Straits Trading : Response to Inquiries from Shareholders on Private Placement Exercise

Response to Inquiries from Shareholders on Private Placement Exercise

SINGAPORE - 25 March 2022 - The Straits Trading Company Limited ("Straits Trading" or the "Company") would like to address inquiries raised by shareholders in relation to the recent private placement exercise undertaken by the Company (the "Private Placement").

Background

Straits Trading had on 26 January 2022 completed the Private Placement with the objectives of improving trading liquidity and broadening the shareholder base.

Based on inquiries and feedback received from seven shareholders, the Company has prepared responses to the said inquiries below:

Key Questions in relation to the Private Placement

1. Please explain the rationale for the Private Placement. Can Straits Trading explain the necessity for this Private Placement, especially when the Company does not need to raise capital at this juncture?

• • Straits Trading had received feedback from shareholders and the investor community that the low trading liquidity of the Straits Trading stock had impacted the investment-attractiveness of Straits Trading and deterred them from acquiring a meaningful stake in the Company.

• • The Company had continually stepped up its efforts to engage the investor community in the past one year. In 2021, the average daily trading volume of ordinary shares in the capital of the Company (the "Shares") was 263,636 Shares compared to 121,845 Shares in 2020.

Average Daily Trading Volume of the Shares for the Period	Average Trading Volume Per Day
30 days prior to the completion of the Private Placement (between 9 December 2021 to 21 January 2022)	181,523
From the completion of the Private Placement exercise on 26 January 2022 (between 26 January 2022 to 10 March 2022)	429,693

• • With due consideration of the feedback from shareholders and the investor community, Straits Trading decided to conduct the Private Placement, pursuant to the general mandate obtained at the Company's annual general meeting on 30 April 2021.

• • Since the completion of the Private Placement, the average daily trading volume of the Shares has risen significantly to 429,693 Shares for the period between 26 January 2022 to 10 March 2022. This represents an increase of 136.7% in daily trades per day compared to 181,523 daily trades, for the period between 9 December 2021 to 21 January 2022, in the month before the Private Placement was completed.

2. Please explain why Straits Trading conducted a highly dilutive Private Placement exercise. How will the equity dilution impact Straits Trading shareholders?

• • Prior to the Private Placement, Straits Trading had considered and weighed the impact of various initiatives to improve trading liquidity with an understanding of and sensitivity towards the dilutive impact on our shareholders.

• • The 26 million new Shares issued in relation to the Private Placement (the "Placement Shares") represents in aggregate approximately 6.4% of the total Shares prior to the Private Placement.

• • Consequently, the majority shareholder of Straits Trading, the Tecity Group, had its shareholding interest diluted from 74.0% to 69.6% post Private Placement.

• • With the completion of the Private Placement, the free float of the Shares had increased from approximately 25.3% to 29.8%.

• • As detailed in Question 1 above, since the exercise was completed, the average daily trading volume of Straits Trading Shares had risen significantly.

• • Assuming the Private Placement had been completed on 31 December 2021, the Group's pro forma Earnings Per Share ("EPS") would be 54.1 Singapore cents compared to 57.6 Singapore cents for unaudited FY2021 EPS and pro forma Net Asset Value per Share would be S$4.27 compared with S$4.35.

3. Has Straits Trading evaluated all viable alternatives to achieve the objective of improving the trading liquidity of Straits Trading Shares and broadening the shareholder base?

• • Straits Trading had considered various options and after careful deliberation, felt that the Private Placement was the most suitable at this juncture, for improving the free float and trading liquidity of the Shares as it facilitated the entry of new investors into the shareholder base.

4. Did the Company consider a Rights Issue instead in the interest of minority shareholders?

• • Although a Rights Issue will allow all existing shareholders to participate but not all shareholders will want to participate. Also, it does not help broaden the shareholder base. In the absence of participation from the majority shareholder, it will send a negative signal to the investor community, and the reputational capital of the Company will also be impacted.

• • In view of the above, Straits Trading believes that conducting a Private Placement is the right call for all stakeholders, given that the maximum discount that is permitted under the Listing Manual is capped at 10%, limiting the extent of dilution to shareholders, while also achieving our objective of increasing the free float of the Company.

5. Did Straits Trading consider the dilutive impact to minority shareholders?

• • Straits Trading is always mindful of the dilution to shareholders and would like to share that the Company has carefully evaluated aspects of the Private Placement and the dilutive impact to shareholders prior to the corporate action undertaken.

• • The Company would like to emphasize that the 6.0% dilution arising from the Private Placement impacted the majority shareholder of Straits Trading, The Tecity Group, most with its shareholding interest diluted from 74.0% to 69.6%.

• • The Private Placement was considered as the most optimal option for now with the key objective to improve the trading liquidity of Straits Trading Shares.

6. Why did Straits Trading have six financial institutions acting as joint placement agents for the Private Placement?

• • Due to the low trading liquidity of Straits Trading Shares, institutional investors could not commit to a sizeable position. Hence, the Company had roped in the participation of six financial institutions to extend our reach to a wider pool of investors.

7. Please explain the basis for the dilutive Private Placement Issue Price at S$3.11 per share. Why are the Placement Shares issued at a huge discount of 8.9%?

• • The Placement Shares were issued at S$3.11 per share, representing a discount of approximately of 8.9% to the volume weighted average share price of S$3.4126 for trades done on the SGX-ST on 13 January 2022.

• • The issue price of the Placement Shares and discount was fixed and agreed among the Company and the joint placement agents for the Private Placement following a bookbuilding process. The Placement Shares were priced to encourage participation from the investor community.

8. Please explain why the Private Placement offering is not extended to minority shareholders. What are the measures taken to ensure transparency of the Private Placement and fairness to minority shareholders?

• • Straits Trading shareholders had passed the resolution to grant the number of shares that can be issued through a placement (on a non pro rata basis) will not be more than 20% of the total number of shares in issue at the Straits Trading's Annual General Meeting ("AGM") held on 30 April 2021. The said resolution has been tabled and duly passed at past AGMs annually.

• • The offer of Placement Shares under the Private Placement was made to eligible institutional, accredited and other investors. Current regulations do not allow a Private Placement offering to retail shareholders.

• • The Company will consider the feedback to allow retail shareholders to participate in future Private Placements and thank shareholders for their interest.

• • Straits Trading is encouraged that shareholders and the investor community had demonstrated their support for the Private Placement with the placement of 26 million shares completed on 25 January 2022 at S$3.11 per share.

Straits Trading would like to thank our shareholders for their understanding and support throughout the Private Placement. The Company remains committed to creating long-term shareholder value in a continually challenging macro environment.

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About The Straits Trading Company Limited

Incorporated in 1887, The Straits Trading Company Limited is a conglomerate-investment company with operations and financial interests in resources, property and hospitality. These include majority or strategic stakes in the world's third-largest tin producer, Malaysia Smelting Corporation Berhad, which is dual listed on Bursa Malaysia and the Singapore Exchange Securities Trading Limited, ESR Cayman Limited and Far East Hospitality Holdings as well as a diversified property portfolio and real estate investment that are wholly-owned by the Group.