2.1 Information on Toyoviet

Toyoviet was incorporated on 14 July 1993 as a private limited company in Vietnam under the Law on Foreign Investment in Vietnam 1996 and the Law on Amendment of and Addition to a number of articles of Law on Foreign Investment, 2000.

As at the date of this announcement:-

(a) Toyoviet has contributed legal capital of USD4,421,141;

(b) Toyoviet is a wholly-owned subsidiary of NTAP which in turn is wholly-owned by NTIH; and

(c) Toyoviet does not have any subsidiary, associated company, joint venture or partnership.

As at 31 December 2008, the net book value of Toyoviet’s properties held under A Street, Binh Chieu Industrial Park, Thu Duc District, Ho Chi Minh City, Vietnam and Plot A, Binh Chieu Industrial Park, Thu Duc District, Ho Chi Minh City, Vietnam of approximately USD738,340 (on the basis of the Bank Negara Malaysia foreign exchange middle rate as at 31 December 2008 of VND100 to USD0.005716) comprised of:-

(a) a two (2) storey office annexed with single storey workshop/production area; and

(b) a single storey workshop/production area and guard house with toilet,

(collectively referred to as “Land and Building”).

Toyoviet is principally involved in manufacturing aluminium paper, paper core, tipping paper and to perform box printing under the Investment License granted by the Ministry of Planning and Investment in Vietnam and the Ho Chi Minh City Industrial and Export Processing Zones Authority. The Investment License is valid for 28 years from the initial investment license dated 14 July 1993.

Based on the latest audited financial statements of Toyoviet for the Financial Year Ended (“FYE”) 31 December 2008, the Net Assets (“NA”) and Loss After Tax (“LAT”) of Toyoviet were VND53,258,676,000 or equivalent to USD3,044,267 and VND8,191,985,000 or equivalent to USD468,254 respectively (on the basis of the Bank Negara Malaysia foreign exchange middle rate of 31 December 2008 VND100 to USD0.005716 as at 31 December 2008).

The present Directors and shareholder of Toyoviet are as follows:-

	Equity interest in Toyoviet
	Contributed legal capital	Equity interest
	(USD)	(%)
Directors
Yen Wen Hwa @ Ngan Tzee Manh (“Yen Wen Hwa”)	-	-
Michael Basil Rosario	-	-
Shareholder
NTAP	4,421,141	100.0

2.2 Original cost of investment and date of investment

The original cost and dates of investment in Toyoviet by NTAP are set out in the table below:-

Date of allotment	Consideration	Total cumulative contributed legal capital (USD)
14 July 1993	Cash	1,000,000
31 May 1994	Cash	2,500,000
25 August 1998	Cash	2,800,000
12 May 2004	Other than cash	4,421,141

2.3 Information on NTAP

NTAP was incorporated in Singapore under the Companies Act, Chapter 50 of Singapore on 14 October 1975 under the name of New Toyo Aluminium Paper Product Co Pte Ltd. NTAP is a wholly-owned subsidiary of NTIH.

As at the date of this announcement:-

(i) the issued and paid-up capital of NTAP is SGD4,758,799 comprising 4,758,799 ordinary shares; and

(ii) NTAP’s subsidiaries are Toyoviet and New Toyo Paper Products (Shanghai) Co., Ltd.

NTAP is principally involves in the manufacturing of speciality papers. NTAP’s subsidiaries are involved in the manufacturing of speciality papers, printed cartons and labels.

As at the date of this announcement, the Directors and shareholder of NTAP are as follows:-

	Equity interest in NTAP
	Issued and paid-up ordinary shares	Equity interest
	(SGD)	(%)
Directors
Yen Wen Hwa	-	-
Lu Le Nhi	-	-
Gary Yen	-	-
George Lee Chee Whye	-	-
Shareholder
NTIH	4,758,799	100.0

2.4 Salient Terms and Conditions of the SPA

The definitions in this section have the same meanings as contained in the SPA.

The salient terms and conditions of the SPA are as follows:-

2.4.1 Agreement for Sale

Subject to the terms and conditions of the SPA, the NTAP shall sell the Contributed Legal Capital with full title guarantee and TWPH shall purchase the Contributed Legal Capital free from all claims, charges, equities, liens, pledges, trust and other encumbrances and with all rights, benefits and entitlements attaching thereto as from the completion date of the SPA (including without limitation, all dividends and distributions declared in respect thereof as at and from such completion date) upon the terms and subject to the conditions of the SPA.

2.4.2 Purchase Consideration

2.4.2.1 The Purchase Consideration for the Contributed Legal Capital shall (subject to any adjustments made pursuant to the provisions in section 2.4.3 of this announcement) be a cash consideration of USD3,650,000 to be paid or satisfied in the following manner:-

(a) First Cash Payment

A first payment of USD1,500,000 shall be paid to NTAP on 31 December 2009;

(b) Second Cash Payment

A second payment of USD500,000 which shall be paid to NTAP on 30 June 2010; and

(c) Third Cash Payment

A third and final payment of USD1,650,000, less any deductions as may be made in accordance with section 2.4.3 of this announcement, shall be paid to NTAP on 31 December 2010.

2.4.3 Variation of the Purchase Consideration on account of a Shortfall arising from a revaluation of the Properties and ATN Machine

2.4.3.1 The parties acknowledge and agree that the Purchase Consideration for the Contributed Legal Capital has been arrived at a willing-buyer willing-seller basis after taking into consideration the audited NTA of Toyoviet as at 31 December 2008 of VND53,258,676,000 or equivalent to USD3,044,267 (on the basis of the Bank Negara Malaysia foreign exchange middle rate at 31 December 2008 of VND100 to USD0.005716) and mainly adjustments relating to the valuations of the Properties and the ATN Machine.

2.4.3.2 In the event that at any time before Completion, a valuation of the Properties and the ATN Machine, by valuers whose appointment are mutually agreed upon by TWPH and NTAP, should disclose an aggregate amount of less than USD1,450,000.00, the Purchase Consideration shall be reduced by an amount that is equivalent to such shortfall.

2.4.4 Conditions Precedent

2.4.4.1 The purchase of the Contributed Legal Capital is conditional upon:-

(a) TWPH being reasonably satisfied at its sole and absolute discretion with the results of an operational and financial due diligence to be carried out on Toyoviet and completed no later than on 30 August 2009or such other date as may be mutually agreed by the parties hereto;

(b) the Corporate Approvals being obtained in respect of its acquisition of the Contributed Legal Capital by the Purchaser;

(c) such other consents or approvals as may be required of any governmental, regulatory body or competent authority having jurisdiction in Malaysia and Vietnam over any transaction that is contemplated under the SPA; and

(d) TWPH being satisfied with the NTAP’s Disclosure Letter and that there has been no breach of any of the representations and warranties given by NTAP to TWPH.

2.4.5 Completion

2.4.5.1 Provided that the SPA has not been rescinded in accordance with clause 5.3 or terminated under clause 10 of the SPA, Completion shall take place within fourteen (14) days after the SPA has ceased to be conditional when all the transactions mentioned in the following sub-clauses shall take place.

2.5 Basis of arriving at the Purchase Consideration

The Purchase Consideration for the Proposed Acquisition was arrived at on a willing-buyer willing-seller basis after taking into consideration the following:-

(i) Toyoviet’s audited net tangible assets as at 31 December 2008 of VND53,258,676,000 or equivalent to USD3,044,267;

(ii) the valuation of the Land and Building of Toyoviet of not less than USD1,000,000; and

(iii) the valuation of the 6-colour ATN gravure printing machine (“ATN Machine”) of Toyoviet of not less than USD450,000.

On 16 June 2009, the management of TWPH has engaged the Raine & Horne International Zaki + Partners Sdn Bhd, the independent valuer (“Valuer”) for Toyoviet’s Land and Building and the Valuer has appraised the Land and Building of Toyoviet by ascribing an aggregate value of USD1,120,000. In addition, the Purchase Consideration has also taken into account the outstanding balance being the amount due from Alliance Print Technologies Co., Ltd, (“APT”) to Toyoviet of USD2,100,000 arising from the sale and purchase agreement dated 14 December 2007 in respect of the acquisition of a 6-Colour Bobst Printer.

2.6 Sources of funding

The Purchase Consideration will be satisfied wholly by cash. The Company expects the Purchase Consideration to be financed through internally generated funds of the Group.

The Group does not expect any additional financial commitment as Toyoviet is capable of raising funds from financial institutions for working capital purposes as the existing assets of Toyoviet are unencumbered. In the event should further financial commitment is required arising from Toyoviet’s business growth and expansion, the Group may source external funding and/or financing to meet such future requirements.

2.7 Assumption of liabilities

There are no liabilities, including contingent liabilities and other guarantees to be assumed by TWPH arising from the Proposed Acquisition.

3.0 RATIONALE FOR THE PROPOSED ACQUISITION

The Group requires an immediate increase in machine capacity to cope with the increase in demand arising from:-

(i) the transfer of all the remaining British American Tobacco Marketing (Singapore) Private Limited (“BAT Singapore”) volumes to the Group and this development will urgently require the use of the ATN Machine;

(ii) the transfer of certain volumes from British American Tobacco Australia Limited to Vietnam operations of the Group;

(iii) the additional volumes secured from British American Tobacco Cambodia Ltd.; and

(iv) the additional domestic and export volumes secured for the Vietnam and Middle East markets.

In addition, the supply agreements with BAT Malaysia and BAT Singapore require the Group to have thirty percent (30%) spare production capacity at any one time in order to meet demand fluctuation and surges. As a mitigating strategy, the Board has:-

(i) on 1 March 2009 the Group via APT has entered into a contract with Toyoviet for a period of four (4) months for utilising Toyoviet’s production facilities to meet its existing production demands and obligations;

(ii) assessed the possible acquisition of new machine which requires a minimum of seven (7) months to be commissioned; and

(iii) sourced for reliable and good quality used machine which is not easily available in the marketplace.

Based on the above assessment, the Board is of the opinion that the Proposed Acquisition is a more feasible option to address the immediate production capacity requirement and the required thirty percent (30%) spare production capacity.

The Proposed Acquisition will enable the Group to improve its profitability through enhanced economies of scale as well as to meet the greater production capacity required as highlighted above. Also, the Proposed Acquisition is to facilitate the Group to meet the demands arising specifically from the Vietnam and Cambodia markets.

4.0 PROSPECTS AND RISK FACTORS OF THE PROPOSED ACQUISITION

4.1 Vietnam

(i) Economic outlook of Vietnam

Because of the global financial crisis and the domestic economic downturns, the main economic indices and GDP growth rates in 2009 in all the three scenarios are all lower than in 2008 and previous years.

In the basic scenario, Vietnam’s economic growth rate decreases to 4.69% in 2009 from 6.18% in 2008. The inflation rate is as high as 9.4%, while export turnover decreases by 12.2% and the trade deficit is 8.7% of GDP. In the scenario, the growth rates of the three main sectors (agriculture, industry and construction-service) are 2.67%, 4.69% and 5.7%, respectively.

Also in this scenario, the budget deficit of 2009 is relatively high at 9.7% of GDP.
In the optimistic scenario, the world’s economic performance is not too pessimistic and Vietnam’s investment environment remains attractive to foreign investors.

The suppositions for the optimistic scenario are that trade partners have GDP to grow by 1%, the crude oil price stays at $60/barrel, while industrial material import prices and farm produce export prices decrease by 20% and 15%, respectively. Meanwhile, the foreign direct investment (FDI) decreases by 15% compared to 2008.

In the pessimistic scenario, people see more disadvantageous conditions: trade partners have the GDP growth rate at 0%, the crude oil price stays at $40/barrel, and FDI disbursement decreases more sharply by 30% over 2008. The VND loses 3 percentage points in value, while the total money supply increases by 15% per annum in 2009.

(Source: “CIEM gives three scenarios for Vietnam’s economy in 2009”, published on 13 May 2009, www.vietnamnet.com)

(ii) Outlook of the tobacco industry in Vietnam

Several foreign tobacco producers have appeared in Vietnam, including British American Tobacco (BAT), Philips Morris and Japan Tobacco (JT). The foreign partners are cooperating with the Vietnam Tobacco Corporation (Vinataba) in producing several types of products with 555, Marlboro, Dunhill, Mild Seven brand names.

Opinions from well informed circled said that the profit the producers gain from doing business in Vietnam is very fat. Some 3bil packages of these products were sold in Vietnam in 2006. The figure represented the 31% market share in terms of the consumed volume, but would represent a much higher market share if considering the turnover, since the products are all medium and high-level products.

In 2006, BAT and Vinataba launched onto the market two new brand names, Pall Mall and Viceroy after the Government accepted with a nod. The event has caused objection from other foreign producers, however, in fact, BAT and Vinataba had to pay a price for the approval on their plan. The Ministry of Industry, who advocated the launching of Pall Mall and Viceroy, said that the production of the new two brand names will help create jobs and bring more money to the state budget.

(Sources: Foreign tobacco groups lust for Vietnam’s market, published on 23 February 2007, www.vietnamnet.com)

(iii) Outlook of the manufacturing industry in Vietnam

The 2008 industrial production value at the 1994 constant price is estimated to increase by 14.6% compared to 2007, including an increase of 4% in state sector, 18.8% in non-state sector, and 18.6% in foreign-invested sector, of which oil and gas decreased by 4.3%. In manufacturing industries, production value of processing industry in 2008 is estimated to reach VND580.2 thousand billion, increasing by 16% compared with 2007, accounting for the largest proportion of the total production value of the whole industry with 88.9%; electricity, gas and water reached VND37 thousand billion, increasing by 13.4%, accounting for 5.7%; output value of the entire exploitation sector reached VND35.6 thousand billion, reducing by 3.5% due to crude oil production decreased, accounting for 5.4% of the bill.

Some key industrial products in 2008 for domestic consumption and exports that keep growth rate higher in comparison with 2007 are: trucks increased 40.6%, bus rose by 38.3%; seafood processing increased by 29.1%, washing machines increased by 28%; adolescent clothing rose by 27.7%; electrical transformer rose by 22.6%; refrigerator, freezer cabinet rose by 22.2%, milk powder increased by 18.6%; in commercial tab-water increased by 15.2%, TV increased by 15%, sport shoes increased by 14.6%, electricity production increased by 12.3%, cement 9.6%. However, many other important products get slight increase or even decrease compared to previous year: Motorcycles increased by 5.5%; air conditioners increased by 4.6%, paper, beer increased by 2.3%, chemical products 1%; rounded-steel decreased by 10.6%, crude oil exploitation decreased by 6.6%; clean coal decreased by 6.1%; paint chemical reduced by 1.9%, textile fabrics from cotton yarn reduced by 1.8%.

(Source: Annual State Budget Report 2008 published on 27 March 2009, www.mof.gov.vn)

4.2 Cambodia

(i) Economic outlook of Cambodia

The year 2008 was marked by remarkable political stability, witnessed by the smooth and successful general election in July and the formation of the new Royal Government of Cambodia for its fourth term in September. This political steadiness is crucial to the economic development process of Cambodia.

Macroeconomic performance in 2008 indicated that the Cambodian economy sustained a remarkable stability in view of the weak world economy despite the fact that the country suffered the impact of rising oil and food prices in the global market. The economy was estimated to grow by about 6.8% in real terms compared with 10.1% and 10.8% in 2007 and 2006, respectively. The deceleration in real GDP growth owes mainly to the unsatisfactory performance of the agricultural sector, resulting from inadequate rainfall in most parts of the country that adversely affected agricultural production, which represents a principal sector in output production. In addition, there has been a downward adjustment of growth in the manufacturing sector to reflect depressed external demand.

Inflation, which had been subdued until 2007, was sparked primarily by international price shocks on fuel and commodities and surged from an annual rate of 10.8% in December 2007 to peak at 25.7% in May 2008, and then fell to 13.5% in December 2008. To avoid fueling an inflationary spiral, the NBC has stepped up its efforts to mop up domestic excess liquidity, thereby easing demand pressure on the local economy.

(Source: Annual Report 2008, National Bank of Cambodia)

(ii) Outlook of the tobacco industry in Cambodia

According to a summary report for Cambodia about the use and the monitoring of tobacco, the percentage of smokers and the tendency to smoke cigarettes among men and women, at the age of 20: 53.9% of the men, and 6% of the women are smoking, while in general, more people in rural areas are smoking cigarettes than in cities.

The same report continued to say that man at and over 40 smokes a lot of cigarettes; the age bracket of women with a high rate of smoking cigarettes is from 40 to 49. People start to smoke on the average from the age of 20. For tobacco a smoker spends approximately US$35.80 per year, and the annual expense of a family with cigarettes smokers is US$69.44 in Cambodia.

A family in Phnom Penh, smoking cigarettes, spends 2.5% of their income, while in rural areas, a family spends 2.9%. In a family, one smoker spends about US$3 per month on average to buy cigarettes, and smokers smoke many cigarettes, starting from five minutes after getting up in the morning.

(Source: The Mirror, Wednesday, 30.7.2008: Rate of Cigarette Smokers in Rural Areas Is Higher than in Cities, www.cambodiamirror.wordpress.com)

4.3 Risk factors

(i) Economic, Political and Regulatory Risks

The financial and business prospects of Toyoviet and the industry in which it operates may depend to some degree on the developments in the political, economic and regulatory factors in Vietnam. Any adverse developments of such factors may materially and adversely affect the financial prospects of Toyoviet and the industry in which it operates. The political and regulatory uncertainties include, amongst others, the risks of war, riots, changes in political leadership, expropriation, nationalism, interest, liquidity and credit conditions, exchange control rules and policies on foreign investments, repatriation of profits, tax, employment and industrial regulations, disruption to supplies and production due to labour issues, re-negotiation or nullification of existing sales orders and contracts.

As such, there is no guarantee that there will not be any changes in economic and business environment, government policies or regulations that may have an adverse impact on Toyoviet.

(ii) Foreign Exchange Risk

Toyoviet operates in Vietnam and its sales and costs are mainly denominated in USD. As such, there is a natural hedge in its operational currency wherein its reporting currency is in VND as the VND is largely fixed against the USD.

There can be no assurance of the future foreign exchange fluctuations will not have a material and/or adverse effects on the Group.

(iii) Investment Risk

There can be no assurance that the anticipated benefits of the Proposed Acquisition will be realised, or that TWPH will be able to generate sufficient revenues from the Proposed Acquisition to offset associated investment costs, or that TWPH will be able to maintain uniform standards of quality and service, controls, policies and procedures.

This risk is particularly mitigated as the business of Toyoviet is similar to the existing business and the Board and senior management have the necessary experience, capabilities, track records and technical know-how in the printing business.

5.0 FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION

5.1 Share capital

The Proposed Acquisition will not affect the issued and paid-up share capital of TWPH as the Proposed Acquisition will not involve any issuance of securities by TWPH.

5.2 Earnings Per Share (“EPS”)

The Proposed Acquisition will not have any material impact on the EPS of the Group for the FYE 31 December 2009 as the Proposed Acquisition is expected to be completed in the third quarter of 2009.

5.3 Substantial shareholders’ shareholdings

The Proposed Acquisition will not affect the substantial shareholders’ shareholdings in TWPH as the Proposed Acquisition does not involve the issuance of new securities in TWPH.

5.4 NA per share and gearing

The Proposed Acquisition will not have any materially impact on the consolidated NA, NA per share and gearing of TWPH for FYE 31 December 2009.

6.0 APPROVALS REQUIRED

The Proposed Acquisition is conditional upon approvals being obtained from the following:-

(i) shareholders of the Company at the forthcoming extraordinary general meeting (“EGM”) to be convened for the Proposed Acquisition; and

(ii) any other relevant authorities/person(s) whether in Malaysia and/or Vietnam, if required.

7.0 DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS

7.1 Major Shareholders

As at the date of this announcement, NTIH is a substantial shareholder of TWPH through Tien Wah Holdings (1990) Sdn Bhd (“TWH”) and Singapore Pacific Investments Pte Ltd (“SPI”), which are the major shareholders of TWPH with 23.99% and 29.89% equity interest respectively in TWPH. New Toyo Lamination (M) Pte Ltd (“NTLM”) is a wholly-owned subsidiary of NTIH and is deemed a substantial shareholder of TWPH through TWH and SPI.

As NTAP is a wholly-owned subsidiary of NTIH which is a party to the Proposed Acquisition, NTIH is deemed interested in the Proposed Acquisition. TWH and SPI are also deemed interested in the Proposed Acquisition (collectively referred to as “Interested Major Shareholders”).

As at the date of this announcement, the shareholdings of the Interested Major Shareholders and persons connected to them in TWPH based on the Register of Substantial Shareholders are as follows:-

	<----------- Direct ---------- >		<----------Indirect--------- >
	No. of ordinary shares held in TWPH	%	No. of ordinary shares held in TWPH	%
NTIH	-	-	37,139,400(1)	53.88
TWH	16,537,500	23.99	-	-
SPI	20,601,900	29.89	-	-
Yen Wen Hwa	-	-	37,139,400 (2)	53.88
Lu Le Nhi	-	-	37,139,400 (3)	53.88
Yen & Son Holdings Pte Limited	-	-	37,139,400 (4)	53.88
NTLM	-	-	16,537,500 (5)	23.99

Notes:-

1. Deemed interested by virtue of its shareholdings in SPI and TWH via its wholly-owned subsidiary, NTLM pursuant to Section 6A of the Companies Act, 1965.

2. Deemed interested by virtue of his shareholdings in Yen & Son Holdings Pte Limited and NTIH pursuant to Section 6A of the Companies Act, 1965.

3. Deemed interested through shares held by spouse, Yen Wen Hwa and her shareholdings in Yen & Son Holdings Pte Limited and NTIH pursuant to Section 6A of the Companies Act, 1965.

4. Deemed interested by virtue of its shareholdings in NTIH.

5. Deemed interested by virtue of its shareholdings in TWH pursuant to Section 6A of the Companies Act, 1965.

7.2 Directors

Tengku Tan Sri Dr Mahaleel bin Tengku Ariff (“Tengku Mahaleel”) and Mr Gary Yen are Directors of both TWPH and NTIH. They are all persons connected to NTIH. Therefore, Tengku Mahaleel and Mr Gary Yen are deemed interested in the Proposed Acquisition (collectively referred to as “Interested Directors”).

As at the date of this announcement, the Interested Directors do not have any shareholdings in TWPH.

Accordingly, the Interested Directors have abstained and will continue to abstain from deliberation and voting at the relevant Board meetings of TWPH.

The Interested Directors (if they are also shareholders) and Interested Major Shareholders will abstain from voting on the resolutions to approve the Proposed Acquisition in respect of their direct and/or indirect shareholdings at the EGM to be convened. They have also undertaken to ensure that persons connected to them will abstain from voting on the resolutions to approve the Proposed Acquisition in respect of their direct and/or indirect shareholdings in TWPH at the EGM to be convened.

Save for the above, none of the other Directors and/or major shareholders of TWPH or any person connected with them (as defined in the Listing Requirements of Bursa Malaysia Securities Berhad) have any interest, direct or indirect, in the Proposed Acquisition.

8.0 DIRECTORS’ OPINION AND RECOMMENDATION

The Board (save for Interested Directors), having taken into consideration all aspects of the Proposed Acquisition, is of the opinion that the terms of the Proposed Acquisition are fair and reasonable and that the Proposed Acquisition is in the best interests of the Company.

9.0 INDEPENDENT ADVISER

In view of the Interested Major Shareholders and Interested Directors as set out in Section 7 above, the Proposed Acquisition is deemed to be related party transaction under Paragraph 10.08 of Chapter 10 of the Listing Requirements of Bursa Malaysia Securities Berhad. In this respect, PM Securities Sdn Bhd has been appointed to act as Independent Adviser to advise the independent directors and minority shareholders of TWPH in relation to the Proposed Acquisition.

10.0 ESTIMATED TIME FRAME FOR COMPLETION

Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by third quarter of 2009.
11.0 DEPARTURE FROM SC GUIDELINES

To the best knowledge of the Board, the Proposed Acquisition does not depart from the Securities Commission’s Guidelines on the Offering of Equity and Equity-Linked Securities.

12.0 DOCUMENTS FOR INSPECTION

Copies of the following documents are available for inspection at the Registered Office of the Company at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan during normal office hours from Mondays to Fridays (except for public holidays) for a period of three (3) months from the date of this announcement:-

(i) the SPA; and

(ii) the valuation certificate dated 18 June 2009 prepared by the Valuer for Toyoviet’s Land and Building.

This announcement is dated 24 June 2009.