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(Extracted from Annual Report 2016)

Dear Shareholders,

On behalf of the Board of Directors, it is my pleasure to present to you TT International's ("TTI" or the "Group") annual report for the financial year ended 31 March 2016 ("FY2016").

While the year under review was marked by a very challenging operating environment, I am delighted to share with you that the Group is making good progress with achieving gradual growth since the completion of two significant developments. That is, the commencement of warehouse retail scheme operation in BIG BOX in the fourth quarter of FY2015 and the investment of USD 42 million by Standard Chartered Private Equity into our Indonesia retail operation in the first quarter of FY2016.

FY 2016 Financial and Operating Performance Review

Despite challenging operating environments and changing retail landscape in most of the markets the Group operates in, the Group delivered a very encouraging results in FY2016. The Group's revenue increased by S$85.2 million or a 32.6% to S$346.5 million in FY2016 as compared to S$261.4 million in FY2015. We recorded a gross profit of S$87.1 million with gross profit margin rising to 25.1% in FY2016 from 23.9% in FY2015. The net loss for FY2016 amounted to S$59.7 million as compared to S$54.5 million in FY2015. This was mainly due to increase in staff costs and other operating expenses (as a result of full year BIG BOX operations and business expansion in Indonesia) as well as increase in depreciation charge relating to Big Box, which was offset by a write-back of provision for Scheme and Scheme-related expenses. Excluding the effect of expense items listed below totalling S$73.2 million, the Group's net profit for the year would be S$13.5 million.

Scheme of Arrangement ĘC Issuance of Convertible Bonds

Pursuant to the Scheme Terms, the Company had, on 25 October 2011, issued to its Scheme Creditors, Redeemable Convertible Bonds (RCBs) amounting S$139,377,000 for the Non-sustainable Debt (as determined on 18 October 2011) of an aggregate principal amount of approximately S$139,377,000. The RCBs were issued to the Scheme Creditors on a pari passu basis on terms as set out in the Scheme Document.

Following the resolution of a disputed debt with one Scheme Creditor, new RCBs of face value amounting to approximately S$139,634,000 were issued on 3 April 2013 to Scheme Creditors (reflecting an increase of S$257,000) in exchange for those issued on 25 October 2011 on the same terms.

Subsequent to this, Disputed Debts amounting S$25,428,000 in relation to certain Scheme Creditors were resolved. Accordingly, the total number of RCBs is increased by S$15,508,000 to approximately S$155,142,000.

On 17 April 2014, the Company made an offer to each Scheme creditor to convert a number of RCB into the Company's new ordinary shares ("Dilution Shares") at a conversion price of S$0.14 in the Company by way of a first dilution exercise (the "First Dilution Exercise") in accordance with the Scheme Terms.

On 14 May 2014 ("First Dilution Date"), 40 bondholders had exercised their rights to convert their RCBs into Dilution Shares. On the First Dilution Date, 20,285,041 Dilution Shares (representing approximately 2.42% of the enlarged issued share capital of the Company) were issued and quoted on the SGX-ST on 15 May 2014.

New RCBs issued to Scheme Creditors on 14 May 2014 reduced by a face value amounting S$2,840,000 (being the face value of the RCBs being converted to the Company's new ordinary shares as a result of the First Dilution Exercise). As such, only RCBs of a total face value amounting S$152,302,000 were issued to the Scheme Creditors (instead of S$155,142,000) in exchange for those issued on 3 April 2013 on the same terms.

On 17 April 2015, the Company made an offer to each Scheme creditor to convert a number of RCB into the Company's new ordinary shares ("Dilution Shares") at a conversion price of S$0.15 in the Company by way of a second dilution exercise (the "Second Dilution Exercise") in accordance with the Scheme Terms.

On 14 May 2015 ("Second Dilution Date"), 35 bondholders had exercised their rights to convert their RCBs into Dilution Shares. On the Second Dilution Date, 21,187,159 Dilution Shares (representing approximately 2.07% of the enlarged issued share capital of the Company) were issued and quoted on the SGX-ST on 15 May 2015.

Accordingly, the new RCBs issued to Scheme Creditors on 14 May 2015 reduced by a face value amounting S$3,178,000 (being the face value of the RCBs being converted to the Company's new ordinary shares as a result of the Second Dilution Exercise). As such, the Company had, on 14 May 2015, issued RCBs of a total face value amounting S$149,124,000 to the Scheme Creditors (instead of S$152,302,000).

On 19 April 2015, Contingent debt amounting S$127,757,000 have been deemed irrevocably, unconditionally and permanently extinguished and/or waived by the contingent creditors pursuant to the Scheme Terms. A contingent claim of S$2,282,000 pending verification have been fully resolved and crystallised. Crystallised debts and disputed debts has also been reduced by S$135,000 and S$2,684,000 respectively. Accordingly, the total number of RCBs decreased by S$42,498,000 to S$106,626,000.

On 18 April 2016, the Company made an offer to each Scheme creditor to convert a number of RCB into the Company's new ordinary shares ("Dilution Shares") at a conversion price of S$0.16 in the Company by way of a third dilution exercise (the "Third Dilution Exercise") in accordance with the Scheme Terms.

On 13 May 2016 ("Third Dilution Date"), 35 bondholders had exercised their rights to convert their RCBs into Dilution Shares. On the Third Dilution Date, 23,078,216 Dilution Shares (representing approximately 2.20% of the enlarged issued share capital of the Company) were issued and quoted on the SGX-ST on 16 May 2016.

Accordingly, the new RCBs issued to Scheme Creditors on 13 May 2016 reduced by a face value amounting S$3,693,000 (being the face value of the RCBs being converted to the Company's new ordinary shares as a result of the Third Dilution Exercise). As such, the Company had, on 13 May 2016, issued RCBs of a total face value amounting S$102,933,000 to the Scheme Creditors (instead of S$106,626,000).

Subsequent to this, the quantum of disputed debts under litigation (in relation to one Scheme Creditor) was preliminarily determined by the Court to be S$18,193,000 (instead of S$25,680,000) pending the outcome of the appeal. Accordingly, the total number of RCBs is reduced by S$3,815,000 to approximately S$99,118,000.

The issuance of RCBs, and the subsequent conversion of RCBs into the Company's shares will enable the Company to resolve its outstanding liabilities under the Scheme in a manner that will be beneficial to all parties – the Company, its Scheme Creditors and, its stakeholders.

Retail Operations

BIG BOX

To make BIG BOX a more vibrant, preferred shopping choice for consumers, the Company had implemented following new initiatives to BIG BOX operations :

  1. Destination-based Directly Supply
    Direct fresh imports from source of origin (such as China, Malaysia, Taiwan, Korea, Japan, etc..) – providing authentic and fresh products directly from the source of origin – thus provide an alternative better choice to consumers from its destination-based supply; and to create a differentiated proposition for Big Box hypermart.

  2. Shop-in-Shop
    Introducing new concepts from Japan Gyomu Supermart and Megumino Sato – A new shop-inshop concept introducing a Japanese specialty section within Big Box hypermart – providing a wider range of authentic products from Japan at affordable prices to consumers.

  3. Children's Edu-play area
    To provide a family–friendly shopping environment, Children's Edu–play area is introduced – providing safe learn–and–play avenue for children while parents are shopping.

  4. Exhibitions, Events and Activities
    To make BIG BOX a place of happening, we had step up our efforts in introducing more events and activities in our 70,000 sqft MEGA.BOX – the one and only Exhibition and Event Hall in Jurong area. A series of activities and programme line up for residents & families living in the western part of Singapore including Jurong East, to participate / experience the weekly events of this happening place.

  5. Online to Offline ("O2O") Platform
    We are actively developing e–Commerce business for Big Box – via forming strategic alliances with leading e–Commerce players by providing redemption centre/pick-up point for consumers' convenience; as well as providing a holistic shopping experience of a combination of online sales/offline touch & feel shopping experience to e–Commerce customers

    The Company believes that its strong warehousing and logistics capabilities could effectively provide the fulfilment services and support for the O2O businesses, thereby creating a win–win business proposition to both the e–Commerce players and BIG BOX for a mutually beneficial business model in the long run.

Indonesian Retail Business

During the reporting financial year, the slower-than-expected Indonesian economy led to a subdue retail market which had in turn slowed down our expansion pace in Indonesia. The Company had taken that opportunity to consolidate and getting itself ready for the expansion and opening of new stores in coming years in view of tentative signs of economic recovery in Indonesia market.

We had also commenced our efforts in building an e-Commerce platform which will help to drive sales from FY2017 onwards.

Outlook

In view of a challenging retail market in Singapore, we are taking active steps to integrate our retail business with logistics & warehousing fulfillment services to facilitate O2O businesses. We have also step up our efforts to organize weekly events year-round for consumers not only in the western part of Singapore but also island-wide. The exhibitions and events will not only make BIG BOX a Place of Happening thereby increasing shopper traffic, it will most importantly, increase sales for all businesses in Big Box.

While we are seeing tentative signs of economic recovery in Indonesia, we will continue to monitor if any further improvement in the economy. We will carefully evaluate and implement our expansion plans to open new stores; and to gradually step up our efforts in building the e-Commerce platform to drive sales in Indonesia market.

We will continue to work vigorously to explore potential business opportunities and to improve internal efficiencies with a view to achieve profitability and enhance shareholder value in the near future and beyond.

Appreciation

To our shareholders who have kept their faith in us throughout the restructuring period, I would like to express our deepest gratitude. Your continued support in our endeavours towards the next milestone of our journey as we continue to work on enhancing shareholders value will be important to the Group. We would like to thank all of our loyal shareholders for their unwavering dedication and support, especially during this difficult period.

I would like to extend my appreciation to my fellow Board members for their invaluable counsel and in forging the vision for the future of the Group together. I would also like to record my deepest appreciations to the management and staff of the Group. Without our committed and dedicated team, the Group would not be able to strive and reach where it is today. Our work to transform the Group has just begun, with your strong confidence and continued support.

Yours sincerely,

Sng Sze Hiang,
Chairman and Chief Executive Officer