinary shares of S$1 each at par for cash. Increase in authorised share capital via the creation of 4,000,000 ordinary shares of S$1 each. Issue of 2,000,000 ordinary shares of S$1 each at par via the capitalisation of amount owing to director. 23 July 1998 S$5,000,000 S$3,100,000 Issue of 100,000 ordinary shares of S$1 each at par for cash.

72

On 31 December 1999, pursuant to a Group restructuring exercise, the Company acquired its various subsidiaries from their then existing shareholder for cash as follows:-

Name of subsidiary Equity acquired % Osim (HK) Company Limited Osim GHC (Taiwan) Co., Ltd Osim (M) Sdn Bhd (Formerly known as Osim Global Health Care (M) Sdn Bhd) 95.1 58.0 60.0 S$10,770,000 S$ 230,000 Purchase consideration

S$ 2,500,000

The above consideration was arrived at by applying a price earnings ratio of approximately 5.6 times to the net profit after taxation of the various subsidiaries for the financial year ended 31 December 1999 except for Osim (HK) Company Limited (``Osim (HK)'') where the consideration was arrived at with reference to the net profit after taxation of Osim (HK) for the financial year ended 31 December 1999 and adding back the 3% royalty payments and management fees paid by Osim (HK) to Osim International Ltd in the financial year ended 31 December 1999. Subsequent to 31 December 1999, the Company acquired additional equity interest in the following subsidiaries:-

Name of subsidiary Equity acquired % Osim (HK) Company Limited Osim GHC (Taiwan) Co., Ltd 4.9 2.0 10.0 S$1,300,000 for cash S$8,000 for cash S$293,000 via the issue of 564,000 ordinary shares of S$0.05 each in the Company Purchase consideration

At an Extraordinary General Meeting held on 26 June 2000, the shareholders of the Company approved, inter alia, the following:- (i) the increase in the authorised share capital of the Company from S$5,000,000 comprising 5,000,000 ordinary shares of S$1 each to S$50,000,000 comprising 50,000,000 ordinary shares of S$1 each; the capitalisation of S$5,921,000 from the revenue reserves of the Company for a bonus issue of 5,921,000 ordinary shares of S$1 each in the capital of the Company, credited as fully paid, to the shareholders of the Company on the basis of 1,910 new ordinary shares for every 1,000 ordinary shares held; the subdivision of each existing ordinary share of S$1 each in the authorised and issued and paid-up share capital of the Company into 20 ordinary shares of S$0.05 each; the conversion of the Company into a public limited company and the change of the Company's name to Osim International Ltd; the adoption of a new set of Articles of Association; the issue of an additional 564,000 new ordinary shares of S$0.05 each to certain shareholders of Osim GHC (Taiwan) Co., Ltd as consideration for the acquisition of a 10% equity in Osim GHC (Taiwan) Co., Ltd; the issue of 11,600,000 new ordinary shares of S$0.05 each to Century Private Equity Holdings (S) Pte Ltd at S$0.47 per share, pursuant to the Subscription Agreement; the issue of 38,000,000 new ordinary shares of S$0.05 each pursuant to the Invitation which when fully paid, allotted and issued, will rank pari-passu in all respects with the existing issued shares of the Company; 73

(ii)

(iii) (iv) (v) (vi)

(vii) (viii)

(ix)

a shareholders' mandate authorising Osim International Ltd to enter into recurrent transactions of a revenue and/or trading nature firstly, in the form of sales of the Company's products to its affiliated companies, Osim GHC (Thailand) Co., Ltd, Osim (USA), Inc., PT Sharon Samaru, Osim (Beijing) Co., Ltd, Osim GHC (Shanghai) Co., Ltd and Health Check and Care (Langfang) Co., Ltd and secondly, warehousing and freight forwarding contracts with its affiliated company, Osim Distribution Centre (S) Pte Ltd; the Osim Share Option Scheme (the ``Scheme'') and the authorisation of the Board of Directors to implement and administer the Scheme, to modify and/or amend the Scheme, to offer and grant options and to allot and issue new shares pursuant to the exercise of options granted pursuant to the Scheme subject to the rules of the Scheme; and the authorisation of the Directors, pursuant to Section 161 of the Act and the provisions of the new Articles of Association becoming effective, to allot and issue such further shares in the Company at any time to such persons, upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued shall not exceed 50 per cent of the issued share capital of the Company immediately prior to the proposed issue, provided that the aggregate number of shares to be issued other than on a pro-rata basis to the then existing shareholders of the Company shall not exceed 20 per cent of the issued share capital of the Company immediately prior to the proposed issue, and, unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.

(x)

(xi)

C.

THE GROUP At the date of this report, the Company had the following subsidiaries and associated company (referred to collectively with the Company as the ``Proforma Group''):-

Place and Date of incorporation Registered/ Issued and paid-up capital Equity interest held by the Group % Subsidiaries Held by the Company Osim International Trading (Shanghai) Co., Ltd. (Formerly known as R. Sim International Trading (Shanghai) Co., Ltd.) Osim (HK) Company Limited Import, trading, franchising and distribution of home health check and health care products Distribution of home health check, health care and healthy lifestyle products Distribution of home health check, health care and healthy lifestyle products Distribution of home health check, health care and healthy lifestyle products People's Republic of China 28 June 1995 Hong Kong 10 October 1996 Malaysia 16 July 1997 Taiwan 29 July 1997 RMB1,666,000 100

Name of company

Principal activities

HK$4,100,000

100

Osim (M) Sdn Bhd (Formerly known as Osim Global Health Care (M) Sdn Bhd) Osim GHC (Taiwan) Co., Ltd

RM500,000

60

NT$25,000,000

70

Associated company Daito-Osim Healthcare Appliances (Suzhou) Co., Ltd Manufacturer and exporter of home health check and health care products People's Republic of China 22 December 1995 RMB6,986,746 30

74

We have acted as auditors of the Company with effect from the financial year ended 31 December 1997. The financial statements of the Company prior to the financial year ended 31 December 1997 were audited by Soh, Wong & Partners. The financial statements of Osim (HK) Company Limited have been audited by our associated firm in Hong Kong with effect from the financial year ended 31 December 1998. The financial statements of *Osim (HK) Company Limited from the date of incorporation to 31 December 1997 were audited by BDO Binder. The financial statements of Osim (M) Sdn Bhd have been audited by our associated firm in Malaysia with effect from the financial year ended 31 December 1999. The financial statements of Osim (M) Sdn Bhd from the date of incorporation to 31 December 1998 were audited by Tan Wong & Co. The financial statements of Osim GHC (Taiwan) Co., Ltd have been audited by our associated firm in Taiwan with effect from the financial year ended 31 December 1999. The financial statements of Osim GHC (Taiwan) Co., Ltd prior to the financial year ended 31 December 1999 have not been audited as no statutory audit was required to be performed under the laws of its country of incorporation. The financial statements of Osim International Trading (Shanghai) Co., Ltd. (``Osim Shanghai'') prior to the financial year ended 31 December 1997 were audited by Shanghai Jia Hua Certified Public Accountants. The financial statements of Osim Shanghai for financial year ended 31 December 1997 have been audited by Shanghai Zhonghua & SASS. With effect from financial year ended 31 December 1998, the financial statements of Osim Shanghai were audited by Zhongzhou Certified Public Accountants (formerly known as Shanghai Jia Hua Certified Public Accountants).

*The audited financial statements of Asia Growth Company Limited for the financial years ended 31 December 1995 to 1996 have been included in the Proforma Group as prior to the incorporation of Osim (HK) Company Limited and during the financial year ended 31 December 1997, the business in Hong Kong was carried out by Asia Growth Company Limited. The business was transferred to Osim (HK) Company Limited in 1997 and Asia Growth Company Limited became dormant. The financial statements of Asia Growth Company Limited were audited by Peter W. H. Mah & Co. The financial statements of Health Check & Care Sdn Bhd for the financial years ended 31 December 1995 to 1997 have been included in the Proforma Group as prior to the incorporation of Osim (M) Sdn Bhd, the business in Malaysia was carried out by Health Check & Care Sdn Bhd. The business was transferred to Osim (M) Sdn Bhd from the date of its incorporation and Health Check & Care Sdn Bhd became dormant. The financial statements of Health Check and Care Sdn Bhd were audited by Kiat & Associates. The financial statements of Asia Growth Company Ltd for the financial years ended 31 December 1995 to 1998 have been included in the Proforma Group as prior to the incorporation of Osim GHC (Taiwan) Co., Ltd, the business in Taiwan was carried out by Asia Growth Company Ltd. Asia Growth Company Ltd merged with Osim GHC (Taiwan) Co., Ltd with effect from 1 January 1999, the date of incorporation of Osim GHC (Taiwan) Co., Ltd.

The auditors' report on the financial statements of the associated company, Daito-Osim Healthcare Appliances (Suzhou) Co. Ltd. for the financial year ended 31 December 1996 was qualified on grounds that the associated company was unable to provide shipping documents to support the import of materials amounting to RMB29,000,000. Subsequent to the financial year ended 31 December 1996, the associated company's auditors sighted the above shipping documents and noted that the transactions have been properly recorded. Other than as disclosed above, there were no other audit qualifications in respect of the audited financial statements of the Company, its subsidiaries and associated company for the financial periods covered by this report. The financial information set out in this report is based on the audited financial statements of the companies in the Proforma Group for the period from 1 January 1995 or their respective dates of incorporation, whichever is later, to 31 December 1999. It has been prepared in accordance with the accounting policies of the Proforma Group set out in Section I of this report and on the basis that the Proforma Group had been in place throughout the financial periods covered by this report. Where the reporting year ends of certain subsidiaries were not co-terminous with the reporting year end of the Company, we have properly accounted for on a consistent basis the audited financial statements of these subsidiaries drawn up to the different year ends after making such adjustments which we considered necessary in presenting the Proforma Group financial information.

75

Osim (HK) Company Limited was incorporated on 10 October 1996. As its business was transferred from Asia Growth Company Limited, we have used the audited financial statements of Asia Growth Company Limited for the proforma periods prior to the transfer of business to Osim (HK) Company Limited for inclusion in the Proforma Group financial statements. Accordingly, we have made a notional adjustment to adjust for the proforma shareholders' equity of Asia Growth Company Limited upon the incorporation of Osim (HK) Company Limited. Osim (M) Sdn Bhd was incorporated on 16 July 1997. As its business was transferred from Health Check & Care Sdn Bhd, we have used the audited financial statements of Health Check & Care Sdn Bhd for the proforma periods prior to the transfer of business to Osim (M) Sdn Bhd for inclusion in the Proforma Group financial statements. Accordingly, we have made a notional adjustment to adjust for the proforma shareholders' equity of Health Check & Care Sdn Bhd upon the incorporation of Osim (M) Sdn Bhd. Osim GHC (Taiwan) Co., Ltd was incorporated on 29 July 1997. As Asia Growth Company Ltd was merged with Osim GHC (Taiwan) Co., Ltd, we have used the audited financial statements of Asia Growth Company Ltd for the proforma periods prior to the merger with Osim GHC (Taiwan) Co., Ltd for inclusion in the Proforma Group financial statements. In arriving at the Proforma Group financial information, we have made such adjustments as we considered necessary in order to present the financial statements on a consistent and comparable basis, including notional adjustments to reflect the investments and share capital of the Company as if the Proforma Group had existed from 1 January 1995.

D.

STATEMENTS OF PROFORMA GROUP RESULTS The results of the Proforma Group after making such adjustments as we considered appropriate are set out below:-

Note Turnover Operating profit Share of (loss) profit of associated company Profit before taxation and minority interests Taxation Profit after taxation but before minority interests Minority interests Profit after taxation and minority interests but before extraordinary item Extraordinary item Profit attributable to the Members of the Company 4 3 1 2 ------------ Year ended 31 December ------------ 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 31,432 1,632 -- 1,632 (541) 1,091 (49) 1,042 -- 1,042 42,897 3,859 (191) 3,668 (1,177) 2,491 (61) 2,430 1,759 4,189 60,837 4,419 (17) 4,402 (1,156) 3,246 84 3,330 -- 3,330 69,747 2,616 583 3,199 (912) 2,287 (28) 2,259 -- 2,259 103,138 10,514 334 10,848 (3,123) 7,725 (284) 7,441 -- 7,441

76

E.

NOTES TO THE STATEMENTS OF PROFORMA GROUP RESULTS 1. Turnover represents revenue from the sale of home health check, health care and healthy lifestyle products net of discounts and returns, and franchise fees from franchising activities as follows:-

------------ Year ended 31 December ------------ 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 Sale of goods Franchise Fees 31,432 -- 31,432 42,897 -- 42,897 60,837 -- 60,837 69,747 -- 69,747 103,121 17 103,138

The Group has significant transactions with related parties on terms agreed between the parties as follows:-

------------ Year ended 31 December ------------ 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 Income Sales to affiliated companies Management fee income from affiliated companies Expenses Purchases from associated company Rental and service fees paid/payable to an affiliated company Others Purchases of fixed assets from an affiliated company -- -- 179 -- -- -- -- -- -- 97 -- 512 124 1,906 272 6,248 48 9,677 42 10,323 24 3,736 20 8,828 22

77

2.

Operating profit has been determined after charging (crediting) the following:-

------------ Year ended 31 December ------------ 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 Depreciation of fixed assets Directors' remuneration and fees -- directors of the Company -- directors of subsidiaries Provision for doubtful trade debts -- affiliated companies Provision for warranty cost Provision for stock obsolescence Interest expense -- bank overdrafts -- term loans -- hire purchase -- trust receipts -- other creditors Interest income -- fixed deposits -- bank balances Exchange loss (gain), net Fixed assets written off Loss on disposal of fixed assets Bad trade debts written off Write back of provision for stock obsolescence -- (2) 157 -- 9 -- -- (11) (1) 93 -- -- 12 -- -- -- (17) (1) (968) 596 3 -- -- (7) (39) 647 8 2 (14) (14) 1,893 -- 4 32 (34) 280 602 4 10 -- 228 574 16 21 -- 77 619 44 183 6 223 694 29 402 7 235 858 19 356 -- -- -- -- -- -- -- -- -- 536 194 222 383 -- 178 201 872 51 824 68 1,373 675 1,524 105 1,317 195 313 406 569 1,440 2,166

3.

Taxation comprises:-

------------ Year ended 31 December ------------ 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 Current tax -- current year -- under/(over) provision of taxation in respect of prior year Deferred tax -- current year -- reversal of prior year deferred tax 40 -- 541 50 -- 1,177 -- (1) 1,156 38 (147) 912 332 -- 3,123 501 -- 1,131 (4) 1,090 67 1,021 -- 2,717 74

78

3.

Taxation (continued) Osim International Trading (Shanghai) Co., Ltd The company is subject to Enterprise Income Tax (``EIT'') at a rate of 15% as approved by the tax bureau of Pudong New Area, People's Republic of China. It is entitled to preferential treatment of EIT and has been granted full exemption from EIT for fiscal years 1996 and 1997 and 50% reduction of EIT for fiscal years 1998 to 2000. Osim GHC (Taiwan) Co., Ltd Pursuant to the amended Income Tax Law (``ITL''), which took effect on 1 January 1998, the income tax paid by the company for fiscal year 1998 and onwards may be used by the individual resident stockholders of the company or its corporate shareholders as individual income tax credits. Pursuant to the ITL, beginning with financial year 1998, annual distributable net earnings as determined under the ITL that are not distributed to shareholders in the following year are subject to an additional income tax at a rate of 10%. The additional income tax paid may be used by the shareholders (with the exception of the domestic corporate shareholders for which dividends received from domestic investee companies are exempt from income tax) as tax credits when the then undistributed earnings are ultimately distributed.

4.

Extraordinary item relates to gain on disposal of leasehold properties of the Company during the financial year ended 31 December 1996 amounting to approximately S$2,335,000 net of taxation of approximately S$576,000. Statement of Adjustments The following adjustments have been made in arriving at the Statements of Proforma Group results:-

------------ Year ended 31 December ------------ 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 Turnover From summation of audited financial statements/ management accounts of individual companies Elimination of sales within Proforma Group Adjusted turnover as stated in the Statement of Proforma Group results Profit before taxation and minority interests From summation of audited financial statements/ management accounts of individual companies Unrealised profit on closing stocks, net Adjusted profit before taxation and minority interests as stated in the Statements of Proforma Group results

5.

39,308 (7,876) 31,432

54,025 (11,128) 42,897

80,022 (19,185) 60,837

91,416 (21,669) 69,747

143,960 (40,822) 103,138

1,991 (359)

4,093 (425)

4,397 5

3,215 (16)

12,292 (1,444)

1,632

3,668

4,402

3,199

10,848

79

F.

SUMMARISED PROFORMA GROUP BALANCE SHEETS The summarised balance sheets of the Proforma Group as at 31 December 1995 to 31 December 1999 as set out below have been prepared based on audited financial statements/management accounts and on the basis that the Proforma Group structure had been in place since 1 January 1995:-

---------------- As at 31 December ---------------- 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 Proforma shareholders' equity Minority interests 6,417 781 7,198 Represented by: Fixed assets Investment in associated company Current assets Current liabilities Net current (liabilities)/assets Less: Non-current liabilities Hire purchase liabilities, non-current portion Term loans, non-current portion Provision for pension benefits Deferred taxation -- (8,837) -- (102) 7,198 (80) (4,175) -- (294) 11,016 (169) (6,886) -- (147) 13,760 (145) (7,820) -- (38) 15,764 (240) (7,255) (157) (369) 11,408 17,272 -- 10,901 (12,036) (1,135) 12,349 303 21,123 (18,210) 2,913 13,455 333 34,124 (26,950) 7,174 16,607 905 24,689 (18,434) 6,255 18,276 1,068 36,607 (36,522) 85 10,186 830 11,016 13,007 753 13,760 14,937 827 15,764 10,269 1,139 11,408

80

G. MOVEMENTS IN PROFORMA SHAREHOLDERS' EQUITY The movements in the shareholders' equity of the Proforma Group for each of the five years ended 31 December 1995 to 1999 are as follows:-

------------ Year ended 31 December ------------ 1995 1996 1997 1998 1999 S$'000 S$'000 S$'000 S$'000 S$'000 Balance brought forward Add (less): Net profit attributable to the Proforma Group Notional adjustment to adjust for proforma shareholders' equity of Asia Growth Company Limited (Note (a)) Notional adjustment to adjust for proforma shareholders' equity of Health Check & Care Sdn Bhd (Note (b)) Increase in share capital/share premium of the Company Goodwill written off (Note (c)) Dividends, net Translation reserve Balance carried forward 1,042 4,189 3,330 2,259 7,441 5,528 6,417 10,186 13,007 14,937

--

--

(635)

--

--

-- -- -- -- (153) 6,417

-- -- -- (370) (50) 10,186

-- -- -- (370) 496 13,007

27 100 -- (370) (86) 14,937

-- -- (12,421) (75) 387 10,269

Notes:- (a) Osim (HK) Company Limited was incorporated on 10 October 1996. As its business was transferred from Asia Growth Company Limited, we have used the audited financial statements of Asia Growth Company Limited for the proforma periods prior to the transfer of business to Osim (HK) Company Limited for inclusion in the Proforma Group financial statements. Accordingly, we have made a notional adjustment to adjust for the proforma shareholders' equity of Asia Growth Company Limited upon the incorporation of Osim (HK) Company Limited. Osim (M) Sdn Bhd was incorporated on 16 July 1997. As its business was transferred from Health Check & Care Sdn Bhd, we have used the audited financial statements of Health Check & Care Sdn Bhd for the proforma periods prior to the transfer of business to Osim (M) Sdn Bhd for inclusion in the Proforma Group financial statements. Accordingly, we have made a notional adjustment to adjust for the proforma shareholders' equity of Health Check & Care Sdn Bhd upon the incorporation of Osim (M) Sdn Bhd. Relates to goodwill on consolidation arising from the acquisition of the various subsidiaries written off directly against reserves.

(b)

(c)

81

H.

STATEMENT OF NET ASSETS The statement of net assets of the Group and of the Company as at 31 December 1999 are set out below with the notes thereon, set out in Section J.

Note Proforma shareholders' equity Minority interests 1 Group S$'000 10,269 1,139 11,408 Represented by -- Fixed assets Investment in subsidiaries Investment in associated company Current assets Stocks Trade debtors Other debtors, deposits and prepayments Due from subsidiaries -- trade -- non-trade Due from affiliated companies -- trade -- non-trade Fixed deposits Cash and bank balances Less: Current liabilities Trade creditors Bills payable to banks (secured) Other creditors and accruals Due to an associated company -- trade Due to affiliated companies -- non-trade Due to a director Term loans, current portion Short term bank loans Hire purchase liabilities, current portion Proposed dividend Provision for taxation Bank overdrafts (secured) 10 Company S$'000 20,816 -- 20,816

2 3 4 5 6 7

18,276 -- 1,068 12,089 8,846 2,574 -- -- 8,587 10 236 4,265 36,607

13,391 15,396 495 4,155 1,567 613 15,426 491 2,688 10 -- 2,117 27,067

9 8 9

10 11

4,658 12,017 8,925 361

4,470 12,017 3,047 221 46 1,073 558 -- 104 74 3,814 3,297 28,721 (1,654)

9 9 12 13 14

46 1,600 646 760 115 75 4,022 3,297 36,522

Net current assets (liabilities) Less: Non-current liabilities Hire purchase liabilities, non-current portion Term loans, non-current portion Provision for pension benefits Deferred taxation 14 12 15

85

240 7,255 157 369 11,408

213 6,427 -- 172 20,816

82

I.

SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies have been consistently applied in the preparation of the Proforma Group and Company financial information. Basis of accounting The financial statements, expressed in Singapore dollars, have been prepared in accordance with the historical cost convention and Statements of Accounting Standard in Singapore. Income recognition Income from sale of goods is recognised upon delivery of goods and acceptance by customers. Franchise fees are recognised on an accrual basis. Basis of consolidation The Proforma Group financial statements include the financial statements of the Company and its subsidiaries made up to the end of each financial year. The results of subsidiaries acquired or disposed of during the financial year are included in or excluded from the Proforma Group financial statements on the basis that the Proforma Group had been in place since 1 January 1995. Significant intercompany balances and transactions have been eliminated on consolidation. When subsidiaries are acquired, any excess of the purchase consideration over the net assets of subsidiaries at the date of acquisition represents goodwill on consolidation and is written off directly against reserves. Similarly, any excess of the net assets of subsidiaries at the date of acquisition over the purchase consideration represents reserve on consolidation which is credited directly to reserves. In the preparation of the consolidated financial statements, the financial statements of the foreign subsidiaries are translated at the rates of exchange ruling at the balance sheet date except for the share capital and reserves which are translated at historical exchange rates and profit and loss items which are translated at the average exchange rates for the year. Foreign currency translation differences are taken directly to translation reserve. Subsidiaries and associated company Investments in subsidiaries and associated company are stated in the financial statements of the Company at cost. Provision is made where there is a decline in value that is other than temporary. An associated company is defined as a company, not being a subsidiary, in which the Proforma Group has a long term equity interest of not less than 20% and in whose financial and operating policy decisions the Proforma Group exercises significant influence. The Proforma Group's share of profits less losses of the associated company is included in the consolidated statement of profit and loss. The Group's share of the post-acquisition accumulated profits and reserves of the associated company is adjusted against the cost of investment in the consolidated balance sheet.

83

Fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight line basis to write-off the cost over their estimated useful lives. The annual rates of depreciation are as follows:- Freehold buildings Leasehold buildings Computers Motor vehicles Electrical appliances Shop renovations Furniture and fittings Office equipment 2%­3% 3% 20%-100% 20% 331/3% 331/3% 10% 10%-20%

No depreciation is provided on freehold land. During the financial year ended 31 December 1998, the Company revised its estimated useful lives of certain fixed assets for depreciation purposes to more accurately reflect the economic useful lives of these fixed assets. The impact of the change in accounting estimate is to decrease profit before taxation for the financial year ended 31 December 1998 and 31 December 1999 by approximately S$182,000 and S$68,000 respectively. During the financial year ended 31 December 1999, a subsidiary, Osim (M) Sdn Bhd, revised its estimated useful lives of certain fixed assets for depreciation purposes to be consistent with the group accounting policy. The impact of the change in the accounting estimate is to decrease profit before taxation for the financial year ended 31 December 1999 by approximately S$105,000. Stocks Stocks are stated at the lower of cost (determined on a weighted average basis) and net realisable value. Provision is made for deteriorated, damaged, obsolete and slow-moving stocks. Taxation Income tax expense is determined on the basis of tax effect accounting, using the liability method and is applied to all significant timing differences. Deferred tax benefits are not recognised unless there is reasonable expectation of their realisation. Affiliated company An affiliated company is defined as a company, not being a subsidiary or an associated company, in which the directors of the Company have an equity interest or exercise significant influence over. Hire purchase Where assets are financed by hire purchase agreements that give rights approximating to ownership, the assets are capitalised as if they had been purchased outright at the values equivalent to the present values of the total rental payable during the periods of the hire purchase and the corresponding hire purchase commitments are included under liabilities. The excess of the hire purchase payments over the recorded hire purchase obligations is treated as finance charges, which are allocated over each hire purchase term to give a constant rate of interest on the outstanding balance at the end of each period.

84

Foreign currency transactions and balances The accounting records of the companies in the Proforma Group are maintained in their respective functional currencies. Transactions in foreign currencies during the year are recorded in the respective functional currencies using exchange rates approximating those ruling at transaction dates. Foreign currency monetary assets and liabilities at the balance sheet date are translated into the respective functional currencies at exchange rates approximating those ruling at that date. All resultant exchange differences are dealt with through the profit and loss account.

J.

NOTES TO THE STATEMENT OF NET ASSETS 1. Proforma shareholders' equity Included in this balance is an amount of approximately $149,000 and $466,000 relating to Enterprise Expansion Fund and capital reserve respectively, which are non-distributable. In accordance with the relevant laws and regulations of the People's Republic of China (``PRC''), Osim International Trading (Shanghai) Co., Ltd (``the subsidiary'') is required to set up an Enterprise Expansion Fund by way of appropriation from its statutory net profit. The amount to be appropriated to the Enterprise Expansion Fund is determined by the board of directors based on the profitability of the subsidiary. The Enterprise Expansion Fund may be used to increase the registered capital of the subsidiary, subject to approval from the PRC authorities. The Enterprise Expansion Fund is not available for dividend distribution to the shareholders.

85

2.

Fixed assets (a) Group

-------------------------------------------------------- 1999 -------------------------------------------------------- Furniture Freehold Freehold Leasehold Motor Electrical Shop and Office land buildings buildings Computers vehicles appliances renovations fittings equipment Total $ $ $ $ $ $ $ $ $ $ 482 -- -- 16 498 10,587 167 -- 32 10,786 3,379 -- -- -- 3,379 293 171 -- (1) 463 737 280 (262) 2 757 73 56 -- -- 129 2,690 2,476 (9) 3 5,160 669 332 -- 2 1,003 205 152 (1) 2 358 19,115 3,634 (272) 56 22,533

(S$'000) Cost As at 1 January 1999 Additions Disposals/write-off Translation difference As at 31 December 1999

86

Accumulated depreciation As at 1 January 1999 Charge for the year Disposals/write-off Translation difference As at 31 December 1999 Net book value As at 31 December 1999 498 10,371 2,744 81 388 70 3,164 720 240 18,276 -- -- -- -- -- 231 182 -- 2 415 534 101 -- -- 635 268 114 -- -- 382 380 157 (167) (1) 369 22 38 -- (1) 59 665 1,344 (4) (9) 1,996 105 179 -- (1) 283 66 51 (1) 2 118 2,271 2,166 (172) (8) 4,257

2.

Fixed assets (continued) (b) Company

---------------------------------------------------- 1999 ---------------------------------------------------- Furniture Freehold Leasehold Motor Electrical and Shop Office building buildings Computers vehicles appliances fittings renovations equipment Total $ $ $ $ $ $ $ $ $ 9,649 167 -- 9,816 3,379 -- -- 3,379 264 97 -- 361 394 150 (209) 335 36 19 -- 55 333 102 -- 435 868 604 (9) 1,463 93 29 -- 122 15,016 1,168 (218) 15,966

(S$'000) Cost As at 1 January 1999 Additions Disposals/write-off As at 31 December 1999 Accumulated depreciation As at 1 January 1999 Charge for the year Disposals/write-off As at 31 December 1999 Net book value As at 31 December 1999

87

159 165 -- 324

535 101 -- 636

264 97 -- 361

232 71 (145) 158

22 16 -- 38

33 43 -- 76

477 487 (4) 960

10 12 -- 22

1,732 992 (149) 2,575

9,492

2,743

--

177

17

359

503

100

13,391

As at 31 December 1999, the Group and the Company had fixed assets under hire purchase with a net book value of approximately S$340,000 and S$236,000 respectively. In addition, the Group and the Company had freehold land, buildings and leasehold buildings with a net book value of approximately S$13,613,000 and S$12,235,000 respectively, which were mortgaged as security for the banking facilities as disclosed in Notes 10 and 12.

3.

Investment in subsidiaries

Country of incorporation and place of business Equity interest held by the Group %

Name of company Subsidiaries Held by the Company Osim International Trading (Shanghai) Co., Ltd. (Formerly known as R. Sim International Trading (Shanghai) Co., Ltd.) Osim (HK) Company Limited

Principal activities

Cost of investment S$'000

Import, trading, franchising, and distribution of home health check and health care products

People's Republic of China

100

295

Distribution of home health check, health care and healthy lifestyle products Distribution of home health check, health care and healthy lifestyle products Distribution of home health check, health care and healthy lifestyle products

Hong Kong

100

12,070

Osim (M) Sdn Bhd (Formerly known as Osim Global Health Care (M) Sdn Bhd) Osim GHC (Taiwan) Co., Ltd

Malaysia

60

2,500

Taiwan

70

531

15,396

4.

Investment in associated company (a) This comprises:-

Group S$'000 Unquoted equity shares, at cost Add: Share of post-acquisition profits of associated company 346 709 1,055 Translation reserve Loan to associated company (136) 149 1,068 Company S$'000 346 -- 346 -- 149 495

(b)

The Company had the following associated company as at 31 December 1999:-

Country of incorporation and place of business Percentage of equity held % Daito-Osim Healthcare Appliances (Suzhou) Co., Ltd Manufacturer and exporter of home health check and health care products People's Republic of China 30

Associated company

Principal activity

Cost of investment S$'000 346

88

(c)

Loan to associated company is unsecured and interest-free. The loan is not expected to be repaid within the next twelve months.

5.

Stocks

Group S$'000 Finished goods Goods-in-transit 13,386 123 13,509 Less provision for stock obsolescence (1,420) 12,089 Company S$'000 4,683 123 4,806 (651) 4,155

Movements in provision for stock obsolescence are as follows:-

At beginning of year Provision for the year Write back of provision Translation difference At end of year 1,251 201 (34) 2 1,420 651 -- -- -- 651

6.

Trade debtors

Group S$'000 Trade debtors Less provision for doubtful debts 8,846 -- 8,846 Company S$'000 1,567 -- 1,567

7.

Other debtors, deposits and prepayments

Group S$'000 Deposits Prepayments Advances to employees Sundry debtors 2,249 246 15 64 2,574 Company S$'000 501 97 14 1 613

89

8.

Due from affiliated companies (trade)

Group S$'000 Due from affiliated companies Less provision for doubtful debts 8,781 (194) 8,587 Company S$'000 2,882 (194) 2,688

Movements in provision for doubtful debts are as follows:-

At beginning of year Provision for the year At end of year 194 -- 194 194 -- 194

9.

Due from (to) affiliated companies/subsidiaries/director These amounts are non-trade in nature, unsecured, interest-free and have no fixed terms of repayment.

10.

Bills payable to banks and bank overdrafts The banking facilities granted to the Company are secured by:­ (a) (b) (c) legal mortgage on the freehold and leasehold buildings of the Company; legal mortgage on the leasehold building of an affiliated company; and joint and several personal guarantee given by certain directors of the Company.

11.

Other creditors and accruals

Group S$'000 Other creditors Accrued operating expenses Provision for warranty costs Accrued payroll costs 4,236 3,324 572 793 8,925 Company S$'000 1,927 433 367 320 3,047

12.

Term loans

Group S$'000 Term loan A Term loan B Term loan C Term loan D Term loan E 5,500 864 621 768 148 7,901 Due within 12 months Due after 12 months (646) 7,255 Company S$'000 5,500 864 621 -- -- 6,985 (558) 6,427

90

Term loans A and B are repayable in equal monthly instalments over a period of 15 years from the date of draw down and term loan C is repayable in equal monthly instalments over a period of 10 years from the date of draw down. Term loans D and E are taken up by a subsidiary. Term loan D is repayable in equal monthly instalments over a period of 18 years from the date of draw down and term loan E is repayable in equal monthly instalments over a period of 5 years from the date of draw down. Interest on term loan A is charged at the bank's prevailing prime lending rate plus 0.75% per annum, interest on term loan B is charged at 6.75% per annum and interest on term loan C is charged at 12.75% per annum. Interest on term loan D and E are charged at 9.05% per annum. Term loans A and B are secured by:- (a) (b) (c) legal mortgage over the freehold and leasehold buildings of the Company; legal mortgage over the leasehold building of an affiliated company; and joint and several personal guarantee given by certain directors of the Company.

Term loan C is secured by a legal mortgage on the leasehold building of the Company. Term loans D and E are secured by legal mortgages over the subsidiary's freehold land and building. 13. Short term bank loans These loans are secured by (i) a guarantee of certain shareholders of a subsidiary; and (ii) a corporate guarantee provided by the Company for the loan taken by a subsidiary, at interest rates ranging from 3.75% to 7.25% per annum and are repayable within the next twelve months. 14. Hire purchase liabilities

Group S$'000 Minimum payments under hire purchase -- within 1 year -- within 2 to 5 years 133 286 419 Finance charges allocated to future periods (64) 355 121 247 368 (51) 317 Company S$'000

Hire purchase liabilities are classified as follows:-

-- current portion -- non-current portion 115 240 355 104 213 317

15.

Provision for pension benefits This relates to the amount of pension cost provided for in the current financial year for a subsidiary. This subsidiary has a retirement plan covering all full-time employees beginning 1999. Benefits under the plan are based on length of service and estimated base pay at the time of retirement.

91

16.

Commitments and contingent liabilities (a) Non-cancellable operating lease commitments

Group S$'000 Due within 1 year Due within 2 to 5 years 9,663 8,095 17,758 Company S$'000 2,206 1,445 3,651

(b) Contingent liabilities, secured

Group S$'000 Letters of credit Bank guarantees 300 709 1,009 Company S$'000 300 509 809

The details of the securities are disclosed in Note 10. (c) Options The Company has been granted options to purchase 100% of Osim (USA), Inc., 55% of Osim GHC (Thailand) Co., Ltd, 10% of PT Sharon Samaru, 100% of Health Check and Care (Langfang) Co, Ltd, Osim (Beijing) Co., Ltd and Osim GHC (Shanghai) Co., Ltd (all being affiliated companies) at fair market values to be determined and subject to the laws of the countries of these companies permitting foreign shareholdings in these companies. 17. Subsequent events Subsequent to 31 December 1999, (a) the Company entered into an agreement with GBI Realty Pte Ltd to purchase a piece of land and construct a building on a turnkey project basis, at Ubi Avenue 1, Singapore, for a consideration of S$36,282,540. This building is to be used as the new Group headquarters. at an Extraordinary General Meeting held on 26 June 2000, the shareholders of the Company approved, inter alia, the following:- (i) the increase in the authorised share capital of the Company from S$5,000,000 comprising 5,000,000 ordinary shares of S$1 each to S$50,000,000 comprising 50,000,000 ordinary shares of S$1 each; the capitalisation of S$5,921,000 from the revenue reserves of the Company for a bonus issue of 5,921,000 ordinary shares of S$1 each in the capital of the Company, credited as fully paid, to the shareholders of the Company on the basis of 1,910 new ordinary shares for every 1,000 ordinary shares held; the subdivision of each existing ordinary share of S$1 each in the authorised and issued and paid-up share capital of the Company into 20 ordinary shares of S$0.05 each; the conversion of the Company into a public limited company and the change of the Company's name to Osim International Ltd; the adoption of a new set of Articles of Association; the issue of additional 564,000 new ordinary shares of S$0.05 each to certain shareholders of Osim GHC (Taiwan) Co., Ltd as consideration for the acquisition of a 10% equity in Osim GHC (Taiwan) Co., Ltd; 92

(b)

(ii)

(iii)

(iv) (v) (vi)

(vii)

the issue of 11,600,000 new ordinary shares of S$0.05 each to Century Private Equity Holdings (S) Pte Ltd at S$0.47 per share pursuant to the Subscription Agreement; the issue of 38,000,000 new ordinary shares of S$0.05 each pursuant to the Invitation which when fully paid, alloted and issued, will rank pari-passu in all respects with the existing issued shares of the Company; a shareholders' mandate authorising Osim International Ltd to enter into recurrent transactions of a revenue and/or trading nature firstly, in the form of sales of the Company's products to its affiliated companies, Osim GHC (Thailand) Co., Ltd, Osim (USA), Inc., PT Sharon Samaru, Osim (Beijing) Co., Ltd, Osim GHC (Shanghai) Co., Ltd and Health Check and Care (Langfang) Co., Ltd and secondly, warehousing and freight forwarding contracts with its affiliated company, Osim Distribution Centre Pte Ltd; the Osim Share Option Scheme (the ``Scheme'') and the authorisation of the Board of Directors to implement and administer the Scheme, to modify and/or amend the Scheme, to offer and grant options and to allot and issue new shares pursuant to the exercise of options granted pursuant to the Scheme subject to the rules of the Scheme; and the authorisation of the Directors, pursuant to Section 161 of the Act and the provisions of the new Articles of Association becoming effective, to allot and issue such further shares in the Company at any time to such persons, upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued shall not exceed 50 per cent of the issued share capital of the Company immediately prior to the proposed issue, provided that the aggregate number of shares to be issued other than on a pro-rata basis to the then existing shareholders of the Company shall not exceed 20 per cent of the issued share capital of the Company immediately prior to the proposed issue, and, unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.

(viii)

(ix)

(x)

(xi)

K.

NET TANGIBLE ASSET BACKING OF THE PROFORMA GROUP The net tangible asset backing of the Proforma Group for each ordinary share of S$0.05 each is based on the statement of net assets of the Proforma Group as at 31 December 1999 and after taking into account the issue of 11.6 million new ordinary shares of S$0.05 each to Century Private Equity Holdings (S) Pte Ltd and the issue of 38 million New Shares of S$0.05 each, which forms part of the subject of the Invitation, and the proceeds and estimated expenses in connection therewith.

S$'000 Net tangible assets as at 31 December 1999 Proceeds from the issue of 11,600,000 new ordinary shares of S$0.05 each at S$0.47 per share to Century Private Equity Holdings (S) Pte Ltd pursuant to the Subscription Agreement Proceeds from the issue of 34,200,000 New Shares of S$0.05 each at S$0.52 per share which forms part of the subject of this Invitation Proceeds from the issue of 3,800,000 Reserved Shares of S$0.05 each at S$0.47 per share which forms part of the subject of this Invitation Less: Estimated expenses of the Invitation payable by the Company 10,269

5,452 17,784 1,786 (1,700) 33,591

93

Number of shares '000 Issued share capital of 3,100,000 ordinary shares of S$1 each as at 31 December 1999 Bonus issue of 5,921,000 ordinary shares of S$1 each 3,100 5,921 9,021 (a) (b) (c) (d) Subdivision into 180,420,000 ordinary shares of S$0.05 each Issue of 564,000 shares of S$0.05 each to certain shareholders of Osim GHC (Taiwan) Co., Ltd Issue of 11,600,000 shares of S$0.05 each to Century Private Equity Holdings (S) Pte Ltd pursuant to the Subscription Agreement Issue of 38,000,000 New Shares of S$0.05 each which forms part of the subject of this Invitation 180,420 564 11,600 38,000 230,584 14.6

Issued and paid-up share capital after the Invitation Net tangible asset backing per S$0.05 share (in cents)

L.

DIVIDENDS Dividends declared by the Company and its subsidiaries during the periods under review were as follows:- Ordinary dividend

Year ended Osim International Ltd 31 August 1996 31 December 1997 31 December 1998 31 December 1999 16.67 cents 16.67 cents 16.13 cents 3.23 cents 370,000 370,000 370,000 74,500 Gross dividend per share Net dividend S$

No other dividends have been paid or proposed by the Company or its subsidiaries for any of the periods under review.

M. AUDITED FINANCIAL STATEMENTS No audited financial statements have been prepared for the Company or its subsidiaries for any period subsequent to 31 December 1999.

Yours faithfully,

Arthur Andersen Certified Public Accountants Singapore Max Loh Khum Whai Partner-in-charge

94

GENERAL AND STATUTORY INFORMATION

1. INFORMATION ON THE DIRECTORS AND THE EXECUTIVE OFFICERS (a) (b) (c) The names, addresses, ages and principal occupations of our Directors and Executive Officers are set out on pages 54, 57 and 58 of this Prospectus respectively. The business and working experience of each of our Directors are set out on pages 54 and 55 of this Prospectus. Our Directors' interests in the Shares as at the date of this Prospectus, as recorded in the register required to be kept by the Company under the Act, are set out below:­

-- Direct Interest -- Number of Shares Dr Ron Sim Chye Hock Teo Sway Heong Teo Chay Lee(1) Leow Lian Soon

(1)

-- Indirect Interest -- Number of Shares 1,804,200

(3) (3)

-- Total Interest -- Number of Shares 180,420,000

(2) (2)

% 92.7 0.9 -- -- -- -- --

% 0.9 92.7 -- -- -- -- --

% 93.6 93.6 -- -- -- -- --

178,615,800 1,804,200 -- -- --

(2)

178,615,800 -- -- -- -- --

180,420,000 -- -- -- -- --

Khor Peng Soon Michael Kan Yuet Yun Ong Kian Min(1)

Notes:­ (1)

(1)

-- --

Mr Teo Chay Lee and Mr Leow Lian Soon, both executive Directors, have been allocated 500,000 Reserved Shares each. In addition, Dr Ron Sim Chye Hock has decided to transfer 500,000 Shares out of his own personal shareholding to each of Mr Teo Chay Lee and Mr Leow Lian Soon as described in note (2) below. Mr Leow Lian Soon's wife, Ms Tao Dong Mei, has been allocated 30,000 Reserved Shares. Mr Michael Kan Yuet Yun and Mr Ong Kian Min, both independent Directors, have been allocated 100,000 Reserved Shares each. The above executive and independent Directors have no present intention of selling their Reserved Shares within 6 months after the Invitation. Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo Chay Lee, Mr Leow Lian Soon, Ms Lim Choon Hui and Mr Chiang See Thong respectively by way of a gift as a token of his appreciation of their contributions to our Group, such transfers to be completed immediately after the Invitation is completed. Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Their indirect interests consist of the interest of their spouse.

(2)

(3)

(d) (e)

The business and working experience of each of our Executive Officers are set out on page 58 of this Prospectus. Save for the service agreements referred to on pages 55 and 56 of this Prospectus, there are no existing or proposed service contracts between our Directors or Executive Officers and us which are not determinable by us within one year without the payment of compensation (other than statutory compensation). The aggregate remuneration and emoluments (including fees, salaries, bonuses and commissions) paid to our Directors for services rendered in all capacities to the Company and its subsidiaries for the financial year ended 31 December 1999 was approximately $1.3 million. For the current financial year ending 31 December 2000, the estimated amount payable to our Directors under the arrangements in force as at the date of this Prospectus is approximately $1.9 million.

(f)

95

(g)

Save as disclosed below, none of our Directors and Executive Officers is or was involved in any of the following:­ (i) (ii) a petition under any bankruptcy laws in any jurisdiction filed against him/her in the last 10 years; being a partner in any partnership involved in a petition under any bankruptcy laws in any jurisdiction filed against the partnership in the last 10 years, while he/she was a partner of that partnership; being a director or executive officer of any corporation involved in a petition under any bankruptcy laws in any jurisdiction filed against the corporation in the last 10 years, while he/she was such a director or executive officer; having an unsatisfied judgements outstanding against him/her; convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty punishable with imprisonment for 3 months or more, or charged for violation of any securities laws or subject to any such pending criminal proceeding; convicted of any offence, in Singapore or elsewhere, involving a breach of any securities or financial market laws, rules or regulations; received any judgement against him/her in any civil proceeding in Singapore or elsewhere in the last 10 years involving fraud, misrepresentation or dishonesty or is subject to any such pending civil proceeding; convicted in Singapore or elsewhere of any offence in connection with the formation or management of any corporation; disqualified from acting as a director of any company, or from taking part in any way directly or indirectly in the management of any company; been subject to any order, judgement or ruling of any court of competent jurisdiction, tribunal or governmental body permanently or temporarily enjoining him/her from engaging in any type of business practice or activity; and to his/her knowledge, in Singapore or elsewhere, been concerned with the management or conduct of affairs of any company or partnership which has been investigated by an inspector appointed under the provisions of the Companies Act, or other securities enactments or by any other regulatory body in connection with any matter involving the company partnership occurring or arising during the period when he/she was so concerned with the company or partnership.

(iii)

(iv) (v)

(vi) (vii)

(viii) (ix) (x)

(xi)

(h)

Dr Ron Sim Chye Hock and Ms Teo Sway Heong, who are our Directors and substantial Shareholders, are husband and wife. Mr Teo Yeong Ann, our Executive Officer is the brother-in-law of Dr Ron Sim Chye Hock and the brother of Ms Teo Sway Heong. Save as disclosed, none of our Directors and Executive Officers are related to one another or to any substantial Shareholder. No option to subscribe for our Shares or debentures or for shares and debentures of any of our subsidiaries has been granted to, or has been exercised by, any of our Directors or Executive Officers within the two years preceding the date of this Prospectus. Save as disclosed on page 70 of this Prospectus, none of our Directors, Executive Officers or substantial Shareholders have any interest, direct or indirect, in any company carrying on a similar trade as the Company or any of its subsidiaries.

(i)

(j)

96

(k)

Save as disclosed on pages 62 and 69 of this Prospectus, none of our Directors or expert are interested, directly or indirectly, in the promotion of, or in any assets which have, within the two years preceding the date of this Prospectus, been acquired by or disposed of by or leased to the Company or any of its subsidiaries, or are proposed to be acquired by or disposed of by or leased to the Company or any of its subsidiaries. None of our Directors are materially interested in any contract or arrangement, subsisting at the date of this Prospectus, which is significant in relation to the business of the Company and its subsidiaries taken as a whole. There is no shareholding qualification for our Directors in the Articles of Association of the Company.

(l)

(m) The directorships, other than that held in Osim (S), of each of our Directors as at 30 June 2000 and for the past five years, and in the case of Dr Ron Sim Chye Hock, to the best of his knowledge and recollection, are set out below:­

Director Dr Ron Sim Chye Hock Present directorships Group Companies Osim (M'sia) Osim (HK) Osim (Taiwan) Osim (Shanghai) Other Companies Global Health Pte Ltd Healthcheck & Care Pte Ltd Homedics Pte Ltd Melbourne Townhouse Pty Limited Osim Distribution Centre (S) Pte Ltd Osim Express Singapore Pte Ltd Osim Investment Pte Ltd Osim Logistics International Pte Ltd Osim Pte Ltd Plasma Precision Technology Pte Ltd R. Sim Holding Pte Ltd R. Sim Hotel & Development Pty Ltd Health Check & Care Co., Limited Asia Growth Company Limited Osim (USA) Osim (Thai) Health Check & Care Sdn Bhd Health Check & Care (Australia) Pty Limited Mr Teo Chay Lee Other Companies Osim (Thai) Mr Leow Lian Soon Group Companies Osim (HK) Osim (Shanghai) Past directorships Other Companies Shen Property & Investment Pte Ltd Scenic Resorts Pte Ltd (formerly Osim Distriplaza Pte Ltd) Health Check & Care (Thailand) Co., Ltd

97

Director Ms Teo Sway Heong

Present directorships Group Companies Osim (Shanghai) Other Companies Global Health Pte Ltd Healthcheck & Care Pte Ltd Osim Pte Ltd R Sim Holding Pte Ltd

Past directorships Group Companies Osim (HK)

Mr Khor Peng Soon

United Test and Assembly Center Ltd Fibers Technology Corporation Pte Ltd Prosper Development Ltd (B.V.I.)

Sembawang Aviation Pte Ltd Semair Pte Ltd Catic Sembawang Aircraft Development Pte Ltd Asia Pacific Air Cargo Pte Ltd Other Companies Singapore Tobacco Co (Pte) Ltd British-American Tobacco Co (Singapore) Ltd

Mr Michael Kan Yuet Yun, PBM

Other Companies Millennium Group Limited, HK

Mr Ong Kian Min*

Other Companies ASA Ceramic Limited GMG Global Ltd JIT Holdings Limited Penguin Boat International Limited Food Empire Holdings Limited ACE Entrepreneurs & Advisers Pte Ltd AdXplorer Pte Ltd BrokersCapital Pte Ltd Hwa Ying (Pte.) Ltd SB China Holdings Pte Ltd Sinor Invest Pte Ltd Water Cove Networks (S) Pte Ltd

Other Companies MG Logic Pte Ltd CH2M Hill Singapore Private Limited

*Companies in which Mr Ong Kian Min was appointed as director for the purpose of incorporation or as nominee director only and in the course of his professional practice have not been included.

(n)

Save as disclosed below, none of our Executive Officers currently hold or have held any directorships during the last five years, in any company as at 30 June 2000:­

Executive Officer Mr Lim Ching Chye Present directorships Other Companies Osim (Thai) Ms Cha Mui Hwang Nil Past directorships Other Companies Homedics Pte Ltd Other Companies Fourhin Metal Roofing Pte Ltd

98

2.

SHARE CAPITAL (a) As at the date of this Prospectus, there is only one class of shares in the capital of the Company. The rights and privileges attached to the Shares are as stated in the Articles of Association of the Company. There are no founder, management or deferred shares. Save as disclosed on pages 23, 25 and 26 of this Prospectus and below, there was no change in the issued share capital of the Company and its subsidiaries within the two years preceding the date of this Prospectus:­

Number of shares issued Par Value Purpose of Issue Resultant paid-up capital Party to whom shares were issued

(b)

Date Osim (S) 23 July 1998

100,000

$1

To increase working capital; issued for cash at par value

$3,100,000

Dr Ron Sim Chye Hock (69,001) Ms Teo Sway Heong (30,999)

Osim (M'sia) 28 December 1998 499,900 RM1 To acquire entire assets and liabilities of Health Check & Care Sdn Bhd RM500,000 Health Check & Care Sdn. Bhd.

Osim (HK) 31 December 1999 Osim (Taiwan) 31 December 1998 500,000 NT$10 To acquire entire assets and liabilities of Osim International Co., Ltd. NT$25,000,000 Shareholders of Osim International Co., Ltd. 3,100,000 HK$1 Capitalisation of director's loan HK$4,100,000 Dr Ron Sim Chye Hock

(c)

Save as disclosed on pages 25 and 26 of this Prospectus and paragraph 2(b) above, no shares in or debentures of the Company and its subsidiaries have been issued, or agreed to be issued, as fully or partly paid-up for cash or for a consideration otherwise than in cash within the two years preceding the date of this Prospectus. Save as disclosed under ``Osim Share Option Scheme'' on pages 59 to 61 and 113 to 136 of this Prospectus, no person has been, or is entitled to be, given an option to subscribe for any shares in or debentures of the Company or of any of its subsidiaries.

(d)

99

3.

ARTICLES OF ASSOCIATION The following provisions in the Articles of Association of the Company relate to our Directors' remuneration and borrowing powers, restrictions on voting powers of our Directors in interested transactions, shareholders' voting rights, consents for variation of class rights and transfer of shareholdings:- Director's remuneration Article 79 The ordinary fees of the Directors shall from time to time be determined by an Ordinary Resolution of the Company and shall not be increased except pursuant to an Ordinary Resolution passed at a General Meeting where notice of the proposed increase shall have been given in the notice convening the General Meeting and shall (unless such resolution otherwise provides) be divisible among the Directors as they may agree, or failing agreement, equally, except that any Director who shall hold office for part only of the period in respect of which such fees is payable shall be entitled only to rank in such division for a proportion of fees related to the period during which he has held office. Article 80 (A) Any Director who holds any executive office, or who serves on any committee of the Directors, or who otherwise performs services which in the opinion of the Directors are outside the scope of ordinary duties of a Director, may be paid such extra remuneration by way of salary, commission or otherwise as the Directors may determine. The fees (including any remuneration under Article 80(A) above) in the case of a Director other than an Executive Director shall be payable by a fixed sum and shall not at any time be by commission on or percentage of the profits or turnover, and no Director whether an Executive Director or otherwise shall be remunerated by a commission on or percentage of turnover.

(B)

Article 81 The Directors may repay to any Director all such reasonable expenses as he may incur in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise in or about the business of the Company. Article 82 The Directors shall have power to pay and agree to pay pensions or other retirement, superannuation, death or disability benefits to (or to any person in respect of) any Director for the time being holding any executive office and for the purpose of providing any such pensions or other benefits to contribute to any scheme or fund or to pay premiums. Article 83 A Director may be party to or in any way interested in any contract or arrangement or transaction to which the Company is a party or in which the Company is in any way interested and he may hold and be remunerated in respect of any office or place of profit other than the office of Auditor of the Company or any subsidiary thereof) under the Company or any other company in which the Company is in any way interested and he (or any firm of which he is a member) may act in a professional capacity for the Company or any such other company and be remunerated therefor and in any such case as aforesaid (save as otherwise agreed) he may retain for his own absolute use and benefit all profits and advantages accruing to him thereunder or in consequence thereof. Article 84 (A) The Directors may from time to time appoint one or more of their body to be the holder of any executive office (including, where considered appropriate, the office of Chairman or Deputy Chairman) on such terms and for such period as they may (subject to the provisions of the Statutes) determine and, without prejudice to the terms of any contract entered into in any particular case, may at any time revoke any such appointment.

100

(B)

The appointment of any Director to the office of Chairman or Deputy Chairman or Managing or Joint Managing or Deputy or Assistant Managing Director shall automatically determine if he ceases to be a Director but without prejudice to any claim for damages for breach of any contract of service between him and the Company.

(C) The appointment of any Director to any other executive office shall not automatically determine if he ceases from any cause to be a Director, unless the contract or resolution under which he holds office shall expressly state otherwise, in which event such determination shall be without prejudice to any claim for damages for breach of any contract of service between him and the Company. Article 88 The remuneration of a Managing Director shall from time to time be fixed by the Directors and may, subject to these presents, be by way of salary or commission or participation in profits or by any or all these modes but he shall not under any circumstances be remunerated by a commission on or a percentage of turnover. Borrowing Powers of Directors Article 109 Subject as hereinafter provided and to the provisions of the Statutes, the Directors may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. Restrictions on Voting Powers of Directors Article 102 A Director shall not vote in respect of any contract or proposed contract or arrangement or any other proposal whatsoever in which he has any personal material interest, directly or indirectly. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting. Shareholders' Voting Rights Article 48 The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges and advantages as regards dividend, return of capital, voting and other matters, as if they held the shares from which the stock arose, but no such privilege or advantage (except as regards participation in the profits or assets of the Company) shall be conferred by an amount of stock which would not, if existing in shares, have conferred such privilege or advantage; and no such conversion shall affect or prejudice any preference or other special privileges attached to the shares so converted. Article 65 Subject and without prejudice to any special privileges or restrictions as to voting for the time being attached to any special class of shares for the time being forming part of the capital of the company, each member entitled to vote may vote in person or by proxy. On a show of hands, every member who is present in person or by proxy shall have one vote and on a poll, every member who is present in person or by proxy shall have one vote for every share which he holds or represents. For the purpose of determining the number of votes which a member, being a Depositor, or his proxy may cast at any General Meeting on a poll, the reference to shares held or represented shall, in relation to shares of that Depositor, be the number of shares entered against his name in the Depository Register as at forty-eight hours before the time of the relevant General Meeting as certified by the Depository to the Company.

101

Article 66 In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose, seniority shall be determined by the order in which the names stand in the Register of Members or (as the case may be) the Depository Register in respect of the share. Article 67 Where in Singapore or elsewhere, a receiver or other person (by whatever name called) has been appointed by any court claiming jurisdiction in that behalf to exercise powers with respect to the property or affairs of any member on the ground (however formulated) of mental disorder, the Directors may in their absolute discretion, upon or subject to production of such evidence of the appointment as the Directors may require, permit such receiver or other person on behalf of such member to vote in person or by proxy at any General Meeting or to exercise any other right conferred by membership in relation to meetings of the Company. Article 68 No member shall, unless the Directors otherwise determine, be entitled in respect of shares held by him to vote at a General Meeting either personally or by proxy or to exercise any other right conferred by membership in relation to meetings of the Company if any call or other sum presently payable by him to the Company in respect of such shares remains unpaid. Article 69 No objection shall be raised as to the admissibility of any vote except at the meeting or adjourned meeting at which the vote objected to is or may be given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairman of the meeting whose decision shall be final and conclusive. Article 70 On a poll, votes may be given personally or by proxy and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way. Article 71 (A) A member may appoint not more than two proxies to attend and vote at the same General Meeting Provided that if the member is a Depositor, the Company shall be entitled and bound:- (a) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares entered against his name in the Depository Register as at forty-eight hours before the time of the relevant General Meeting as certified by the Depository to the Company; and to accept as the maximum number of votes which in aggregate the proxy or proxies appointed by the Depositor is or are able to cast on a poll a number which is the number of shares entered against the name of that Depositor in the Depository Register as at forty-eight hours before the time of the relevant General Meeting as certified by the Depository to the Company, whether that number is greater or smaller than the number specified in any instrument of proxy executed by or on behalf of that Depositor.

(b)

(B)

The Company shall be entitled and bound, in determining rights to vote and other matters in respect of a completed instrument of proxy submitted to it, to have regard to the instructions (if any) given by and the notes (if any) set out in the instrument of proxy.

(C) In any case where a form of proxy appoints more than one proxy, the proportion of the shareholding concerned to be represented by each proxy shall be specified in the form of proxy. (D) A proxy need not be a member of the Company.

102

Article 72 (A) An instrument appointing a proxy shall be in writing in any usual or common form or in any other form which the Directors may approve and:- (a) (b) (B) in the case of an individual, shall be signed by the appointor or his attorney; and in the case of a corporation, shall be either given under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation.

The signature on such instrument need not be witnessed. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy pursuant to Article 73, failing which the instrument may be treated as invalid.

Article 73 An instrument appointing a proxy must be left at such place or one of such places (if any) as may be specified for that purpose in or by way of note to or in any document accompanying the notice convening the meeting (or, if no place is so specified, at the Office) not less than forty-eight hours before the time appointed for the holding of the meeting or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) for the taking of the poll at which it is to be used, and in default shall not be treated as valid. The instrument shall, unless the contrary is stated thereon, be valid as well for any adjournment of the meeting as for the meeting to which it relates; Provided that an instrument of proxy relating to more than one meeting (including any adjournment thereof) having once been so delivered for the purposes of any meeting shall not be required again to be delivered for the purposes of any subsequent meeting to which it relates. Article 74 An instrument appointing a proxy shall be deemed to include the right to demand or join in demanding a poll, to move any resolution or amendment thereto and to speak at the meeting. Article 75 A vote cast by proxy shall not be invalidated by the previous death or insanity of the principal or by the revocation of the appointment of the proxy or of the authority under which the appointment was made Provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the Office at least one hour before the commencement of the meeting or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) the time appointed for the taking of the poll at which the vote is cast. Class Rights Article 4 Subject to the Statutes, no shares may be issued by the Directors without the prior approval of the Company in General Meeting but subject thereto and to Article 8, and to any special rights attached to any shares for the time being issued, the Directors may allot or grant options over or otherwise dispose of the same to such persons on such terms and conditions and for such consideration and at such time and subject or not to the payment of any part of the amount thereof in cash as the Directors may think fit, and any shares may be issued with such preferential, deferred, qualified or special rights, privileges or conditions as the Directors may think fit, and preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors, Provided always that:- (a) (b) no shares shall be issued to transfer a controlling interest in the Company without the prior approval of the members in a General Meeting; no shares shall be issued at a discount except in accordance with the Statutes;

103

(c)

(subject to any direction to the contrary that may be given by the Company in a General Meeting) any issue of shares for cash to members holding shares of any class shall be offered to such members in proportion as nearly as may be to the number of shares of such class then held by them and the provisions of the second sentence of Article 8(A) with such adaptations as are necessary shall apply; and the rights attaching to shares of a class other than ordinary shares shall be expressed in the resolution creating the same.

(d)

Article 5 (A) In the event of preference shares being issued, the total nominal value of issued preference shares shall not at any time exceed the total nominal value of the issued ordinary shares and preference shareholders shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance sheets and attending General Meetings of the Company, and preference shareholders shall also have the right to vote at any meeting convened for the purpose of reducing the capital or winding-up or sanctioning a sale of the undertaking of the Company or where the proposal to be submitted to the meeting directly affects their rights and privileges or when the dividend on the preference shares is more than six months in arrear. The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued.

(B)

Variation of Class Rights Article 6 (A) Whenever the share capital of the Company is divided into different classes of shares, the special rights attached to any class may, subject to the provisions of the Statutes, be varied or abrogated either with the consent in writing of the holders of three-quarters in nominal value of the issued shares of the class or with the sanction of a Special Resolution passed at a separate General Meeting of the holders of the shares of the class (but not otherwise) and may be so varied or abrogated either whilst the Company is a going concern or during or in contemplation of a winding-up. To every such separate General Meeting, all the provisions of these presents relating to General Meetings of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two persons at least holding or representing by proxy at least one-third in nominal value of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll and that every such holder shall on a poll have one vote for every share of the class held by him, Provided always that where the necessary majority for such a Special Resolution is not obtained at such General Meeting, consent in writing if obtained from the holders of three-quarters in nominal value of the issued shares of the class concerned within two months of such General Meeting shall be as valid and effectual as a Special Resolution carried at such General Meeting. The foregoing provisions of this Article shall apply to the variation or abrogation of the special rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class the special rights whereof are to be varied. The repayment of preference capital other than redeemable preference capital, or any alteration of preference shareholders' rights, may only be made pursuant to a Special Resolution of the preference shareholders concerned Provided Always that where the necessary majority for such a Special Resolution is not obtained at the General Meeting, consent in writing if obtained from the holders of three-fourths of the preference shares concerned within two months of the General Meeting, shall be as valid and effectual as a special resolution carried at the General Meeting.

(B)

(C) The special rights attached to any class of shares having preferential rights shall not, unless otherwise expressly provided by the terms of issue thereof, be deemed to be varied by the creation or issue of further shares ranking as regards participation in the profits or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto.

104

Transfer of Shares Article 36 All transfers of the legal title in shares may be effected by the registered holders thereof by transfer in writing in the form for the time being approved by any Stock Exchange upon which the Company may be listed or any other form acceptable to the Directors. The instrument of transfer of any share shall be signed by or on behalf of both the transferor and the transferee and be witnessed Provided that an instrument of transfer in respect of which the transferee is the Depository shall be effective although not signed or witnessed by or on behalf of the Depository. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register of Members in respect thereof. Article 37 The Register of Members may be closed at such times and for such period as the Directors may from time to time determine Provided always that such Register shall not be closed for more than thirty days in any year Provided always that the Company shall give prior notice of such closure as may be required to any Stock Exchange upon which the Company may be listed, stating the period and purpose or purposes for which the closure is made. Article 38 (A) There shall be no restriction on the transfer of fully paid up shares (except where required by law, the listing rules of any Stock Exchange upon which the shares of the Company may be listed or the rules and/or bye-laws governing any Stock Exchange upon which the shares of the Company may be listed) but the Directors may in their discretion decline to register any transfer of shares upon which the Company has a lien and in the case of shares not fully paid up, may refuse to register a transfer to a transferee of whom they do not approve Provided always that in the event of the Directors refusing to register a transfer of shares, they shall within one month beginning with the day on which the application for a transfer of shares was made, serve a notice in writing to the applicant stating the facts which are considered to justify the refusal as required by the Statutes. The Directors may in their sole discretion refuse to register any instrument of transfer of shares unless:- (a) all or any part of the stamp duty (if any) payable on each share certificate and such fee not exceeding $2 as the Directors may from time to time require pursuant to Article 41, is paid to the Company in respect thereof; the instrument of transfer is deposited at the Office or at such other place (if any) as the Directors may appoint accompanied by the certificates of the shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do; the instrument of transfer is in respect of only one class of shares; and the amount of the proper duty with which each share certificate to be issued in consequence of the registration of such transfer is chargeable under any law for the time being in force relating to stamps is tendered.

(B)

(b)

(c) (d)

Article 39 If the Directors refuse to register a transfer of any shares, they shall within one month after the date on which the transfer was lodged with the Company send to the transferor and the transferee notice of the refusal as required by the Statutes. Article 40 All instruments of transfer which are registered may be retained by the Company.

105

Article 41 There shall be paid to the Company in respect of the registration of any instrument of transfer or probate or letters of administration or certificate of marriage or death or stop notice or power of attorney or other document relating to or affecting the title to any shares or otherwise for making any entry in the Register of Members affecting the title to any shares such fee not exceeding $2 as the Directors may from time to time require or prescribe. Article 42 The Company shall be entitled to destroy all instruments of transfer which have been registered at any time after the expiration of six years from the date of registration thereof and all dividend mandates and notifications of change of address at any time after the expiration of six years from the date of recording thereof and all share certificates which have been cancelled at any time after the expiration of six years from the date of the cancellation thereof and it shall conclusively be presumed in favour of the Company that every entry in the Register of Members purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and properly made and every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and every share certificate duly and properly cancelled and every other document hereinbefore mentioned so destroyed was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company; Provided always that:- (a) the provisions aforesaid shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties thereto) to which the document might be relevant; nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any other circumstances which would not attach to the Company in the absence of this Article; and references herein to the destruction of any document include references to the disposal thereof in any manner.

(b)

(c)

Article 47 The holders of stock may transfer the same or any part thereof in the same manner and subject to the same Articles and subject to which the shares from which the stock arose might previously to conversion have been transferred (or as near thereto as circumstances admit) but no stock shall be transferable except in such units (not being greater than the nominal amount of the shares from which the stock arose) as the Directors may from time to time determine.

4.

BANK BORROWINGS Save as disclosed in the section on ``REVIEW OF FINANCIAL POSITION'' on pages 47 to 50 of this Prospectus and in Accountants' Report on pages 90 and 91 of this Prospectus, we do not have any bank borrowings at 31 December 1999.

5.

WORKING CAPITAL Our Directors are of the opinion that, after taking into account its existing banking facilities and the net proceeds of the New Shares, our Group has sufficient working capital for its present operating requirements.

106

6.

UNDERWRITING AND PLACEMENT ARRANGEMENTS (a) Pursuant to the Management and Underwriting Agreement dated 17 July 2000, OCBC Bank has agreed to underwrite the Offer Shares for an underwriting commission of 1.5 per cent. of the Offer Price of the Offer Shares. The underwriting commission will be paid by the Company and the Vendor in the proportion borne by the number of Offer Shares each has offered pursuant to the Invitation to the total number of Offer Shares offered pursuant to the Invitation. In addition, OCBC Bank will receive a fee for its services as Manager in connection with the Invitation. Pursuant to the Placement Agreement dated 17 July 2000, OCBC Bank agreed to subscribe for or purchase, or procure the subscription for or purchase of, the Placement Shares for a placement commission of 1.5 per cent. of the Placement Price of the Placement Shares, to be paid by the Company and the Vendor in the proportion borne by the number of Placement Shares each has offered pursuant to the Invitation to the total number of Placement Shares offered pursuant to the Invitation. The Placement Price is $0.47 for the Reserved Shares and $0.52 for the remaining Placement Shares. Brokerage will be paid by the Company and the Vendor, in the proportion borne by the number of Invitation Shares each has offered pursuant to the Invitation to the total number of Invitation Shares offered pursuant to the Invitation, to members of the SGX-ST, merchant banks in Singapore and members of the Association of Banks in Singapore (including OCBC Bank) in respect of accepted applications made on Application Forms bearing their respective stamps, or to Participating Banks in respect of successful applications made through Electronic Applications at ATMs of the relevant Participating Banks, at the rate of 1.0 per cent. of the Offer Price for the Offer Shares and at a rate of 1.0 per cent. of the Placement Price for the Placement Shares. The Management and Underwriting Agreement may be terminated by OCBC Bank at any time on or prior to the close of the Application List on the occurrence of certain events including, inter alia, changes in political, financial, monetary or economic conditions in Singapore or abroad which result, inter alia, in the Singapore stock market and/or stock market overseas being materially and adversely affected. In the event the Management and Underwriting Agreement is terminated for any reason, the Company and the Vendor reserve the right, at their absolute discretion, to cancel the Invitation. (e) The Placement Agreement is conditional upon the Management and Underwriting Agreement not having been terminated or rescinded pursuant to the provisions of the Management and Underwriting Agreement.

(b)

(c)

(d)

7.

CONSENTS (a) The Auditors and Reporting Accountants have given and have not withdrawn their written consent to the issue of this Prospectus with the inclusion of the Accountants' Report and their name in the form and context in which they are included in this Prospectus and references thereto in the form and context in which they appear in this Prospectus and to act in such capacities in relation to this Prospectus. The Manager, Underwriter and Placement Agent, Solicitors to the Invitation, Principal Bankers and Share Registrar have each given and have not withdrawn their respective written consents to the issue of this Prospectus with the inclusion of their respective names and references thereto in the form and context in which they respectively appear in this Prospectus and to act in such capacities in relation to this Prospectus.

(b)

107

8.

MATERIAL CONTRACTS The dates of, parties to, and general nature of all material contracts, not being contracts our Group had entered into in the ordinary course of our business, within the two years preceding the date of issue of this Prospectus are as follows:­ (a) Merger Agreement dated 16 November 1998 between Osim (Taiwan) and Osim International Co., Ltd. whereby Osim (Taiwan) purchased the entire undertaking of Osim International Co., Ltd. and issued 500,000 new shares of par value NT$10 each as consideration; Reconstruction Agreements dated 9 December 1999, 31 December 1999 and 25 February 2000 between the Company and Dr Ron Sim Chye Hock whereby the Company acquired the interests of Dr Ron Sim Chye Hock in Osim (Taiwan), Osim (HK) and Osim (M'sia) respectively as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus and as amended by the Supplemental Agreement dated 31 March 2000; Lease Agreement dated 30 December 1999 entered between the Company and Osim (Beijing) whereby the Company leased out its property at 6 Xuanwumenwai Street, Junefield Plaza Tower 1, 15th Floor, unit 1526 and 1527, Beijing, PRC for a period of 2 years at a monthly rental of RMB17,000; Reconstruction Agreement dated 31 December 1999 between the Company and Ms Teo Sway Heong whereby the Company acquired the interest of Ms Teo Sway Heong in Osim (HK) as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus and as amended by the Supplemental Agreement dated 31 March 2000; Sale and Purchase Agreement dated 18 February 2000 between the Company and Mr Leow Lian Soon whereby the Company acquired the interest of Mr Leow Lian Soon in Osim (Taiwan) as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus; Sale and Purchase of Property Agreement dated 3 March 2000 between the Company and Dr Ron Sim Chye Hock whereby the Company purchased Unit 8C, 1523-2 Dong Fang Road, Pudong New Development Zone, Shanghai, PRC from Dr Ron Sim Chye Hock for the consideration of RMB790,000; Sale and Purchase Agreement dated 20 March 2000 between the Company and Ms Tan Poh Khim whereby the Company acquired the interest of Ms Tan Poh Khim in Osim (HK) as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus; Joint Venture Agreement dated 24 March 2000 between the Company and Daito Electric Machine Industry Company Limited to regulate their relationship as shareholders of Daito-Osim (Suzhou); Sale and Purchase Agreement dated 8 May 2000 between the Company and Mr Chen Chuan I whereby the Company acquired the interest of Mr Chen Chuan I in Osim (Taiwan) as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus; Sale and Purchase Agreement dated 8 May 2000 between the Company and Ms Ho Jui Mei whereby the Company acquired the interest of Ms Ho Jui Mei in Osim (Taiwan) as part of the Restructuring Exercise disclosed on pages 25 and 26 of this Prospectus; Two Call Option Agreements both dated 8 May 2000 between Dr Ron Sim Chye Hock and the Company whereby Dr Ron Sim Chye Hock granted the Company call options over his shares of Osim (USA) and Osim (Thai) respectively as disclosed on page 65 of this Prospectus; Call Option Agreement dated 8 May 2000 between Mr Teo Chay Lee and the Company whereby Mr Teo Chay Lee granted the Company call options over his shares of Osim (Thai) as disclosed on page 65 of this Prospectus;

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

(k)

(l)

(m) Call Option Agreement dated 8 May 2000 between Ms Han Shu Nong and the Company whereby Ms Han Shu Nong granted the Company call options over her shares of HCC (Langfang) as disclosed on pages 66 and 67 of this Prospectus;

108

(n)

Call Option Agreement dated 8 May 2000 between Mr Wang Bang Zhi and the Company whereby Mr Wang Bang Zhi granted the Company call options over his shares of Osim GHC (SH) as disclosed on pages 66 and 67 of this Prospectus; Call Option Agreement dated 10 May 2000 between Mr Chandra Makmuri and the Company whereby Mr Chandra Makmuri granted the Company call options over his shares of PT Sharon as disclosed on page 66 of this Prospectus; Sale and Purchase Agreement dated 12 May 2000 between the Company and GBI Realty Pte Ltd whereby the Company purchased from GBI Realty Pte Ltd the land at Ubi Avenue 1, Singapore as disclosed on page 45 of this Prospectus; Two Call Option Agreements both dated 19 May 2000 between Ms Tao Dong Mei and the Company whereby Ms Tao Dong Mei granted the Company call options over her shares of Osim GHC (SH) and HCC (Langfang) respectively as disclosed on pages 66 and 67 of this Prospectus; Call Option Agreement dated 19 May 2000 between Osim GHC (SH) and the Company whereby Osim GHC (SH) granted the Company call options over its shares of Osim (Beijing) as disclosed on pages 66 and 67 of this Prospectus; Call Option Agreement dated 19 May 2000 between HCC (Langfang) and the Company whereby HCC (Langfang) granted the Company call options over its shares of Osim (Beijing) as disclosed on pages 66 and 67 of this Prospectus; Call Option Agreement dated 22 June 2000 between Mr Krit Suktachan and the Company whereby Mr Krit Suktachan granted the Company call options over his shares of Osim (Thai) as disclosed on page 65 of this Prospectus; the Subscription Agreement dated 17 July 2000 between the Company, Dr Ron Sim Chye Hock and Investor; a depository agreement dated 17 July 2000 between the Company and CDP, pursuant to which CDP agreed to act as share depository for the Company's securities traded through the SGX-ST;

(o)

(p)

(q)

(r)

(s)

(t)

(u) (v)

(w) the Management and Underwriting Agreement referred to in paragraph 6 on page 107 of this Prospectus; and (x) the Placement Agreement referred to in paragraph 6 on page 107 of this Prospectus.

9.

LITIGATION We are not engaged in any litigation as plaintiff or defendant in respect of any claims or amounts which are material in the context of the Invitation and our Directors have no knowledge of any proceedings pending or threatened against ourselves or any facts likely to give rise to any litigation, claims or proceedings which might materially affect the financial position of our business.

109

10.

SUBSTANTIAL SHAREHOLDERS Our substantial Shareholders and their interests in the Shares as at the date of this Prospectus are as follows:­

-- Direct Interest -- Number of Shares Ron Sim Chye Hock Teo Sway Heong Investor

Notes:­ (1) Includes 500,000, 500,000, 200,000 and 100,000 Shares which Dr Ron Sim Chye Hock will transfer to Mr Teo Chay Lee, Mr Leow Lian Soon, Ms Lim Choon Hui and Mr Chiang See Thong respectively by way of a gift as a token of appreciation of their contributions to our Group, such transfers to be completed immediately after the Invitation is completed. Dr Ron Sim Chye Hock and Ms Teo Sway Heong are husband and wife. Their respective deemed interest consists of their interest in the shares held by the other.

-- Indirect Interest -- Number of Shares 1,804,200

(2) (1)(2)

-- Total Interest -- Number of Shares 180,420,000 180,420,000 11,600,000 % 93.6 93.6 6.0

% 92.7 0.9 6.0

% 0.9 92.7 --

178,615,800 1,804,200 11,600,000

(1)

178,615,800 --

(2)

11.

MISCELLANEOUS (a) The nature of our business is set out on pages 29 to 34 of this Prospectus. As at the date of this Prospectus, all the corporations deemed to be related to us by virtue of Section 6 of the Act are set out in the Accountants' Report on page 74 of this Prospectus. Save as disclosed in this Prospectus, our Directors are not aware of any material information, including trading factors or risks which is unlikely to be known or anticipated by the general public and which could materially affect our Group's profits. Save as disclosed in this Prospectus, the financial condition and operations of our Group are not likely to be affected by any of the following:­ (i) known trends, demands, commitments, events or uncertainties that will result in or are reasonably likely to result in the liquidity of our Group increasing or decreasing in any material way; material commitments for capital expenditure; any significant economic changes, unusual or infrequent events or transactions that will materially affect the amount of reported income from operations; and known trends or uncertainties that have had or are expected to have a material favourable or unfavourable impact on revenues or operating income.

(b)

(c)

(ii) (iii) (iv) (d)

The amount payable on application is $0.52 for each Offer Share and Placement Share and $0.47 for each Reserved Share. There has been no previous issue of shares by us, or offer for sale of its shares, to the public within the two years preceding the date of this Prospectus. Application monies received by us and the Vendor in respect of all applications will be placed in a separate non-interest bearing account with OCBC Bank (the ``Receiving Bank''). Any refund of all or part of the application monies to unsuccessful or partially successful applicants will be made without interest or any share of such revenue or any benefit arising therefrom. The estimated amount of the expenses of the Invitation and of the application for the listing, including underwriting and placement commission, brokerage, management fee and all other incidental expenses in relation to the Invitation, is approximately $2.0 million. Other than brokerage, underwriting and placement commission which will be paid by us and the Vendor in the proportion borne by the number of Invitation Shares each has offered pursuant to the Invitation to the total number of Invitation Shares offered pursuant to the Invitation, the listing and other incidental fees payable to the SGX-ST for the listing application, and the expenses of the Invitation will be paid by us. No preliminary expenses have been incurred or are payable by any person in relation to this Invitation.

(e)

(f)

110

(g)

No commission, discount or brokerage has been paid or other special terms granted within the preceding two years or is payable to any of our Directors, promoter, expert, proposed Director or any other person for subscribing or agreeing to subscribe, or procuring or agreeing to procure subscription, for any of our Shares or debentures or any shares in or debentures of any of our subsidiaries. No amount, benefit, cash or securities has been paid or given within the two years preceding the date of this Prospectus or is intended to be paid or given to any promoter. The time of opening of the Application List is 10.00 a.m. on 27 July 2000. There is no minimum amount which, in the opinion of our Directors, must be raised by the Invitation in order to provide for the following items:- (i) (ii) the purchase price of any property purchased or to be purchased which is to be defrayed in whole or in part out of the proceeds of the Invitation; any preliminary expenses payable by us and any commission so payable to any person in consideration of his agreeing to subscribe for, or of his procuring or agreeing to procure subscriptions for, our Shares; the repayment of any money borrowed by us in respect of any of the foregoing matters; and working capital.

(h) (i) (j)

(iii) (iv)

Although no minimum amount must be raised from the Invitation in order to provide for the items set out above, the amount to be provided for those items is proposed to be provided out of the proceeds of the Invitation and/or out of other sources of funding including banking facilities and the issuance of securities. (k) Save as disclosed under ``Use of Proceeds'' on page 11 of this Prospectus and under ``Future Plans -- New Corporate Headquarters'' on page 45 of this Prospectus, no property has been purchased or acquired by us or our subsidiaries or is proposed to be so purchased or acquired which is to be paid for wholly or partly out of the proceeds of the Invitation or the purchase or acquisition of which has not been completed at the date of the issue of this Prospectus, other than property the contract for the purchase or acquisition whereof was entered into in the ordinary course of our business or the business of our subsidiaries, the contract not being made in contemplation of the Invitation nor the Invitation in consequence of the contract. Our Directors currently have no intention of changing the auditors of the various companies in our Group after the Invitation or appointing another firm of accountants as joint auditors of the Company or the various companies in our Group.

(l)

(m) No Shares or debentures shall be allotted on the basis of this Prospectus later than 6 months after the date of issue of this Prospectus.

12.

STATEMENT BY THE DIRECTORS AND THE VENDOR This Prospectus has been seen and approved by the Directors and the Vendor and they collectively and individually accept full responsibility for the accuracy of the information given in this Prospectus and confirm that, having made all reasonable enquiries, to the best of their knowledge and belief this Prospectus constitutes a full and true disclosure of all the material facts about the Invitation and the Group, and the facts stated and opinions expressed in this Prospectus are fair and accurate in all material respects as at the date hereof and that there are no other material facts the omission of which would make any statements herein misleading.

111

13.

STATEMENT BY THE MANAGER OCBC Bank, as the Manager, confirms that, to the best of its knowledge and belief and based on information made available to it by the Group, this Prospectus constitutes a full and true disclosure of all the material facts about the Invitation and the Group and it is not aware of any other facts, the omission of which will make any statements herein misleading.

14.

DOCUMENTS FOR INSPECTION Copies of the following documents may be inspected at the registered office of the Company during normal business hours for a period of six months from the date of this Prospectus:­ (a) (b) (c) (d) (e) (g) the Memorandum and Articles of Association of the Company; the Directors' Report as set out on page 71 of this Prospectus; the Accountants' Report as set out on pages 72 and 94 of this Prospectus; the letters of consent referred to in paragraph 7 on page 107 of this Prospectus; the material contracts referred to in paragraph 8 on pages 108 and 109 of this Prospectus; and the audited accounts of each company in the Group for each of the last two financial years ended 31 December 1999.

112

APPENDIX A

SUMMARY OF THE PRINCIPAL TERMS OF OSIM SHARE OPTION SCHEME (THE ``SCHEME'')

The following is a summary of the principal terms of the Scheme and is qualified in its entirety by reference to the rules of the Scheme (the ``Rules'') as set out on pages 118 to 135. Capitalised terms used in this summary which are not otherwise defined in this summary bear the same meaning as ascribed to them in the Rules. 1. Scope The Scheme covers eligible Employees, Executive and Non-Executive Directors of the Company, its subsidiaries or associated companies (the ``Group'') who are Employees (each, a ``Participant''). 2. Administration (i) (ii) This Scheme shall be administered by the Committee in its absolute discretion with such powers and duties as are conferred on it by the Board of Directors. The Committee shall have the power, from time to time, to make or vary such regulations (not being inconsistent with this Scheme) for the implementation and administration of this Scheme as it thinks fit. Any decision of the Committee, made pursuant to any provision of this Scheme (other than a matter to be certified by the Auditors), shall be final and binding (including any decisions pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or procedure thereunder or as to any rights under the Scheme). A Grantee who is a member of the Committee shall not be involved in its deliberation in respect of Options to be granted to him.

(iii)

(iv)

3.

Eligibility Directors (both Executive and Non-Executive) of the Company, other than Dr Ron Sim Chye Hock and Ms Teo Sway Heong, and full-time confirmed employees of the Group, who have attained the age of twenty-one (21) years on or prior to the relevant Offer Date and are not undischarged bankrupts and who have not entered into a composition with their respective creditors, shall be eligible to participate in the Scheme, at the absolute discretion of the Committee. The employees must have been in the full-time service of the Group (as the case may be). Notwithstanding the above, Controlling Shareholders and their associates are not eligible to participate in the Scheme.

4.

Size of the Scheme The aggregate nominal amount of Shares over which the Committee may grant Options on any date, when added to the nominal amount of Shares issued and issuable in respect of all Options granted under the Scheme, shall not exceed fifteen (15) per cent. of the issued share capital of the Company on the day preceding that date.

5.

Entitlement Subject to Rule 4 and Rule 10, the aggregate number of Shares in respect of which Options may be offered to a Participant for subscription in accordance with the Scheme shall be determined at the discretion of the Committee which shall take into account (where applicable) criteria such as the rank and responsibilities within the Group, performance, years of service and potential for future development of the Grantee, and the performance of the Group.

113

6.

Grant of Options The Committee may, save as provided in Rule 4, Rule 5 and Rule 6, offer to grant Options to such Grantees as it may select in its absolute discretion at any time during the period when the Scheme is in force, except that no Options shall be granted during the period of 30 days immediately preceding the date of announcement of the Company's interim and/or final results (whichever the case may be). In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is made, offers to grant Options may only be made on or after the third Trading Day on which such announcement is released.

7.

Acceptance of Offer Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever unless approved in writing by the Committee. The grant of an Option by the Committee to a Grantee shall be accepted within thirty (30) days after the relevant Offer Date. Upon acceptance of the Option, the Grantee to whom it is granted will pay to the Company a consideration of S$1.00. Any offer which is not accepted shall, upon the expiry of the thirty (30) days period, automatically lapse and shall be null and void and of no effect.

8.

Exercise Price (a) Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect of which an Option is exercisable shall be determined by the Committee at its absolute discretion, and fixed by the Committee at:­ (i) a price (the ``Market Price'') equal to the average of the last dealt prices for a Share, as determined by reference to the Financial News or other publication published by the SGX-ST for the 3 consecutive trading days immediately preceding the Offering Date of that Option, rounded up to the nearest whole cent in the event of fractional prices; or a price which is set at a discount to the Market Price, provided that:- (1) the maximum discount shall not exceed 20 per cent. of the Market Price (or such other percentage or amount as may be determined by the Committee and permitted by the SGX-ST); and the Shareholders of the Company in general meeting shall have authorised the making of offers and grants of Options under the Scheme at a discount not exceeding the maximum discount as aforesaid.

(ii)

(2)

(b)

Where the Exercise Price as determined above is less than the par value of the Share, the Exercise Price shall be the par value.

9.

Alteration of Capital If a variation in the issued share capital of the Company occurs (whether by way of a capitalisation of profits or rights issue or reduction (including any reduction arising by reason of the Company purchasing or acquiring its issued Shares), subdivision or consolidation or distribution or issues for cash or for shares or otherwise than for cash, or otherwise howsoever), the Exercise Price in respect of Shares comprised in an Option to the extent unexercised and/or the nominal value, class and/or number of Shares comprised in an Option to the extent unexercised and the rights attached thereto, or in respect of which additional Options may be granted to Participants under the Scheme and/or the maximum entitlement in any Financial Year, may, at the option of the Committee, be adjusted in such manner as the Committee may determine to be appropriate and, except in relation to a capitalisation issue, upon the written confirmation of the Auditors (acting only as experts and not as arbitrators) that in their opinion, such adjustment is fair and reasonable.

114

Provided always no such adjustment shall be made (i) which would result in the Shares to be issued upon the exercise of an Option being issued at a discount to the nominal value and if such an adjustment would but for this sub-Clause have so resulted, the Exercise Price payable shall be the nominal value of a Share, (ii) if, as a result, the number of Shares which a Participant shall be entitled to subscribe for pursuant to the exercise of Options granted to him shall be reduced and (iii) unless the Committee after considering all relevant circumstances, considers it equitable to do so. The issue of securities as consideration for an acquisition of any assets by the Company will not be regarded as a circumstance requiring adjustment. Additionally, the cancellation of issued Shares purchased or acquired by the Company during the period when a share purchase mandate (or any renewal thereof) granted by the Shareholders of the Company is in force by way of a market purchase of such Shares undertaken by the Company on the SGX-ST shall not normally be regarded as a circumstance requiring adjustment unless the Committee considers an adjustment to be appropriate or determines that an adjustment should be made, having regard to market purchases of Shares undertaken by the Company from time to time during the time the share purchase mandate (or any renewal thereof) is in force. 10. Option Period (a) An Option shall only be exercisable, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof unless the number of remaining Options held by the Participant correspond to less than 1,000 Shares), at any time, by a Participant after the first anniversary of the Offer Date during the Option Period, provided always that Options granted to Executive Directors and other than Employees (other than Employees of Associated Companies) shall be exercised before the tenth anniversary of the relevant Offer Date and Options granted to Non-Executive Directors or to Employees of Associated Companies shall be exercised before the fifth anniversary of the relevant Offer Date, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company. In respect of Options with the Exercise Price set at a discount to Market Price, subject to the condition that no Options shall be exercisable prior to the second anniversary of the Offer Date of that Option, the Options granted to Executive Directors and other than Employees (other than Employees of Associated Companies) shall be exercisable on such terms as may be determined by the Committee, provided always that all the Options shall be exercised before the tenth anniversary of the relevant Offer Date and Options granted to Non-Executive Directors or Employees of Associated Companies shall be exercised before the fifth anniversary of the relevant Offer Date, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company. Special provisions deal with the lapse or earlier exercise of Options in circumstances which include:- (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) the termination of the Employee's employment; the bankruptcy of the Grantee or the entering into a composition with the Grantee's creditors; the termination of an Executive Director's employment; the misconduct of the Grantee; the death of the Grantee; a take-over of the Company; the winding up of the Company; the reconstruction of the Company; and the amalgamation of the Company with another company. 115

(b)

(c)

11.

Rights of New Shares Shares which are allotted on the exercise of an Option by a Grantee shall be issued, as the Grantee may elect, in the name of CDP to the credit of the securities account of the Grantee maintained with CDP or the Grantee's securities sub-account with a CDP Depository Agent or in the name of the Grantee. Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects with the then existing issued Shares in the capital of the Company except for any dividends, rights, allotments or other distributions, the record date of which is prior to the date on which such an Option is exercised. For this purpose, ``record date'' means the date as at the close of business on which Shareholders must be registered in order to participate in any dividends, rights, allotments or other distributions (as the case may be).

12.

Alterations and Modifications to the Scheme Subject to the approval of the SGX-ST (and any other stock exchange on which the Shares may be listed or quoted) and such other regulatory authorities as may be necessary, the provisions of the Scheme may be amended from time to time by a resolution of the Committee provided that any amendment which shall alter adversely the rights attached to any Option and which (in the opinion of the Committee) materially alters the rights attached to the Options granted prior to such amendment shall only be effected, with the consent in writing of such number of Participants who, if they exercised their Options in full, would thereby become entitled to not less than three-quarters (3/4) in nominal amount of all the Shares which would have to be issued and allotted upon the exercise in full of all outstanding Options, nor shall any modification or alteration be made to the advantage of Participants except with the prior approval of Shareholders at a general meeting provided always the Committee may at any time by resolution (and without any other formality, save for the prior approval of the SGX-ST) amend or alter the Scheme in any way to the extent necessary to cause the Scheme to comply with any statutory provision or the provisions or the regulations of any regulatory or other relevant authority or body (including the SGX-ST).

13.

Duration of the Scheme The Scheme shall continue to be in force at the discretion of the Committee, subject to a maximum period of ten years, commencing on the date on which the Scheme is adopted by Shareholders in the Extraordinary General Meeting. Subject to compliance with any applicable laws and regulations in Singapore, the Scheme may be continued beyond the above-stipulated period with the approval of the Shareholders in a general meeting and of any relevant authorities which may then be required.

14.

Disclosure in Annual Report The Company shall make the following disclosure in its annual report:- (a) (b) The names of the members of the Committee; The information required in the table below for the following Participants:­ (i) (ii) Directors of the Company; Participants, other than those in sub-paragraph (b)(i) and (ii) above, who receive five (5) per cent. or more of the total number of Options available under the Scheme; and

116

(iii)

The number and proportion of options granted at a discount of less than 10% and options granted at a discount of more than 10% during the financial year under review:-

Options granted during financial year under review (including terms) Aggregate Options granted since commencement of Scheme to end of financial year under review Aggregate Options exercised since commencement of Scheme to end of financial year under review

Name of Participant

Aggregate Options outstanding as at end of financial year under review

117

RULES OF THE OSIM SHARE OPTION SCHEME

1. DEFINITIONS In this Scheme, unless the context otherwise requires, the following words and expressions shall have the following meanings:- ``Act'' ``Associated Company'' The Companies Act, Chapter 50 of Singapore, as amended or modified from time to time. A company which the Company has control over and in which at least twenty (20) per cent. but not more than fifty (50) per cent. of its shares are held by the Company. The auditors of the Company for the time being. The Board of Directors of the Company for the time being. The Central Depository (Pte) Limited. A committee of Directors who is duly authorised and appointed by the Board pursuant to Rule 15 to administer the Scheme. Osim International Ltd. The capacity to dominate decision making, directly or indirectly, in relation to the financial and operating policies of the Company. A Shareholder exercising control over the Company and unless rebutted, a person who controls directly or indirectly a shareholding of fifteen (15) per cent. or more of the Company's issued share capital shall be presumed to be a Controlling Shareholder of the Company. A person holding office as a director for the time being of the Company. Any full-time confirmed employee of the Group selected by the Committee to participate in the Scheme in accordance with Rule 4. A Director who is a full-time employee of the Company and who performs an executive function. The price at which a Participant shall subscribe for each Share upon the exercise of an Option, as determined in accordance with Rule 8, or such adjusted price as may be applicable pursuant to Rule 9. Extraordinary General Meeting. Any Employee or Director of the Company who is eligible to participate in the Scheme in accordance with Rule 4, notwithstanding that such Employee or Director of the Company is a Controlling Shareholder. The Company, its Subsidiaries and its Associated Companies (as they may exist from time to time). The right to subscribe for Shares granted pursuant to the Scheme and for the time being subsisting, and in respect of which the Subscription Price is determined in accordance with Rule 8.1(ii). A day on which the SGX-ST is open for trading of shares.

``Auditors'' ``Board'' ``CDP'' ``Committee'' ``Company'' ``Control'' ``Controlling Shareholder''

``Director'' ``Employee''

``Executive Director'' ``Exercise Price''

``EGM'' ``Grantee''

``Group'' ``Incentive Option''

``Market Day''

118

``Market Price Option''

The right to subscribe for Shares granted pursuant to the Scheme and for the time being subsisting, and in respect of which the Subscription Price is determined in accordance with Rule 8.1(i). A Director who is not an Executive Director. The date on which an offer to grant an Option is made. An Incentive Option or a Market Price Option, as the case may be. Subject as provided in Rules 11 and 14, the period for the exercise of an Option being:- (a) in the case of a Market Price Option, a period commencing after the first anniversary of the Offer Date and expiring not later than the tenth anniversary of such Offer Date, subject to the provisions of the Act, Rules 10 and 11, any other applicable law or regulation and any other conditions as may be introduced by the Committee from time to time; and in the case of an Incentive Option, a period commencing after the second anniversary of the Offer Date and expiring not later than the tenth anniversary of such Offer Date, subject to the provisions of the Act, Rules 10 and 11, any other applicable law or regulation and any other conditions as may be introduced by the Committee from time to time.

``Non-Executive Director'' ``Offer Date'' ``Option'' ``Option Period''

(b)

provided that where the Option is granted to a Non-Executive Director or to Employees of Associated Companies, the Option shall expire not later than the fifth anniversary of the Offer Date. ``Participant'' ``SGX-ST'' ``Scheme'' ``Shares'' ``Shareholders'' A holder of an Option. Singapore Exchange Securities Trading Limited. The Osim Share Option Scheme as amended from time to time. Ordinary shares of S$0.05 each in the capital of the Company. The registered holders for the time being of the Shares (other than the CDP) or in the case of Depositors, Depositors who have Shares entered against their names in the Depository Register. A company which is for the time being a subsidiary of the Company as defined by Section 5 of the Act. A day on which the Shares are traded on the SGX-ST. Singapore dollars.

``Subsidiary'' ``Trading Day'' ``$'' or ``S$''

The terms ``Depositor'', ``Depository Register'' and ``Depository Agent'' shall have the meanings ascribed to them respectively by Section 130A of the Act. The terms ``associate'' shall have the meaning ascribed to it by the Singapore Exchange Securities Trading Limited Listing Manual which is defined to include an immediate family member (that is, the spouse, child, adopted child, step-child, sibling or parent) of such director, chief executive officer or substantial shareholder, the trustees, acting in their capacity as such trustees, of any trust of which the director, chief executive officer or substantial shareholder or his immediate family is a beneficiary or, in the case of a discretionary trust, is a discretionary object and any company in which the director/his immediate family, the chief executive officer/his immediate family or substantial shareholder/his immediate family has an aggregate interest (directly or indirectly) of 25 per cent. or more, and, where a substantial shareholder is a corporation, its subsidiary or holding company or fellow subsidiary or a company in which it and/or they have (directly or indirectly) an interest of 25 per cent or more.

119

Words denoting the singular shall, where applicable, include the plural and vice versa and words denoting the masculine gender shall, where applicable, include the feminine and neuter gender. References to persons shall include corporations. Any reference in the Scheme to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Act or any statutory modification thereof and used in this Scheme shall, where applicable, have the same meaning assigned to it under the Act. Any reference in this Scheme to a time of day shall be a reference to Singapore time unless otherwise stated. 2. NAME OF THE SCHEME The Scheme shall be called the ``Osim Share Option Scheme''. 3. OBJECTIVES OF THE SCHEME It is the Group's long term objective to pursue continuous growth and expansion in its business and operations, and it recognises that maintaining an experienced workforce is important towards achieving such objective. Hence, it is desired that the Company should implement a share option scheme which gives the Company the flexibility to use share options as a means of promoting long term staff retention. Such flexibility would include a discretion to offer and grant share options at a discount to the market price of the Shares. The Scheme is primarily a share incentive scheme. It recognises the fact that the services of such Employees and Non-Executive Directors are important to the success and continued well-being of the Group. Implementation of the Scheme will enable the Company to give recognition to the contributions made by such Employees and Non-Executive Directors. At the same time, it will give such Employees and Non-Executive Directors an opportunity to have a direct interest in the Company at no direct cost to its profitability and will also help to achieve the following positive objectives:- (i) (ii) (iii) 4. to motivate such Employees and Non-Executive Directors to maintain a high level of performance and contribution; to attract and maintain a group of key Employees whose contributions are important to the long term growth and profitability of the Group; and to improve employer and employee relations.

ELIGIBILITY 4.1 The employees' eligibility to participate in the Scheme (including Executive Directors) shall be at the absolute discretion of the Committee and each Participant shall:- (a) (b) (c) (d) be confirmed in his/her employment with the Group and not on probation; have been in the full-time service of the Group; have attained the age of twenty-one (21) years on or before the Offer Date; and not be an undischarged bankrupt and must not have entered into a composition with his creditors.

4.2

Executive Directors (other than Dr Ron Sim Chye Hock) who satisfy the eligibility requirements in Rule 4.1(a), (b), (c) and (d) shall also be eligible to participate in the Scheme. Non-Executive Directors (other than Ms Teo Sway Heong) who satisfy the eligibility criteria in Rule 4.1(c) and (d) shall also be eligible to participate in the Scheme. For the avoidance of doubt, Dr Ron Sim Chye Hock and Ms Teo Sway Heong or any Controlling Shareholders or their associates shall not be eligible to participate in the Scheme. 120

4.3

4.4

4.5

Subject to the Act and any requirement of the SGX-ST or any other stock exchange on which the Shares may be listed or quoted, the terms of eligibility for participation in the Scheme may be amended from time to time at the absolute discretion of the Committee.

5.

LIMITATIONS UNDER THE SCHEME 5.1 The aggregate number of Shares over which the Committee may grant Options on any date, when added to the number of Shares issued and issuable in respect of all Options granted under this Scheme, shall not exceed fifteen (15) per cent. of the issued share capital of the Company on the day immediately preceding the Offer Date of the Option. The number of Shares comprised in Market Price Options or, as the case may be, Incentive Options, to be offered to any Employee in accordance with the Scheme shall be determined at the absolute discretion of the Committee, who shall take into account criteria such as the position, the past performance, years of service and potential for future development of that employee, provided that:­ (a) the aggregate number of Shares which may be offered by way of grant of Options to any single eligible person under the Scheme shall not exceed 25 per cent. of the total number of Shares available under the Scheme; and the aggregate number of Shares which may be offered by way of grant of Options in any single financial year under the Scheme shall not exceed 25 per cent. of the total number of Shares available under the Scheme (the ``Annual Quota''), Provided That in the event that the Annual Quota is not exceeded in any single financial year, Annual Quota for the following financial year shall be increased by the unused portion of the Annual Quota for the first-mentioned financial year.

5.2

(b)

6.

OFFER DATE 6.1 The Committee may, subject as provided in Rule 4 and Rule 5, offer to grant Options to such Grantees as it may select in its absolute discretion at any time during the period when the Scheme is in force, except that no Options shall be granted during the period of 30 days immediately preceding the date of announcement of the Company's interim and/or final results (whichever the case may be). In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is made, offers to grant Options may only be made after the third Trading Day on which such announcement is released. An offer to grant the Option to a Grantee shall be made by way of a letter (the ``Letter of Offer'') in the form or substantially in the form set out in Schedule 1, subject to such modifications as the Committee may determine from time to time.

6.2

7.

ACCEPTANCE OF OFFER 7.1 An Option offered to a Grantee pursuant to Rule 6 may only be accepted by the Grantee within thirty (30) days after the relevant Offer Date and not later than 5.00 p.m. on the thirtieth (30th) day from such Offer Date (i) by completing, signing and returning to the Company the Acceptance Form in or substantially in the form set out in Schedule 2, subject to such modification as the Committee may from time to time determine, accompanied by payment of S$1.00 as consideration or such other amount and such other documentation as the Committee may require and (ii) if, at the date on which the Company receives from the Grantee the Acceptance Form in respect of the Option as aforesaid, he remains eligible to participate in the Scheme in accordance with these Rules. If a grant of an Option is not accepted strictly in the manner as provided in this Rule 7, such offer shall, upon the expiry of the thirty (30) day period, automatically lapse and shall forthwith be deemed to be null and void and be of no effect.

7.2

121

7.3

The Company shall be entitled to reject any purported acceptance of a grant of an Option made pursuant to this Rule 7 or Exercise Notice given pursuant to Rule 12 which does not strictly comply with the terms of the Scheme. Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever without the Committee's prior written approval, but may be exercised by the Grantee's duly appointed personal representative as provided in Rule 11.5 in the event of the death of such Grantee. The Grantee may accept or refuse the whole or part of the offer. If only part of the offer is accepted, the Grantee shall accept the offer in multiples of 1,000 Shares. The Committee shall within fifteen (15) Market Days of receipt of the Acceptance Form and consideration acknowledge receipt of the same. In the event that a grant of an Option results in a contravention of any applicable law or regulation, such grant shall be null and void and of no effect and the relevant Participant shall have no claim whatsoever against the Company. Unless the Committee determines otherwise, an Option shall automatically lapse and become null, void and of no effect and shall not be capable of acceptance if:- (a) (b) (c) (d) it is not accepted in the manner as provided in Rule 7.1 within the thirty (30) days period; or the Participant dies prior to his acceptance of the Option; or the Participant is adjudicated a bankrupt or enters into a composition with his creditors prior to his acceptance of the Option; or the Grantee being an Executive Director or, as the case may be, an Employee, ceases to be in the employment of the Group or (being a Non-Executive Director) ceases to be a Director of the Company, in each case, for any reason whatsoever prior to his acceptance of the Option; or the Company is liquidated or wound-up prior to the Grantee's acceptance of the Option.

7.4

7.5

7.6

7.7

(e) 8.

EXERCISE PRICE 8.1 Subject to any adjustment pursuant to Rule 9, the Exercise Price for each Share in respect of which an Option is exercisable shall be determined by the Committee at its absolute discretion, and fixed by the Committee at:­ (i) a price (the ``Market Price'') equal to the average of the last dealt prices for a Share, as determined by reference to the Financial News or other publication published by the SGX-ST for the 3 consecutive Trading Days immediately preceding the Offer Date of that Option, rounded up to the nearest whole cent in the event of fractional prices; or a price which is set at a discount to the Market Price, provided that: (A) the maximum discount shall not exceed 20% of the Market Price (or such other percentage or amount as may be prescribed or permitted for the time being by the SGX-ST); and the Shareholders of the Company in general meeting shall have authorised the making of offers and grants of Options under the Scheme at a discount not exceeding the maximum discount as aforesaid.

(ii)

(B)

8.2

Where the Exercise Price as determined above is less than the par value of the Share, the Exercise Price shall be the par value.

122

9.

VARIATION OF CAPITAL 9.1 If a variation in the issued ordinary share capital of the Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, sub-division or consolidation) shall take place, then:­ (a) the Subscription Price for the Shares; and/or the nominal value, class and/or number of Shares comprised in the Option to the extent unexercised and the rights attached thereto; and/or the nominal value, class and/or number of Shares over which additional Options may be granted under the Scheme,

(b)

shall be adjusted in such manner as the Committee may determine to be appropriate and except in relation to a capitalisation issue, upon the written confirmation by the Auditors (acting only as experts and not as arbitrators), that in their opinion, such adjustment is fair and reasonable. 9.2 Notwithstanding the provisions of Rule 9.1, no such adjustment shall be made:­ (a) if as a result, the Subscription Price shall fall below the nominal value of a Share and if such adjustment would but for this paragraph (a) result in the Subscription Price being less than the nominal value of a Share, the Subscription Price payable shall be the nominal value of a Share; and unless the Committee after considering all relevant circumstances, considers it equitable to do so.

(b)

9.3

The following (whether singly or in combination) shall not be regarded as events requiring adjustment:­ (a) (b) any issue of securities as consideration for or in connection with an acquisition or a private placement of securities; any increase in the number of issued Shares as a consequence of the exercise of options or other convertibles issued from time to time by the Company entitling holders thereof to acquire new Shares in the capital of the Company (including the exercise of any Options granted pursuant to the Scheme and any previous scheme(s)); and any reduction in the number of issued Shares as a result of the cancellation of issued Shares purchased by the Company by way of market purchase(s) effected on the SGX-ST pursuant to a share purchase mandate (or any renewal thereof) given by the shareholders of the Company in general meeting and for the time being in force.

(c)

9.4

Upon any adjustment required to be made pursuant to this Rule, the Company shall notify the Participant (or his duly appointed personal representatives, where applicable) in writing and deliver to him (or his duly appointed personal representatives, where applicable) a statement setting forth the Subscription Price thereafter in effect and the nominal value, class and/or number of Shares thereafter to be issued on the exercise of the Option. Any adjustment shall take effect upon such written notification being given. The restriction on the number of Shares to be offered to any Grantee under Rule 5 above, shall not apply to the number of additional Shares or Options over additional Shares issued by virtue of any adjustment to the number of Shares and/or Options pursuant to this Rule 9. Upon any adjustment required to be made, the Company shall notify each Participant (or his duly appointed personal representative(s)) in writing and deliver to him (or his duly appointed personal representative(s)) a statement setting forth the new Exercise Price thereafter in effect and the nominal value, class and/or number of Shares thereafter comprised in the Option so far as unexercised and the maximum entitlement in any one financial year.

9.5

9.6

123

10.

TAKE-OVER AND WINDING-UP OF THE COMPANY 10.1 In the event of a take-over offer being made for the Company, Participants (including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1) holding Options as yet unexercised shall, notwithstanding Rule 11 and 12 but subject to Rule 10.5, be entitled to exercise such Options in full or in part in the period commencing on the date on which such offer is made or, if such offer is conditional, the date on which the offer becomes or is declared unconditional, as the case may be, and ending on the earlier of:- (a) the expiry of six (6) months thereafter, unless prior to the expiry of such six (6) month period, at the recommendation of the offeror and with the approvals of the Committee and the SGX-ST, such expiry date is extended to a later date (being a date falling not later than the date of expiry of the Option Period relating thereto); or the date of the expiry of the Option Period relating thereto,

(b)

whereupon any option then remaining unexercised shall immediately lapse and become null and void, provided always that if during such period the offeror becomes entitled or bound to exercise the rights of compulsory acquisition of the Shares under Section 215 of the Act and, being entitled to do so, gives notice to the Participants that it intends to exercise such rights on a specified date, the Option shall remain exercisable by the Participants until the specified date or the expiry of the Option Period relating thereto, whichever is earlier. Any Option not so exercised by the said specified date shall lapse and become null and void provided that the rights of acquisition or obligation to acquire stated in the notice shall have been exercised or performed, as the case may be. If such rights of acquisition or obligations have not been exercised or performed, all Options shall subject to Rule 11.2 remain exercisable until the expiry of the Option Period. For the avoidance of doubt, the provisions of this Rule 10.1 shall not come into operation in the event that a take-over offer which is conditional does not become or is not declared unconditional. 10.2 If under the Act the court sanctions a compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with another company or companies, Participants (including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1) shall be entitled, notwithstanding Rule 11 and Rule 12 but subject to Rule 10.5, to exercise any Option then held by them during the period commencing on the date upon which the compromise or arrangement is sanctioned by the court and ending either on the expiry of ninety (90) days thereafter or the date upon which the compromise or arrangement becomes effective, whichever is later (but not after the expiry of the Option Period relating thereto), whereupon any unexercised Option shall lapse and become null and void, provided always that the date of exercise of any Option shall be before the tenth anniversary of the Offer Date. If an order or an effective resolution is passed for the winding up of the Company on the basis of its insolvency, all Options, to the extent unexercised, shall lapse and become null and void. In the event of a members' solvent voluntary winding up (other than for amalgamation or reconstruction), Participants (including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1) shall, subject to Rule 10.5, be entitled within ninety (90) days of the passing of the resolution of such winding up (but not after the expiry of the Option Period relating thereto) to exercise in full any unexercised Option, after which such unexercised Option shall lapse and become null and void.

10.3

10.4

124

10.5

If in connection with the making of a general offer referred to in Rule 10.1 above or the scheme referred to in Rule 10.2 above or the winding up referred to in Rule 10.3 and 10.4 above, arrangements are made (which are confirmed in writing by the Auditors, acting only as experts and not as arbitrators, to be fair and reasonable) for the compensation of Participants, whether by the continuation of their Options or the payment of cash or the grant of other options or otherwise, a Participant holding an Option, which is not then exercisable, may not, at the discretion of the Committee, be permitted to exercise that Option as provided for in this Rule 10. To the extent that an Option is not exercised within the periods referred to in this Rule 10, it shall lapse and become null and void.

10.6

11.

OPTION PERIOD 11.1 An Option shall only be exercisable, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 shares or any multiple thereof unless the number of remaining Options held by the Participant correspond to less than 1,000 Shares), at any time, by a Participant after the first anniversary of the Offer Date during the Option Period (or, in the case of Options with the Exercise Price set at a discount to Market Price, after the second anniversary of the Offer Date during the Option Period) provided always that Options granted to Executive Directors and other than Employees (other than Employees of Associated Companies) shall be exercised before the tenth anniversary of the relevant Offer Date and Options granted to Non-Executive Directors or to Employees of Associated Companies shall be exercised before the fifth anniversary of the relevant Offer Date, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company. An Option shall, to the extent unexercised, immediately lapse and become null and void and a Participant shall have no claim against the Company:- (a) subject to Rules 11.2, 11.3 and 11.4, upon the Participant ceasing to be in full-time employment of the Company or any of the companies within the Group for any reason whatsoever; or upon the bankruptcy of the Participant or the happening of any other event which result in his being deprived of the legal or beneficial ownership of such Option; or in the event of misconduct on the part of the Participant, as determined by the Committee in its absolute discretion.

11.2

(b) (c)

For the purpose of Rule 11.2(a), a Participant shall be deemed to have ceased to be so employed as of the date the notice of termination of employment is tendered by or is given to him, unless such notice shall be withdrawn prior to its effective date. 11.3 If a Participant ceases to be employed by the Group by reason of his:- (a) (b) (c) (d) ill health, injury or disability as certified by a medical practitioner approved by the Committee; redundancy; retirement at or after a normal retirement age; or retirement before that age with the consent of the Committee,

or for any other reason approved in writing by the Committee, he may, at the absolute discretion of the Committee exercise any unexercised Option within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.

125

11.4

If a Participant ceases to be employed by a Subsidiary or an Associated Company:- (a) by reason of the Subsidiary or the Associated Company, as the case may be, by which he is principally employed ceasing to be a company within the Group or the undertaking or part of the undertaking of such Subsidiary or Associated Company, as the case may be, being transferred otherwise than to another company within the Group; or for any other reason, provided the Committee gives its consent in writing,

(b)

he may, at the absolute discretion of the Committee, exercise any unexercised Options within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void. 11.5 If a Participant dies and at the date of his death holds any unexercised Option, such Option may, at the absolute discretion of the Committee, be exercised by the duly appointed legal personal representatives of the Participant within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.

12.

EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES 12.1 An Option may be exercised, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), by a Participant giving notice in writing to the Company in or substantially in the form set out in Schedule 3 (the ``Exercise Notice''), subject to such modifications as the Committee may from time to time determine. Every Exercise Notice must be accompanied by a remittance for the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option, the relevant CDP charges (if any) and any other documentation the Committee may require. All payment shall be made by cheque, cashier's order, bank draft or postal order made out in favour of the Company. An Option shall be deemed to be exercised upon the receipt by the Company of the said notice duly completed and the receipt by the Company of the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option. Subject to:­ (a) such consents or other actions required by any competent authority under any regulation or enactment for the time being in force as may be necessary (including any approvals required from the SGX-ST); and compliance with the Rules of the Scheme and the Memorandum and Articles of Association of the Company,

12.2

(b)

the Company shall, as soon as practicable after the exercise of an Option by a Participant but in any event within ten (10) Market Days after the date of the exercise of the Option in accordance with Rule 12.1, allot the Shares in respect of which such Option has been exercised by the Participant and within five (5) Market Days from the date of such allotment, despatch the relevant share certificates to the Participant or CDP for the credit of the securities account of that Participant (as the case may be) by ordinary post or such other mode of delivery as the Committee may deem fit. 12.3 The Company shall as soon as practicable after the exercise of an Option, apply to the SGX-ST or any other stock exchange on which the Shares are quoted or listed for permission to deal in and for quotation of the Shares which may be issued upon exercise of the Option and the Shares (if any) which may be issued to the Participant pursuant to any adjustments made in accordance with Rule 9. Shares which are all allotted on the exercise of an Option by a Participant shall be issued, as the Participant may elect, in the name of CDP to the credit of the securities account of the Participant maintained with CDP or the Participant's securities sub-account with a CDP Depository Agent or in the name of the Participant.

12.4

126

12.5

Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects with the then existing issued Shares in the capital of the Company except for any dividends, rights, allotments or other distributions, the record date of which is prior to the date such Option is exercised. For this purpose, ``record date'' means the date as at the close of business on which Shareholders must be registered in order to participate in any dividends, rights, allotments or other distributions (as the case may be). Except as set out in Rule 12.2 and subject to Rule 9, an Option does not confer on a Participant any right to participate in any new issue of Shares. The Company shall keep available sufficient unissued Shares to satisfy the full exercise of all Options for the time being remaining capable of being exercised, provided that such Shares set apart shall not exceed fifteen (15) per cent. of the total issued capital of the Company.

12.6

12.7

13.

ALTERATIONS AND MODIFICATIONS TO THE SCHEME 13.1 Any or all of the provisions of the Scheme may be modified and/or altered at any time and from time to time by resolution of the Committee except that:­ (a) no modification or alteration shall alter adversely the rights attaching to any Option granted prior to such modification or alteration except with the consent in writing of such number of Participants who, if they exercised their Options in full, would thereby become entitled to not less than three-quarters (3/4) in nominal amount of all the Shares which would fall to be issued and allotted upon exercise in full of all outstanding Options; the definitions of ``Director'', ``Employee'', ``Group'' and ``Option Period'' and the provisions of Rules 4, 5, 7.1, 8.1, 11.1, 12.5, 15 and this Rule shall not be altered or modified to the advantage of Participants under the Scheme except with the prior approval of Shareholders at a general meeting; and no modification or alteration shall be made without the prior approval of the SGX-ST or (if required) any other stock exchange on which the Shares are quoted or listed, and such other regulatory authorities as may be necessary.

(b)

(c)

13.2

Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any time by resolution (and without any other formality save for the prior approval of the SGX-ST) amend or alter the Scheme in any way to the extent necessary to cause the Scheme to comply with any statutory provision or the provisions or the regulations of any regulatory or other relevant authority or body (including the SGX-ST). Written notice of any modification or alteration made in accordance with this Rule shall be given to all Participants.

13.3

14.

DURATION OF THE SCHEME 14.1 The Scheme shall continue to be in force at the discretion of the Committee, subject to a maximum period of ten (10) years, commencing on the date on which the Scheme is adopted by Shareholders in the Extraordinary General Meeting. Subject to compliance with any applicable laws and regulations in Singapore, the Scheme may be continued beyond the above stipulated period with the approval of the Shareholders by ordinary resolution at a general meeting and of any relevant authorities which may then be required. The Scheme may be terminated at any time by the Committee or by resolution of the Shareholders at a general meeting subject to all other relevant approvals which may be required and if the Scheme is so terminated, no further Options shall be offered by the Company hereunder, but the provisions of the Scheme shall, in relation to the Options then subsisting, remain in full force and effect.

14.2

127

14.3

The termination, discontinuance or expiry of the Scheme shall be without prejudice to the rights accrued to Options which have been granted and accepted as provided in Rule 8, whether such Options have been exercised (whether fully or partially) or not.

15.

ADMINISTRATION OF THE SCHEME 15.1 This Scheme shall be administered by the Committee in its absolute discretion with such powers and duties as are conferred on it by the Board of Directors. The Committee shall have the power, from time to time, to make or vary such regulations (not being inconsistent with this Scheme) for the implementation and administration of this Scheme as it thinks fit. Any decision of the Committee, made pursuant to any provision of this Scheme (other than a matter to be certified by the Auditors), shall be final and binding (including any decisions pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or procedure thereunder or as to any rights under this Scheme). A Participant who is a member of the Committee shall not be involved in its deliberation in respect of Options to be granted to him.

15.2

15.3

15.4

16.

NOTICES 16.1 Any notice given by a Participant to the Company shall be sent by post or delivered to the registered office of the Company or such other address as may be notified by the Company to the Participant in writing. Any notice given by the Company to a Participant shall be sent to the Participant by post to his address stated in the records of the Company and, if sent by post, shall be deemed to have been given on the day immediately following the date of posting.

16.2

17.

TERMS OF EMPLOYMENT UNAFFECTED 17.1 This Scheme or any Option shall not form part of any contract of employment between the Company, any Subsidiary and/or Associated Company and any Participant and the rights and obligations of any individual under the terms of the office or employment with such company within the Group shall not be affected by his participation in this Scheme or any right which he may have to participate in it or any Option which he may hold and this Scheme or any Option shall afford such an individual no additional rights to compensation or damages in consequence of the termination of such office or employment for any reason whatsoever. This Scheme shall not confer on any person any legal or equitable rights (other than those constituting the Options themselves) against the Company, any Subsidiary or Associated Company directly or indirectly or give rise to any cause of action at law or in equity against the Company, any Subsidiary and/or any Associated Company.

17.2

18.

NON-ASSIGNABILITY OF OPTIONS An Option shall be personal to the Participant to whom it is granted and save as provided in Rule 11, the Participant shall not transfer or assign to any other person, or create any charge, lien or other encumbrance whatsoever on or over the Option or any part thereof.

19.

TAXES All taxes (including income tax) arising from the exercise of any Option granted to any Participant under the Scheme shall be borne by the Participant.

128

20.

COSTS AND EXPENSES OF THE SCHEME 20.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the issue and allotment of any Shares pursuant to the exercise of any Option in CDP's name, the deposit of share certificate(s) with CDP, the Participant's security account with CDP or the Participant's securities sub-account with his Depository Agent and all taxes referred to in Rule 20 which shall be payable by the relevant Participant. Save for such costs and expenses expressly provided in this Scheme to be payable by the Participants, all fees, costs, and expenses incurred by the Company in relation to the Scheme including but not limited to the fees, costs and expenses relating to the issue and allotment of the Shares pursuant to the exercise of any Option shall be borne by the Company.

20.2

21.

DISCLAIMER OF LIABILITY Notwithstanding any provisions herein contained and subject to the Act, the Board, the Committee and the Company shall not under any circumstances be held liable for any costs, losses, expenses and damages whatsoever and howsoever arising in respect of any matter under or in connection with the Scheme including but not limited to the Company's delay or failure in issuing and allotting the Shares or in applying for or procuring the listing of and quotation for the Shares on the SGX-ST or any other stock exchanges on which the Shares are quoted or listed.

22.

DISPUTES Any disputes or differences of any nature in connection with the Scheme shall be referred to the Committee and its decision shall be final and binding in all respects.

23.

CONDITION OF OPTION Every Option shall be subject to the condition that no Shares shall be issued pursuant to the exercise of an Option if such issue would be contrary to any law or enactment, or any rules or regulations of any legislative or non-legislative governing body for the time being in force in Singapore or any other relevant country.

24.

DISCLOSURE IN ANNUAL REPORT The Company shall make the following disclosure in its annual report:- (a) (b) The names of the members of the Committee; The information required in the table below for the following Participants:­ (i) (ii) Directors of the Company; and Participants, other than those in Rule 24(b)(i) above, who receive five (5) per cent. or more of the total number of Options available under the Scheme;

Options granted during financial year under review (including terms) Aggregate Options granted since commencement of Scheme to end of financial year under review Aggregate Options exercised since commencement of Scheme to end of financial year under review

Name of Participant

Aggregate Options outstanding as at end of financial year under review

129

(c)

(i) (ii)

the number and proportion of options granted at a discount of the (10) per cent or less to the Market Price during the financial year under review; and the numbers and proportion of options granted at the discount of more than ten (10) per cent to the Market Price during the financial year under review.

25.

GOVERNING LAW This scheme shall be governed by and construed in accordance with the laws of the Republic of Singapore. The Company and the Participants, by accepting the offer of the grant of Options in accordance with the Scheme, submit to the exclusive jurisdiction of the courts of the Republic of Singapore.

130

SCHEDULE 1

OSIM SHARE OPTION SCHEME

LETTER OF OFFER Serial No:__________________ PRIVATE AND CONFIDENTIAL Date: To: Name Designation Address PRIVATE AND CONFIDENTIAL

Dear Sir/Madam We are pleased to inform you that you have been nominated by the Committee of the Board of Directors of Osim International Ltd (the ``Company'') to participate in the Osim Share Option Scheme (the ``Scheme''). Accordingly, an offer is hereby made to grant you an Option (as defined in the Scheme), in consideration of the payment of a sum of S$1.00, to subscribe for and be allotted ________ ordinary shares of S$0.05 each in the capital of the Company at the price of S$____________ per ordinary share. The Option shall be subject to the terms of this Letter of Offer and the Scheme (as the same may be amended from time to time pursuant to the terms and conditions of the Scheme), a copy of which is enclosed herewith. The Option is personal to you and may not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever. If you wish to accept the offer, please sign and return the enclosed Acceptance Form with a sum of S$1.00 not later than _______ a.m./p.m. on the ______ day of __________________2000 failing which this offer will forthwith lapse.

Yours faithfully For and on behalf of Osim International Ltd

_____________________________ Name: Designation:

131

SCHEDULE 2

OSIM SHARE OPTION SCHEME

ACCEPTANCE FORM Serial No:__________________ To: The Committee Osim Share Option Scheme c/o The Company Secretary Osim International Ltd 57 Genting Lane Singapore 349564 : : : : __________________________________ __________________________________ S$ ________________________________ S$ ________________________________ (exclusive of the relevant CDP charges)

Closing Time and Date for Acceptance of Option No. of Shares in respect of which Option is offered Exercise Price per Share Total Amount Payable on acceptance of Option

I have read your Letter of Offer dated ________________________ (the ``Offer Date'') and agree to be bound by the terms thereof and of the Osim Share Option Scheme stated therein. I confirm that my acceptance of the Option will not result in the contravention of any applicable law or regulation in relation to the ownership of shares in the Company or options to subscribe for such shares. I hereby accept the Option to subscribe for ________ ordinary shares of S$0.05 each in the capital of Osim International Ltd (the ``Shares'') at S$____________ per Share and enclose *cash/banker's draft/cashier's order/postal order no. __________________ for S$1.00 being payment for the purchase of the Option. I understand that I am not obliged to exercise the Option. I also understand that I shall be responsible for all the fees of CDP relating to or in connection with the issue and allotment of any Shares in CDP's name, the deposit of share certificates with CDP, my securities account with CDP or my securities sub-account with a CDP Depository Agent (as the case may be) (collectively, the ``CDP charges''). I confirm that as at the date hereof:- (a) (b) (c) I am not less that 21 years old nor an undischarged bankrupt nor have I entered into a composition with any of my creditors; I satisfy the eligibility requirements to participate in the Scheme as defined in Rule 4 of the Scheme; and I satisfy the other requirements to participate in the Scheme as set out in the Rules of the Scheme.

I hereby acknowledge that you have not made any representation or warranty or given me any expectation of employment or continued employment to induce me to accept the offer and that the terms of the Letter of Offer and this Acceptance Form constitute the entire agreement between us relating to the offer. I agree to keep all information pertaining to the grant of the Option to me confidential.

132

PLEASE PRINT IN BLOCK LETTERS Name in full Designation Address Nationality *NRIC/Passport No. Signature Date

*Delete as appropriate. Notes:- 1. 2. 3. Option must be accepted in full or in multiples of 1,000 Shares unless the number of remaining Options held by the Participant correspond to less than 1,000 Shares. The Acceptance Form must be forwarded to the Company Secretary in an envelope marked ``Private and Confidential''. The Participant shall be informed by the Company of the relevant CDP charges payable at the time of the exercise of an Option.

: : : : : : :

__________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________

133

SCHEDULE 3

OSIM SHARE OPTION SCHEME

EXERCISE NOTICE To: The Committee Osim Share Option Scheme c/o The Company Secretary Osim International Ltd 57 Genting Lane Singapore 349564

Total Number of ordinary shares of S$0.05 each (the ``Share'') at S$____________ per Share under an Option granted on ________________________ (the ``Offer Date'') Number of Shares previously allotted and issued thereunder Outstanding balance of Shares which may be allotted and issued thereunder Number of Shares now to be subscribed (in multiples of 1,000 unless the number of remaining Options held by the Participant correspond to less than 1,000 Shares) 1.

: : :

__________________________________ __________________________________ __________________________________

:

__________________________________

Pursuant to your Letter of Offer dated ________________________ (the ``Offer Date'') and my acceptance thereof, I hereby exercise the Option to subscribe for Shares in Osim International Ltd (the ``Company'') at S$____________ per Share. I hereby request the Company to allot and issue to me the number of Shares specified in paragraph 1 in the name of The Central Depository (Pte) Limited (``CDP'') to the credit of my *Securities Account with a CDP/* Securities Sub-Account with a CDP Depository Agent specified below and to deliver the share certificates relating thereto to CDP at my own risk. I further agree to bear such fees or other charges as may be imposed by CDP (the ``CDP charges'') in respect thereof:- *(a) *(b) Direct Securities Account Number Securities Sub-Account Number : : : ______________________________________ ______________________________________ ______________________________________

*2.

Name of CDP Depository Agent 3.

I enclose a *cheque/cashier's order/bank draft/postal order no. __________________ for $____________ in payment for the subscription of S$____________ for the total number of the said Shares and the CDP charges of S$____________. I agree to subscribe for the Shares subject to the terms of the Letter of Offer, the Osim Share Option Scheme (as the same may be amended pursuant to the terms thereof from time to time) and the Memorandum and Articles of Association of the Company. I declare that I am subscribing for the Shares for myself and not as a nominee for any other person.

4.

5.

134

PLEASE PRINT IN BLOCK LETTERS Name in full Designation Address Nationality *NRIC/Passport No. Signature Date

*Delete as appropriate. Notes:­ 1. An Option may be exercised in whole or in part provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof unless the number of remaining Options held by the Participant correspond to less than 1,000 Shares. The form entitled ``Exercise Notice'' must be forwarded to the Company Secretary in an envelope marked ``Private and Confidential''.

: : : : : : :

__________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________

2.

135

APPENDIX B

TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS

Applications are invited for the subscription and/or purchase of Invitation Shares subject to the following terms and conditions:­ 1. APPLICATIONS FOR THE INVITATION SHARES MUST BE MADE IN LOTS OF 1,000 SHARES AND HIGHER INTEGRAL MULTIPLES THEREOF. APPLICATIONS FOR ANY OTHER NUMBER OF SHARES WILL BE REJECTED. Applications for Offer Shares may be made by way of Offer Shares Application Forms or by way of Electronic Applications through ATMs of the Participating Banks (``ATM Electronic Applications''). Applications for the Placement Shares (other than Reserved Shares) may only be made by way of Placement Shares Application Forms. Applications for Reserved Shares may only be made by way of Reserved Shares Application Forms. APPLICANTS MAY NOT USE CENTRAL PROVIDENT FUND (``CPF'') FUNDS TO APPLY FOR THE INVITATION SHARES. Only one application for either the Offer Shares or the Placement Shares may be made for the benefit of one person (other than in respect of Reserved Shares). A person submitting an application for Offer Shares by way of an Application Form MAY NOT submit another application for Offer Shares by way of an Electronic Application and vice versa. Such separate applications shall be deemed to be multiple applications and shall be rejected. A person, other than an approved nominee company, who is submitting an application in his own name should not submit any other application (other than for Reserved Shares), whether by way of an Application Form or by way of an Electronic Application, for any other person. Such separate applications shall be deemed to be multiple applications and shall be rejected. An applicant who has been procured by a Placement Agent to subscribe for Placement Shares (other than for Reserved Shares) shall not make any application for Offer Shares either through an Electronic Application or by way of an Application Form and vice versa. Such separate applications shall be deemed to be multiple applications and shall be rejected. An applicant for Reserved Shares using the Reserved Shares Application Form may submit one separate application for the Offer Shares in his own name either by way of an Application Form or by way of an Electronic Application provided he adheres to the terms and conditions of this Prospectus. Such separate applications shall not be treated as multiple applications. Joint or multiple applications shall be rejected. Persons submitting or procuring submissions of multiple share applications (whether for Offer Shares, Placement Shares or both Offer Shares and Placement Shares) may be deemed to have committed an offence under the Penal Code (Chapter 224) of Singapore and the Securities Industry Act (Chapter 289) of Singapore, and such applications may be referred to the relevant authorities for investigation. 4. Applications will not be accepted from any person under the age of 21 years, undischarged bankrupts, sole-proprietorships, partnerships, chops or non-corporate bodies, joint Securities Account holders of CDP and applicants whose addresses (furnished in their Application Forms or, in the case of Electronic Applications, contained in the records of the relevant Participating Banks) bear post office box numbers.

2.

3.

136

5.

The existence of a trust will not be recognised. Any application by a trustee or trustees must be made in his/her/their own name(s) and without qualification. Applications made by way of an Application Form in the name(s) of an approved nominee company or approved nominee companies must comply with paragraph 6 below. NOMINEE APPLICATIONS MAY BE MADE BY APPROVED NOMINEE COMPANIES ONLY. Approved nominee companies are defined as banks, merchant banks, finance companies, insurance companies, licensed securities dealers in Singapore and nominee companies controlled by them. Applications made by persons acting as nominees other than approved nominee companies shall be rejected. FOR NON-NOMINEE APPLICATIONS, EACH APPLICANT MUST MAINTAIN A SECURITIES ACCOUNT WITH CDP IN HIS OWN NAME AT THE TIME OF HIS APPLICATION. An applicant without an existing Securities Account with CDP in his own name at the time of his application will have his application rejected, in the case of an application by way of an Application Form, or will not be able to complete his Electronic Application, in the case of an Electronic Application. An applicant with an existing Securities Account who fails to provide his Securities Account number or who provides an incorrect Securities Account number in section B of the Application Form or in his Electronic Application, as the case may be, is liable to have his application rejected. Subject to paragraph 8 below, an application shall be rejected if the applicant's particulars such as name, NRIC/passport number, nationality and permanent residence status provided in his Application Form or in the records of the relevant Participating Bank at the time of his Electronic Application, as the case may be, differ from those particulars in his Securities Account as maintained with CDP. If the applicant possesses more than one individual direct Securities Account with CDP, his application shall be rejected. If the address of an applicant stated in the Application Form or, in the case of an Electronic Application, in the records of the relevant Participating Bank, as the case may be, is different from the address registered with CDP, the applicant must inform CDP of his updated address promptly, failing which the notification letter on successful allotment and other correspondence from the CDP will be sent to his address last registered with CDP. The Company and the Vendor reserve the right to reject any application which does not conform strictly to the instructions set out in the Application Form and this Prospectus or which does not comply with the instructions for Electronic Applications or with the terms and conditions of this Prospectus or, in the case of an application by way of an Application Form, which is illegible, incomplete, incorrectly completed or which is accompanied by an improperly drawn remittance. The Company and the Vendor further reserve the right to treat as valid any applications not completed or submitted or effected in all respects in accordance with the terms and conditions of this Prospectus and also to present for payment or other processes all remittances at any time after receipt and to have full access to all information relating to, or deriving from, such remittances or the processing thereof. The Company and the Vendor reserve the right to reject or accept any application or to accept any application in part only without assigning any reason thereof, and no enquiry and/or correspondence on the decision of the Company and the Vendor will be entertained. This right applies to applications made by way of Application Forms and by way of Electronic Applications. In deciding the basis of acceptance, due consideration will be given to the desirability of allotting the Shares to a reasonable number of applicants with a view to establishing an adequate market for the Shares.

6.

7.

8.

9.

10.

137

11.

Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It is expected that CDP will send to each successful applicant, at his own risk, within 15 Market Days after the close of the Application List, a statement of account stating that his Securities Account has been credited with the number of Invitation Shares allotted and/or allocated to him. This will be the only acknowledgement of application moneys received and is not an acknowledgement by the Company and the Vendor. Each applicant irrevocably authorises CDP to complete and sign on his behalf as transferee or renouncee any instrument of transfer and/or other documents required for the issue or transfer of the Invitation Shares allotted and/or allocated to the applicant. This authorisation applies to applications made by way of Application Forms and by way of Electronic Applications. By completing and delivering an Application Form and, in the case of an ATM Electronic Application, by pressing the ``Enter'' or ``OK'' or ``Confirm'' or ``Yes'' key on the ATM in accordance with the provisions herein, each applicant:­ (a) irrevocably offers to subscribe for the number of Invitation Shares specified in his application (or such smaller number for which the application is accepted) at the Offer Price or the Placement Price (as the case may be) and agrees that he will accept such Shares as may be allocated to him, in each case on the terms of, and subject to the conditions set out in, the Prospectus and the Memorandum and Articles of Association of the Company; and warrants the truth and accuracy of the information provided in his application.

12.

(b) 13.

In the event of an under-subscription for Offer Shares as at the close of the Application List, the number of Offer Shares under-subscribed shall be made available to satisfy applications for Placement Shares to the extent that there is an over-subscription for Placement Shares as at the close of the Application List. Any Reserved Shares not taken up by the employees and business associates of the Group will be made available first to satisfy other applications for the Placement Shares to the extent that there is an over-subscription for the Placement Shares and then to satisfy applications for Offer Shares to the extent that there is an over-subscription for Offer Shares. In the event of an under-subscription for Placement Shares (other than Reserved Shares) as at the close of the Application List, that number of Placement Shares (other than Reserved Shares) under-subscribed shall be made available to satisfy applications for Offer Shares to the extent that there is an over-subscription for Offer Shares as at the close of the Application List. In the event of an over-subscription of the Offer Shares as at the close of the Application List and the number of Placement Shares are fully subscribed or over-subscribed as at the close of the Application List, the successful applications for the Offer Shares will be determined by ballot or otherwise as determined by the Directors and the Vendor, and approved by the SGX-ST.

14.

Each applicant irrevocably authorises CDP to disclose the outcome of his application, including the number of Invitation Shares allotted or allocated to the applicant pursuant to his application, to authorised operators. Acceptance of applications will be conditional upon, inter alia, the Company and the Vendor being satisfied that:­ (a) (b) permission has been granted by the SGX-ST to deal in and for quotation for all the existing Shares and the New Shares on the Official List of the SGX-ST; and the Management and Underwriting Agreement and the Placement Agreement referred to on page 107 of this Prospectus have become unconditional and have not been terminated.

15.

16. 17.

No application will be held in reserve. No Shares will be allotted or allocated on the basis of this Prospectus later than six months after the date of issue of this Prospectus.

138

18.

Additional terms and conditions for applications by way of Application Forms are set out on pages 139 to 142 of this Prospectus. Additional terms and conditions for applications by way of Electronic Applications are set out on pages 142 to 146 of this Prospectus. Any reference to the ``applicant'' in this section shall include a person applying for the Offer Shares by way of an Application Form or by way of an Electronic Application , a person applying for the Placement Shares through the Placement Agent, or a person applying for Reserved Shares by way of a Reserved Shares Application Form.

19.

20.

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS Applications by way of Application Forms shall be made on and subject to the terms and conditions of this Prospectus including but not limited to the terms and conditions appearing below as well as those set out under the section on ``TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION'' on pages 136 to 146 of this Prospectus, as well as the Memorandum and Articles of Association of the Company. 1. Applications must be made using the WHITE Application Forms and official envelopes ``A'' and ``B'' for Offer Shares and the BLUE Application Forms for Placement Shares (other than Reserved Shares) accompanying and forming part of this Prospectus. Attention is drawn to the detailed instructions contained in the respective Application Forms and this Prospectus for the completion of the Application Forms which must be carefully followed. The Company and the Vendor reserve the right to reject applications which do not conform strictly to the instructions set out in the Application Forms and this Prospectus or to the terms and conditions of this Prospectus or which are illegible, incomplete, incorrectly completed or which are accompanied by improperly drawn remittances. The Application Forms must be completed in English. Please type or write clearly in ink using BLOCK LETTERS. All spaces in the Application Forms except those under the heading ``FOR OFFICIAL USE ONLY'' must be completed and the words ``NOT APPLICABLE'' or ``N.A.'' should be written in any space that is not applicable. Individuals, corporations, approved nominee companies and trustees must give their names in full. Applications must be made, in the case of individuals, in their full names appearing in their identity cards (if applicants have such identification documents) or in their passports and, in the case of corporations, in their full names as registered with a competent authority. An applicant, other than an individual, completing the Application Form under the hand of an official must state the name and capacity in which that official signs. A corporation completing the Application Form is required to affix its Common Seal (if any) in accordance with its Memorandum and Articles of Association or equivalent constitutive documents of the corporation. If an application by a corporate applicant is successful, a copy of its Memorandum and Articles of Association or equivalent constitutive documents must be lodged with the Company's Share Registrar and Share Transfer Office. The Company and the Vendor reserve the right to require any applicant to produce documentary proof of identification for verification purposes. (a) (b) All applicants must complete page 1 and Sections A and B of the Application Forms. All applicants are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Forms. Where paragraph 7(a) is deleted, the applicants must also complete Section C of the Application Forms with particulars of the beneficial owner(s). Applicants who fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, on page 1 of the Application Forms are liable to have their applications rejected.

2.

3.

4.

5.

(c)

139

6.

Individual and corporate applicants, whether incorporated or unincorporated and wherever incorporated or constituted, will be required to declare whether they are citizens or permanent residents of Singapore or corporations in which citizens or permanent residents of Singapore or any body corporate constituted under any statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporations. Approved nominee companies are required to declare whether the beneficial owner of the Invitation Shares is a citizen or permanent resident of Singapore or a corporation, whether incorporated or unincorporated and wherever incorporated or constituted, in which citizens or permanent residents of Singapore or any body corporate whether incorporated or unincorporated and wherever incorporated or constituted under any statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporation. Each application must be accompanied by a remittance in Singapore currency for the full amount payable, in respect of the number of Invitation Shares applied for, in the form of a BANKER'S DRAFT or CASHIER'S ORDER drawn on a bank in Singapore, made out in favour of ``OSIM SHARE ISSUE ACCOUNT'' crossed ``A/C PAYEE ONLY'', with the name and address of the applicant written clearly on the reverse side. Applications not accompanied by any payment or accompanied by ANY OTHER FORM OF PAYMENT WILL NOT BE ACCEPTED. Remittances bearing ``NOT TRANSFERABLE'' or ``NON TRANSFERABLE'' crossings shall be rejected. No acknowledgement of receipt will be issued by the Company, the Vendor or OCBC Bank for applications and application moneys received. It is expected that unsuccessful applications will be returned to the applicants by ordinary post (without interest or any share of revenue or other benefit arising therefrom) within three Market Days after the close of the Application List at the applicants' own risk. Where an application is rejected or accepted in part only, the full amount or the balance of the application moneys, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) to the applicant by ordinary post at the applicant's own risk within 14 days after the close of the Application List. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the meanings assigned to them in this Prospectus. In consideration of the Company and the Vendor having distributed the Application Form to the applicant and agreeing to close the Application List at 12.00 noon on 27 July 2000 or such later time or date as the Company and the Vendor may, in their absolute discretion, decide and by completing and delivering the Application Form, the applicant agrees that:­ (a) (b) his application is irrevocable; his remittance will be honoured on first presentation and that any application moneys returnable may be held pending clearance of his payment without interest or any share of revenue or other benefit arising therefrom; all applications, acceptances and contracts resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and that he irrevocably submits to the non-exclusive jurisdiction of the Singapore courts; in respect of the Invitation Shares for which his application has been received and not rejected, acceptance of his application shall be constituted by written notification by or on behalf of Company and the Vendor and not otherwise, notwithstanding any remittance being presented for payment by or on behalf of the Company and the Vendor; and he will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of his application.

7.

8.

9.

10.

(c)

(d)

(e)

140

Applications for Offer Shares 1. Applications for Offer Shares MUST be made using the WHITE Offer Shares Application Forms and WHITE official envelopes ``A'' and ``B''. ONLY ONE APPLICATION should be enclosed in each envelope. The applicant must:­ (a) (b) enclose the WHITE Offer Shares Application Form, duly completed and signed, together with his remittance in the WHITE envelope ``A'' provided; in the appropriate spaces on WHITE envelope ``A'':­ (i) (ii) (iii) (c) (d) write his name and address; state the number of Offer Shares applied for; and affix adequate Singapore postage;

2.

SEAL WHITE envelope ``A''; write, in the special box provided on the larger WHITE envelope ``B'' addressed to OCBC BANK, 18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, the number of Offer Shares for which the application is made; and insert WHITE envelope ``A'' into WHITE envelope ``B'', seal WHITE envelope ``B'' and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND at his own risk to OCBC BANK, 18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, so as to arrive by 12.00 noon on 27 July 2000 or such later date and time as the Company and the Vendor may, in their absolute discretion, decide. Local Urgent Mail or Registered Post must NOT be used.

(e)

3. 4.

No acknowledgement of receipt will be issued for any application or remittance received. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances are liable to be rejected.

Applications for Placement Shares (other than Reserved Shares) 1. Applications for Placement Shares must be made using the BLUE Placement Shares Application Forms. ONLY ONE APPLICATION should be enclosed in each envelope. The completed BLUE Placement Shares Application Form and the applicant's remittance with the name and address of the applicant written clearly on the reverse side, must be enclosed and sealed in an envelope to be provided by the applicant. The sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at the applicant's own risk to OCBC BANK, 18 CHURCH STREET #02-00, OCBC CENTRE SOUTH, SINGAPORE 049479, to arrive by 12.00 noon on 27 July 2000 or such later date and time as the Company and the Vendor may, in their absolute discretion, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received.

2.

3.

141

Applications for Reserved Shares 1. Applications for Reserved Shares must be made using the PINK Reserved Shares Application Forms. ONLY ONE APPLICATION should be enclosed in each envelope. The completed PINK Reserved Shares Application Form and the applicant's remittance with the name and address of the applicant written clearly on the reverse side, in accordance with the terms of this Prospectus, must be enclosed and sealed in an envelope to be provided by the applicant. The sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at the applicant's own risk to the Company at 57 Genting Lane, Osim Industrial Building, Singapore 349564, to arrive by 12.00 noon on 27 July 2000 or such later date and time as the Company and the Vendor may, in their absolute discretion, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received.

2.

3.

ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS The procedures for Electronic Applications at ATMs of the Participating Banks are set out on the ATM screens (in the case of ATM Electronic Applications) of the relevant Participating Banks (the ``Steps''). For illustration purposes, the procedures for Electronic Applications at ATMs of the OCBC Bank group are set out in the ``STEPS FOR ATM ELECTRONIC APPLICATIONS'' appearing on page 146 of this Prospectus. Please read carefully the terms of this Prospectus, the Steps and the terms and conditions for Electronic Applications set out below before making an Electronic Application. Any reference to the ``applicant'' in the terms and conditions for Electronic Applications and the Steps shall mean the applicant who applies for Offer Shares through an ATM of a Participating Bank. An applicant must have an existing bank account with and be an ATM cardholder of one of the Participating Banks before he can make an Electronic Application at the ATMs of that Participating Bank. An ATM card issued by one Participating Bank cannot be used to apply for Offer Shares at an ATM belonging to other Participating Banks. The Steps set out the actions that the Applicant must take at ATMs of the OCBC Bank group to complete an Electronic Application. The actions that an applicant must take at ATMs of other Participating Banks are set out on the ATM screens of the relevant Participating Banks. Upon the completion of his Electronic Application transaction, the applicant will receive an ATM transaction slip (``Transaction Record''), confirming the details of his Electronic Application. The Transaction Record is for retention by the applicant and should not be submitted with any printed Application Form. An applicant, including one who has a joint bank account with any of the Participating Banks, must ensure that he enters his own Securities Account number when using the ATM card issued to him in his own name. Using his own Securities Account number with an ATM card which is not issued to him in his own name will render his Electronic Application liable to be rejected. An Electronic Application shall be made on and subject to the terms and conditions of this Prospectus including but not limited to the terms and conditions appearing below and those set out under the section on ``TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION'' on page 146 of this Prospectus as well as the Memorandum and Articles of Association of the Company. 1. In connection with his Electronic Application for Offer Shares, the applicant is required to confirm statements to the following effect in the course of activating his Electronic Application:­ (a) that he has received a copy of this Prospectus and has read, understood and agreed to all the terms and conditions of application for Offer Shares in this Prospectus prior to effecting the Electronic Application and agrees to be bound by the same; (b) that he consents to the disclosure of his name, NRIC/passport number, address, nationality, permanent resident status, CDP Securities Account number, CPF investment account number (if applicable) and share application amount (the ``Relevant Particulars'') from his account with that Participating Bank to the Share Registrar, CDP, CPF, SCCS, the Company, the Vendor and the Manager (the ``Relevant Parties''); and 142

(c) that the Electronic Application made is his only application for Offer Shares and it is made in his own name and at his own risk. His application will not be successfully completed and cannot be recorded as a completed transaction unless he presses the ``Enter'' or ``OK'' or ``Confirm'' or ``Yes'' key in the ATM. By doing so, the applicant shall be treated as signifying his confirmation of each of the three statements. In respect of statement 1(b) above, his confirmation, by pressing the ``Enter'' or ``OK'' or ``Confirm'' or ``Yes'' key, shall signify and shall be treated as his written permission, given in accordance with the relevant laws of Singapore including Section 47(4) of the Banking Act, Chapter 19 of Singapore to the disclosure by that Participating Bank of the Relevant Particulars to the Relevant Parties. 2. By making an Electronic Application, the applicant confirms that he is not applying for Offer Shares as nominee of any other person and that any Electronic Application that he makes is the only application made by him as beneficial owner. The applicant shall make only one Electronic Application for Offer Shares and shall not make any other application for Invitation Shares (other than Reserved Shares), whether at the ATMs of any participating bank or on the application forms. Where a person has made an application for Offer Shares or Placement Shares (other than Reserved Shares) on an application form, he shall not make an Electronic Application for Offer Shares. The applicant must have sufficient funds in his bank account with his Participating Bank at the time he makes his Electronic Application, failing which his Electronic Application will not be completed. Any Electronic Application which does not conform strictly to the instructions set out on the screens of the ATM through which the Electronic Application is being made shall be rejected. The applicant irrevocably agrees and undertakes to subscribe for and to accept the number of Offer Shares applied for as stated on the Transaction Record or any lesser number of Offer Shares that may be allotted or allocated to him in respect of his Electronic Application. In the event that the Company and the Vendor decide to allot any lesser number of such Offer Shares or not to allot any Offer Shares to the applicant, the applicant agrees to accept such decision as final. If the applicant's Electronic Application is successful, his confirmation (by his action of pressing the ``Enter'' or ``OK'' or ``Confirm'' or ``Yes'' key on the ATM) of the number of Offer Shares applied for shall signify and shall be treated as his acceptance of the number of Offer Shares that may be allotted or allocated to him and his agreement to be bound by the Memorandum and Articles of Association of the Company. No applications will be kept in reserve. Where an Electronic Application is unsuccessful, the full amount of the application moneys will be refunded in Singapore dollars (without interest or any share of revenue or other benefit arising therefrom) to the applicant by being automatically credited to the applicant's account with his Participating Bank within three Market Days after the close of the Application List. Trading on a ``WHEN ISSUED'' basis, if applicable, is expected to commence after such refund has been made. Where an Electronic Application is rejected or accepted in part only, the full amount or the balance of the application moneys, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) to the applicant by being automatically credited to the applicant's account with his Participating Bank within 14 days after the close of the Application List. Responsibility for timely refund of application moneys from Electronic Applications lies solely with the respective Participating Banks. Therefore, you are strongly advised to consult your Participating Bank as to the status of your Electronic Application and/or the refund of any moneys to you from an unsuccessful or partially successful Electronic Application, to determine the exact number of Offer Shares allotted to you before trading the Offer Shares on SGX-ST. Neither SGX-ST, the CDP, the SCCS, the Participating Banks, our Company, the Vendor or the Manager assume any responsibility for any loss that may be incurred as a result of you having to cover any net sell positions or from buy-in procedures activated by the SGX-ST.

3.

4.

5.

143

6.

If the applicant's Electronic Application is made through the ATMs of Keppel TatLee Bank Limited and is unsuccessful, it is expected that a computer generated notice will be sent to the applicant by his Participating Bank (at the address of the applicant stated in the records of such Participating Bank as at the date of his Electronic Application) by ordinary post at the applicant's own risk within three Market Days after the close of the Application List. If the applicant's Electronic Application is made through the ATMs of the OCBC Bank group (comprising, OCBC Bank and Bank of Singapore Limited), Overseas Union Bank Limited (``OUB''), The Development Bank of Singapore Ltd (``DBS Bank'') (including those of its POSBank Services division) or the United Overseas Bank Limited group (comprising United Overseas Bank Limited, Far Eastern Bank Ltd and Industrial & Commercial Bank Limited), and is unsuccessful, no notification will be sent by such Participating Bank. Applicants who make Electronic Applications through the ATMs of the following banks may check the provisional results of their Electronic Applications as follows:­

Bank OCBC Telephone/Web-site 1 800 363 3333 Available at ATM ATM Operating Hours Phone Banking/ATM: 24 hours a day 24 hours a day Service expected from Evening of the balloting day

DBS Bank

1 800 222 2222 327 4767 www.dbs.com.sg

Internet Banking or Internet Kiosk ATM

7.00 p.m. on the balloting day

KTB

222 8228

ATM: 24 hours a day Phone Banking: Mon-Fri: 0800-2200 Sat: 0800-1500

ATM: Evening of the balloting day Phone Banking: 8.00 a.m. on the day after the balloting day Evening of the balloting day

OUB

1 800 224 2000 www.oub2000.com.sg

Not Available

Internet Banking/Phone Banking: 24 hours a day OUB Mobile Buzz: 24 hours a day

UOB

1 800 533 5533 1 800 222 2121 www.uobcyberbank.com.sg

ATM (Other Transactions -- ``IPO Enquiry'')

Phone Banking/ATM: 24 hours a day

6.00 p.m. on the balloting day

*Applicants who make Electronic Applications through the ATMs of OUB and who have activated their OUB Mobile Buzz services will be notified of the results of their Electronic Application, via their mobile phones.

7.

Electronic Applications shall close at 12.00 noon on 27 July 2000 or such later date and time as the Company and the Vendor may, in their absolute discretion, decide. The applicant is deemed to have requested and authorised the Company and the Vendor to:­ (a) (b) (c) register the Offer Shares allotted or allocated to the applicant in the name of CDP for deposit into his Securities Account; send the relevant Share certificate(s) to CDP; return or refund (without interest or any share of revenue or other benefit arising therefrom) the application moneys, should his Electronic Application be rejected, by automatically crediting the applicant's bank account with his Participating Bank with the relevant amount within three Market Days after the close of the Application List; and

8.

144

(d)

return or refund (without interest or any share of revenue or other benefit arising therefrom) the balance of the application moneys, should his Electronic Application be accepted in part only, by automatically crediting the applicant's bank account with his Participating Bank with the relevant amount within 14 days after the close of the Application List.

9.

The applicant irrevocably agrees and acknowledges that his Electronic Application is subject to risks of electrical, electronic, technical and computer-related faults and breakdowns, fires, acts of God and other events beyond the control of the Participating Banks, the Company, the Vendor and the Manager and if, in any such event, the Company, the Vendor, the Manager and/or the relevant Participating Bank do not record or receive the applicant's Electronic Application, or data relating to the applicant's Electronic Application or the tape containing such data is lost, corrupted, destroyed or not otherwise accessible, whether wholly or partially for whatever reason, the applicant shall be deemed not to have made an Electronic Application and the applicant shall have no claim whatsoever against the Company, the Vendor, the Manager and/or the relevant Participating Bank for the Offer Shares applied for or for any compensation, loss or damage. The existence of a trust will not be recognised. Any Electronic Application by an applicant must be made in his own name and without qualification. The Company and the Vendor will reject any Electronic Application by any person acting as nominee. All particulars of the applicant in the records of his Participating Bank at the time he makes his Electronic Application shall be deemed to be true and correct and his Participating Bank and the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any change in the particulars of the applicant after the time of the making of his Electronic Application, the applicant shall promptly notify his Participating Bank.

10.

11.

12. The applicant should ensure that his personal particulars as recorded by both CDP and the relevant Participating Bank are correct and identical, otherwise, his Electronic Application is liable to be rejected. The applicant should promptly inform CDP of any change in address, failing which the notification letter on successful allotment and other correspondence from the CDP will be sent to his address last registered with CDP. 13. In consideration of the Company and the Vendor arranging for the Electronic Application facility through the ATMs of the Participating Banks and agreeing to close the Application List at 12.00 noon on 27 July 2000 or such later time or date as the Directors and the Vendor, may in their absolute discretion decide, by making and completing an Electronic Application, the applicant agrees that:­ (a) (b) his Electronic Application is irrevocable; his Electronic Application, the acceptance by the Company and the Vendor and the contract resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and he irrevocably submits to the non-exclusive jurisdiction of the Singapore courts; none of the Company, the Vendor, the Manager and the Participating Banks shall be liable for any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery of data relating to his Electronic Application to the Company, the Vendor or CDP due to a breakdown or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 9 above or to any cause beyond their respective controls; in respect of Offer Shares for which his Electronic Application has been successfully completed and not rejected, acceptance of the applicant's Electronic Application shall be constituted by written notification by or on behalf of the Company and the Vendor and not otherwise, notwithstanding any payment received by or on behalf of the Company and the Vendor; and he will not be entitled to exercise any remedy of rescission or misrepresentation at any time after acceptance of his application.

(c)

(d)

(e)

145

Steps for ATM Electronic Applications through ATMs of the OCBC Bank group An applicant making an Electronic Application through the ATMs of the OCBC Bank group shall be viewing the following instructions on the ATM screens of the OCBC Bank group. Certain words appearing on the screen are in abbreviated form (``a/c'', ``appln'', ``ESA'', ``no.'' and ``&'' refer to ``account'', ``application'', ``electronic share application'', ``number'' and ``and'' respectively). Instructions for Electronic Applications appearing on the ATM screens of the Participating Banks (other than the OCBC Bank group) may differ from those represented below. Step 1 2 3 4 5 6 : : : : : : Insert your personal OCBC ATM card Enter your Personal Identification Number Select ``Other Services'' Select ``Electronic Share Appln'' Select ``OSIM'' For an applicant making an Electronic Application at the ATM for the first time (a) For non-Singaporean Press the ``Yes'' key if you are a permanent resident of Singapore, otherwise, press the ``No'' key. (b) Enter your own Securities Account number (12 digits) eg. 168101234567 and press ``Yes'' key to confirm that the Securities Account number you have entered is correct.

7

:

Check your particulars appearing on the screen and press the ``Correct'' key to confirm that your particulars are correct. Press the ``Confirm'' key to confirm that you have read the following messages:­ -- You have read, understood and agreed to all terms of appln & Prospectus/ Document -- You consent to disclose your NRIC/Passport No., address, nationality, securities a/c no., qty. of securities applied for and CPF investment a/c no. to share registrar, CDP, CPF, SCCS, Issuer & Vendor(s) -- This appln is made in your own name & at your own risk

8

:

9

:

Press the ``Confirm'' key again to confirm that you have read the following messages:­ -- Where applicable, a copy of the Prospectus/Document has been lodged with and registered by the Registrar of Companies & Businesses in Singapore who take no responsibility for its contents -- The Prospectus/Document are available at various Participating Banks

10

:

Select the number of Shares you wish to apply for:- -- For fixed price ESA, this is the only application submitted -- Fixed Price: $0.52

11 12

: :

Select the type of bank account to debit your application moneys Check the details of your application appearing on the screen and press the ``Confirm'' key to confirm your application For customers with multiple bank accounts, select the bank account from which to debit your application moneys Remove Transaction Record for your reference only

13

:

14

:

146

Singapore

Osim International Ltd 57 Genting Lane Osim Industrial Building Singapore 349564 Tel: (65) 747-6866 Fax: (65) 846-4919

OSIM Global Network

Hong Kong Taiwan PRC Indonesia Malaysia Thailand USA UAE

For more information on Osim International, visit our website at http://www.osim.com.sg

Information

152 pages

Report File (DMCA)

Our content is added by our users. We aim to remove reported files within 1 working day. Please use this link to notify us:

Report this file as copyright or inappropriate

54803