General Announcement::Annual General Meeting for FY2021 - Response to Queries from Shareholders

SHOPPER360 LIMITED

(Incorporated in Singapore)

(Company Registration No.: 201634929Z)

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ANNUAL GENERAL MEETING FOR FY2021

• RESPONSE TO QUERIES FROM SHAREHOLDERS
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The board of directors (the "Board") of shopper360 Limited (the "Company", and together with its subsidiaries, the "Group") refers to the Notice of Annual General Meeting for the financial year ended 31 May 2021 ("FY2021"), which was issued on 13 September 2021. The following is the response from the Board to the questions received from certain shareholders of the Company.

QUESTION 1

Would the board/management provide shareholders with greater clarity on the following operational matters? Specifically:

1. Field force management: The segment contributed approximately 68% of the Group's total
   revenue in FY2021 (FY2020: 66%). The segment was categorized as an 'essential' service which enabled the Group to continue to fulfill its responsibilities to its clients during the Movement Control Order. Given that supermarkets reported strong sales during the pandemic, did the volume of business under the field force management increase substantially? If so, can management help shareholders understand if revenue under field force management should have increased correspondingly with the volume?
   In addition, are there opportunities to extend the field force management operations to other markets, such as Singapore or Myanmar?
   Company's response:
   Supermarkets reported strong sales during the Movement Control Order ("MCO"). However, such strong sales in the retail grocery business does not directly impact our field force management segment, as not all categories in the retail grocery business are doing well in the pandemic and not all retail groceries are treated equal. For instance, convenience stores at transportation hubs in Malaysia had very little footfall and were closed early during the MCO. Neighbourhood mini markets did well because of travel restrictions beyond a certain radius. Some retailers restricted merchandisers from entering their stores. Many supermarkets and hypermarkets impacted by COVID-19 infections would close for a few days for sanitization purposes. These variable factors impacted our merchandisers' ability to achieve their variable portions of income and that correspondingly impacted our management fees as we charge a percentage based on the total salaries paid out to them. Furthermore, there is a segment of our field force management teams that covers non-essential retail stores (such as handphone and electronic stores) that were unable to operate during the MCO. This impacted some of our technology customers and reduced the variable portions of their contract staff's remuneration, that again directly impacted our fees earned.
   We are currently providing some merchandising for our joint venture partner in Myanmar, Pahtama Group. As for Singapore, we have received relevant enquiries from our customers, and we expect to commence providing field force management services in Singapore in the next 12 months.

1. Marvel Distribution Sdn. Bhd.: For FY2021, the Group recognised RM177,308 in sales of goods. This should be attributable to the Marvel Distribution Sdn. Bhd. ("Marvel") which is the Group's new marketing & distribution arm. Marvel delivers products directly to general trade retailers while-on-the-move with our very own van sales team. Can management elaborate further on the competitive advantage of Marvel? Does Marvel leverage data analytics to improve its operations?
   Will the Group be taking on significant inventory risks in the distribution business? In Note 17 (page 119 - Inventories), it was stated that changes in finished goods included as cost of sales amounted to RM393,178 (2020: Nil) although the Group recognised just RM177,308 in revenue from sales of goods.
   Company's response:
   As far as we are aware, Marvel is the first distribution company in Malaysia that has launched a van sales app with e-payment facility and capability. COVID-19 has educated retailers on the importance of contactless payment mode. Marvel will also launch B2B app that will allow our retailers to self-order and make online payment, with delivery to be made within next 3 to 5 days. With all the data collected, it will help us to understand the retailers' buying patterns, which will enable us to improve our route plan, inventory management and future sales opportunities.
   For a distributor of our size, the typical period of inventory stockholding is about 45 to 60 days, due to the minimum order quantity (MOQ). There will be opportunities in future to reduce our inventory stockholding as our business grows. The risk of inventory stockholding is mitigated as most of the high value inventories are returnable to suppliers and most of the products have a minimum shelf life of 18 to 24 months.
2. Sampling activities and events management: Can management elaborate further on the challenges faced by the Group in the sampling activities and events management segment in view of the restrictions under the existing safe distancing management measures? How is management addressing these challenges?
   Company's response:
   During the full MCO, our sampling activities and events management faced numerous challenges, including cancellations and postponement on a number of events and roadshows. Customers who continued to have their promoters instore focused on education of products with no product tasting. We also faced frequent rescheduling changes caused by COVID-19 infections at different stores at different weeks, and would have to deploy the promoters to other stores or simply cancel when we were not able to change their stores at the last minute. We pivoted by offering other services to our customers to meet the revenue gap, such as content creation for virtual engagement, tele-sales, and providing part-time workers to assist factories in managing COVID-19 testing before workers entered the factories.
3. Myanmar: Can management help shareholders better understand the situation on the ground in Myanmar? What is the size of its team in Myanmar? What additional measures has management taken to protect its employees in Myanmar?

Company's response:

Currently, we have about 35 full time staff in Yangon, Myanmar. Our joint venture partner in Myanmar, Pahtama Group, has assisted us by providing security information on ground through a professional securities agency. This allows us to direct and inform our staff which areas to avoid when they travel for their field visits in Yangon as well as the outskirts of Yangon. It also provides us an understanding of when we need to keep our staff working from home instead of going to the Myanmar office.

We are fortunate that Pahtama Group's parent company, City Holdings Limited ("CH"), has taken the initiative to vaccinate all of our staff in Myanmar at no cost to our Group. We have also leveraged on CH's Group buy for COVID-19self-test kits, oximeters and oxygenators from China. We developed standard operating procedures for our HR department to provide to our staff should they need to use the self-test kits, oximeters or oxygenators. If any of our staff require a suitable quarantine facility because their home is not conducive, they can check-in into CH's makeshift quarantine hotel. Finally, our Myanmar management team conducts a weekly call with CH Group to share learnings on how to cope and thrive during this period.

QUESTION 2

On pages 16-29 of the Annual Report, the Company showcased the Group's business activities which included in-store advertising, creative specialist, contest fulfilment, gamification and others. In addition, from pages 32 to 37 of the Annual Report, shareholders can see the highlights of the Group from June 2020 to May 2021. This includes examples of the Group's capabilities, such as the use of augmented reality, digital mediums (LED video banners, mini digital screens, video banner and e-paper) and digital contests.

1. Can management elaborate further on the growth opportunities for the Group in online/digital marketing? How well placed is the Group to capture these opportunities as more and more consumers make purchases online?
   Company's response:
   Most of our clients are using our services such as field force, in-store advertising and promoters. We constantly engage with our clients to offer our digital marketing services to complement their investment with us in our core offline services. We are only just scratching the surface with the opportunities we have gained so far, and we look forward to creating more awareness with our current clients as well as new clients that we have this capability. In August 2021, we kicked off a virtual marketing event for our clients to precisely share our capabilities to them in this area, which we will be sharing at the upcoming AGM meeting (via a short video of our executions).
2. What is the size and capability of the Group's digital marketing team? Company's response:
   We have a core digital team of 10 persons in shopperplus Malaysia that drives digital shopper marketing innovation with clients as well as business partners in hardware, digital media platform and software. The team comes with industry background and experience in managing digital campaign and hence is well positioned to work with client(s) as they transitioned their offline campaign into digital touchpoints and engagement.

1. Can management share its digital roadmap/strategy?
   Company's response:
   We have 3 key areas of focus. First, we will be launching our digital shopper marketing platform (contest, gamification and expo) so that we can equip our brand and partners with easily accessible tools to roll out their shopper campaign and leverage on insights and data to build more effective shopper campaign that resonate with their target audience. Second, we are partnering with our clients to visualize the data sets better for action. We collect huge amounts of data on behalf of our clients in field force segment and we are able to offer predictability on out-of-stock occurrences so that together with their retail partners, they can reduce them significantly and increase sales. Lastly, we are digitalizing the process of recruitment for our field and contract staff so that we can increase efficiency in our placements and handle large volumes of requests.
2. What are some of the successes of the Group's gamification activities? Is management able to quantify the reach of its gamification activities?
   Company's response:
   Gamification enables brands to connect with shoppers in a fun and entertaining manner and is especially relevant given the rise of Gen-Y and Millennials, and their love for gaming! Via gamification, we are able to not only reach across to our shoppers on our product benefits through game play, but we are able also to extend this to conversion via inclusion of Click Through
   Action (CTA) such as 'shop now' or 'earn more rewards' prompt in our games. We are also able to help partners track engagement, view and conversion through our measurement tools.
3. Is management also leveraging analytics to provide customer insights, business intelligence and other value-add services to its customers?
   Company's response:
   Yes, we currently provide customer insights for all our clients in field force and sampling segments which are reviewed with our customers every month or quarterly depending on their needs.

QUESTION 3

During the financial year, the Group made two investments into start-up companies, PB Grocery Group (RM1.38 million; Note 15 - Financial assets at fair value through profit or loss) and Lapasar Sdn. Bhd. (formerly known as Tenderin Sdn. Bhd.) (RM2.00 million; Note 16 - Financial assets at fair value through other comprehensive income).

1. Can the audit committee help shareholders understand the reasons for the different accounting treatment of these two investments?
   Company's response:
   The Group's investment in Lapasar Sdn. Bhd. ("Tenderin") is recognized as a financial asset at fair value through other comprehensive incomeas this investment is expected to be held for the long term.

The Group's investment in PB Grocery Group Sdn. Bhd. ("PB Grocery Group") is recognized as a financial asset at fair value through other profit or loss. The main difference in the accounting treatment in relation to this investment is that included in the equity investment is a put option which gives the Group the right, at any time, to sell the investment back to the founding shareholders of PB Grocery Group (or any third party approved by the founding shareholders) at the higher of the market value of the ordinary shares, the subscription price paid by the Group or in the event the shareholders have resolved that the investee company finances its operations by issuing new ordinary shares, the value of the new ordinary shares at the pre-money valuation of the investee company at that point in time. This investment is a hybrid contract which is measured in its entirety at fair value.

A hybrid contract that comprises an equity instrument with an embedded derivative that is not separated is accounted for and classified in its entirely, as fair value through profit and loss. For further details, please refer to the Company's Annual Report for the financial year ended 31 May 2021 ("AR2021"), Notes to Financial Statements 2(k) and 15.

1. What roles did the independent directors play in the acquisitions of these companies? In the board approval process, what is the level of due diligence (including commercial due diligence) carried out by the directors?
   Company's response:
   The Board of Directors ("Board") has approved and adopted a set of guidelines on the internal process for assessing investment opportunities. The guidelines cover, among others, the process of assessing investment opportunities and the size of investment that will require the Board's approval.
   For each potential investment, the management will present to the Board for consideration and deliberation, information comprising the business rationale, financial and legal due diligence commissioned and results thereof, and the key terms of the proposed investment.
2. What is the board's experience in valuing start-up companies? What guidance has the board provided to management to ensure that the Company does not overpay for its acquisition? In addition, it is noted that Rekaweb.com Sdn. Bhd. ("RKW"), being the controlling shareholder of the Company, was an investor in PB Grocery Group prior to the Company's investment. Ms Chew Sue Ann (executive chairman and Group managing director of the Company) is a shareholder of RKW.
   Company's response:
   Mr Hew Koon Chan ("Mr Hew") (Lead Independent Director) and Mr Zaffary Bin Ab Rahid ("Mr Zaffary") (Non-Independent Director) have relevant financial expertise to guide and add value to the Group's investment of our investee companies.
   Mr Hew has extensive and practical accounting and financial management knowledge and experience. His background is from investments and private equity before establishing Integer Capital Pte Limited in 2004, providing consultancy on mergers and acquisitions. Mr Zaffary is the senior general manager of investments and business at Kooperasi Permodalan Felda (KPF), an investment co-operative which is entrusted with the responsibility of promoting and