The Board of Directors of Ei-Nets Ltd (?

Originally Posted by Martin_goh

Hi All Investors,

The reply from SGX is in favour of the company and we they said we have no case. But no reply from MAS yet.

But I still don't give up hope and pursuing further on the issue of backdating the conversion dates and the difference between fixed conversion price and floating price.

Reply From SGX

Dear Martin,

We refer to your letters dated 18 and 26 October.

You mentioned in your letters that the conversion price for the First Tranche of convertible notes issued to Pacific Capital Investment Management ("PCIM") should not be based on 90% of average traded closing prices of the 5 consecutive business days from 4th September to 10 September 2007, as shareholders had only approved the issue of the Convertible Notes on 28 September 2007.

Listing Rule 811(3) stipulates that the 10% threshold for the Conversion Price's discount to the prevailing market price is not applicable if specific shareholders' approval is obtained for the issue of the convertible notes.

Specific shareholders' approval has been obtained for the issue of the convertible notes to PCIM at the EGM on 28 September 2007, based on the terms disclosed in the Circular to shareholders, including the conversion price mechanism.

It is disclosed in the Circular to the shareholders that the price at which each Share shall be issued upon conversion (the "Conversion Price") shall be either:

(a) 125% of the average of the traded closing day price per Share for the 30 business days prior to:
(i) in respect of each sub-tranche of Tranche 1 Notes, the date of the Subscription Agreement; and
(ii) in respect of subsequent sub-tranches, the respective Closing Dates (the "Fixed Conversion Price"), subject to adjustment in the manner provided in the Terms and Conditions; or

(b) 90% of the Closing Day Price per Share on any 5 consecutive Business Days (as selected by the relevant Note holder) during the 30 Business Days immediately preceding the relevant Conversion Date (the "Floating Conversion Price").

As shareholders had approved the issue of the convertible notes, the Company is not in breach of our listing rules.

Hope the above clarifies our position. Should you require further clarification on the conversion terms, please contact the management of Ei-Nets Ltd.

Thank you.

Best Regards,
Sharon Ho
Issuer Regulation
Risk Management & Regulation Group
Singapore Exchange Limited

Reply to SGX

Dear Ms Sharon,

But the price difference between fixed conversion price and floating conversion price is terrible.

The assumption given in the circular for shareholders to vote is based upon :-

(a) 125% of the average of the traded closing day price per Share for the 30 business days prior to:
(i) in respect of each sub-tranche of Tranche 1 Notes, the date of the Subscription Agreement; and
(ii) in respect of subsequent sub-tranches, the respective Closing Dates (the "Fixed Conversion Price"), subject to adjustment in the manner provided in the Terms and Conditions;

The fixed conversion price is 8 cents per share and for (b) floating price is 2.9 cents per share.

We are talking about Tranche 1 Notes, should not the price of 8 cents be used to be fairer to shareholders than price of 2.9 cents as this is the 1st.Notes conversion. By choosing 2.9 cents more shares dilutions.

In case of discrepancy which one take precedence for shareholder's interests the higher or lower price ?

Extracts from the circular:

Assumptions:

(1) The Notes will be converted at the Fixed Conversion Price . We have used the average of the closing day price per Share of S$0.0425 for the 30 business days prior to this announcement in our calculation.

(2) The Conversion Price per Share is S$0.053 i.e. approximately125% of the average of the closing day price per Share based on the Fixed Conversion Price.

(3) The Notes were issued on 1 July 2006 and fully converted on the same day of their issue.

(4) In calculating the gearing, funds from the issue of the Notes are used for expansion, thus there is no reduction in debts.
Regards.

Martin Goh

Letter to MAS Mr Heng See Keat

Dear Mr. Heng Swee Keat,

The reply from the SGX is not satisfactory.

We would like to appeal to you to look into more details. The question is not on the 90% issue but early exercising of Notes by PCIM.

The shareholders approved the Notes only on 28th. September 2007. This is the date that the company seek approval from shareholders from the circular for EGM:-

(1) to create and issue from time to time , to PCIM unsecured non-interest bearing notes due 2012 -------

(2) to allot and issue:
( i) upon conversion of the Notes, such numbers of new ordinary shares--------

The question is that the company had allowed PCIM to convert the shares based upon on five consecutive working days from 4th.September to 10th. September 2007 and mandate only given to Company on 28th. September 2007 to create the notes and allot the shares upon conversion of notes,

PCIM had the choice of until 17th.November 2007 to exercise the notes and still within the contract but they choose to exercise early on 16th.October 2007 thus rendering the date of 4 th.Sept to 10th. sept 2007 irrelevant or non-existing as the dates falls outside the date 28th. September 2007 shareholders allows the company to allot and issue shares to PCIM. The earliest date after 28th. September 2007 would be from 1st. October to 5th. October 2007.

The date of 28th.September 2007 is the binding date for creation , exercising and conversion of Notes. Otherwise no need to call for Ordinary Resolution to vote during EGM.

The dates of creation on of Notes on 15th. October 2007 and exercising of Notes on 16th. October 2007 is no issues ( from 28/9/2007) but PCIM by converting early had given up is rights of 30 days as explained in my letter. Only 11 days from 16th.to convert the notes see chart attached (Notes1).

The other question if there is vast difference in Fixed Price vs Floating prices as per contract, which one takes precedence as we are not sure whether the company by allowing PCIM to use the lower price is correct ( see files attached).

Share dilution and shareholders rights and interests is protected is our main concern.

Thank You on behalf of retail investors.

Martin Goh