Sabina Corporation Limited - Investment Property Development Consultancy Australia

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Issued 21/03/11
Updated   25/10/11

Sabina Corporation Limited
ABN 67 010 723 181
Registered Office
C/- PKF Offices, Level 5, RSL Centre, 9 Beach Road, Surfers Paradise, Qld 4217
Email: mail@sabina.com.au    Website: www.sabina.com.au

This Explanatory Memorandum is provided to Shareholders as additional information and should be read in conjunction with the Notice of Annual General Meeting ("AGM") of Sabina Corporation Limited to be held at The Brisbane Polo Club, Corner Eagle & Felix Streets, Waterfront Place, Brisbane, Qld 4000, Australia at 11.30 am Friday 25th November 2011.

  1. Annual Financial Report

    The first item on the Notice of AGM deals with the presentation of the Financial Report, Directors' Report and Auditor's Report for the Year ended 30th June 2011. Apart from matters regarding remuneration, no resolution is required to be moved in this regard.

    In accordance with section 250S of the Corporations Act 2001 (Cth) ("Corporations Act"), Shareholders will be given a reasonable opportunity to ask questions about, and make comments on, the management of the Company.

    In addition to asking questions at the AGM, Shareholders may address written questions to the Company's Auditor if the question is relevant to:

    • The content of the Auditor's report; or
    • The conduct of the audit of the annual financial report.

    Note:

    Under section 250PA (1) Corporations Act, a shareholder must submit the question to the Company no later than the 5th business day before the day on which the AGM is held.

    Written questions for the auditor must be delivered by 18th November 2011. Please send any written questions to the address listed in the proxy form is attached to this Explanatory Memorandum.

  2. Ordinary Resolution No 1 - Re-election of Director (Mr R X Yu)

    Rule 16.1of the Company's constitution requires that, at every annual general meeting, one-third of the Directors (excluding the managing director) must retire from office and stand for re-election. The Directors who are to retire are those who have been in office the longest since last being elected.

    In accordance with Rules 16.1 and 16.2 of the Company's Constitution, Mr Roger Xianwei Yu retires from office and, being eligible, stands for reelection.

    Mr. R X Yu MAPPL, Juris Doctor (age 48) first joined Sabina Board on 29th September 2006 and was subsequently appointed Secretary on 1st July 2010.

    He is in private practice in Brisbane as a barrister of the Supreme Court of Queensland. Born in Jiangxi, China, he started his career by studying a fouryear degree course in English Language & Literature in Nanchang University. In 1987 he graduated with a Postgraduate Diploma in Applied Linguistics from Kunming University of Science and Technology. He was appointed to the position of Associate Professor and Vice-Dean of the Department of Foreign Languages in Jiangxi University of Science & Technology prior to his coming to the University of Queensland in 1998. He graduated with Master of Applied Law in June 2000 and was awarded a Juris Doctor degree by the University of Queensland in May 2003.

    Mr Roger Yu is also a director of a number of private companies that in the past are related to the property unit trusts that Sabina has investment units. However, Sabina at date of this document has no investment interest left in any of the unit trusts.

    The Directors (with Mr. Yu abstaining) unanimously recommend that Shareholders vote in favour of this resolution.

  3. Ordinary Resolution No 2 - Remuneration Report

    In accordance with Subsection 250(2) of the Corporations Act, a listed company is required to pass a resolution at the company's AGM adopting the Remuneration Report.

    The Company does not have any employees. Accordingly, other than the Director's fees, the Remuneration Report is nil for the financial year ended 30th June 2011. Details of the Remuneration Report are included in the Annual Report.

    G8 Management Pty Ltd has over the last two years taken over the responsibility of maintaining the administrative office of the company. This has resulted in substantial savings to Sabina, estimated between $100,000 and $200,000 per annum in reduced overheads. G8 Management Pty Ltd is paid a base consultancy fee of $240,000 per annum.

    Note:

    • The resolution of shareholders is advisory only and not binding on the Company or the Directors. ยท The Directors (whose remuneration details are contained in the Remuneration Report) and their closely related parties are restricted from voting on this resolution under section 250 R(4) Corporations Act.
    • If you appoint another director as your proxy for this resolution, you MUST direct your proxy how to vote, otherwise your vote will not be counted. Follow the instructions on the proxy form carefully to direct your proxy to either vote for or against the resolution, or to abstain from voting.
    • If you appoint the Chair of the meeting as your proxy, and you do not provide voting directions, you MUST place a mark in Box C of the proxy form to direct the Chair to cast your undirected proxy vote in accordance with his stated intentions, otherwise your vote will not be counted. The Chair of the meeting intends to vote all available proxies in favour of this resolution.


  4. Ordinary Resolution No 3 - Issue of 2,800,000 Shares at 25 cents each in satisfaction of Promissory Notes for $700,000

    The Company has previously relied on the financial support of its principal shareholder, Churchill Nominees Australia Pty Ltd and Mr. P B Chen's private company, G8 Management Pty Ltd.

    In the last two years, G8 Management Pty Ltd in particular has made numerous cash advances by way of Promissory Notes to the Company for working capital purposes. As at 30th June 2011, the principal value of those promissory notes totalled $700,000. The Promissory Notes attract interest at a rate of 12% per annum. G8 Management Pty Ltd in keeping with its previous undertaking has, subject to shareholder approval, agreed to take 2,800,000 shares at 25 cents each in lieu of $700,000 in cash under the promissory notes. This will assist the company dramatically in conserving its limited cash resources.

    A further Promissory Note of $200,000 was also owing to the Billabong Unit Trust. However, since 30th June 2011, the Company has redeemed its 170,000 units at $1.00 each in the Billabong Unit Trust and used the proceeds to retire that Promissory Note. The balance of $30,000 owing to the Billabong Unit trust has been transferred to a current account which attracts no interest.

    At the end of the 2010/2011 financial year, the Company wrote-off the investment units it held in the UniVillage Unit Trust and the Legana Unit Trust. However, G8 Management Pty Ltd has agreed at that time to leave the $700,000 Promissory Notes as an unsecured debt.

    The Directors have recommended that G8 Management Pty Ltd be issued with 2,800,000 fully-paid shares at 25 cents each in full satisfaction of the unsecured Promissory Notes. In accordance with ASX Listing Rule 10.11, shareholder approval is required to issue the shares to G8 Management Pty Ltd.

    The independent directors of the Company have determined that the issue of shares to G8 Management Pty Ltd is on arm's length terms pursuant to section 210 of the Corporations Act, such that shareholder approval is not required for the purpose of Chapter 2E of the Corporations Act. Further, as approval is being obtained under ASX Listing Rule 10.11, approval is not required under ASX Listing Rule 7.1.

    In accordance with ASX Listing Rule 10.13 the following information is provided:

    • Mr P B Chen, a director of the Company is the sole director of G8 Management Pty Ltd. As such, G8 Management Pty Ltd is a related party of the Company.
    • The total number of shares to be issued in satisfaction of the $700,000 promissory notes is 2,800,000 ordinary shares at 25 cents each.
    • The date by which the Company will issue the shares will not be more than one (1) month after the date of the AGM.
    • The issue price of the shares is 25 cents each. As at the date of this Explanatory Memorandum, the market price of the Company's shares was 0.03 cents.
    • G8 Management Pty Ltd and its associates cannot vote on this resolution. See the voting exclusion statement in the Notice of Meeting.
    • The funds raised by the issue would allow the Promissory Notes of $700,000 owing to G8 Management Pty Ltd to be fully retired.


    The Directors (with Mr. P B Chen abstaining) unanimously recommend that Shareholders vote in favour of this resolution.

  5. Ordinary Resolution No 4 - Issue Shares to Directors

    To ensure the financial viability of the Company, the Directors have not received any cash payments for their fees for the financial year ended 30th June 2011.

    The Board has determined that the directors' fees totalling $13,500 for the year ended 30th June 2011 be paid in full through the issue of 54,000 fullypaid ordinary shares at an issue price of 25 cents. At the date of this Explanatory Memorandum, the market price of Sabina shares was 0.03 cents. The directors' fees payable based on actual attendance has been computed at the same rate per meeting as in previous years (i.e. $1,000.00 for the chairperson, and $500.00 each for the directors).

    Shareholder approval is required for the issue of shares to the Directors in accordance with ASX Listing Rule 10.11.

    The Directors' fees accrued during the financial year ended 30th June 2011, and the shares to be issued, are as follows:

    Name No. of Shares/Price Amount
         
    Mr. P B Chen 24,000 shares @ $0.25 $6,000
    Mr. R D Tilby 12,000 shares @ $0.25 $3,000
    Mr. R X Yu 12,000 shares @ $0.25 $3,000
    Mr. J R Huey   6,000 shares @ $0.25 $1,500
         
    Total 54,000 shares $13,500


    If approved, the shares will be issued no more than one (1) month after the date of the meeting.

    Note:

    • If you appoint the Chair of the meeting as your proxy, and you do not provide voting directions, you MUST place a mark in Box C of the proxy form to direct the Chair to cast your undirected proxy vote in accordance with his stated intentions, otherwise your vote will not be counted. The Chair of the meeting intends to vote all available proxies in favour of this resolution.
    • If you appoint another director as your proxy for this resolution, you MUST direct your proxy how to vote; otherwise your vote will not be counted. Follow the instructions on the proxy form carefully to direct your proxy to either vote for or against the resolution, or to abstain from voting.

  6. Ordinary Resolution No 5 - Ratification of Past Issue of Shares

    The purpose of Resolution No 5 is for shareholders to approve and ratify, under ASX Listing Rule 7.4, those share issues which occurred during the 12 months before the date of the AGM, and which count toward Company's 15% limits under ASX Listing Rule 7.1.

    ASX Listing Rule 7.1 provides that (subject to certain exceptions, none of which is relevant here) prior approval of Shareholders is required for an issue of shares if the shares will, when aggregated with the shares issued by the entity during the previous 12 months, exceed 15% of the number of the shares on issue at the commencement of that 12 month period.

    The allotment and issue of shares detailed in this resolution did not exceed the 15% threshold. However, ASX Listing Rules 7.4 provides that where an entity ratifies an issue of shares, the issue will be treated as having been made with approval for the purpose of ASX Listing Rule 7.1, thereby replenishing the entity's 15% capacity and enabling it to issue further shares up to that limit.

    Resolution No 5 proposes the ratification and approval of the allotment And issue of shares for the purpose of satisfying the requirements of ASX Listing Rule 7.4.

    Details of the issue

    On 25th August 2011, the Directors approved the issue of 1,900,000 new fullypaid ordinary Sabina shares at 25 cents each in exchange for 475,000 $1.00 units in Mariners FC Developments Unit Trust. The "equity swap" represents the first tranche of a total of 14,000,000 fully-paid ordinary Sabina shares to be issued as consideration for the acquisition of a 35% interest in the Mariners FC Development Unit Trust.

    The Company has agreed to issue a second tranche of 12,100,000 shares for the acquisition of a further 2,275,000 units pursuant the Executive Agreement signed on 24th August 2011 with Turnbull Investments Pty Ltd, however this agreement has now been varied by mutual agreement to include a cash component of $750,000 in lieu of 3,000,000 Sabina shares. Thus, in the second tranche, the total number of shares to be issued has decreased from 12,100,000 to 9,100,000 shares. The allotment of the 9,100,000 shares in the second tranche is subject to shareholder approval under Resolution No 6.

    Background on the Executive Agreement dated 24th August 2011

    After the decision to write-off all the investments totalling some $1,167,400 in the unit trusts in Tasmania, the Directors have been actively seeking other opportunities for the Company.

    The deal struck with Mr Peter Turnbull allows the parties to form an alliance with their operations (i.e. property development, investments and consultancy services) and to collaborate as strategic partners. Mr. Peter Turnbull, a well6 known accountant and businessman in NSW has agreed to exchange a 35% interest in the Mariners FC Developments Unit Trust that owns the $36 million development at Tuggerah known as "The Centre of Excellence" - (see Appendix "B") for $2,750,000 in the form of 11 million Sabina shares at 25 cents each and $750,000 cash; total $ 3.5 million.

    On 24th August 2001, the Chairman issued a Market Release to ASX announcing that the Company under an Executive Agreement signed with Mr. Turnbull that Sabina would acquire the 35% equity held by Mariners FC Unit Trust which also includes the equity interest of Mr Kevin McCabe from the Scarborough Group International, UK. Mr. McCabe's company (Scarborough Malta Limited) has also joined the strategic partnership with Turnbull and Sabina. The shares in the first tranche totalling 1,900,000 were allotted as follows: 1,235,000 Sabina shares to Turnbull Group Investments Pty Ltd and 665,000 Sabina shares to Scarborough Malta Limited.

    Shareholders are asked under Resolution No 5 to ratify the issue of the 1,900,000 shares in accordance with ASX Listing Rule 7.4.

    The Directors unanimously recommend that Shareholders vote in favour of this resolution.

  7. Ordinary Resolution No 6 - New Issue of Shares

    As explained under Item (6) above, the second tranche of 12,100,000 Sabina shares has now been varied by a reduction of 3,000,000 shares; from 12,100,000 to 9,100,000 shares so as to allow a cash component of $750,000 to be paid in the third tranche.

    The price of 25 cents per share was accepted by the Vendors (Turnbull and Scarborough) because of the following assertions:

    • The price of 25 cents per share for Sabina shares was based on the calculation below which was used as guide by the Directors in its negotiations on new acquisitions in general:

      (i) Total net asset value as per Balance Sheet $2,207,205
      (ii) Balance of Contrabart Trade Dollars not taken up $1,143,450
      (iii) Tax Credit on accumulated tax losses at say 15% $1,267,330
         
        $4,617,985

      Therefore, $ 4,617,985 divided by 18,930,278 shares = 24.4 cents.
    • The share price used previously to acquire a 23.5% equity interest in Green Energy Trust was also calculated at 25 cents a share. Refer Market Release issued to ASX on 25th June 2010.
    • Past and current negotiations on property deals where a portion of the consideration is by way of Sabina shares is always assessed at 25 cents.
    • The Directors have been paid shares in lieu of directors' fees for the past five years and the shares were all calculated at 25 cents.
    • The Directors consider the 25 cents per share to be a reasonable value irrespective of the market price as it is not indicative due to the small spread.


    The acquisition shall be settled as follows:

    • The first tranche of 1,900,000 Sabina shares at 25 cents each in exchange for 475,000 $1.00 units. The issue of these shares was approved by the directors and the shares have already been issued and listed. Ratification of the share issue is sought under Resolution No 5.
    • The second tranche is for the issue of 9,100,000 Sabina shares also at 25 cents each in exchange for 2,275,000 $1.00 units. This second tranche is subject to shareholder approval under Resolution No 6.
    • The final tranche is a cash component of $750,000 to Turnbull Group Investments Pty Ltd, payable not later than two years subject to availability of funds.
    • No further cash contribution is required from Sabina as a Unitholder as the unit trust is managing its own project funding to complete the current works that have started in August 2011.

    Shareholder approval is therefore sought under ASX Listing Rule 7.1 to allow the Company to issue the second tranche of 9,100,000 shares. If approved, the 9,100,000 shares will be issued as follows: 4,865,000 Sabina shares to Turnbull Group Investments Pty Ltd and 4,235,000 Sabina shares to Scarborough Malta Limited. The shares will be issued no more than one (1) month after the date of the meeting.

    Both Turnbull Group Investments Pty Ltd and Scarborough Malta Limited, in accordance with the terms of the Executive Agreement, have agreed on a pro-rata basis that a maximum total of 7,000,000 Sabina shares (or such reduced number so as not to allow Sabina's relevant interest to be in breach of section 606 Corporations Act) will be held under voluntary escrow as security for the Company's 35% profit share guaranteed at not less than $1,750,000 at the completion of the $36 million Mariners development project at Tuggerah in NSW, scheduled for August 2013.

    In accordance with ASX Listing Rule 3.10A, an announcement to ASX will be made 10 business days prior to the release of the escrowed securities.

    The Directors believe that the involvement with the Scarborough Group and the Turnbull Group in a strategic partnership is positive development for Sabina shareholders.

    Please refer to Appendix "B" for project details on the "Centre of Excellence".

    The Directors unanimously recommend that Shareholders vote in favour of resolution.

  8. Ordinary Resolution No 7 - Issue of Convertible Notes

    The Board has been discussing with its new strategic partners as to how the Company can secure working capital during the current difficult economic conditions in the property industry. Stock Brokering firm, Patersons Securities 8 Limited, has advised that they would be able to assist with a capital raising of $5 million through the issue of convertible notes at 12% interest for a term of two (2) years to Clients of Patersons. The notes will be convertible into fullypaid 20 million ordinary shares at 25 cents each prior to the maturity date. The Company is also finalizing arrangements with its new partners (Turnbull Group Investments Pty Ltd and Scarborough Malta Limited) whereby they would support the capital rising by giving the lenders a put option over their convertible notes. These notes may only be converted to shares in accordance with both the ASX Listing Rules and the Corporations Act.

    The funds raised are budgeted for:

    Acquisition of new properties (+ mortgage loans) $2,500,000
    Interest reserve $500,000
    Stage 1 - construction of Legana subdivision $750,000
    Broker's fees / commissions $250,000
    Reduction of liabilities $500,000
    Corporate overhead expenses $500,000
       
    Total Expenditure $5,000,000

    The terms and conditions of the convertible notes are set out in Appendix "A" enclosed with this Explanatory Memorandum.

    Shareholder approval is sought under ASX Listing Rule 7.1 to allow the Directors to raise up to $5 million for general working capital purposes through the issue of convertible notes at the Board's discretion. If approved, the convertible notes will be issued no later than three (3) months after the date of the meeting.

    The additional funds would assist the Company's operations greatly. The Directors therefore unanimously recommend that Shareholders vote in favour of this resolution.

  9. General

    Questions and Comments by Shareholders at the Meeting.



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