VibroPower : RESPONSES TO QUERIES FROM THE SHAREHOLDERS ON THE EXTRAORDINARY GENERAL MEETING AND RECEIPT OF THE LETTERS BY COMPANY

(Company Registration No. 200004436E)

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RESPONSES TO QUERIES FROM THE SHAREHOLDERS ON THE EXTRAORDINARY GENERAL MEETING AND RECEIPT OF THE LETTERS BY COMPANY

The board of directors of the Company ("directors") of VibroPower Corporation Limited ("the Company" and together with its subsidiaries and associated companies "the Group") wishes to announce that the Company has received questions from the Shareholders relating to the Company's Extraordinary General Meeting to be held on 9 November 2020. Further questions from shareholders will be addressed at the Extraordinary General Meeting.

The Company has also received letters from Messrs Chng Beng Hock, Lim Eng Tiong and Zhang Weiquan, Jonathan who have requested that their letters be circulated to the shareholders of the Company. Although the Company is not legally obliged to circulate these letters, it has decided, in the interest of transparency, to do so.

The Company's responses to the questions from Shareholders are set out below:-

Questions 1 to 5 from shareholder, Mr. Chng Beng Hock:

Question 1:

On 8 September 2020, the Company announced a proposed placement of up to 9,500,000 new ordinary shares in the capital of the Company ("Placement Exercise") at an issue price of S$0.132 per share (the "Issue Price"). The Company entered into separate subscription agreements with Wong Kim Siong ("WKS") and his son, Wong Chong Heng ("WCH"). WKS and WCH subscribed for 7,000,000 and 2,500,000 new ordinary shares in the capital of the Company respectively, which would give them an aggregate of 14.98% of the Company's enlarged issued and paid-up share capital.

The Placement Exercise was completed on 5 October 2020 as announced by the Company on SGXNet on 6 October 2020. It is noteworthy that the Issue Price is at the maximum discount permissible pursuant to Rule 811 of the SGX-ST's Listing Manual and the aggregate percentage of shares issued and allotted is just under the limit of Rule 803 of the SGX-ST's Listing Manual, which provides that an issuer must not issue securities to transfer a controlling interest (i.e. 15%) which would then have required the prior approval of shareholders in a general meeting.

1. How were the Issue Price and the number of shares that were issued and allotted decided?
2. It was mentioned in the announcement (insert footnote 1) that the Company's Chief Executive
   Officer introduced them (which contradicts another statement therein which indicates that they were already known to the Group, "a (insert footnote 2) owned by WCH and the group are trading partners"). What is the nature and amount of business that the Group has with WKS, WCH and any of their associates? Note: For references made, to provide the references as footnotes.

Company's response:-

1. After negotiations between the parties, taking into account the challenging business environment and the
   Company's need for funds, the Company decided to give a discount of up to 10% to the VWAP based on the last traded share price and raised about S$1,254,000. The Issue Price and number of shares were arrived on this basis.
2. WCH is a business contact of Benedict Chen, the Company's Chief Executive Officer. WCH owns WCS Power Sdn Bhd and Siong Engineering and Electrical Works, which are customers of the Group and purchased generators from VibroPower Pte Ltd and VibroPower Generators Sdn Bhd. The value of the business transacted is below 5% of the Group's total sales for FY2019.

Question 2:

On 30 January 2020, the Company announced the filing of writ of summons against an unnamed former business partner to recover a loan made, amounting to approximately S$1.7 million (the "Loan"). The Company also announce on the same day a profit guidance that the Group is not expected to report a profit for FY2019. These were announced 2 weeks after the Company announced the results of the rights cum warrant issue on 15 January 2020.

1. What was the nature and terms of the loan made to the unnamed business partner?
2. What is the rationale in extending the loan to the unnamed business partner despite the Group's declining results and weak financial position?
3. When was the Company made aware of the loan repayment difficulties of the unnamed business partner?
4. When was loan repayment difficulties of the unnamed business partner first made known to the Board?
5. When did the Company decide to commence legal action against the unnamed business partner?
6. When were the Letter of Demand, Statement of Claims and Writ of Summons issued to the unnamed partner?
7. If the Company had known of the issue prior to the conclusion of the rights cum warrant issue, did the Company or the Board discuss or consider disclosing this material fact to its shareholders?
8. What is the prospect of recovery of this loan amount?
9. What is the legal cost incurred to date and what is the estimated total legal cost?
10. Does this loan or the legal proceedings to recover the loan amount involve any IPT?
11. SGX enhanced the disclosure regime to include the provision of loans, guarantees and any other forms of financial assistance, which took effect from 7 February 2020. Are there any other loans, guarantees or any other forms of financial assistance that the Group provided?
12. Are there any updates to shareholders regarding this?

Company's response:

(a)The Company would like to clarify that the claim was not a simple straight loan made to its former business partner - instead, the claim constitutes cumulative accounts receivables that arose in the ordinary course of business as a result of the customer-supplier relationship between the Group and its former business partner. The Group is a supplier of generator components while its former business partner engaged subcontractors to assemble the generator components supplied and install generators for end- customers. Certain assemblies were done by the Group as well. End-customers typically do not buy generator components but prescribe the type and requirements of generator sets required.

Part of the claim is a result of the Group's advances of working capital to allow the former business partner to execute its projects, and thereby receive payment to be used to make payment to the Group. These advances have fixed repayment dates and carry interest.

1. To expand the Group's market to include the oil and gas industry. The Group sold generator components and services to the former business partner. The Group has made aggregate sales amounting to approximately S$4.26 million to the former business partner and the receivables arose in the ordinary course of business.
2. The Company sent its first demand on or about June 2019.

(d)The board was made aware of the default payments in January 2020 when the former business partner defaulted on its payment obligations to the Group in January 2020.

1. The Group decided to commence legal action in January 2020 against the former business partner to recover the receivables which are all payable on demand.
2. The Group had sent two letters of demand to its former business partner in June 2019 and October 2019. A mareva injuction was issued by the High Court on 15 January 2020 against its former business partner and director to prevent any dissipation of assets. A Writ of Summons and Statement of claim were filed thereafter in February 2020 against the former business partner.
3. On 1 October 2019, the Company announced a Rights cum Warrants Issue which was approved at the Company's EGM held on 17 December 2019. The former business partner defaulted on its payment obligations to the Group in early January 2020, which was after the Company's EGM relating to the Rights cum Warrants Issue.
4. The Company believes it has a strong case for the recoverability of the amount due to the Company, subject to the solvency of the former business partner.
5. The legal cost incurred to date is below S$200,000. The Company is unable to estimate the total legal cost as the legal proceedings are still on going.
6. None of the directors, chief executive officer or controlling shareholders of the Company has any interest (whether direct or indirect) in the former business partner. Accordingly, this is not an interested person transaction under Chapter 9 of the Listing Manual.

The contractual engagement for legal service is made between the Company's subsidiary, VibroPower Pte Ltd, and Unilegal LLC. The Lead ID is the lawyer assigned by Unilegal LLC to represent VibroPower Pte Ltd on the lawsuit. Unilegal LLC is not an associate of the Lead ID and is therefore not an interested person under Chapter 9 of the Listing Manual. Accordingly, the engagement of Unilegal LLC is not an interested person transaction pursuant to Chapter 9 of the Listing Manual.

1. The Group has complied with the disclosure requirements under the Listing Manual in respect of any loans, guarantees or any other forms of financial assistance that the Group provided, and will continue to make the necessary disclosures, where required.
2. The legal proceedings are ongoing and the Company will make an announcement where they are any material developments.

Question 3:

Between 2014 and 2019, the Annual Reports of the Company disclosed almost S$17 million of IPT occurred of which a vast majority of these IPT was with Mason Industries Pte. Ltd. ("Mason") of which Mr Chen Siew Meng, brother of Chen, is a director and 95.5% shareholder.

In the years 2006 to 2014, the annual reports of the group included the following statement in the corporate governance section:

"The Group had appointed Genesis Capital Pte Ltd as an independent financial adviser to review and opine on the adequacy of the procedure governing the transactions with interested parties. The report is included in the circular dated 8th August 2006."

According to documents obtained from a search of the Supreme Court of Singapore's hearings, it appears that Ernest Balasubramaniam is the solicitor representing Vibropower Pte Ltd (a wholly-owned subsidiary of the Company).

1. How are the terms of business between the Group and Mason negotiated and concluded? Does the Group source for alternative quotes for services/products provided by Mason?
2. Has the Group reviewed the adequacy of procedure in the past 5 years aside from the report as mention above by Genesis Capital Pte Ltd?
3. Has the Group conducted checks on the financial health and creditworthiness of Mason?
4. What are the credit terms between the Group and Mason? Are there any loans between the Group and Mason?
5. Has the Group engaged Ernest Balasubramaniam or his firm in any other legal work? If so, what is the nature and amount of the work incurred and has the Group disclosed this anywhere?

Company's responses:-

1. Alternative quotes are sourced and the procedures under the IPT mandate are adopted. The interested person transactions with Mason had been approved under the Renewal of the Shareholders' General Mandate for Interested Person Transactions at the Company's EGM held on 11 May 2020 with 100% voting for this resolution. Please refer to the Company's circular dated 15 April 2020, a copy of which is attached to this announcement, for details.

(b)The Group has not reviewed its procedures as there have been no material changes to the Interested Person Transactions comprising purchase of parts, supply of skilled labour, provision of administrative services and reimbursement of expenses, which had been previously been reviewed by Genesis Capital Pte Ltd.

1. The Group does conduct checks on the financial health of Mason on an annual basis.
2. The credit terms granted to the Group are based on typical standard commercial terms. Any loan to or from any related party is disclosed in the Annual report.
3. The Group has not engaged Mr Balasubramaniam or his firm in any other matter. The Group has not made any payment to Mr Balasubramaniam other than director fees, which are subject to approval by shareholders at the AGM.

Question 4:

Despite reporting a loss for FY2019 and the declining sales of the Group through the past few years, the remuneration of the Executive Director of the Company, Benedict Chen Oon Meng ("Mr. Chen"), remained in the same band with no noticeable reduction.

The Remuneration Committee (RC) of the Company has disclosed the following in the Annual Report of the Company:

"The RC considers all aspects of remuneration (including directors' fees, salaries, allowances, bonuses, benefits in kind and termination payments) and will aim to be fair and avoid rewarding poor performance."

1. Can the RC elaborate on any reductions made to the Mr. Chen's remuneration package to address the declining sales of the Group?
2. Can the RC provide details of how the metric for performance is established and the methodology of how the remuneration is established?