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(extracted from Annual Report 2016)

Dear Shareholders,

2016 was a tumultuous year for Natural Cool.

Our Air Con division continues to perform well and sales revenue reached a new high of S$ 121.5 million. Moving forward, we want to continue growing and have plans to expand this business to markets outside of Singapore in a significant way. We are also studying how we can harness technology as a digital disruptor in our industry.

Meanwhile, our Paint division struggled last year due to stiff market competition and a number of operational changes which has resulted in the division reporting a loss in 2016. With a new management in place at the Paint division, we will work hard to achieve profitability in the coming year. In February 2017, we announced the commencement of an internal investigation into certain irregular transactions and activities pertaining to the Paint division. While this investigation is still on going, we assure you that we will where necessary, spare no effort to enforce our rights under relevant laws to ensure our assets and business are protected. To this end, we have appointed our Independent Non-Executive Chairman as an advisor to the Company to advise us on interalia, law enforcement matters arising from amongst other things, the internal investigation review, and other commercial security matters of the Group.

As for our Investment portfolio, we have taken a prudent approach to impair the carrying value of our long term investments (including our interest in HMK Energy Pte Ltd). In this regard, we are currently actively reviewing options as to how best we can unlock shareholder value from these investments.

The Board of Directors were reconstituted in February 2017 amidst much shareholder and public interest in the Company. The new Board wishes to assure shareholders of its belief in the long term prospects of the Company and the new Board has commenced its review of the internal policies of the Group with the aim of improving the Group's internal processes and systems to realise its potential. Once such review is completed, we will update shareholders duly. The new Board wishes to assure shareholders that it stands committed to steer the Group through this difficult time, uphold principles of good corporate governance, and deliver value to all shareholders.

In order to provide the flexibility to the new Board in executing its growth strategies, we have proposed reinstating the general share issue mandate which was revoked by Shareholders last December. If approved by Shareholders at the upcoming AGM, please be assured the new Board will exercise its discretion judiciously.

With regards to High Court Case No. 1128/2016 which the Company is a party to, the matter is now in the hands of our lawyers, and we will provide Shareholders with an update when there are material developments.

Appreciation and Welcome

We would like to take this opportunity to thank all our stakeholders, including our customers, management and staff, and our vendors for their unwavering support this past one year. We trust that you will continue supporting all of our businesses for many years to come.

Yours faithfully,

Goh Teck Sia
Independent
Non-Executive Director and Chairman
Tsng Joo Peng
Executive Director and
Chief Executive Officer