HAISAN RESOURCES BERHAD ( HAISAN OR COMPANY )

Transcription

1 HAISAN RESOURCES BERHAD ( HAISAN OR COMPANY ) (I) (II) PROPOSED DISPOSAL OF SEVEN (7) PARCELS OF LEASEHOLD INDUSTRIAL LAND TOGETHER WITH THE BUILDINGS ERECTED THEREON, ALL LOCATED AT JALAN PELABUHAN UTARA, BANDAR SULTAN SULEIMAN, PELABUHAN KLANG, SELANGOR ( PORT KLANG PROPERTIES ), WHICH ARE RESPECTIVELY OWNED BY HAI SAN & SONS SDN BHD ( HSS ) AND HAI SAN HOLDINGS SDN BHD ( HSH ), BOTH WHOLLY-OWNED SUBSIDIARIES OF HAISAN, FOR A TOTAL CASH CONSIDERATION OF RM35.00 MILLION ( PROPOSED DISPOSAL ); AND PROPOSED TENANCY OF THE PORT KLANG PROPERTIES BY HAISAN FOR AN INITIAL PERIOD OF THREE (3) YEARS SUBSEQUENT TO THE COMPLETION OF THE PROPOSED DISPOSAL ( PROPOSED TENANCY ) (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) 1. INTRODUCTION On 15 January 2016, Public Investment Bank Berhad ( PIVB ) on behalf of the Board of Directors of Haisan ( Board ), had announced that on even date, Haisan has accepted a letter of offer for the disposal of the Port Klang Properties together with a tenancy agreement for Haisan to rent the Port Klang Properties from Nadi Nikmat Sdn Bhd ( Nadi, Purchaser or Landlord ). Pursuant to the above, on behalf of the Board, PIVB wishes to announce that Haisan had on 29 January 2016 entered into two (2) agreements as follows: (i) (ii) conditional sale and purchase agreement between HSS, HSH ( Vendors ) and the Purchaser for the proposed disposal of the Port Klang Properties for a total cash consideration of RM35.00 million ( Disposal Consideration ) ( SPA ); and conditional tenancy agreement between Haisan and the Landlord for the proposed tenancy of the Port Klang Properties for an initial period of three (3) years subsequent to the completion of the Proposed Disposal ( Tenancy Agreement ) which is held in escrow upon the execution of the SPA to be effective upon the completion of the SPA. The details of the Proposals are set out in the ensuing sections of this announcement

2 2. DETAILS OF THE PROPOSALS 2.1 Proposed Disposal The proposed disposal entails the disposal of the Port Klang Properties by the Vendors to the Purchaser for a total cash consideration of RM35.00 million Information on the Port Klang Properties The Port Klang Properties are owned and registered under HSS and HSH, both wholly-owned subsidiaries of Haisan as set out in the table below: Port Klang Properties Properties owned by HSS a piece of leasehold industrial land measuring approximately 12, square meters ( sq. m. ), together with the buildings erected thereon, located at Lot 506, Jalan Pelabuhan Utara, Port Klang, Selangor, Malaysia a piece of leasehold industrial land measuring approximately 17, sq. m., together with the buildings erected thereon, located at Lot 507, Jalan Pelabuhan Utara, Port Klang, Selangor, Malaysia a piece of leasehold industrial land measuring approximately 1, sq. m. located at PT 73157, Jalan Pelabuhan Utara, Port Klang, Selangor, Malaysia a piece of leasehold industrial land measuring approximately sq. m. located at PT 73158, Jalan Pelabuhan Utara, Port Klang, Selangor, Malaysia a piece of leasehold industrial land measuring approximately 2, sq. m., together with the buildings erected thereon, located at PT 9998, Jalan Pelabuhan Utara, Port Klang, Selangor, Malaysia Properties owned by HSH a piece of leasehold industrial land measuring approximately 2, sq. m. located at PT 73156, Jalan Pelabuhan Utara, Port Klang, Selangor, Malaysia a piece of leasehold industrial land measuring approximately 25, sq. m., together with the buildings erected thereon, located at Lot 15728, Jalan Pelabuhan Utara, Port Klang, Selangor, Malaysia Market value* (RM 000) 7,700 8, ,050 1,200 16,050 Note: * Based on the valuation as appraised by the independent registered valuer appointed by the Company, JS Valuers Property Consultants Sdn Bhd ( Valuer ) as at 18 December

3 Presently, the Port Klang Properties are built upon with detached factories/warehouses with an annexed office building and other supporting structures. The factories/warehouses are generally equipped with temperature-controlled cold room facilities comprising insulation paneling and refrigerating equipment/machineries. The Port Klang Properties are mainly used to house the corporate headquarters of Haisan and its subsidiaries ( Haisan Group or Group ), the Group s multiple temperature-controlled facility ( MTCF ) of 18,000-pallet space, the engineering division and an ice factory. In addition, a single-storey factory with a gross floor area of approximately 1, sq. m. has been leased to a third-party tenant for the manufacturing of flatbreads. Upon completion of the Proposals, Haisan shall rent the entire Port Klang Properties from the Landlord and will continue to sub-lease the building above to the existing tenant. The Port Klang Properties are all charged to financial institutions ( Chargees ) for credit facilities granted to the Group. Pursuant to a debt restructuring agreement between Haisan, certain of its subsidiaries and the scheme lenders dated 5 February 2013 ( DRA-2013 ), part of the proceeds of the Proposed Disposal of approximately RM34 million will be used as full and final settlement of amounts owing to the Secured Lenders A (as defined in the DRA-2013) of approximately RM49.20 million as at the date of this announcement. Further details of the Port Klang Properties are set out in Appendix I of this announcement Details of the Purchaser Name Nadi was incorporated in Malaysia on 8 December 2015 as a limited company under the Companies Act, The authorised share capital of Nadi is RM400, comprising 400,000 ordinary shares of RM1.00 each, while its issued and paid-up share capital is RM comprising 100 ordinary shares of RM1.00 each. The principal activity of Nadi is investment holding. The directors of Nadi are Dato Yusli Bin Mohamed Yusoff, Hishamudin Bin Yaacob and Mohamed Shahrom Bin Abdul Ghani. The substantial shareholders of Nadi are as follows: Direct No. of ordinary shares % Indirect No. of ordinary shares % Dato Yusli Bin Mohamed Yusoff Hishamudin Bin Yaacob Mohamed Shahrom Bin Abdul Ghani

4 2.1.3 Salient terms of the SPA (i) Disposal Consideration The disposal consideration for the Port Klang Properties will be RM35.00 million. (ii) Deposit The deposit of RM3.50 million (the Deposit ) shall be paid to the appointed solicitors of the purchaser as stakeholder ( the Stakeholders ) as a refundable deposit in the following manner; (a) (b) two percent (2%) or RM0.70 million which has already been paid by the Purchaser to the Stakeholders; and eight percent (8%) or RM2.80 million which shall be paid by the Purchaser to the Stakeholders upon the execution of the SPA. The Stakeholders shall be irrevocably authorised to release the Deposit together with all accrued interest thereon to the Vendors upon the date that the SPA becomes unconditional or to refund the Deposit together with all accrued interest thereon to the Purchaser in the event of termination of the SPA. (iii) Balance Disposal Consideration The balance of the Disposal Consideration of RM31.50 million ( Balance Disposal Consideration ) shall be paid to the Stakeholders within thirty (30) days upon all conditions precedent stated in the SPA being met. (iv) Conditions precedent The SPA is conditional upon the following being obtained or fulfilled within three (3) months from the date of the SPA or such other extended period that may be mutually agreed between the parties in writing ( Conditional Period ): (a) the Vendors obtaining a letter of approval from the relevant authority approving the extension of the leasehold tenure of lands held under HS(D) PT 506, HS(D) 5848 PT 507 and PN 4390 Lot to a minimum of unexpired sixty (60) years from year 2016 ( Land Lease Extension ) in accordance with the provisions of the National Land Code

5 The current leasehold terms of the above mentioned properties are tabulated below: Legal description Lot 15728, Mukim and District of Klang, Selangor Darul Ehsan PT 506, Mukim and District of Klang, Selangor Darul Ehsan PT 507, Mukim and District of Klang, Selangor Darul Ehsan Tenure Sixty (60) years lease expiring on 1 May 2029 Sixty (60) years lease expiring on 18 June 2034 Sixty (60) years lease expiring on 18 June 2034 (b) (c) (d) the Vendors obtaining a letter of approval from the relevant state authority for the consent to transfer of lands held under HS(M) PT 73156, HS(M) PT73157, HS(M) PT and HS(M) PT 9998 in favour of the Purchaser; the Vendors obtaining the approval from its board of directors, its shareholder and Haisan for the sale of the Port Klang Properties to the Purchaser in accordance with the terms herein following the approval and/or clearance from Bursa Malaysia Securities Berhad ( Bursa Securities ) and/or the Securities Commission Malaysia ( SC ); and the execution of the Tenancy Agreement by Haisan with the Purchaser. (v) Option to purchase For a consideration of RM10.00 only, the Purchaser hereby grants the Vendors an option to purchase the Port Klang Properties at the purchase price of RM38,500, valid for a period of one (1) year from the date of completion of the SPA ( Option ). The purchase price of RM38.50 million above, which represents a premium of ten percent (10%) to the disposal consideration, was arrived at on a willing buyer-willing seller basis after taking into consideration of, amongst others, the following: (i) (ii) the disposal consideration for the Proposed Disposal of RM35.00 million; and the validity period of the Option of one (1) year

6 Upon the exercise of the Option by the Vendors, an earnest deposit of two percent (2%) of the Option price shall be paid by the Vendors to the Stakeholders. Within thirty (30) days from the payment of the deposit, the parties are to execute the sale and purchase agreement for the Option and eight percent (8%) of the Option price as balance deposit, shall be paid by the Vendors to the Stakeholders upon execution of the sale and purchase agreement for the Option. The balance of the Option price shall be paid by the Vendors to the Stakeholders within six (6) months from the date of execution of the sale and purchase agreement for the Option and a further extension period of three (3) months subject to the written approval of the Purchaser to complete the sale and purchase agreement for the Option. In the event the Vendors fails to pay the balance Option price at the expiry of the extension period, interest at the rate of eight percent (8%) per annum shall be chargeable to the Vendors calculated on a daily basis from the day following next upon the expiry of the aforesaid extension period until the date the Purchaser s Solicitors are in receipt of the full Balance Option Purchase Price. Upon completion of the sale and purchase agreement for the Option, the Purchaser s Solicitors shall at all times assist the Vendors to facilitate the transfer of the ownership of the Property to the Vendor. (vi) Default by the Purchaser If for any reason whatsoever the Purchaser shall fail to pay the Balance Disposal Consideration in the manner and within the time stipulated in Section 2.1.3(iii) above, the Vendors shall be entitled to terminate the SPA by written notice to the Purchaser and the Deposit paid by the Purchaser shall be forfeited as agreed liquidated damages. All other sums paid by the Purchaser to the Vendors under the SPA towards the Balance Disposal Consideration (if any) shall be refunded or caused to be refunded to the Purchaser without interest within fourteen (14) days thereof, failing which interest at the rate of eight percent (8%) per annum on any sum outstanding shall be chargeable by the Purchaser, calculated on daily basis from the day following next upon the expiry of the aforesaid fourteen (14) days until the date of actual refund by the Vendors

7 Upon the receipt of the Purchaser s solicitors written confirmation to Haisan and the Vendors that the Tenancy Agreement and all copies thereof held by the Stakeholders have been cancelled and destroyed by the Stakeholders thereafter the Vendors shall be at liberty to resell or otherwise dispose of or deal with the Port Klang Properties as the Vendors shall think fit and the SPA shall then become null and void and cease to be of any further effect. (vii) Default by the Vendors In any of the following event, the Vendors are in material breach of any term or condition of the SPA for any reason whatsoever at anytime prior to the receipt of the full payment of the Balance Purchase Price together with interest, if any, from the Purchaser by the Vendor s Solicitors, the Purchaser shall be entitled to give notice in writing to the Vendors specifying the default or breach and requiring the Vendors to remedy the said default or breach within fourteen (14) days of receipt of such notice. If the Vendors fails to remedy the relevant default or breach within the stipulated fourteen (14) days or refuses to complete the sale of the Port Klang Properties for any reason whatsoever (not caused by the default of the Purchaser), then the Purchaser shall be entitled to sue for specific performance of the SPA and all reliefs flowing therefrom. If the Vendors fails to remedy the relevant default or breach within the stipulated fourteen (14) days or refuses to complete the sale of the Port Klang Properties for any reason whatsoever (not caused by the default of the Purchaser), the Purchaser shall be further entitled to the termination of the SPA by notice in writing to the Vendors. In the event the Purchaser elects to terminate the SPA by notice in writing, the Vendors shall refund all monies paid by the Purchaser to the Vendors towards account of the Purchase Price (including the Deposit together with all interest accrued thereon) and in addition thereto the Vendors shall pay to the Purchaser a sum equivalent to the Deposit as agreed liquidated damages within fourteen (14) days thereof failing which interest at the rate of eight percent (8%) per annum on any sum outstanding shall be chargeable by the Purchaser, calculated on daily basis from the day following next upon the expiry of the aforesaid fourteen (14) days until the date of actual refund by the Vendors

8 (viii) Termination In the event that on the last day of the Conditional Period, any of the conditions precedent is not fulfilled or obtained in the manner provided in the SPA, then the Purchaser may by notice in writing to the Vendors terminate the SPA and upon receipt of such notice of termination, the Purchaser s Solicitors shall be irrevocably authorised to refund to the Purchaser the Deposit together with all interest accrued thereon within fourteen (14) days thereof in exchange for the following: (a) (b) the Purchaser s duly executed and registrable notice of withdrawal in the prescribed form of any private caveat lodged pursuant to the SPA together with the relevant registration fees; and the return by the Purchaser s and/or the Purchaser s Solicitors of the Memorandum of Transfer (as defined in the SPA) and all the other documents evidencing title which are deposited with the Purchaser and/or the Purchaser s Solicitors as stakeholders under the SPA including all such documents provided by the Vendors to the Purchaser and/or Solicitors in respect of the SPA. Upon such termination, the SPA shall become null and void and cease to be of any further effect and the Vendors shall be at liberty to resell or otherwise dispose of or deal with the Port Klang Properties as the Vendors shall think fit, without prejudice to any claims that either party may have arising from antecedent breaches Basis and justification of arriving at the Disposal Consideration The disposal consideration of RM35.00 million was arrived at on a willing buyer-willing seller basis after taking into consideration of, amongst others, the following: (i) (ii) the market value of the Port Klang Properties of RM35.10 million as at 18 December 2015, as appraised by the Valuer on an as is basis in view that the approvals have not been obtained from the relevant state authority for the Land Lease Extension and all the premiums and charges have not yet been paid; and the Proposed Tenancy

9 In arriving at the market value of the Port Klang Properties, the Valuer had considered the Cost method of valuation and the Investment method of valuation based on the following bases: (i) (ii) on an as is basis; and on the assumption that approvals have been obtained from the relevant state authority for the Land Lease Extension with all the premiums and charges fully settled ( Assumption Basis ). In using the Cost method of valuation, the Valuer had valued the land and building components separately, using the Comparison method of valuation to arrive at the market value of the land component and the Depreciated Replacement Cost method of valuation to arrive at the market value of the building component. The land and building values are then summated to arrive at the market value of the subject property. In using the Investment method of valuation, the Valuer had capitalised the net annual property income (i.e. rental) by discounting at a rate of return comparable to that of similar investments. Using the Cost method of valuation and the Investment method of valuation, the Valuers had arrived at a market value of the Port Klang Properties on the above basis as follows: Method of valuation Market value (RM 000) As is basis Cost method 35,100 36,800 Investment method 35,100 Assumption Basis Cost method 45,100 45,800 Investment method 45,100 Consequently the Valuers had adopted the Investment method of valuation as a more appropriate method as the Port Klang Properties are to be acquired for investment purposes with a rent back arrangement for an initial term of three (3) years period with fixed rental income. In determining the disposal consideration for the Port Klang Properties, the Board had adopted the as is basis in view that the approvals have not been obtained from the relevant state authority for the Land Lease Extension and all the premiums and charges have not yet been paid. Premised on the Investment method of valuation and on an as is basis, the Valuer had adopted a market value of the Port Klang Properties of RM35.10 million

10 After taking into consideration the total market value of the Port Klang Properties and pursuant to the negotiations between Haisan and the Purchaser, both parties had mutually agreed on a disposal consideration of RM35.00 million which represents a discount of RM0.10 million or 0.28% to the market value of the Port Klang Properties of RM35.10 million Date and original cost of investment The dates and original cost of investment for the Port Klang Properties are as follows: Original cost of investment RM 000 Years of transaction - Land 13, Building 21, Total 34, Utilisation of proceeds from the Proposed Disposal The gross proceeds of RM35.00 million arising from the Proposed Disposal is intended to be utilised in the following manner: Proposed utilisation RM 000 Expected timeframe for the utilisation of proceeds Repayment of borrowings 34,000 (a) Within three (3) months Estimated expenses 1,000 (b) Within six (6) months Total 35,000 Notes: (a) (b) As disclosed in Section above, an amount of approximately RM34 million to be raised from the disposal of the Port Klang Properties will be used to settle the outstanding loans to the respective Chargees for the Port Klang Properties of approximately RM49.20 million as at the date of this announcement. Any surplus or shortfall to this amount will be adjusted accordingly from or to the working capital requirements of the Group, as the case may be. The estimated expenses include professional fees, stamp duties and registration fees payable on the SPA and Tenancy Agreement, taxation (if any) and the cost of holding the general meeting to obtain approval of the shareholders for the Proposals. Any surplus or shortfall to this amount will be adjusted accordingly from or to the working capital requirements of the Group, as the case may be Assumption of liabilities There are no liabilities, including contingent liabilities and guarantees, to be assumed by the Purchaser arising from the Proposed Disposal

11 2.1.8 Additional financial commitment Haisan does not expect to incur any additional material financial commitment for the Proposed Disposal Cash Company or Practice Note 17 ( PN17 ) Company Haisan was classified as an Affected Listed Issuer pursuant to Paragraph 8.04 of Chapter 8 and Paragraph 2.1(e) of the PN17 of the Main Market Listing Requirements of Bursa Securities ( Listing Requirements ) on 9 June The Proposed Disposal is not expected to result in Haisan becoming a Cash Company as defined in the Listing Requirements. 2.2 Details of the Proposed Tenancy Subsequent to the Proposed Disposal, Haisan will rent back the Port Klang Properties from the Landlord Salient terms of the Proposed Tenancy (i) Term The initial duration of the tenancy shall be three (3) years ( Initial Period ) with an option for Haisan to renew for an additional three (3) years ( Renewed Period ). (ii) Security and utilities deposit The security deposit and utilities deposit shall be equivalent to and maintained at six (6) months and three (3) months respectively, of the rental for the Port Klang Properties. In the event of any increase or variation of the rental at any time during the Initial Period or the Renewed Period, as the case may be, the security deposit and utilities deposit shall be adjusted to reflect the equivalent of six (6) months and three (3) months of the increased or varied rental, as the case may be. The security deposit and utilities deposit shall be paid by Haisan to the Landlord on the commencement date of the Tenancy Agreement. (iii) Rent The monthly rental of the Port Klang Properties for the Initial Period shall be RM291, per month and shall be paid by Haisan monthly in advance within the first seven (7) days of each calendar month to the Landlord and/or its authorised agent/manager

12 The monthly rental for Renewed Period shall be renegotiated and mutually agreed by the Landlord and Haisan based on prevailing market rate provided that such increase shall not exceed eight percent (8%) of the prevailing rental. (iv) Option to renew Subject to Haisan being in compliance with all its covenants, obligations, responsibilities and/or liabilities in the Tenancy Agreement and not being in material or continuous breach of any provisions in the Tenancy Agreement, the Landlord shall grant to Haisan an option to renew the tenancy for a period of three (3) years. If Haisan shall be desirous of renewing the tenancy at the expiration of the Initial Period, Haisan shall at least three (3) months before the expiry date give to the Landlord notice in writing of its desire to renew. (v) Right of first refusal If at any time during the Initial Period or the Renewed Period, as the case may be, in the event the Landlord intends to effect a disposal to a third party transferee, which is not an associate of the Landlord, then Haisan will be granted the first right of refusal to purchase the Port Klang Properties upon the same purchase price and similar terms and conditions offered to such third party transferee to be offered and exercised in the manner provided in the Tenancy Agreement. The Landlord shall give written notice to Haisan granting the right of first refusal by stating the purchase price and the terms and conditions for the disposal and Haisan shall within fourteen (14) days from the receipt of the Landlord s written notice, confirm its acceptance or non-acceptance of the terms and conditions therein, failing which Haisan is deemed to have not accepted the offer under the right of first refusal to purchase the Port Klang Properties and the Landlord shall be at liberty to sell the Port Klang Properties to any third party it deemed expedient. If Haisan accepts the above offer, both parties shall enter into negotiations for the sale and purchase of the Port Klang Properties upon terms mutually acceptable and execute the sale and purchase agreement in respect thereof, within fourteen (14) days from Haisan s acceptance of the offer, failing which the offer shall lapse and the Landlord shall be at liberty to sell the Port Klang Properties to any third party it deemed expedient without any further reference to Haisan

13 (vi) Assignment and subletting by Haisan Haisan shall not, without the prior written consent of the Landlord (which consent shall not be unreasonably withheld by the Landlord), assign the Tenancy Agreement, the tenancy or any interest thereunder but shall be allowed to sublet or transfer possession or control over the Port Klang Properties or any part thereof or permit the use of the Port Klang Properties by any party other than Haisan. For the avoidance of doubt, notwithstanding any permitted subtenancy or sub-letting pursuant to this section, Haisan shall nevertheless remain liable for the payment of the rental to the Landlord and for the full and timely performance of all and other terms and conditions to be observed by Haisan under the Tenancy Agreement. (vii) Default and termination Default by Haisan The events of default as extracted from the Tenancy Agreement are as follows: (a) (b) (c) (d) save and except for the purpose of reconstruction, reorganisation or amalgamation, any step or action being taken for the winding up, dissolution or liquidation or a petition for winding up being presented against Haisan or any order is being made or a resolution being passed for the winding up or liquidation of Haisan and/or a judgment or order shall not have been set aside within thirty (30) days from the date of the making thereof; Haisan institutes any proceeding or gives its consent to the institution of any proceedings for the relief of Haisan under any winding up or insolvency laws; or Haisan makes any assignment for the benefit of its creditors or applies for or consents to the appointment of a receiver for Haisan; or Haisan abandons or quits or attempts to quit and/or redelivers vacant possession of the Port Klang Properties, at any time prior to the expiry of the Initial Period or the Renewed Period, as the case may be, for any reason whatsoever; or

14 (e) (f) Haisan defaults in the payment of any rental or in any other payment required to be made by Haisan hereunder when due as provided in the Tenancy Agreement and such default shall continue for seven (7) days after Haisan receives written notice thereof from the Landlord; or Haisan commits a default of any of the other covenants and agreements contained in the Tenancy Agreement to be kept, observed and performed by Haisan and such default shall continue for fourteen (14) days after Haisan receives written notice thereof, then the Landlord shall be entitled to the following: (a) (b) the remedy of specific performance of the Tenancy Agreement against Haisan; or the termination of the Tenancy Agreement. Default by the Landlord If the Landlord shall commit a material breach of any of the covenants and agreements contained in the Tenancy Agreement and such material breach shall have continued for thirty (30) days after the Landlord receives written notice thereof from Haisan, unless the default is remedied within thirty (30) days thereafter, Haisan shall be entitled to the remedy of specific performance of the Tenancy Agreement against the Landlord and to all reliefs following therefrom. (viii) Other salient terms of the Tenancy Agreement (a) (b) The Landlord shall at its own cost insure the Port Klang Properties with a licensed insurer in Malaysia throughout the Initial Period against risks of damage or destruction by fire for such amount and under such appropriate policy of insurance that may be deemed expedient by the Landlord. The Landlord is under no obligation to repair or replace or maintain any part of the Port Klang Properties, whether such needs are due to the normal wear and tear and/or due to any structural and/or design defect of the Port Klang Properties and/or due to any other cause of whatsoever nature, as the case may be, for the duration of the Initial Period or the renewed period, as the case may be

15 (c) (d) (e) Haisan has or will take sufficient and adequate all risk insurance coverage with reputable insurance companies covering Haisan s fixtures, fittings, chattels and equipment in the Port Klang Properties against appropriate risks including inter-alia, public liability, fire, burglary and any other third party claims in respect of any injuries or loss suffered or caused to any employee, visitor or invitee or person lawfully present on the Port Klang Properties for the whole duration of the Initial Period and/or the renewed period, as the case may be. Haisan will comply with insurance sprinkler and/or fire alarm regulations and Haisan will bear the cost of any alterations to the sprinklers and/or fire alarm installation which may become necessary by reason of the noncompliance by Haisan with the regulations of the General Insurance Association of Malaysia or requirements of the insurer engaged by the Landlord to provide insurance for the Port Klang Properties against fire. Haisan shall be responsible for the repair, maintenance, replacement, upkeep and maintenance of the Port Klang Properties including the structure, shell, core, interior, exterior, façade, internal and/or external compound of the Port Klang Properties Liabilities to be assumed There are no liabilities, including contingent liabilities and guarantees, to be assumed by Haisan arising from the Proposed Tenancy Additional financial commitment Haisan does not expect to incur any additional material financial commitment for the Proposed Tenancy. 3. RATIONALE FOR THE PROPOSALS Haisan was classified as an Affected Listed Issuer pursuant to Paragraph 8.04 of Chapter 8 and Paragraph 2.1(e) of PN17 of the Listing Requirements on 9 June Pursuant thereto, the Group is currently in the midst of implementing its debt restructuring as per the DRA-2013 and regularisation plan, which was approved by its shareholders at its extraordinary general meeting ( EGM ) held on 2 January 2014 to regularise its financial position

16 The Proposed Disposal is intended to rationalise the capital resources of the Group tied to long term assets to meet the Group s immediate debt servicing obligations which are all due and payable. As disclosed in Section above, an amount of approximately RM34 million will be used as full and final settlement of the amounts owing to the Secured Lenders A (as defined in the DRA-2013) of approximately RM49.20 million as at the date of this announcement. The repayment of the borrowings will improve the financial performance of the Group as the settlement of debts will entail the total outstanding secured loans as at the date of this announcement of approximately RM49.20 million to be considered fully settled. The settlement of the above amount is expected to result in interest savings of approximately RM3.49 million per annum based on the interest rate of 7.10% per annum (computed as base lending rate %), as well as a waiver of debts of approximately RM14.48 million for the outstanding secured loans above. In addition, the Proposals will not result in a disruption to the operating activities of the Group as Haisan will rent back the Port Klang Properties upon completion of the Proposed Disposal, with the certainty provided by the Tenancy Agreement for a tenancy period of up to six (6) years. 4. EFFECTS OF THE PROPOSALS 4.1 Issued and paid-up share capital The Proposals will not have any effect on the issued and paid-up share capital of the Company as it does not involve any issuance of new shares by the Company. 4.2 Net assets ( NA ) and gearing The proforma effects of the Proposals on the NA and gearing of the Group based on the consolidated financial statements of Haisan as at 31 December 2014 are as follows: Audited as at 31 December 2014 RM 000 I After the Proposed Disposal RM 000 II After (I) and the Proposed Tenancy RM 000 Share capital 6,027 6,027 6,027 Exchange translation reserve 1,057 1,057 1,057 Accumulated losses (77,146) (58,915)* (58,915) Deficit in shareholders equity/ Net liabilities (70,062) (51,831) (51,831) No of ordinary shares in issue ( 000) 120, , ,541 Net liabilities per share (RM) Total borrowings (RM 000) 125,176 # 78,895 Gearing (times) N/A N/A N/A

17 Notes: * Includes the waiver of debts of RM million, a gain on disposal of the Port Klang Properties of RM6.95 million and offset by the estimated expenses of RM1.00 million. # Includes interest accrued of RM million as at 31 December 2014 on the unsecured collateralised loan obligations and other secured and unsecured loan interest which was accounted for in After the repayment of borrowings of RM34.00 million and waiver of debts of RM million. 4.3 Substantial shareholders shareholdings The Proposals will not have any effect on the substantial shareholders shareholdings of the Company as it does not involve any issuance of new shares by the Company. 4.4 Earnings and earnings per share ( EPS ) The Proposals are expected to be completed by the first (1 st ) quarter of 2016 and is not expected to have any material effect on the consolidated earnings and EPS of the Group for the financial year ending 31 December For illustrative purposes, based on the audited financial statements of Haisan for the financial year ended 31 December 2014, and assuming that the Proposals and the utilisation of proceeds had been effected on that date, the Proposals will have the following proforma effect on the Group s earnings and loss per share ( LPS ): Loss for the financial year ended 31 December 2014 attributable to the equity holders of the Company Proforma consolidated earnings (RM 000) Proforma consolidated (LPS)/EPS* (sen) (4,595) (3.81) Add: Proforma gain from the Proposed Disposal 6, Add: Proforma gain from the waiver of debts arising from the settlement from the proceeds of the Proposed Disposal 12, Less: Estimated expenses (1,000) (0.83) Proforma net income for the audited financial year ended 31 December 2014 Note: 13, * Based on the proforma consolidated earnings of the Group divided by the 120,540,900 ordinary shares of RM0.05 each in Haisan in issue. The actual gain on the Proposed Disposal will depend on, amongst others, the net book value of the Port Klang Properties at the point of completion and the expenses to be incurred in connection to the Proposed Disposal

18 5. RISK FACTORS The potential risk factors relating to the Proposals, which may not be exhaustive, includes the following: 5.1 Non-completion of the Proposals If all the conditions precedent of the SPA and Tenancy Agreement are not fulfilled by all the parties, including the failure to secure the approvals from shareholders or consent from the lenders having an interest over the assets being the subject of the agreements or any other relevant authorities within the stipulated time set out in the SPA and Tenancy Agreement, the Proposals may be delayed or terminated. Should a delay or non-completion occur in the completion of the Proposals, the Group may not realise all the benefits that may accrue to it including meeting its debt servicing obligations. In view that all of the Group s existing borrowings are due and payable, the non-settlement of these borrowings would not address its financial condition to enable the Group to operate as a going concern. The management of the Company shall use its best endeavors to ensure every effort is made to satisfy the conditions precedent amongst others, to obtain all the necessary approvals from the shareholders in a timely manner for the Proposals. 5.2 Risk of loss of core income generating assets Upon completion of the Proposed Disposal, the Company will no longer own the Port Klang Properties, which is a core income generating asset of the Group. However, pursuant to the Proposed Tenancy, Haisan will rent back the Port Klang Properties from the Landlord for an initial period of three (3) years subsequent to the completion of the Proposed Disposal. Pursuant to the Proposed Tenancy, the Company will be bound by the terms and conditions of the Tenancy Agreement. The breach of any terms of the Tenancy Agreement by either party may result in the termination of the Tenancy Agreement, which may have a material adverse effect on the operations and financial performance of the Group as the Port Klang Properties are the core assets of the Group generating a major amount of the cash flows and contributing a steady stream of revenue to the Group. Further, there is no assurance that Haisan would be able to conclude a new tenancy agreement for the renewal of the tenancy of the Port Klang Properties after the expiry of the Tenancy Agreement. Hence, any failure to enter into a renewal of the tenancy agreement for the Port Klang Properties may result in disruption of the Group s operations in the future

19 In addition, if the Landlord wishes to sell the Port Klang Properties in the future and the Group does not have sufficient cash resources and/or financing to exercise its first right of refusal to acquire the Port Klang Properties, this may have a material adverse effect on the operations and financial performance of the Group in the future. The management of the Group shall use its best endeavours to ensure compliance with all the terms of the Tenancy Agreement and would continuously take appropriate measures to mitigate such risks. In addition, pursuant to the terms of the Tenancy Agreement, the tenancy shall have an initial period of three (3) years with an option to renew for three (3) more years. Haisan will make early plans to negotiate the renewal of the Tenancy Agreement prior to the expiry of the Initial Period for the Port Klang Properties or to explore other suitable location(s) to set up its new MTCF, if the need arises in the future. 6. INTER-CONDITIONALITY OF THE PROPOSALS The Proposed Disposal and the Proposed Tenancy are inter-conditional upon one another. The Proposals are not conditional upon any other corporate exercises undertaken or to be undertaken by Haisan. 7. APPROVALS REQUIRED 7.1 Proposed Disposal The Proposed Disposal is subject to and conditional upon the following being obtained: (i) (ii) the approval from the shareholders of Haisan at an EGM to be convened; and the approval from any other relevant authorities, if required. 7.2 Proposed Tenancy The Proposed Tenancy is subject to and conditional upon the following being obtained: (i) (ii) the approval from the shareholders of Haisan at an EGM to be convened; and the approval from any other relevant authorities, if required

20 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders and/or persons connected to them have any interest, direct or indirect in the Proposals. 9. DIRECTORS STATEMENT The Board, having considered all relevant aspects of the Proposals, including but not limited to the rationale, justification and the financial effects of the Proposals, is of the opinion that the Proposals are in the best interest of the Company. 10. PERCENTAGE RATIO APPLICABLE TO THE PROPOSALS PURSUANT TO PARAGRAPH 10.02(G) OF THE LISTING REQUIREMENTS The highest percentage ratio applicable to the Proposed Disposal pursuant to paragraph 10.02(g) of the Listing Requirements is 35.79%, computed based on the audited net book value of the Port Klang Properties as at 31 December 2014 compared to the total assets of the Haisan Group. 11. ESTIMATED TIMEFRAME FOR SUBMISSION TO THE AUTHORITIES AND COMPLETION The submission of valuation reports to Bursa Securities in respect of the Proposals will be made within one (1) month from the date of this announcement. Barring any unforeseen circumstances and subject to the fulfillment of all terms and conditions as set out in the SPA and the Tenancy Agreement, the Proposals are expected to be completed in the first (1 st ) quarter of DOCUMENTS AVAILABLE FOR INSPECTION A copy of the following is available for inspection at the Registered Office of Haisan at Lot 506, Jalan Pelabuhan Utara, Bandar Sultan Suleiman Pelabuhan Klang, Selangor Darul Ehsan during normal business hours from Monday to Friday (except state public holidays) for a period being not less than three (3) months from the date of this announcement. (i) (ii) (iii) The SPA; The Tenancy Agreement; and The valuation reports of the Port Klang Properties by the Valuer. This announcement is dated 29 January

21 APPENDIX I DETAILS OF THE PORT KLANG PROPERTIES Owner HSS Legal description of the property PT 506, Mukim and District of Klang, Selangor Darul Ehsan Title No.: HS(D) Description/ Existing use (i) A single storey detached factory for production (1) ; (ii) A single story detached factory for processing; (iii) A single storey detached ice factory; and (iv) A 2.5 storey office building Tenure Leasehold (60 years lease expiring on ) Age of building (years) Land area (sq. m.) Encumbrances 36 12, Charged to Public Bank Berhad Net book value* (RM 000) Valuation # (RM 000) Net lettable/ useable area (sq. m.) Average occupancy rate (%) 6,200 7,700 7, HSS PT 507, Mukim and District of Klang, Selangor Darul Ehsan Title No.: HS(D) 5848 (i) A single storey detached factory for production; (ii) A single storey detached factory - vacant; (iii) A 1.5 storey detached factory for warehousing (2) ; and (iv) A TNB substation Leasehold (60 years lease expiring on ) 36 17, Charged to Public Bank Berhad 6,400 8,150 8, HSS PT 73157, Mukim and District of Klang, Selangor Darul Ehsan Title No.: HS(M) Vacant land Leasehold (99 years lease expiring on ) - 1, Charged to OCBC Bank (Malaysia) Berhad HSS PT 73158, Mukim and District of Klang, Selangor Darul Ehsan Title No.: HS(M) Vacant land Leasehold (99 years lease expiring on ) Charged to OCBC Bank (Malaysia) Berhad

22 APPENDIX I DETAILS OF THE PORT KLANG PROPERTIES (Cont d) Owner HSS Legal description of the property PT 9998, Mukim and District of Klang, Selangor Darul Ehsan Title No.: HS(M) Description/ Existing use A single storey detached factory for warehousing (2) Tenure Leasehold (99 years lease expiring on ) Age of building (years) Land area (sq. m.) Encumbrances - (3) 2, Charged to OCBC Bank (Malaysia) Berhad Net book value* (RM 000) Valuation # (RM 000) Net lettable/ useable area (sq. m.) Average occupancy rate (%) 740 1, HSH PT 73156, Mukim and District of Klang, Selangor Darul Ehsan Title No.: HS(M) Vacant land Leasehold (99 years lease expiring on ) - 2, Charged to Hong Leong Bank Berhad 890 1, HSH Lot 15728, Mukim and District of Klang, Selangor Darul Ehsan Title No.: PN 4390 A single storey detached factory for warehousing Leasehold (60 years lease expiring on ) 25 25, Charged to OCBC Bank (Malaysia) Berhad and Oversea-Chinese Banking Corporation Limited 13,100 16,050 14, Total 35,100 Notes: * Net book values of the land of the Port Klang Properties, based on the Company s audited financial statements for the financial year ended 31 December # Valuation was carried out on the Port Klang Properties by the Valuer on 18 December 2015, using the Cost method of valuation and the Investment method of valuation on an as is basis in accordance with the Asset Valuation Guidelines of the SC. (1) Rented out to a third-party at a rental rate of RM0.90 million per annum. Upon completion of the Proposals, Haisan will continue to sub-lease the building to the existing tenant at the existing rate. (2) Building without proper title certificate. (3) Haisan is not able to ascertain the age of the building as the relevant information was not disclosed to HSS during the acquisition of the property by HSS in