In conjunction with the Proposed KIMB Disposal, the Company proposes to undertake the Proposed Properties Disposal.

Transcription

1 KURNIA ASIA BERHAD ( KAB OR THE COMPANY ) I. PROPOSED DISPOSAL BY THE COMPANY OF ITS 100% EQUITY INTEREST IN KURNIA INSURANS (MALAYSIA) BERHAD ( KIMB ) TO AmG INSURANCE BERHAD ( AmG ) FOR A TOTAL CASH CONSIDERATION OF RM1,550 MILLION SUBJECT TO ADJUSTMENT ( PROPOSED KIMB DISPOSAL ); AND II. PROPOSED DISPOSAL OF PROPERTIES IN SECTION 41, TOWNSHIP AND DISTRICT OF KUALA LUMPUR AND STATE OF WILAYAH PERSEKUTUAN, KUALA LUMPUR ( SAID PROPERTIES ) BY KIMB TO TAN SRI DATO PADUKA KUA SIAN KOOI ( TAN SRI KUA ) TO BE SATISFIED IN CASH ( PROPOSED PROPERTIES DISPOSAL ) (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) For illustrative purposes, the exchange rate for Australian Dollar ( AUD ) to Ringgit Malaysia ( RM ) used in this Announcement is based on the rate of AUD1.00 = RM as at 30 June 2011, which is the financial year close date of Insurance Australia Group Limited ( IAGL ) (Source: Bank Negara Malaysia ( BNM ), Middle Rate as at p.m.). 1. INTRODUCTION Reference is made to the announcements dated 19 December 2011 and 4 April 2012 in relation to the possible disposal by KAB of its 100% equity interest in KIMB to AmG. On behalf of the Board of Directors of KAB ( Board ), CIMB Investment Bank Berhad ( CIMB ) wishes to announce that following the approval of the Minister of Finance ( MoF ) (via BNM s letter dated 3 April 2012 which was received on 4 April 2012), KAB has on 12 April 2012 entered into a conditional sale and purchase agreement ( SPA ) with AmG in relation to the Proposed KIMB Disposal. In conjunction with the Proposed KIMB Disposal, the Company proposes to undertake the Proposed Properties Disposal. 2. DETAILS OF THE PROPOSALS 2.1 Proposed KIMB Disposal Introduction On 12 April 2012, the Company entered into the SPA with AmG for the sale of an aggregate of 600,000,000 ordinary shares of RM1.00 each in KIMB ( KIMB Shares ) ( Sale Shares ), representing 100% of the enlarged share capital of KIMB as follows: 370,000,000 existing KIMB Shares ( Existing Shares ); and 230,000,000 new KIMB Shares ( New Shares ) to be issued from the conversion of the existing RM230,000,000 nominal value irredeemable convertible subordinated debt of KIMB ( ICSD ) held by the Company. The Company will convert the ICSD into New Shares on or before the completion date of the Proposed KIMB Disposal. The sale consideration for the Sale Shares of RM1,550 million (subject to adjustment on completion) is to be satisfied in cash. 1

2 2.1.2 The sale consideration The sale consideration of RM1,550 million was arrived at through a bidding process involving several parties. In considering the sale consideration, the Board has also taken into account, amongst others, the market valuation of comparable insurance companies and the following financial considerations: (iii) (iv) KIMB s net assets ( NA ) of RM million based on the audited financial statements as at 31 December 2010; KIMB s NA of RM million based on the unaudited financial statements as at 30 June 2011; KIMB s profit after taxation ( PAT ) of RM million based on the audited financial statements for the financial year ended 31 December 2010; and KIMB s PAT of RM million based on the unaudited financial statements for the six (6)-month financial period ended 30 June The sale consideration of RM1,550 million represents the following implied price-to-book ( PBR ) and price-to-earnings ( PER ) multiple: Date Audited 31 December 2010 Unaudited 30 June 2011 NA of KIMB RM mil Implied PBR (times) Implied PER (times) (1) e: (1) Computed based on the annualised PAT of RM million. The sale consideration of RM1,550 million shall be subject to the adjustment mechanism as set out in Section For illustrative purposes, based on the audited NA of KIMB as at 31 December 2011 of RM million, and further assuming that the Completion Net Assets (as defined in Section ) is RM million vis-a-vis the Benchmark Net Assets (as defined in Section ) of RM million, the sale consideration shall increase by RM million. There are no liabilities (including any contingent liabilities and/or guarantees) to be assumed by AmG in respect of the Sale Shares. 2

3 2.1.3 Salient terms of the SPA The salient terms of the SPA are as follows: KAB agrees to sell and AmG agrees to purchase the Sale Shares free from encumbrances and with all the rights including dividends, interest, coupon payments or other distributions or return of capital, whether in cash or in kind and whether interim or final (but excluding any payment of interest on the ICSD) attaching to the Sale Shares on the completion date upon the terms and subject to the conditions of the SPA. The sale consideration for the Sale Shares shall be RM1,550 million to be satisfied in cash, subject to the adjustment mechanism set out in the SPA as set out in Section ( Adjusted Sale Price ) The Adjusted Sale Price shall be paid by AmG to KAB in the following manner: upon execution of the SPA, AmG shall pay a deposit of RM75 million to an escrow agent to be held and dealt with in accordance with the terms of the SPA and an escrow agreement entered into by KAB, AmG and the escrow agent; and AmG shall pay the balance of the Adjusted Sale Price on the completion date in the manner set out in the SPA The sale and purchase of the Sale Shares shall be conditional upon the fulfilment of amongst others, the following conditions precedent on or before the expiry of three (3) months from the date of the SPA or such other date as KAB and AmG may agree in writing: (iii) the approval of the shareholders of KAB in respect of the sale of the Sale Shares upon the terms and subject to the conditions of the SPA and the change of KAB s name being obtained at its general meeting; receipt by KAB of the irrevocable undertaking provided by a financial institution as chargee of the Existing Shares, ICSD and New Shares (when issued) ( Chargee ) that the Chargee will immediately deliver the original share certificate(s) for the Existing Shares and the New Shares (when received by the Chargee) and the duly executed transfer form(s) in respect of the Existing Shares and the New Shares together with the PDS6 stamping proforma to AmG, and will as soon as practicable discharge the charge over the Existing Shares upon receipt of the redemption sum payable to the Chargee for the discharge of the charge over the Existing Shares, the ICSD and the New Shares (when issued) ( Chargee Undertaking ); receipt by KIMB of written consents and/or waivers to the change of control of KIMB upon completion of the SPA, from each of the following parties: (a) (b) each of the reinsurers under the reinsurance treaty agreements listed in the SPA; and each of the counterparties to the agreements listed in the SPA; 3

4 (iv) (v) the issue of reinsurance acceptable to AmG and on terms agreed between AmG and KAB in respect of the outstanding claims reserve of KIMB as at a specified date, if assessed to be required ( Reinsurance Agreement ); and no material adverse effect shall have occurred and continue to persist when the last of the conditions precedent set out in to (iv) above have been fulfilled or waived, as the case may be The completion accounts date shall be the last day of the month in which the date of fulfilment of the last conditions precedent falls ( Completion Accounts Date ). Immediately following the Completion Accounts Date, the Company will procure KIMB to prepare the draft completion accounts which will be audited by the reporting accountant and reviewed by the review accountant. The Company and AmG will then determine if there are any adjustments required based on the review accountant s report and agree on the final completion accounts. In the event of a dispute, an independent accountant may be engaged in accordance with the terms of the SPA and its decision shall be final and binding on the Company and AmG. An independent actuary will be jointly appointed by the Company and AmG to determine the net outstanding unpaid claims and adjustment expenses as at the Completion Accounts Date Adjustment to the sale consideration Immediately after the agreement or determination of the final completion accounts, there shall be a comparison between the Completion Net Assets and the Benchmark Net Assets and: (a) If the Completion Net Assets exceed the Benchmark Net Assets, the sale consideration shall be increased by an amount equal to: Completion Net Assets minus Benchmark Net Assets (b) If the Benchmark Net Assets exceed the Completion Net Assets, the sale consideration shall be decreased by an amount equal to: Benchmark Net Assets minus Completion Net Assets where: Benchmark Net Assets means an amount equal to the higher of: (a) RM756,520,615 plus (188% x the rate of the Reinsurance Capital Charge (being the capital charge associated with the Reinsurance Agreement required by the Risk Based Capital Framework issued by BNM) x reinsurance cover limit), and 4

5 (b) The NA amount that satisfies a capital adequacy ratio of 188% as at the Completion Accounts Date as defined by BNM, including for the avoidance of doubt the Reinsurance Capital Charge. Completion Net Assets means the amount of the NA stated in the final completion accounts. The amount determined under Section above will be the Adjusted Sale Price on completion Others In addition, as part of KAB s internal restructuring on or prior to the completion of the Proposed KIMB Disposal, KAB agrees to acquire from KIMB, the lease of the property held under H.S.(D) , PT 9901, Pekan Baru Sungai Buloh, Daerah Petaling, Negeri Selangor Darul Ehsan ( SDCC Property ). An agreement was entered into between KAB and KIMB for the disposal of the SDCC Property for a cash consideration of RM40 million and the said agreement will be automatically terminated if the SPA cannot be completed in accordance with its terms. The SDCC Property is presently leased by KIMB pursuant to the lease agreement dated 30 December 2002 between KIMB and the Selangor State Development Corporation for 60 years expiring on 11 September The SDCC Property is a parcel of industrial land built upon with a single storey warehouse annexed with three (3)-storey office, a one and-a-half (1 ½)-storey training centre, two (2) blocks of three (3)- storey office buildings and ancillary buildings, with a land area of 21,799 square metre. The SDCC Property has a leasehold tenure of 99 years expiring on 18 October Within three (3) months of the completion of the Proposed KIMB Disposal ( Said Period ), KAB shall effect, and cause each of its associated or subsidiary company in Thailand, Indonesia and Cambodia ( Affiliates ) to similarly effect, a change of name to one that excludes the word Kurnia or any associated logos, or any words or abbreviations of similar impute or similar logos (collectively, the Kurnia Names ). By the date falling on the expiry of the Said Period, KAB and each of its Affiliates shall cease to use in any manner and in any territory: the Kurnia Names as the name or part of the name of any entity, trade, business, domain name, trademark, service mark or brand; and the domain names Kurnia.com.my and kurnia.com Information on KIMB KIMB was incorporated in Malaysia under the Companies Act, 1965 ( Act ) as a public limited company on 30 December 1978 under the name of Industrial and Commercial Insurance Berhad. On 30 April 1991, the company assumed its present name following the acquisition by Kurnia Damai Sdn Bhd, a company controlled by Tan Sri Kua. Subsequently in November 2004, KAB acquired the entire issued and paid-up share capital of KIMB in conjunction with and as an integral part of the listing exercise of KAB. 5

6 KIMB is principally engaged in the underwriting of general insurance. KIMB provides a full range of general insurance products including motor, fire, personal accident, marine, medical, engineering, workmen s compensation and other miscellaneous classes of insurance, but has carved a niche in motor underwriting. KIMB s market share of motor gross written premium for year 2011 is 13.6%, being the largest motor insurer in Malaysia. KIMB operates through a wide network of thirty (30) branches and has about 5,500 agents. Its agency force is strategically located in major cities and town serving about three (3) million policyholders nationwide. As at 31 December 2011, KIMB employs more than 1,000 employees. As at 31 December 2011, KIMB has an authorised share capital of RM600,000,000 comprising 600,000,000 KIMB Shares of which 370,000,000 KIMB Shares are issued and fully paid-up. The key financial data of KIMB is set out below. Financial year ended 30 June Audited 6-month financial period ended 31 December Financial years ended 31 December RM 000 Revenue 1,085, ,962 1,063,301 1,133,537 Profit before taxation 68,137 65,980 71, ,535 Tax expense 16,000 (4,599) (12,445) (13,916) PAT 84,137 61,381 58,711 86,619 Issued and paid-up share capital 370, , , ,000 Number of KIMB Shares in issue (000) 370, , , ,000 Weighted average number of KIMB Shares in issue (000) 332, , , ,000 Gross earnings per share (sen) 20.5 Net earnings per share (sen) 25.3 (1) (1) NA/Shareholders fund 539, , , ,667 NA per KIMB Share (RM) Current ratio (times) (2) Total borrowings (all interestbearing debts) (RM) Gearing ratio (times) Net gearing ratio (times) es: (1) Annualised. (2) Computed based on total assets over total liabilities (inclusive of insurance reserves) of KIMB. 6

7 KAB s original cost of investment in the Existing Shares and ICSD was about RM million. The investment was made at the dates as follows: Date of investment Cost of investment RM November , September September 2008 (1) (37,388) (2) 400,000 Total 690,619 es: (1) Dividend paid out of pre-acquisition retained profit. (2) Represents the RM400 million nominal value of ICSD to KAB, out of which RM170 million nominal value of ICSD have been converted into KIMB Shares at the conversion price of RM1.00 per KIMB Share by KAB on 19 September Information on AmG AmG is a general insurance business which trades under the AmAssurance brand, and is 51% owned by AmBank Group and 49% by IAG International Pty Limited, a wholly-owned subsidiary of IAGL. It was formerly part of the composite insurance (life and general) operation of AmBank Group which was separated in December 2008, with AmG assuming the general insurance business. It is Malaysia s fourth largest motor insurer and the eighth largest general insurer by gross written premium as at 31 December It has an extensive distribution network made up of AmBank Group s 190 bank branches and its own nineteen (19) branches and 2,900 insurance agents, and serves approximately one (1) million policyholders. IAGL, is a general insurance group with operations in Australia, New Zealand, the United Kingdom and Asia. AmG was incorporated in Malaysia under the Act as a public limited company on 18 January 2008 under its current name of AmG Insurance Berhad. The immediate holding company of AmG is AMAB Holdings Sdn Bhd, a company incorporated in Malaysia under the Act, and its ultimate holding company is AMMB Holdings Berhad ( AMMB ), a public listed company in Malaysia. The PAT and NA of AmG, based on the audited financial statements for the financial year ended 31 March 2011 were RM69.86 million and RM million respectively. The profit after tax and minority interests ( PATAMI ) and NA of AMMB, based on the audited financial statements for the financial year ended 31 March 2011 were RM1,342.8 million and RM10,308.9 million respectively. The PATAMI and NA of IAGL, based on the audited financial statements for the financial year ended 30 June 2011 were AUD250 million (or approximately RM810.8 million) and AUD4,417 million (or approximately RM14,325.7 million) respectively. AMMB, through its subsidiaries, provides a wide range of retail banking, business banking, investment banking, corporate and institutional banking, Islamic banking and related financial services, including the underwriting of general and life insurance, stock and share-broking, futures broking, investment advisory and asset, real estate investment trusts and unit trusts management. The ultimate offerors for the Proposed KIMB Disposal are AMMB and IAGL. 7

8 2.1.7 Proposed utilisation of proceeds Based on the sale consideration of RM1,550 million, KAB intends to utilise the gross cash proceeds of RM1,550 million from the Proposed KIMB Disposal in the following manner: Purpose Estimated timeframe for utilisation RM 000 Investment in existing subsidiary/associate of KAB Eighteen (18) months from the receipt of the proceeds from the Proposed KIMB Disposal 100,000 Repayment of bank borrowings (1) Immediately upon receipt of the proceeds from the Proposed KIMB Disposal 360,000 Repayment of amount due to KIMB (2) Immediately upon receipt of the proceeds from the Proposed KIMB Disposal 7,364 Payment to KIMB for the SDCC Property Immediately upon receipt of the proceeds from the Proposed KIMB Disposal 40,000 Repayment of amount due to the directors of KAB (2) Immediately upon receipt of the proceeds from the Proposed KIMB Disposal 31,028 General working capital and estimated expenses for the Proposed KIMB Disposal (3) Within eighteen (18) months from the receipt of the proceeds from the Proposed KIMB Disposal 40,000 Total identified utilisation 578,392 Investments or acquisitions of new core business (4) Eighteen (18) months (5) from the receipt of the proceeds from the Proposed KIMB Disposal (of which certain amounts are to be placed in escrow) 971,608 Total 1,550,000 es: (1) Part of the proceeds raised from the Proposed KIMB Disposal will be used to fully repay the outstanding term loan of KAB due to the Chargee. If the actual redemption amount is different from the amount allocated, the excess or shortfall will be adjusted to the investments or acquisitions of new core business. (2) Part of the proceeds raised from the Proposed KIMB Disposal will be used to fully repay the outstanding amount due to KIMB and certain directors of KAB. For illustrative purposes, the amounts allocated represent the amounts owing as at 31 December If the actual amounts outstanding are different from the amounts allocated, the excess or shortfall will be adjusted to the investments or acquisitions of new core business. 8

9 es (cont d): (3) The estimated expenses for the Proposed KIMB Disposal are approximately RM26 million. If the actual expenses for the Proposed KIMB Disposal are different from the amount allocated, the excess or shortfall will be adjusted to the utilisation for general working capital. If actual aggregate utilisation for general working capital and estimated expenses for the Proposed KIMB Disposal is different from the aggregate amount allocated, the excess or shortfall will be adjusted to the investments or acquisitions of new core business. (4) Part of the proceeds raised from the Proposed KIMB Disposal will be used for investments or acquisitions of new core business. At present, KAB has yet to identify a new core business or future principal activity for the KAB group of companies ( KAB Group ) upon completion of the Proposed KIMB Disposal. KAB is still assessing and evaluating plans for the optimal utilisation of the proceeds from the Proposed KIMB Disposal. Included under this caption is: (a) (b) a deposit of RM75 million paid by AmG to the escrow agent upon execution of the SPA, and to be retained by the escrow agent until the expiry of the claims period; and KAB shall remit funds into the escrow account such that the total amount in the escrow account shall be equal to the reinsurance cover on the inception date of the Reinsurance Agreement (if any). This amount shall be released by the escrow agent to KAB immediately upon the earlier of the date of expiry of the Reinsurance Agreement and the date of termination of the Reinsurance Agreement. The total gross proceeds of RM1,550 million is subject to adjustment based on the terms of the SPA. Any shortfall or excess to this amount will be adjusted accordingly to the investments or acquisitions of new core business. The proceeds raised from the Proposed KIMB Disposal (including accrued interest, if any) or the balance thereof is intended to be initially placed as deposits with banks or licensed financial institutions or short-term money market instruments prior to the eventual utilisation for the above intended purposes. 2.2 Proposed Properties Disposal Details of the Said Properties In conjunction with the Proposed KIMB Disposal, KIMB has on 12 April 2012 entered into a conditional sale and purchase agreement ( Properties SPA ) with Tan Sri Kua for the disposal of the Said Properties to Tan Sri Kua on an as is where is basis. The Said Properties are to be disposed off free from encumbrances. The salient terms of the Properties SPA are set out in Section below. Details of the Said Properties are as follows: Lot No. Lot 2485 Lot 575 Lot 576 Lot 577 Lot 578 Title No. GRN GRN GRN GRN GRN Mukim / District / State Section 41/ Township and District of Kuala Lumpur/ Wilayah Persekutuan Kuala Lumpur Description of property Ten (10) and half (1/2) storey office building Vacant land Vacant land Vacant land Vacant land Tenure Freehold Freehold Freehold Freehold Freehold Age of building 16 years 9

10 Lot No. Lot 2485 Lot 575 Lot 576 Lot 577 Lot 578 Land area (sq. m.) Gross floor area (sq. m.) 5, Existing/Proposed usage Office building Private parking for staff Private parking for staff Private parking for staff Private parking for staff Date of investment 16 October January January January January 1996 Valuer CH Williams Talhar & Wong ( WTW ) Date of valuation 2 February 2012 Method of valuation Investment and Comparison Method Comparison Method Cost of investment (RM million) Market value (RM million) (1) Net book value ( NBV ) as at 31 December 2011 (RM million) Lettable space (sq. m.) 3, Lettable space available and occupancy (sq. m.) 2,666.7 Occupancy rate (%) Registered owner KIMB KIMB KIMB KIMB KIMB Encumbrances Nil Nil Nil Nil Nil e: (1) As extracted from the WTW s valuation letters dated 6 April The sale consideration The sale consideration of the Proposed Properties Disposal shall be the higher of the market value of the Said Properties as determined by an independent valuer based on the independent valuer s letter or report that is dated within thirty (30) days prior to the date of the Properties SPA; and NBV of the Said Properties as at the Completion Accounts Date, to be satisfied in cash. 10

11 The audited NBV of the Said Properties as at 31 December 2011 is RM million. The aggregate market value of the Said Properties is RM29.0 million as at 2 February 2012 as appraised by WTW, a firm of registered professional valuers, based on the valuation letters on the Said Properties dated 6 April Based on the foregoing, and for illustrative purposes, the sale consideration of the Proposed Properties Disposal is RM million. The sale consideration of RM million represents a premium of approximately 38.0% to the market value of the Said Properties based on the valuation letters Liabilities to be assumed by Tan Sri Kua There are no liabilities, (including any contingent liabilities and/or guarantees) to be assumed by Tan Sri Kua pursuant to the Proposed Properties Disposal Salient terms of the Properties SPA The salient terms of the Properties SPA are as set out below: Completion of the sale and purchase of the Said Properties is conditional upon the fulfillment of the conditions precedent ( Properties Conditions Precedent ) set out herein on or before the expiry of three (3) months from the date hereof ( Properties Cut-Off Date ) or such other date as the Parties may agree in writing ( Properties Extended Cut-Off Date ): the approval of the shareholders of KAB in respect of the sale of the Said Properties to Tan Sri Kua upon the terms and subject to the conditions of the Properties SPA; and the approval of BNM in respect of the sale of the Said Properties to Tan Sri Kua upon the terms and subject to the conditions of the Properties SPA If the Properties Conditions Precedent are not fulfilled or waived by the Properties Cut-Off Date or Properties Extended Cut-Off Date, as the case may be, the Properties SPA may be forthwith terminated by either KIMB or Tan Sri Kua and Tan Sri Kua shall withdraw and/or cause the withdrawal of private caveat on the Said Properties lodged by Tan Sri Kua at Tan Sri Kua s sole costs and expense (if entered) and thereafter the Properties SPA shall have no further force or effect whatsoever and neither KIMB and Tan Sri Kua shall have any further claim against the other save for antecedent breaches and the provisions under the Properties SPA which shall subsist notwithstanding such termination The purchase price of the Said Properties shall be paid or caused to be paid by Tan Sri Kua within two (2) months after the unconditional date or such other date as mutually agreed between the Vendor and the Purchaser ( Properties Completion Date ). 11

12 KIMB shall give a notice in writing of not less than one (1) month prior to the Properties Completion Date to Tan Sri Kua informing Tan Sri Kua of its intention to lease the office space currently occupied by KIMB in the Said Properties for a period of up to twenty (20) years from the Properties Completion Date at the lease rental that shall be at market value as determined by an independent valuer and with lease rental adjustment every three (3) years based on market value provided that KIMB shall be entitled to terminate the lease without any penalty or compensation for early termination if KIMB has given written notice of not less than six (6) months Information on Tan Sri Kua Tan Sri Kua is a major shareholder of KAB with direct and indirect shareholdings of 51.44% and 0.33% respectively as at 30 March He was appointed as a Director on 12 April 2004 and is currently the Executive Chairman of KAB. Tan Sri Kua has over thirty (30) years of experience in the insurance industry. His other directorship in a public company is Kurnia Foundation Proposed utilisation of proceeds The entire proceeds from the Proposed Properties Disposal will be used by KIMB for general working capital purposes. 3 RATIONALE 3.1 Proposed KIMB Disposal The Board believes that KIMB has grown to reach a size and market position whereby it would benefit from a strong insurance operator to spur its next phase of growth. As such, the Proposed KIMB Disposal will provide KIMB linkages, through AmG, to IAGL, a global insurance player with technical expertise, experience in the local market, global reach and financial resources, to drive the next phase of expansion for KIMB. The Proposed KIMB Disposal also provides a timely opportunity for KAB to unlock the value of its investment in KIMB. As a result of the Proposed KIMB Disposal, the KAB Group will realise a proforma gain on disposal of about RM million based on the sale consideration of RM1,550 million and audited financial statements of KIMB as at 31 December Proposed Properties Disposal In conjunction with the Proposed KIMB Disposal, KAB and AmG agreed that the Said Properties will be disposed to Tan Sri Kua. These properties are non-core assets of KIMB. Further, the Proposed Properties Disposal provides an avenue for KIMB to realise its investment in the Said Properties by divesting the Said Properties at the higher of the market value of the Said Properties as determined by an independent valuer based on the independent valuer s letter or report that is dated within thirty (30) days prior to the date of the Properties SPA; and NBV of the Said Properties as at the Completion Accounts Date. 12

13 Based on the illustrated sale consideration of RM million (being the audited NBV of the Said Properties as at 31 December 2011) and WTW s valuation of the Said Properties of RM29.0 million, the sale consideration represents a premium of 38.0% to the market value of the Said Properties. 4. RISK FACTORS Both the Proposed KIMB Disposal and Proposed Properties Disposal are subject to completion risk. The Proposed KIMB Disposal and Proposed Properties Disposal are conditional upon the approvals and/or consent/waiver being obtained from the relevant authorities and/or parties, as disclosed in Section 7 below, and further subject to conditions precedent as set out in Section and Section above. There is no assurance that the conditions precedent can be fulfilled and the Proposed KIMB Disposal and Proposed Properties Disposal can be completed within the time period permitted under the respective SPA and Properties SPA. In the event the conditions precedent are not fulfilled or waived within the permitted time period, the parties may either terminate the relevant agreements or mutually extend the said period. However, both KAB and KIMB (where relevant) will continue to take all reasonable steps to ensure that all approvals are obtained and conditions precedent fulfilled in a timely manner to facilitate the completion of the Proposed KIMB Disposal and Proposed Properties Disposal. 5. LISTING STATUS OF THE COMPANY Upon completion of the Proposed KIMB Disposal, Bursa Malaysia Securities Berhad ( Bursa Securities ) may classify the Company as a Cash Company pursuant to paragraph 8.03 and Practice e ( PN ) 16 of the Main Market Listing Requirements of Bursa Securities ( Listing Requirements ). In addition, the Company is also expected to be classified as an affected listed issuer under PN17 of the Listing Requirements by virtue of the disposal of its major business pursuant to the Proposed KIMB Disposal. In this regard, the Company would have to regularise its condition as a Cash Company and/or an affected listed issuer within the stipulated timeframes set out under the Listing Requirements. KAB is still assessing and evaluating plans for the optimal utilisation of the proceeds from the Proposed KIMB Disposal and will endeavour to regularise its condition as a Cash Company and/or an affected listed issuer within the stipulated timeframes. 6. EFFECTS OF THE PROPOSALS 6.1 Issued and paid-up share capital The Proposals will not have any effect on the issued and paid-up share capital of KAB. 6.2 Shareholdings of the substantial shareholders The Proposals will not have any effect on the substantial shareholders shareholdings in KAB. 13

14 6.3 NA, NA per share and gearing The proforma effects of the Proposed KIMB Disposal and Proposed Properties Disposal on the NA, NA per share and gearing of the KAB Group are set out below: Audited as at 31 December 2011 RM 000 After the Proposed KIMB Disposal and Proposed Properties Disposal # Share capital 375, ,000 Share premium 12,578 12,578 Treasury shares (11,971) (11,971) Other reserves 36,082 (2,041) Retained profits/ (accumulated losses) (10,303) (1) 776,996 Shareholders funds/ NA 401,386 1,150,562 Number of shares (net of treasury shares) (000) 1,488,423 1,488,423 NA per share (RM) Total borrowings (RM 000) 360,000 Total cash and bank balances (RM 000) 130,771 (2) - (3) 989,636 Gearing ratio (times) Net gearing ratio (times) 0.57 *- es: # The Proposed KIMB Disposal and Proposed Properties Disposal are expected to be completed around the same time. * Net cash position. (1) The proforma retained profit includes taking into account the aggregate estimated expenses for the Proposed KIMB Disposal and Proposed Properties Disposal of RM26 million. (2) After repayment of bank borrowings of RM360 million. (3) Inclusive of the amounts to be placed in escrow as set out in e 4 of Section Earnings and earnings per share ( EPS ) The Proposed KIMB Disposal is expected to increase the earnings and EPS of the KAB Group for the financial year ending 31 December The KAB Group expects to realise a gain on disposal arising from the Proposed KIMB Disposal. However, KIMB will no longer contribute to the future consolidated earnings of the KAB Group upon completion of the Proposed KIMB Disposal. For illustrative purpose and based on the audited financial statements of the KAB Group for the financial year ended 31 December 2011, the Proposed KIMB Disposal would result in a proforma gain on disposal of about RM million (representing an EPS of sen) to the KAB Group. Upon completion of the Proposed KIMB Disposal, KIMB which contributed RM million to the consolidated earnings of KAB or 5.82 sen to the consolidated EPS of KAB for the financial year ended 31 December 2011 will no longer be consolidated as part of the KAB Group. The Proposed Properties Disposal will not have any effect on the earnings and EPS of the KAB Group other than the expenses to be incurred to implement the Proposed Properties Disposal which is not expected to be material. 14

15 7. APPROVALS REQUIRED 7.1 Proposed KIMB Disposal The Proposed KIMB Disposal is subject to approvals being obtained from the following: the MoF via BNM, which was obtained on 3 April 2012; (iii) (iv) the shareholders of KAB at an extraordinary general meeting ( EGM ) to be convened; the Chargee Undertaking; written consents and/or waivers to the change of control of KIMB upon completion of the SPA, from each of the following parties: (a) (b) each of the reinsurers under the reinsurance treaty agreements listed in the SPA; and each of the counterparties to the agreements listed in the SPA; and (v) any other relevant parties, if required. The approval of MoF for the Proposed KIMB Disposal by KAB was not subject to any conditions. 7.2 Proposed Properties Disposal The Proposed Properties Disposal is subject to approvals being obtained from the following: (iii) BNM; the shareholders of KAB at an EGM to be convened; and any other relevant parties, if required. The Proposed KIMB Disposal and the Proposed Properties Disposal are not conditional upon each other. The Company expects to submit applications to the relevant authorities as disclosed above for their approval within three (3) months from the date of this announcement. 15

16 8. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS 8.1 Proposed KIMB Disposal None of the Directors and/or major shareholders of KAB and/or persons connected with them have any interest, direct or indirect, in the Proposed KIMB Disposal. 8.2 Proposed Properties Disposal Save as disclosed below, none of the Directors and/or major shareholders of KAB and/or persons connected with them have any interest, direct or indirect, in the Proposed Properties Disposal. Interested Director and interested major shareholder Tan Sri Kua (Executive Chairman/Non- Independent Executive Director ) Nature of interest Director and major shareholder of the Company and the proposed acquirer of the Said Properties Shareholdings as at 30 March 2012 Direct No. of KAB shares % 765,646, Indirect No. of KAB shares % (1) 5,000, e: (1) Deemed interest by virtue of his spouse s shareholdings in KAB. Interested Directors Datuk Kua Chung Sen (Deputy Executive Chairman/Non- Independent Executive Director) Dato' Quah Teong Moo (Non-Independent Non-Executive Director) Nature of interest Director of the Company and the brother of Tan Sri Kua Director of the Company and the brother of Tan Sri Kua Shareholdings as at 30 March 2012 Direct No. of KAB shares % 12,702, Indirect No. of KAB shares % (1) 60,000, ,867, e: (1) Deemed interest by virtue of his shareholdings in CS Kua Sdn Bhd. Accordingly Tan Sri Kua, Datuk Kua Chung Sen and Dato Quah Teong Moo (collectively, the Interested Directors ) have abstained and will continue to abstain from deliberating and voting on the Proposed Properties Disposal at the relevant board meetings. The Interested Directors will abstain from voting, in respect of their direct and/or indirect shareholdings, on the resolution pertaining to the Proposed Properties Disposal at an EGM to be convened. Further, the Interested Directors will undertake to ensure that persons connected with them will abstain from voting, in respect of their direct and/or indirect shareholdings, on the resolution pertaining to the Proposed Properties Disposal at an EGM to be convened. 16

17 9. STATEMENT BY THE DIRECTORS 9.1 Proposed KIMB Disposal The Board, having considered all aspects of the Proposed KIMB Disposal and the advice of M&A Securities Sdn Bhd ( M&A Securities ), being the Independent Adviser for the Proposed KIMB Disposal, is of the opinion that the Proposed KIMB Disposal is in the best interest of KAB. The Board is also satisfied that AmG has adequate financial resources to acquire the Sale Shares by cash based on its financial position as set out in Section above as well as the cash/cash equivalent position of AMMB of RM13,502.6 million and the cash and short term money held for investment purposes of IAGL of AUD823 million (or approximately RM2,669.2 million), respectively, based on their respective audited consolidated financial statements for the financial year ended 31 March 2011 and 30 June The Board does not intend to seek other alternative offers for the Sale Shares. 9.2 Proposed Properties Disposal The Board, excluding the Interested Directors, having considered the rationale for the Proposed Properties Disposal, the independent valuation by WTW and the advice of M&A Securities, being the Independent Adviser for the Proposed Properties Disposal, is of the opinion that the Proposed Properties Disposal is in the best interest of KAB Group. 10. ADVISERS 10.1 Proposed KIMB Disposal CIMB and UBS Investment Bank have been appointed as advisers for the Proposed KIMB Disposal. As the Proposed KIMB Disposal represents a major disposal pursuant to paragraph 10.02(eA) of the Listing Requirements, KAB has appointed M&A Securities on 13 January 2012 as the Independent Adviser in relation to the Proposed KIMB Disposal. The role of the Independent Adviser is as follows: (iii) to comment as to whether the Proposed KIMB Disposal is fair and reasonable in so far as the shareholders of KAB are concerned, including the reasons for the key assumptions made and the factors taken into consideration in forming such opinion; to advise the shareholders of KAB on whether they should vote in favour of the Proposed KIMB Disposal; and to take all reasonable steps to satisfy itself that it has a reasonable basis to make the comments and advice in subparagraphs and above. 17

18 10.2 Proposed Properties Disposal CIMB has been appointed as the adviser for the Proposed Properties Disposal. In view that the Proposed Properties Disposal is a related party transaction, the Board has also appointed M&A Securities to act as the Independent Adviser to advise the non-interested directors and shareholders of the Company on following: (iii) to comment as to whether the Proposed Properties Disposal is fair and reasonable in so far as the shareholders of KAB are concerned, and whether the Proposed Properties Disposal is to the detriment of the minority shareholders, and such opinion must set out the reasons for, the key assumptions made and the factors taken into consideration in forming that opinion; to advise minority shareholders of KAB on whether they should vote in favour of the Proposed Properties Disposal; and to take all reasonable steps to satisfy itself that it has a reasonable basis to make the comments and advice in subparagraphs and above. 11. AUDIT COMMITTEE The Audit Committee of KAB having considered all aspects of the Proposed Properties Disposal including the market value of the Said Properties based on WTW s valuation, is of the opinion that the Proposed Properties Disposal is fair, reasonable and on normal commercial terms and it is in the best interest of KAB Group and not detrimental to the interest of the minority shareholders of KAB on the following basis: (iii) the sale consideration for the Proposed Properties Disposal shall be at the higher of the (a) market value of the Said Properties as determined by an independent valuer based on the independent valuer s letter or report that is dated within thirty (30) days prior to the date of the Properties SPA; and (b) NBV of the Said Properties as at the Completion Accounts Date, and is therefore not financially detrimental to KIMB; upon completion of the Proposed KIMB Disposal, KIMB will no longer be part of the KAB Group; and based on the illustrated sale consideration of RM million (being the audited NBV of the Said Properties as at 31 December 2011) and WTW s valuation of the Said Properties of RM29.0 million, the sale consideration represents a premium of 38.0% to the market value of the Said Properties. The Audit Committee has also sought independent advice from M&A Securities in forming its views and conclusion on the Proposed Properties Disposal. 12. ESTIMATED TIMEFRAME FOR THE COMPLETION OF THE PROPOSALS Subject to all the required approvals being obtained, and barring any unforeseen circumstances, the Proposals are expected to be completed by the third (3rd) quarter of

19 13. HIGHEST PERCENTAGE RATIO APPLICABLE TO THE PROPOSED KIMB DISPOSAL AND PROPOSED PROPERTIES DISPOSAL PURSUANT TO PARAGRAPH 10.02(G) OF THE LISTING REQUIREMENTS 13.1 Proposed KIMB Disposal The highest percentage ratio is about 386.2%, based on the sale consideration of RM1,550 million (before any adjustments) and the audited NA of KAB Group of RM million as at 31 December Proposed Properties Disposal The highest percentage ratio is about 10.0%, based on the illustrated sale consideration of the Said Properties of RM million and the audited NA of KAB Group of RM million as at 31 December TRANSACTIONS WITH RELATED PARTY FOR THE PRECEDING TWELVE (12) MONTHS The total amount transacted between the KAB Group and the Interested Directors (excluding directors remuneration in the ordinary course of business) for the preceding twelve (12) months up to 30 March 2012 are as follows: Interested Directors Amount (RM mil) Purpose Tan Sri Kua 6.36 Interest on amount due to Tan Sri Kua, advances from and partial repayment of advances from Tan Sri Kua There were no transactions between the KAB Group and Datuk Kua Chung Sen and Dato' Quah Teong Moo in the preceding twelve (12) months. 15. DOCUMENTS FOR INSPECTION The agreements and valuation letters are available for inspection at the registered office of the Company at 25th Floor, Menara Kurnia, Block B4 Pusat Dagang Setia Jaya (Leisure Commerce Square), No. 9, Jalan PJS 8/9, Petaling Jaya, Selangor Darul Ehsan during normal business hours from Mondays to Fridays (except for public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 12 April