BOUSTEAD PLANTATIONS BERHAD (Company No.: 1245-M) (Incorporated in Malaysia)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant If you are in or any other doubt professional as to the adviser course of immediately. action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy Bursa Malaysia or completeness Securities and Berhad expressly takes no disclaims responsibility any liability for the whatsoever contents of for this any Circular, loss howsoever makes no arising representation from or in reliance as to its upon accuracy the whole or completeness or any part and of the expressly contents disclaims of this Circular. any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. BOUSTEAD PLANTATIONS BERHAD (Company No.: 1245-M) (Incorporated in Malaysia) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PART A PROPOSED ACQUISITION BY BOUSTEAD RIMBA NILAI SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF BOUSTEAD PLANTATIONS BERHAD ( BPB ), OF COUNTRY LEASE PLANTATION LANDS HELD UNDER 42 LAND TITLES MEASURING A TOTAL OF 11, HECTARES IN THE DISTRICT OF LABUK AND SUGUT, SANDAKAN, SABAH, INCLUSIVE OF ALL ASSETS LOCATED ON THE PLANTATION LANDS FROM PERTAMA LAND & DEVELOPMENT SDN BHD FOR A TOTAL CASH CONSIDERATION OF RM750 MILLION PART B PROPOSED BONUS ISSUE OF 640,000,000 NEW ORDINARY SHARES IN BPB ( BPB SHARES ) ON THE BASIS OF 2 NEW BPB SHARES FOR EVERY 5 EXISTING BPB SHARES HELD ON AN ENTITLEMENT DATE TO BE DETERMINED LATER AND NOTICE OF EXTRAORDINARY GENERAL MEETING Principal Adviser AFFIN HWANG INVESTMENT BANK BERHAD (14389-U) (A Participating AFFIN HWANG Organisation INVESTMENT of Bursa BANK Malaysia BERHAD Securities (14389-U) Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) The notice of the Extraordinary General Meeting ( EGM ) and the Proxy Form are enclosed in this Circular. The Details notice of of our the Extraordinary EGM: General Meeting ( EGM ) and the Proxy Form are enclosed in this Circular. Details of Date our EGM: and time : Thursday, 12 April 2018 at 11:00 a.m. or immediately following the conclusion or adjournment (as the case may be) of our 105th Annual General Meeting which will be Date and time : Thursday, held 12 at 9:00 April a.m on the at same 11:00 day a.m. and or at the immediately same following venue, or the at any adjournment conclusion or thereof, adjournment whichever (as is later. the case may be) of our 105th Annual General Meeting which will be held at 9:00 a.m. on the same day and at the same venue, or at any adjournment thereof, whichever Venue : is Mutiara Ballroom, later. Ground Floor, Royale Chulan Damansara, 2 Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Darul Ehsan. Venue : Mutiara Ballroom, Ground Floor, Royale Chulan Damansara, 2 Jalan PJU 7/3, Mutiara Damansara, You are allowed to appoint a proxy to vote on your behalf. Petaling Please Jaya, complete Selangor Darul and return Ehsan. the Proxy Form in accordance with the You instructions therein. The details of lodging the Proxy Form are as follows: are allowed to appoint a proxy to vote on your behalf. Please complete and return the Proxy Form in accordance with the instructions therein. Last date The and details time of for lodging the : Tuesday, Proxy Form 10 are April as 2018 follows: at 11:00 a.m. lodgment Last date and time for : Tuesday, 10 April 2018 at 11:00 a.m. lodgment To be deposited at our : Tricor Investor & Issuing House Services Sdn Bhd located at Unit 32-01, Level 32, Tower Share Registrar s registered A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, Kuala To office be deposited at our : Tricor Lumpur Investor & or its Customer Issuing House Services Service Sdn Centre Bhd at Unit located G-3, at Ground Unit 32-01, Floor, Level Vertical 32, Tower Podium, Share Registrar s registered A, Avenue Vertical Business 3, Suite, Bangsar Avenue South, 3, No. 8, Jalan Bangsar South, Kerinchi, No , Jalan Kuala Kerinchi, Lumpur Kuala office Lumpur or its Customer Service Centre at Unit G-3, Ground Floor, Vertical Podium, Avenue This 3, Circular Bangsar South, is dated No. 8, 28 March Jalan Kerinchi, Kuala Lumpur. This Circular is dated 28 March 2018

2 DEFINITIONS Except where the context otherwise requires, the following definitions shall apply throughout this Circular: Act : Companies Act, 2016 ABB : Affin Bank Berhad ABB Group : Collectively, Affin Bank Berhad and its subsidiaries Affin Hwang IB : Affin Hwang Investment Bank Berhad Assets : All buildings, plant and machinery, motor vehicles and other assets located on the Plantation Lands Balance Purchase Price : RM675.0 million, being 90% of the Purchase Consideration Board : Board of directors of our Company Bonus Shares : Bonus issue of 640,000,000 new BPB Shares BPB or Company : Boustead Plantations Berhad BPB Group : Collectively, BPB and our subsidiaries BPB Shares : Ordinary shares in our Company BRNSB or Purchaser : Boustead Rimba Nilai Sdn Bhd, our wholly-owned subsidiary Bursa Securities : Bursa Malaysia Securities Berhad Circular : This circular to our shareholders dated 28 March 2018 Completion Date : The date of the payment of the Balance Purchase Price which will be on or before the expiry of the Completion Period or the Extended Completion Period Completion Period : 1 month from the date on which all of the CPs have been fulfilled Conditional Period : 6 months from the date of the SPA with a further extension to be mutually agreed between BRNSB and the Vendor CP : Conditions precedent of the SPA, further details as set out in Section of Part A of this Circular CPO : Crude palm oil Deposit : RM75.0 million, being 10% of the Purchase Consideration DutaLand : DutaLand Berhad DPSB Duta Plantations Sdn Bhd, a wholly-owned subsidiary of DutaLand EGM : Extraordinary general meeting ELB : Estate Land Board i

3 DEFINITIONS (CONT D) Entitlement Date : A date to be determined and announced later by our Board, on which the names of the Entitled Shareholders must appear in the Record of Depositors of our Company as at the close of business in order to be entitled to participate in the Proposed Bonus Issue Entitled Shareholders : Our shareholders whose name appear in the Record of Depositors of our Company on the Entitlement Date EPS : Earnings per share Estates : Collectively, Pertama Estate, Sg Sapa Payau Estate, Sg Ruku-Ruku Estate, Sg Lokan Estate and Sg Lokan Baru Estate Extended Completion Period : A period of 1 month from the expiry of the Completion Period FFB : Fresh fruit bunches FYE : Financial year ended or when the context requires, financial year ending Ha : Hectares Listing Requirements : Main Market Listing Requirements of Bursa Securities LPD : 28 February 2018, being the latest practicable date prior to the printing and despatch of this Circular Malakoff Estate : Oil palm plantation estate located within the District of Seberang Perai Utara, Pulau Pinang measuring 1, Ha Malakoff Sale : The sale of 5 adjoining parcels of freehold land measuring a total of Ha, being part of Malakoff Estate by CIMB Islamic Trustee Berhad (acting solely in the capacity as a trustee for our Company) to Setia Recreation Sdn Bhd for a total cash consideration of RM620.1 million, which was completed on 26 September 2017 MOT : Memorandum of transfer MPOB : Malaysian Palm Oil Board MT : Metric tonne NA : Net assets Nak Palm Oil Mill : An existing oil palm mill with a production capacity of 40 MT per hour located at Nak Estate, owned by Boustead Gradient Sdn Bhd, our wholly-owned subsidiary OER : Oil extraction rate Plantation Assets : Collectively, the Plantation Lands and Assets Plantation Lands : Country lease plantation lands held under 42 land titles located in the District of Labuk and Sugut, Sandakan, Sabah measuring a total of 11, Ha PLD : Pertama Land & Development Sdn Bhd, a wholly-owned subsidiary of DutaLand ii

4 DEFINITIONS (CONT D) PLD SPAs : Sale and purchase agreements dated 30 June 2003 in relation to the acquisition by PLD of country lease plantation lands held under 15 land titles which form part of the Estates measuring a total of 4, Ha, from MSB, LESB, TPSB, LSB, LAJSB, MPSB, TESB, Telupid and LPSB PK : Palm kernel Proposed Acquisition Proposed Bonus Issue : Proposed acquisition by BRNSB of the Plantation Assets from PLD for the Purchase Consideration, subject to the terms and conditions contained in the SPA : Proposed bonus issue of 640,000,000 new BPB Shares on the basis of 2 Bonus Shares for every 5 existing BPB Shares Proposed Sale : Proposed sale by BPB of freehold plantation lands held under 3 land titles located in the District of Seberang Perai Utara, Pulau Pinang measuring a total of Ha to Titanium Greenview Sdn Bhd and Sunrich Conquest Sdn Bhd for a total cash consideration of RM136.0 million, which was announced on 24 January 2018 Purchase Consideration Raine & Horne or Valuer : Cash consideration of RM750 million pursuant to the Proposed Acquisition : Raine & Horne International Zaki + Partners Sdn Bhd, a firm of independent valuers registered with the Board of Valuers, Appraisers, Estate Agents and Property Managers Malaysia RM and sen : Ringgit Malaysia and sen, respectively SPA : Sale and purchase agreement dated 30 October 2017 entered into between the Vendor, the Registered Owners and BRNSB in relation to the Proposed Acquisition Sq ft : Square foot Title Deeds : Original document of each title under the Plantation Lands Valuation Certificate : Valuation certificate dated 17 November 2017 in relation to the Plantation Assets prepared by Raine & Horne Valuation Reports : Valuation reports dated 10 October 2017 in relation to the Plantation Assets prepared by Raine & Horne Vendor : PLD VWAP : Volume weighted average market price iii

5 DEFINITIONS (CONT D) Registered Owners (other than PLD) LAJSB : Ladang Anak Jati Sdn Bhd LESB : Labuk Estate Sdn Bhd LPSB : Labuk Plantation Sdn Bhd LSB : Labukpalm Sdn Bhd MPSB : Moyog Properties Sdn Bhd MSB : Majusa Sdn Bhd Telupid : Telupid Estate Sdn Bhd TESB : Tawai Estate Sdn Bhd TPSB : Telupid Plantation Sdn Bhd All references to we, us, our and ourselves and our Company are to BPB, and where the context otherwise requires, our subsidiaries refers to the subsidiaries of BPB. Our Group collectively refers to our Company and our subsidiaries. All references to you in this Circular are to our shareholders who are entitled to attend and vote at our forthcoming EGM and whose names appear in our Record of Depositors at the time and on the date to be determined by our Board. Unless specifically referred to, words denoting the singular shall include the plural and vice versa and words denoting the masculine gender shall include the feminine and neuter genders and vice versa. References to persons shall include corporations. Any reference in this Circular to any enactment is a reference to that enactment currently enforced and as may be amended from time to time and any re-enactment thereof. Any reference to a time or date in this Circular shall be a reference to Malaysian Standard Time (GMT +8), unless otherwise stated. [The rest of this page is intentionally left blank] iv

6 TABLE OF CONTENTS Page PART A LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSED ACQUISITION 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED ACQUISITION 2 3. RATIONALE FOR THE PROPOSED ACQUISITION INDUSTRY OUTLOOK AND PROSPECTS RISK FACTORS EFFECTS OF THE PROPOSED ACQUISITION APPROVALS REQUIRED CORPORATE PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM DIRECTORS STATEMENT ESTIMATED TIMEFRAME FOR COMPLETION EGM FURTHER INFORMATION 31 PART B LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSED BONUS ISSUE 1. INTRODUCTION DETAILS OF THE PROPOSED BONUS ISSUE RATIONALE FOR THE PROPOSED BONUS ISSUE EFFECTS OF THE PROPOSED BONUS ISSUE HISTORICAL SHARE PRICES APPROVALS REQUIRED CORPORATE PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS 37 CONNECTED TO THEM 9. DIRECTORS STATEMENT ESTIMATED TIMEFRAME FOR COMPLETION EGM FURTHER INFORMATION 39 APPENDICES I LOCATION OF THE PLANTATION LANDS 40 II VALUATION CERTIFICATE ON THE PLANTATION ASSETS 41 III FURTHER INFORMATION 68 NOTICE OF EGM PROXY FORM ENCLOSED ENCLOSED v

7 PART A LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSED ACQUISITION

8 BOUSTEAD PLANTATIONS BERHAD (Company No.: 1245-M) (Incorporated in Malaysia) Registered Office: 28th Floor, Menara Boustead 69 Jalan Raja Chulan Kuala Lumpur Board of Directors: 28 March 2018 Gen. Tan Sri Dato Mohd Ghazali Hj. Che Mat (R) (Non-Independent Non-Executive Chairman) Tan Sri Dato Seri Lodin Wok Kamaruddin (Non-Independent Non-Executive Vice Chairman) Dato Mohzani Abdul Wahab (Senior Independent Non-Executive Director) Maj. Gen. Dato Hj. Khairuddin Abu Bakar (R) J.P. (Independent Non-Executive Director) Dr. Raja Abdul Malek Raja Jallaludin (Independent Non-Executive Director) Datuk Zakaria Sharif (Non-Independent Non-Executive Director) To: Our shareholders Dear Sir/Madam, PROPOSED ACQUISITION 1. INTRODUCTION On 22 August 2017, we announced that BRNSB had issued a letter of intent dated 18 August 2017 to the Vendor for the proposed acquisition of the Plantation Assets. On 6 October 2017, we announced that BRNSB, via its letter to the Vendor dated 6 October 2017, had agreed to purchase the Plantation Assets subject to the terms and conditions to be mutually agreed upon by the relevant parties and the signing of a sale and purchase agreement within 30 days from 6 October On 30 October 2017, Affin Hwang IB, on behalf of our Board, announced that BRNSB entered into the SPA with the Vendor and the Registered Owners for the Proposed Acquisition. Further details on the Proposed Acquisition are set out in the ensuing sections. THE PURPOSE OF PART A OF THIS CIRCULAR IS TO PROVIDE YOU WITH DETAILS OF THE PROPOSED ACQUISITION AS WELL AS TO SEEK YOUR APPROVAL FOR THE RESOLUTION PERTAINING TO THE PROPOSED ACQUISITION TO BE TABLED AT OUR FORTHCOMING EGM. A NOTICE OF THE EGM TOGETHER WITH THE PROXY FORM IS ENCLOSED IN THIS CIRCULAR. YOU ARE ADVISED TO READ AND CAREFULLY CONSIDER THE CONTENTS OF THIS CIRCULAR INCLUDING THE APPENDICES BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED ACQUISITION AT OUR FORTHCOMING EGM. 1

9 2. DETAILS OF THE PROPOSED ACQUISITION The SPA involves the proposed acquisition by BRNSB of the Plantation Assets for the Purchase Consideration of RM750 million, subject to the terms and conditions contained in the SPA. The Plantation Assets comprise the Plantation Lands and the Assets. The Plantation Lands are currently cultivated with oil palm. The Plantation Lands comprise 42 country lease land titles measuring a total of 11, Ha. Out of these 42 country lease land titles, PLD is the registered and beneficial owner of 27 country lease land titles measuring 7, Ha. The remaining 15 country lease land titles measuring 4, Ha are registered under the name of the respective Registered Owners (other than PLD). Notwithstanding the completion of the PLD SPAs on 30 June 2003, the transfers of these 15 country lease land titles have not been effected from the Registered Owners (other than PLD) to PLD. Accordingly, PLD is the beneficial owner of these 15 country lease land titles and as at the LPD, these 15 country lease land titles remain under the name of the Registered Owners (other than PLD). 2.1 Basis and justification of arriving at the Purchase Consideration The Vendor agrees to sell and BRNSB agrees to purchase the Plantation Assets at the Purchase Consideration free from all encumbrances, caveats, liens and other restraints, subject to the restrictions in interest and conditions of the titles of the Plantation Assets and the conditions set out in Section of Part A of this Circular. The Purchase Consideration is derived at on a willing-buyer willing-seller basis after taking into consideration the market value of the Plantation Assets of RM760 million as appraised by the Valuer as at the material date of valuation of 10 October Our Board is of the view that the Purchase Consideration is justifiable after taking into consideration the following: (a) the Purchase Consideration represents a discount of RM10 million or 1.3% from the market value of the Plantation Assets of RM760 million and this is deemed to be the fair value transacted on an arm s length basis; and (b) the future prospects of the Estates as detailed in Section 4.3 of Part A of this Circular. Based on the Valuation Reports, the Valuer has adopted the following methods of valuation in arriving at the market value of the Plantation Assets: (i) Income capitalisation approach (discounted cash flow) The income capitalisation approach (discounted cash flow) converts future amounts (i.e. cash flows or income and expenses) to a discounted current amount. The market value measurement reflects current market expectations in respect of the future amounts. This approach estimates the annual income accruing to the oil palm based on the FFB yield and the long term average price of the crop. The cost of production such as general and administrative charges, harvesting, upkeep and cultivation costs are deducted and the resultant net income is capitalised at an appropriate rate of return for the remaining cropping life of the oil palm to arrive at the value of the existing crops. Further, the Valuer had taken into consideration the necessary cost of production required to implement good agricultural practices and adequate fertiliser inputs in order to improve the FFB yield of the Estates to the industry average of FFB yield in Sabah after 2 years. 2

10 At the end of the economic life of the cultivation, the Plantation Assets are reverted to basic land condition, in which the basic land value is discounted for the period. The Valuer has adopted, amongst others, the following assumptions under this approach: (a) (b) (c) (d) a life span of 25 years for the oil palm; long term average price for CPO and PK of RM2,500 per MT and RM1,750 per MT respectively; FFB price of RM510 per MT; and discount rates of 8% and 3% in computing the present values of the net income of the oil palm cultivation and the reversionary basic land value respectively. The Valuer has arrived at the market value of the Plantation Assets by adopting the income capitalisation approach (discounted cash flow). The market values of the Plantation Assets are as follows: No. Estate Land area Market Value Ha RM Pertama Estate 2, , Sg Sapa Payau Estate 1, , Sg Ruku Ruku Estate 3, , Sg Lokan Estate 2, , Sg Lokan Baru Estate 1, ,100 Total 11, ,000 (Source: Valuation Reports) (ii) Comparison approach The Valuer also used the comparison approach as a check to the income capitalisation approach (discounted cash flow). The comparison approach seeks to determine the value of the Plantation Assets by comparing recent transactions and sale evidences involving other similar properties in the vicinity of the Estates. Adjustments are made to the transaction value by taking into account factors such as time, size, location, accessibility, cultivation and tenure of the titles. [The rest of this page is intentionally left blank] 3

11 The Valuer has relied on the following comparable transactions under the comparison approach of valuation for the Estates: Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Location Property type Located off KM 107, Ranau-Sandakan Agriculture (oil palm plantation) Known as Tanah Emas Corporation Berhad, Located off Batu 74, Jalan Ranau-Sandakan Agriculture (oil palm plantation) Located within Tenegang Koyah/Ulu Segama Agriculture (oil palm plantation) Located within the area known as Sungai Segama, Off Jalan Sandakan Lahad Datu Agriculture (oil palm plantation) Known as Ladang Pintasan 8, Located at Kg Kuamut, Sungai Kinabatangan Agriculture (oil palm plantation) Located off Batu 78, Jalan Ranau- Sandakan Agriculture (oil palm plantation) Tenure Leasehold Leasehold Leasehold Leasehold Leasehold Leasehold Total title land area (Ha) 1, , , Date of transaction 20 August June September December July December 2016 Total transacted price RM74,051,490 RM71,720,000 RM184,596,825 RM34,086,310 RM100,448,621 RM17,570,250 Transacted price per Ha RM72,061 RM85,779 RM76,603 RM71,631 RM65,474 RM70,422 Pertama Estate & Sg Sapa Payau Estate Effective adjustment * Adjusted land value per Ha -10.0% -20.0% -2.5% -5.0% -25.0% -32.5% RM64,855 RM68,623 RM74,687 RM68,049 RM49,106 RM47,535 From the above analysis, the adjusted land value ranges from RM47,535 to RM74,687 per Ha. The Valuer has adopted Comparable 2 of RM68,623 per Ha as the best comparable as it is located near the Pertama Estate and Sg Sapa Payau Estate. The market value of the Pertama Estate and Sg Sapa Payau Estate using the comparison approach is RM268 million. Sg Ruku-Ruku Estate Effective adjustment * Adjusted land value per Ha -15.0% -25.0% -10.0% -20.0% -30.0% -35.0% RM61,252 RM64,334 RM68,942 RM57,305 RM45,832 RM45,774 From the above analysis, the adjusted land value ranges from RM45,774 to RM68,942 per Ha. The Valuer has adopted Comparable 2 of RM64,334 per Ha as the best comparable as it is located near to the Sg Ruku-Ruku Estate. The market value of the Sg Ruku-Ruku Estate using the comparison approach is RM205 million. 4

12 Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Location Located off KM 107, Ranau-Sandakan Known as Tanah Emas Corporation Berhad, Located off Batu 74, Jalan Ranau-Sandakan Located within Tenegang Koyah/Ulu Segama Located within the area known as Sungai Segama, Off Jalan Sandakan Lahad Datu Known as Ladang Pintasan 8, Located at Kg Kuamut, Sungai Kinabatangan Located off Batu 78, Jalan Ranau- Sandakan Sg Lokan & Sg Lokan Baru Estate Effective adjustment * Adjusted land value (per Ha) -20.0% -25.0% -10.0% -10.0% -30.0% -35.0% RM57,648 RM64,334 RM68,942 RM64,468 RM45,832 RM45,774 From the above analysis, the adjusted land value ranges from RM45,774 to RM68,942 per Ha. The Valuer has adopted Comparable 2 of RM64,334 per Ha as the best comparable as it is located near to the Sg Lokan and Sg Lokan Baru Estate. The market value of the Sg Lokan and Sg Lokan Baru Estate using the comparison approach is RM284 million. Note: * After taking into account factors such as time, size, location, accessibility, cultivation and tenure of the titles. (Source: Valuation Reports) In summary, the aggregate market value of the Plantation Assets under the comparison approach is RM757 million. The Valuer has adopted the income capitalisation approach as the main method based on the following: (i) the Plantation Assets are currently producing a constant stream of income; and (ii) there is sufficient data on income and production cost to provide a fair representation of the market value of the Plantation Assets using this approach. Please refer to Section 2.2 of Part A and Appendix II of this Circular for further information on the Plantation Assets and the Valuation Certificate respectively. 5

13 2.2 Description of the Plantation Assets The Plantation Assets comprise 5 plantation estates, the particulars of which are as follows: Name of estates Location Tenure of leasehold period No. of land titles Area (Ha) Pertama Estate Sg Sapa Payau Estate Mile 75, 76 & 77 Jalan Labuk and Telupid, District of Labuk & Sugut, Sandakan, Sabah. 99 years expiring between 2079 and , , Sg Ruku-Ruku Estate Mile 75, Jalan Labuk and Sungai Ruku Ruku, District of Labuk & Sugut, Sandakan, Sabah. 99 years expiring between 2079 and , Sg Lokan Estate Sg Lokan Baru Estate Mile 72 Sungai Lokan, Sungai Lokan and Sungai Ruku Ruku, District of Labuk & Sugut, Sandakan, Sabah. 99 years expiring between 2079 and , , , Please refer to Appendix I of this Circular for a map showing the location of the Plantation Lands. Further details of the Plantation Assets are set out below: Age profile of the oil palm : Age profile Ha % Immature (0 to 3 years) Young mature (4 to 9 years) 1, Prime mature (10 to 20 years) 6, Past mature (more than 20 years) 2, Total planted area 9, Estate land area : Estate land area Ha % Planted area 9, Planting reserve Unplantable area Building, sites and roads Overplanted area (58.93) (0.51) Other reserve and grid line (64.92) (0.56) Total estate land area 11, Average : For the FYE 30 June MT/Ha FFB (1) production of Plantation profit : For the FYE 30 June RM , , ,059 Audited net book value as at 30 June 2017 : RM340,242,000 (2) 6

14 Market value as at 10 October 2017 (1) : RM760,000,000 Notes: (1) Based on the Valuation Reports. (2) Including net book value of other assets amounting to about RM1.03 million that are not allocated to the individual Estates Pertama Estate Location : Mile 75, 76 & 77 Jalan Labuk and Telupid, District of Labuk & Sugut, Sandakan, Sabah. Registered owners, title particulars and tenure of country lease : No. Title particulars Registered Owner Tenure 1. CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL MSB (1) Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL (2) PLD Leasehold 99 years expiring 31/12/ CL (2) PLD Leasehold 99 years expiring 31/12/2079 Existing use and description List of agricultural equipment and motor vehicles Category of land use Restriction in interest : Cultivated with oil palm and include buildings and road facilities. : No. Description Unit 1. Motor vehicles 2 2. Water bowser 5 3. Tipping trailer Tractor 14 : Not applicable : Not applicable Special terms : Subject to the provisions and conditions contained in the Land Ordinance (Sabah Cap. 68) and the special terms per the respective land titles Development plan : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the development plan per the respective land titles The owner covenants : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the owner covenants per the respective land titles Encumbrances : Nil Total land area : 2, Ha 7

15 Age profile of the : Age profile Ha % oil palm (3) Immature (0 to 3 years) - - Young mature (4 to 9 years) Prime mature (10 to 20 years) 1, Past prime (more than 20 years) - - Total planted area 2, Estate land area (3) : Land area Ha % Planted area 2, Planting reserve Unplantable area Building, sites and roads Overplanted area (0.20) (0.01) Other reserve and grid line Total estate land area 2, Average : For the FYE 30 June MT/Ha FFB (3) production of Plantation profit : For the FYE 30 June RM , , ,287 Audited net book value as at 30 June 2017 : RM115,541,000 (4) Market value as at : RM188,900, October 2017 (3) Notes: (1) PLD is the beneficial owner pursuant to the PLD SPAs. (2) Shared titles between Pertama Estate and Sg Sapa Payau Estate. (3) Based on the Valuation Reports. (4) Combined net book value for Pertama Estate and Sg Sapa Payau Estate Sg Sapa Payau Estate Location : Mile 75, 76 & 77 Jalan Labuk and Telupid, District of Labuk & Sugut, Sandakan, Sabah. Registered owners, title particulars and tenure of country lease : No. Title particulars Registered Owner Tenure 1. CL PLD Leasehold 99 years expiring 31/12/ CL MSB (1) Leasehold 99 years expiring 31/12/ CL MSB (1) Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL MSB (1) Leasehold 99 years expiring 31/12/ CL (2) PLD Leasehold 99 years expiring 31/12/ CL (2) PLD Leasehold 99 years expiring 31/12/2079 Existing use and description : Cultivated with oil palm and include buildings and road facilities. 8

16 List of agricultural equipment and motor vehicles Category of land use Restriction in interest : No. Description Unit 1. Motor vehicles 2 2. Water bowser 4 3. Tractor 8 4. Tipping trailer 12 : Not applicable : Not applicable Special terms : Subject to the provisions and conditions contained in the Land Ordinance (Sabah Cap. 68) and the special terms per the respective land titles. Development plan : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the development plan per the respective land titles The owner covenants : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the owner covenants per the respective land titles Encumbrances : Nil Total land area : 1, Ha Age profile of the : Age profile Ha % oil palm (3) Immature (0 to 3 years) - - Young mature (4 to 9 years) Prime mature (10 to 20 years) Past prime (more than 20 years) - - Total planted area Estate land area (3) : Land area Ha % Planted area Planting reserve - - Unplantable area Building, sites and roads Overplanted area - - Other reserve and grid line - - Total estate land area 1, Average : For the FYE 30 June MT/Ha FFB (3) production of Plantation profit : For the FYE 30 June RM , ,089 Audited net book value as at 30 June 2017 : RM115,541,000 (4) Market value as : RM87,100, (3) at 10 October Notes: (1) PLD is the beneficial owner pursuant to the PLD SPAs (2) Shared titles between Pertama Estate and Sg Sapa Payau Estate. (3) Based on the Valuation Reports. (4) Combined net book value for Pertama Estate and Sg Sapa Payau Estate. 9

17 2.2.3 Sg Ruku-Ruku Estate Location : Mile 75, Jalan Labuk and Sungai Ruku Ruku, District of Labuk & Sugut, Sandakan, Sabah. Registered owners, title particulars and tenure of country lease : No. Title particulars Registered Owner Tenure 1. CL LESB (1) Leasehold 99 years expiring 31/12/ CL TPSB (1) Leasehold 99 years expiring 31/12/ CL LPSB (1) Leasehold 99 years expiring 31/12/ CL LAJSB (1) Leasehold 99 years expiring 31/12/ CL MPSB (1) Leasehold 99 years expiring 31/12/ CL TESB (1) Leasehold 99 years expiring 31/12/ CL Telupid (1) Leasehold 99 years expiring 31/12/ CL LPSB (1) Leasehold 99 years expiring 31/12/ CL MSB (1) Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/2080 Existing use and description List of agricultural equipment and motor vehicles Category of land use Restriction in interest : Cultivated with oil palm and include buildings and road facilities : No. Description Unit 1. Motor vehicles 2 2. Tipping trailer Tractor Water bowser 4 : Not applicable : Not applicable Special terms : Subject to the provisions and conditions contained in the Land Ordinance (Sabah Cap. 68) and the special terms per the respective land titles. Development plan : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the development plan per the respective land titles The owner covenants : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the owner covenants per the respective land titles Encumbrances : Nil Total land area : 3, Ha 10

18 Age profile of the : Age profile Ha % oil palm (2) Immature (0 to 3 years) - - Young mature (4 to 9 years) - - Prime mature (10 to 20 years) Past prime (more than 20 years) 2, Total planted area 2, Estate land area (2) : Land area Ha % Planted area 2, Planting reserve - - Unplantable area Building, sites and roads Overplanted area (24.08) (0.75) Other reserve and grid line (18.91) (0.59) Total estate land area 3, Average : For the FYE 30 June MT/Ha FFB (2) production of Plantation profit : For the FYE 30 June RM , , ,312 Audited net book value as at 30 June 2017 : RM93,631,000 Market value as at : RM202,000, October 2017 (2) Notes: (1) PLD is the beneficial owner pursuant to the PLD SPAs. (2) Based on the Valuation Reports Sg Lokan Estate Location : Mile 72 Sungai Lokan, Sungai Lokan and Sungai Ruku Ruku, District of Labuk & Sugut, Sandakan, Sabah. Registered owners, title particulars and tenure of country lease : No. Title particulars Registered Owner Tenure 1. CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL MSB (1) Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL MSB (1) Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/2079 Existing use and description : Cultivated with oil palm and include buildings and road facilities 11

19 List of agricultural equipment and motor vehicles Category of land use Restriction in interest : No. Description Unit 1. Motor vehicles 2 2. Water bowser 3 3. Tractor Tipping trailer 16 : Not applicable : Not applicable Special terms : Subject to the provisions and conditions contained in the Land Ordinance (Sabah Cap. 68) and the special terms per the respective land titles. Development plan : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the development plan per the respective land titles The owner covenants : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the owner covenants per the respective land titles Encumbrances : Nil Total land area : 2, Ha Age profile of the : Age profile Ha % oil palm (2) Immature (0 to 3 years) - - Young mature (4 to 9 years) Prime mature (10 to 20 years) 1, Past prime (more than 20 years) Total planted area 2, Estate land area (2) : Land area Ha % Planted area 2, Planting reserve - - Unplantable area Building, sites and roads Overplanted area (34.50) (1.35) Other reserve and grid line (22.89) (0.90) Total estate land area 2, Average production of FFB (2) : For the FYE 30 June MT/Ha Plantation profit : For the FYE 30 June RM , , ,949 Audited net book value as at 30 June 2017 : RM130,040,000 (3) Market value as at : RM166,900, October 2017 (2) Notes: (1) PLD is the beneficial owner pursuant to the PLD SPAs. (2) Based on the Valuation Reports. (3) Combined net book value for Sg Lokan Estate and Sg Lokan Baru Estate. 12

20 2.2.5 Sg Lokan Baru Estate Location : Mile 72 Sungai Lokan, Sungai Lokan and Sungai Ruku Ruku, District of Labuk & Sugut, Sandakan, Sabah. Registered owners, title particulars and tenure of country lease : No. Title particulars Registered Owner Tenure 1. CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/ CL PLD Leasehold 99 years expiring 31/12/2087 Existing use and description List of agricultural equipment and motor vehicles Category of land use Restriction in interest : Cultivated with oil palm and include buildings and road facilities : No. Description Unit 1. Motor vehicles 2 2. Water bowser 3 3. Tractor Tipping trailer 11 : Not applicable : Not applicable Special terms : Subject to the provisions and conditions contained in the Land Ordinance (Sabah Cap. 68) and the special terms per the respective land titles. Development plan : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the development plan per the respective land titles The owner covenants : Subject to the provisions and conditions in the Land Ordinance (Sabah Cap. 68) and the owner covenants per the respective land titles Encumbrances : Nil Total land area : 1, Ha Age profile of the : Age profile Ha % oil palm (1) Immature (0 to 3 years) Young mature (4 to 9 years) - - Prime mature (10 to 20 years) 1, Past prime (more than 20 years) - - Total planted area 1,

21 Estate land area (1) : Land area Ha % Planted area 1, Planting reserve Unplantable area Building, sites and roads Overplanted area (0.15) (0.01) Other reserve and grid line (28.47) (1.51) Total estate land area 1, Average production of FFB (1) : For the FYE 30 June MT/Ha Plantation profit : For the FYE 30 June RM , , ,422 Audited net book value as at 30 June 2017 : RM130,040,000 (2) Market value as at : RM115,100, October 2017 (1) Notes: (1) Based on the Valuation Reports. (2) Combined net book value for Sg Lokan Estate and Sg Lokan Baru Estate. 2.3 Salient terms of the SPA The salient terms of the SPA are as follows: CPs The SPA is subject to and conditional upon the following CPs being fulfilled on or before the Conditional Period: (i) (ii) (iii) the approval from our shareholders; the approval from the shareholders of DutaLand, the ultimate holding company of the Vendor; and the approval from any regulatory authorities, if applicable Mode of payment The Purchase Consideration will be settled in the following manner: (i) payment of the Deposit, the breakdown as follows: (a) (b) (c) RM15.0 million, being 2% of the Purchase Consideration prior to the execution of the SPA, which was paid to the Vendor on 22 August 2017; RM37.5 million, being 5% of the Purchase Consideration upon execution of the SPA, which was paid to the Vendor on 30 October 2017; and RM22.5 million, being 3% of the Purchase Consideration upon execution of the SPA, which was paid to BRNSB s solicitors on 30 October 2017 for the purpose of real property gains tax, (ii) payment of the Balance Purchase Price within the Completion Period. 14

22 If BRNSB fails to pay the Balance Purchase Price by the Completion Period, the Vendor will grant BRNSB an automatic extension within the Extended Completion Period to pay the Balance Purchase Price, subject to a late payment interest rate of 8% per annum to be calculated on a daily basis from the next day after the last day of the Completion Period to the date of payment of the outstanding Balance Purchase Price by the Purchaser Execution of MOT Upon execution of the SPA, the Vendor and the Registered Owners will execute 2 original copies of a valid and registrable MOT in favour of BRNSB for each of the land titles under the Plantation Lands and deposit the same with BRNSB s solicitors, who will attend to the adjudication thereof Delivery of land titles At any time after the execution of the SPA, the Vendor and the Registered Owners will deliver the Title Deeds to the Vendor s solicitors. Within 5 business days from the payment of the Balance Purchase Price, the Vendor s solicitors will deliver the Title Deeds to BRNSB s solicitors for the presentation of the MOTs in favour of BRNSB Caveat Upon execution of the SPA, BRNSB shall be entitled to enter private caveats on the land titles to protect its interest on the Plantation Lands pending the completion of the SPA Non-fulfilment of the CPs If one or more of the CPs is not fulfilled within the Conditional Period, the SPA will be terminated. The Vendor will return the Deposit to BRNSB, free of interest, within 10 business days from the date of the notice issued jointly by the Vendor and BRNSB. Thereafter, both parties will not have any claim against the other except any pre-existing breach under the SPA and the Vendor can sell or deal with the Plantation Assets in such manner they deem fit Non-perfection of the MOT If the transfer of the land titles of the Plantation Lands cannot be registered by the relevant land authority for any reason or defect not due to any act, omission, default, neglect and/or blameworthy conduct on the part of any of the Parties which cannot be rectified within 30 days from the Parties knowledge of the reason or defect, BRNSB may terminate the SPA by written notice to the Vendor, in which: (i) (ii) the Vendor will refund all monies paid relating to the Purchase Consideration including the Retention Sum (notwithstanding that the Retention Sum may already have been released by the Purchaser s Solicitors to the Director General), free of interest to BRNSB within 14 days from the date of BRNSB s termination notice to the Vendor; and in simultaneous exchange of the refund, BRNSB will withdraw all private caveats lodged over the Plantation Lands, return the MOTs, the original Title Deeds (if delivered) and all other related documents with the Vendor s interest on the Plantation Assets intact and and redeliver possession of the Plantation Assets in the same state and condition as at the date of their delivery and free from any structures which BRNSB may have erected or constructed and occupiers. 15

23 Thereafter, the SPA will be terminated and both parties will not have any claim against the other except any pre-existing breach under the SPA. The Vendor can sell or deal with the Plantation Assets in such manner they deem fit Vacant possession Vacant possession of the Plantation Assets will be delivered by the Vendor to BRNSB in satisfactory conditions and in compliance with the conditions set out in Section of Part A of this Circular simultaneously upon payment of the Balance Purchase Price, together with any late payment interest and payment of the apportionment of all outgoings in respect of the Plantation Lands, by BRNSB to the Vendor ( Delivery Date ). BRNSB may hold a joint-inspection on the Delivery Date to ensure that the conditions set out in Section of Part A of this Circular have been fulfilled Default by BRNSB If BRNSB fails to pay the Balance Purchase Price or any part of it and the Vendor had complied with all its obligations pursuant to the SPA, the Vendor may terminate the SPA and forfeit the Deposit as agreed liquidated damages. If the SPA is terminated, subject to the withdrawal of the private caveats lodged by BRNSB on the Plantation Lands (if any) and re-delivery of the possession of the Plantation Assets in the same state and condition as at the date of its delivery, the Vendor will return to BRNSB all payments of the Purchase Consideration, free of interest, after deducting the Deposit. Thereafter, the SPA will have no further effect and both parties will not have any claim against the other except any pre-existing breach under the SPA. The Vendor can sell or deal with the Plantation Lands in such manner they deem fit. Each party will pay its own solicitors fees and the respective costs agreed to be borne and discharged by the party as set out in the SPA without any contribution by the other Default by the Vendor If the Vendor fails to complete the sale of the Plantation Assets or breach any of the terms and conditions under the SPA and BRNSB had complied with all its obligations pursuant to the SPA, BRNSB may provide a notice to the Vendor specifying such failure or breach. If the Vendor fails to remedy such failure or breach within 14 business days from the date of receipt of such notice, BRNSB may either seek specific performance and all other remedies available under the law or terminate the SPA. If the SPA is terminated, the Vendor will return to BRNSB all payments of the Purchase Consideration and a further sum equivalent to the Deposit as agreed liquidated damages. Thereafter, the SPA will have no further effect and both parties will not have any claims against the other except any pre-existing breach, without prejudice to other rights and remedies available to BRNSB, in law or equity or under the SPA. If the Vendor fails to deliver any of the agricultural equipment and vehicles of the Plantation Assets upon Completion Date, the Vendor will pay for such Assets within 7 business days from the Completion Date, based on the amount and subject to the provisions set out in the SPA. 16

24 Representations and warranties The representations and warranties made by the Vendor and the Registered Owners under the SPA are, among others, as follows: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) the Vendor and the Registered Owners are the registered owners of the Plantation Lands. The Plantation Lands are free from encumbrances, charges, caveats, liens and restrictions-in-interest; the Vendor and/or the Registered Owners are not in default under any agreement or instrument to which it is a party or by which it may be bound and there is no pending or imminent litigation, arbitration or administrative proceedings, as the case may be, which might materially affect or impair the Vendor s ability to perform its obligations, stipulations and undertakings under the SPA; there are no demands, suits, proceedings, claims or liabilities whatsoever by any third party against the Vendor and/or the Registered Owners which would affect the obligations of the Vendor and/or the Registered Owners under the provisions of the SPA; the Plantation Lands or any part of it have not been acquired by the Sabah State Government or any other authorities and the Vendor have not received any notice under Section 3 or a declaration under Section 5 of the Land Acquisition Ordinance (Sabah Cap. 69) that the Plantation Lands or any part of it are subject to acquisition or intended acquisition by the Sabah State Government or any authorities; there are no outstanding notices in respect of the Plantation Lands served upon the Vendor and/or the Registered Owners from any local authorities, which might affect or impair the Vendor and/or the Registered Owners ability to perform their obligations under the SPA; no winding-up proceedings have been commenced against the Vendor and/or the Registered Owners as at the date of the SPA and the Vendor and/or the Registered Owners have not commenced any action or passed any resolution for its voluntary winding-up; all outgoings (including fines and penalties, if any) assessed or imposed upon the Plantation Lands which are due and payable as at the date of the SPA have been fully settled by the Vendor and/or the Registered Owners and any outgoings (including fines and penalties, if any) that may be assessed or imposed at any time between the date of the SPA and the delivery of vacant possession of the Plantation Lands will be fully settled by the Vendor and/or the Registered Owners; and the Vendor and/or the Registered Owners have observed and complied with all conditions of title, covenants, restrictions and category of use, whether express or implied, in respect of the Plantation Lands and will indemnify BRNSB against any liabilities in respect of taxes, fees, charges or other amounts payable in respect of the Plantation Lands before the delivery of vacant possession of the Plantation Assets as provided under the SPA. 17

25 The representations and warranties made by BRNSB under the SPA are, among others, as follows: (a) (b) (c) BRNSB is not in default under any agreement or instrument to which it is a party or by which it may be bound and there is no pending or imminent litigation, arbitration or administrative proceedings which might materially affect or impair BRNSB s ability to perform its obligations under the SPA; there are no demands, suits, proceedings, claims or liabilities by any third party against BRNSB which would affect the rights of BRNSB to purchase the Plantation Assets; and no winding-up proceedings have been commenced against BRNSB as at the date of the SPA and BRNSB has not commenced any action or passed any resolution for its voluntary winding-up Condition of the Plantation Lands The Plantation Lands will be sold to BRNSB free from all encumbrances, caveats, liens and other restraints. BRNSB has inspected the Plantation Assets during the period from 4 to 14 September Upon delivery of vacant possession of the Estates, BRNSB will comply with all notices and requirements of the Sabah State Government and local authorities in respect of the Lands, if any. The vacant possession of the Estates will be delivered by the Vendor to BRNSB upon registration of the Title Deeds in favour of BRNSB, subject to the following: (i) (ii) the Estates will be free from all debts and liabilities as at the Completion Date, save as otherwise provided in the SPA; the Vendor will pay for the entire construction costs for the proposed construction of a block of workers quarters amounting to RM350,000, notwithstanding that the construction works may not be completed on or before the Completion Date; (iii) the Vendor will settle all lease, hire-purchase rentals and/or instalments which are due and payable on or prior to the Completion Date for the leasing and/or hire-purchase of tractors which form part of the Assets; (iv) (v) (vi) the Vendor will pay for the existing terracing contract for the Sg Lokan Baru Estate valued at about RM170,000, notwithstanding that the related works may not be completed on or before the Completion Date; upon execution of the SPA, the Vendor will place an order to provide a minimum of RM3.0 million worth of fertilisers for use in the Estates. If the suppliers cannot deliver such volume of the fertilisers by the Completion Date, the Vendor will pay the remaining undelivered volume of the fertilisers as and when they are delivered to the Estates. from the date of the SPA until the Completion Date, the Vendor undertakes to ensure that the road upkeeping works, weeding and manuring of the Estates shall continue per the Estates current budget plan. If there is any unreasonable variance compared to said budget plan which will be calculated on a monthly basis, BRNSB and the Vendor will discuss and resolve the matter; and 18

26 (vii) save for the above, all other subsisting contracts will be terminated on or before the Completion Date and all outstanding liabilities shall be solely borne by the Vendor Appointment of observer Between the execution of the SPA and the Completion Date, BRNSB may appoint representative(s) to observe the running of the Plantation Assets to ensure a smooth transition and handover of the Plantation Assets to BRNSB on the Completion Date Employees of the Plantation Assets Prior to the Completion Date, all of the employees of the Plantation Assets will be terminated by the Vendor in accordance with the applicable law and the Vendor will be liable to settle all redundancy claims, compensation or collect any loans, debts or any amount whatsoever against the employees. Immediately after the Completion Date, BRNSB will employ selected employees under new employment agreements with a probationary period of 6 months and on other terms and conditions to be determined by BRNSB Goods and Services Tax ( GST ) Whenever required under the GST Act, BRNSB will pay GST to the Vendor at the current rate of 6% or at any other rate as may be amended from time to time under the GST Act, subject to the following: (i) (ii) the Vendor is permissible under the GST Act to collect GST; and the Vendor must issue valid tax invoice which complies with the requirements of the GST Act, provided always that no amount of GST imposed shall become due and payable by BRNSB unless the Vendor fulfils the conditions stipulated above. GST Act means any Act imposing or relating to the imposition or administration of a goods and services tax in Malaysia and any regulation made under that Act. 2.4 Liabilities to be assumed There are no liabilities, including contingent liabilities and guarantees, to be assumed by our Company arising from the Proposed Acquisition. 2.5 Additional financial commitment Save for the capital expenditure and operation expenses in relation to the Plantation Assets, the Purchase Consideration and other expenses relating to the Proposed Acquisition, our Group do not expect to incur any other additional financial commitment after the completion of the Proposed Acquisition. Further information on the estimated capital expenditure and operational expenses for the improvement of the Plantation Assets are set out in Section 4.3 of Part A of this Circular. 19

27 2.6 Source of funding We had previously completed the Malakoff Sale and set aside the proceeds of RM300 million to acquire oil palm plantation lands. As stated in the circular to our shareholders in relation to the Malakoff Sale dated 16 March 2017, pending the use of said proceeds, in the interim period, the proceeds will be placed in profit-bearing investment accounts, invested in money market instruments or used for repayment of our Company s revolving credit or overdraft facilities. We have used said proceeds to repay our revolving credit facilities during the FYE 31 December Accordingly, the Proposed Acquisition will be funded in the following manner: RM million Internally generated funds * 75.0 Existing revolving credit facilities or overdraft facilities to be redrawn New term loan facilities Purchase Consideration Note: * Being the payment of the Deposit. 2.7 Information on BRNSB BRNSB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 13 June 1995 as a private limited company under the name of Rimba Nilai Sdn Bhd. On 4 March 2004, the company assumed its present name. BRNSB is our wholly-owned subsidiary. It is principally involved in the cultivation of oil palm and processing of FFB. As at the LPD, the total issued share capital of BRNSB is RM100,000,000 represented by 100,000,000 ordinary shares. The existing directors of BRNSB are Mr Chow Kok Choy, Dato Shoib Abdullah and Sharudin Jaffar. 2.8 Information on PLD PLD was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 9 June 1981 as a private limited company under its present name. PLD is a wholly-owned subsidiary of DPSB. It is principally involved in the cultivation of oil palm and sales of oil palm FFB. As at the LPD, the total issued share capital of PLD is RM10,000,000 represented by 10,000,000 ordinary shares. The existing directors of PLD are Tan Sri Dato Yap Yong Seong, Dato Sri Yap Wee Keat, Yap Wee Chun and Ng Ju Siong. 20

28 2.9 Information on Registered Owners other than the Vendor (i) LAJSB LAJSB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 20 August 1981 as a private limited company. LAJSB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of LAJSB is RM3 represented by 3 ordinary shares. The existing directors of LAJSB are Yap Wee Chun and Ng Ju Siong. (ii) LESB LESB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 20 August 1981 as a private limited company LESB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of LESB is RM3 represented by 3 ordinary shares. The existing directors of LESB are Yap Wee Chun and Ng Ju Siong. (iii) LPSB LPSB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 23 July 1981 as a private limited company. LPSB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of LPSB is RM3 represented by 3 ordinary shares. The existing directors of LPSB are Yap Wee Chun and Ng Ju Siong. (iv) LSB LSB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 20 August 1981 as a private limited company. LSB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of LSB is RM3 represented by 3 ordinary shares. The existing directors of LSB are Yap Wee Chun and Ng Ju Siong. (v) MPSB MPSB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 7 May 1980 as a private limited company. MPSB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of MPSB is RM3 represented by 3 ordinary shares. The existing directors of MPSB are Yap Wee Chun and Ng Ju Siong. 21

29 (vi) MSB MSB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 26 March 1980 as a private limited company. MSB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of MSB is RM3,000 represented by 3,000 ordinary shares. The existing directors of MSB are Yap Wee Chun and Ng Ju Siong. (vii) Telupid Telupid was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 20 August 1981 as a private limited company. Telupid is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of Telupid is RM3 represented by 3 ordinary shares. The existing directors of Telupid are Yap Wee Chun and Ng Ju Siong. (viii) TESB TESB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 6 August 1981 as a private limited company. TESB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of TESB is RM3 represented by 3 ordinary shares. The existing directors of TESB are Yap Wee Chun and Ng Ju Siong. (ix) TPSB TPSB was incorporated in Malaysia under the Companies Act, 1965 (and deemed incorporated under the Act) on 5 September 1981 as a private limited company. TPSB is a wholly-owned subsidiary of DPSB. It is presently a dormant company. As at the LPD, the total issued share capital of TPSB is RM3 represented by 3 ordinary shares. The existing directors of TPSB are Yap Wee Chun and Ng Ju Siong. 22

30 3. RATIONALE FOR THE PROPOSED ACQUISITION The Proposed Acquisition is part of our Group s strategy to acquire more plantation lands in Malaysia in view of the scarcity of suitable and sizeable land banks for oil palm cultivation. Upon completion of the Proposed Acquisition, the total plantation land bank held by our Group (excluding 139 Ha pursuant to the Proposed Sale) will increase by about 14.2%, from 81,699 Ha to 93,278 Ha. This also represents an increase of 15.4% in total planted area of oil palms from 64,869 Ha to 74,867 Ha. The Proposed Acquisition represents a move to replace some of our Group s plantation lands in Peninsular Malaysia which were disposed in recent years with sizable plantation lands in Sabah at a lower land cost per Ha. This is in view of the rapid developments in Peninsular Malaysia which have resulted in lands being less viable for plantation activities. This strategy also presents our Group with the opportunity to improve our income over the long term for our future growth. For illustration purposes, our Group undertook the Malakoff Sale and the Proposed Sale at a consideration of RM914,932 per Ha and RM979,509 per Ha respectively, compared to the cost of acquisition of RM64,771 per Ha for this Proposed Acquisition. After taking into consideration the above as well as the prospects of the Estates, as further elaborated in Section 4.3 of Part A of this Circular, we are of the view that the Proposed Acquisition represents a strategic investment by our Group which is expected to grow our Group s plantation revenue and profitability in the future. 4. INDUSTRY OUTLOOK AND PROSPECTS 4.1 Overview of the Malaysian economy For the fourth quarter of 2017, the Malaysian economy registered a growth of 5.9% (3Q 2017: 6.2%) as private sector spending continued to be the primary driver of growth (7.4%; 3Q 2017: 7.3%). The external sector performance improved further (5.4%; 3Q 2017: 1.7%), as real import growth moderated faster than real export growth. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 0.9% (3Q 2017: 1.8%). For the year as a whole, the economy registered a robust growth of 5.9% (2016: 4.2%). Domestic demand expanded by 6.2% (3Q 2017: 6.6%) supported by continued strength in private sector expenditure (7.4%; 3Q 2017: 7.3%), amid waning support from public sector spending (3.4%; 3Q 2017: 4.0%). Private consumption expanded by 7.0% (3Q 2017: 7.2%), supported by continued wage and employment growth. The agriculture sector s growth performance improved, reflecting mainly higher CPO output as yields recovered from adverse weather conditions in the previous quarter. The agriculture sector s growth will be driven by further improvements in CPO yields and the maturing of oil palm trees. For 2018, growth is expected to remain favourable with domestic demand continuing to be the key driver of growth. The positive growth momentum will continue to benefit from spillovers from better global growth on to domestic economic activity. (Source: Economic and Financial Developments in Malaysia in the Fourth Quarter of 2017, Bank Negara Malaysia) 23

31 4.2 Industry outlook The Malaysian oil palm industry showed sterling performance in CPO production and FFB yield witnessed significant increases following recovery from the impact of the El-Nino phenomenon a year earlier. According to the Department of Statistics, Malaysia, higher palm oil prices and improved export demand helped push export earnings to RM77.85 billion, up from RM67.92 billion in Oil palm planted area in 2017 reached 5.81 million Ha, an increase of 1.3% as against 5.74 million Ha the previous year. Sarawak overtook Sabah as the largest oil palm planted state, with 1.56 million Ha or 26.8% of the total Malaysian oil palm planted area, followed by Sabah with 1.55 million Ha or 26.6% and Peninsular Malaysia with 2.70 million Ha or 46.6%. In 2017, CPO production increased by 15.0%, reaching million MT as against million MT in The increase was due to higher FFB processed, up by 17.7% arising from higher FFB production that increased by 12.4%. CPO production in Peninsular Malaysia, Sabah and Sarawak increased by 19.0%, 7.6% and 15.1% to million MT, 5.22 million MT and 4.13 million MT, respectively. The FFB yield improved significantly in 2017 by 12.4% to MT/Ha as against MT/Ha in FFB yield for Peninsular Malaysia increased by 18.6% to MT/Ha as against MT/Ha in Sabah s FFB yield registered an increase of 7.3% to MT/Ha as against MT, while that of Sarawak was equally higher at MT/Ha, up by 8.5% compared to MT/Ha in The National OER in 2017 declined slightly by 2.3% to 19.72% from 20.18% in 2016 due to lower quality FFB processed by the mills. OER in Peninsular Malaysia, Sabah and Sarawak declined by 2.8%, 2.4% and 0.2% to 19.21%, 20.60% and 19.98% respectively. (Source: Overview of the Malaysian Oil Palm Industry, 2017, MPOB) [The rest of this page is intentionally left blank] 24

32 4.3 Prospects of the Estates The palm oil industry is recognised as a main contributor for the domestic economy, hence we are of the view that the future prospects for the Estates will remain favourable. In Sabah, our Group operates 13 estates and 4 palm oil mills, with a total plantation land of 29,482 Ha, out of which 27,206 Ha is planted with oil palms. Our Group has an established track record for our FFB yield and estate management in Sabah. A summary of our Group s FFB yield in Sabah for the past 3 years is set out below: FFB yield (MT/Ha) (1) 18.0 (1) 16.6 (2) 17.3 MPOB s benchmark yield for Sabah (3) (MT/Ha) Notes: (1) Lower yield mainly attributable to the severe dry spell in 2015 and 2016 which had lasting after effects that impacted cropping patterns in the Sabah region. (2) Lower yield mainly attributable to high rainfalls as well as inaccessibility to some of our Group s estates due to flooding. (3) Source: MPOB. The total FFB yield from the Estates for the past 3 years is set out below: For the FYE 30 June FFB yield (MT/Ha) From the tables set out above, the FFB yield from the Estates is significantly lower than our Group s FFB yield for our Sabah estates. Our management intends to focus on improving the productivity of the Estates upon completion of the Proposed Acquisition by implementing the following measures: (i) (ii) progressive replanting of old and low yielding fields with higher yielding planting materials. Our management plans to replant about 7,400 Ha out of 9,998 Ha plantable area of the Estates over the next 10 years with improved high yielding semi-clonal and clonal oil palms, which is expected to boost the FFB yield and profitability of the Estates in the long run; construction of a new palm oil mill on one of the Estates. The Estates are located in close proximity with our Group s existing estates, namely Resort, Nak and Sutera Estates, allowing our Group to benefit from economies of scale particularly in terms of mill operations. Please refer to Appendix I of this Circular on the location of the Estates and our Group s existing estates. Our management plans to construct a new palm oil mill with a production capacity of 60 MT/hour on one of the Estates which is expected to improve production and operational efficiencies. The said mill, with a target completion by 2020, will increase the OER of FFB as it will eventually replace the Nak Palm Oil Mill which has a lower production capacity of 40 MT/hour. All of the FFB produced from the other estates of our Group which are currently transported to the Nak Palm Oil Mill will then be transported to the relocated palm oil mill, which will reduce transportation costs; 25

33 (iii) implementation of good agricultural practices and adequate fertiliser inputs based on site yield potential. Based on the reports titled Agronomic Report & 2016/17 Fertilisers Recommendations prepared by a third party consultant as extracted from the Valuation Reports, the Estates can achieve the industry yield with adequate input of fertilisers consistently carried out for the next 2 years. For sufficient replenishment, 2 applications of fertilisers per year is required to sustain good yield levels; (iv) (v) efficient FFB harvesting and evacuation through sufficient supply of labour and the usage of mechanised equipment and machineries; and improving the infrastructure within the Estates such as building access roads, bridges and workers quarters. Our Group estimates a total investment of RM250 million for the above measures which will be made over a period of 10 years upon completion of the Proposed Acquisition (the said amount includes construction of palm oil mill of up to RM95 million). The capital expenditure is expected to be financed via internally generated funds and/or bank borrowings. The exact mix of the internally generated funds and/or bank borrowings will be determined by our Group at a later stage, after taking into consideration the gearing level of our Group, interest costs and internal cash requirements for our Group s business operations. Our management believes that through their vast experience and technical expertise in the plantation business, they will be able to apply such knowledge to improve the yield of the Estates to be in line with other estates owned and/or managed by our Group. We have proven our ability to improve the FFB yield of our estates from the previous acquisition of G&G Estate in Sabah. The implementation of good agricultural practices and high fertiliser inputs on this estate have resulted in improved FFB yield of 22.5 MT/Ha in 2017, compared with MT/Ha achieved before we acquired the estate in December The increase in plantation hectarage pursuant to the Proposed Acquisition will also improve our Group s presence in the oil palm cultivation business in Malaysia. The Proposed Acquisition will enable us to strategically position itself to stay competitive in highly challenging market conditions. We believe that the strategic value creation to be derived from the Proposed Acquisition will translate into operational efficiencies thus improving profitability in the long run. [The rest of this page is intentionally left blank] 26

34 5. RISK FACTORS Risk factors relating to the Proposed Acquisition include, but are not limited to, the following: 5.1 Inability to source for labour to operate the Estates As elaborated under Section of Part A of this Circular, all existing employees of the Estates will be terminated by the Vendor and we will be hiring selected former employees as well as new employees to operate the Estates. Due to increasing competition with other plantation companies to source for labour in Malaysia, there is no assurance that we will be able to source for sufficient labour required to operate and maintain the Estates. Notwithstanding the above, we will continuously consider measures to attract and retain employees in ensuring the smooth operation of the Estates. 5.2 Non-completion of the Proposed Acquisition The SPA is conditional upon fulfilment of the CPs. The CPs comprise, among others, obtaining the relevant approvals from the shareholders of the holding companies of both Vendor and the Purchaser. Our Board will take reasonable steps to ensure that such CPs are met and fulfilled within the prescribed timeframe, besides ensuring every effort is made to obtain all the necessary approvals in order to complete the Proposed Acquisition in a timely manner. 5.3 Failure to improve the Estates yield There can be no assurance that our Group will be able to achieve the expected yield from the Estates, notwithstanding the capital expenditure to be incurred by our Group in order to improve the productivity of the Estates upon completion of the Proposed Acquisition. This is because the performance of the Estates is subject to certain external factors that may cause disruptions or reduction in the production of supply of FFB, such as unfavourable weather, landslides, diseases, crop pests affecting the oil palm and insufficient labour to harvest the FFB. 5.4 Business risk In undertaking the Proposed Acquisition, we are subject to certain risks inherent in the plantation industry. These include, but are not limited to, outbreaks of oil palm plantation diseases, damage from pests, fire or other natural disasters, unscheduled interruptions in palm oil milling, adverse climate conditions, changes in law and tax regulations affecting palm oil, increase in labour and/or other production costs and changes in business and credit conditions. Our ability to mitigate these risks depends on various factors, including the ability to keep abreast of the latest technologies, disease prevention and plantation operations and other developments in the industry as well as our ability to effectively implement business strategies. Although we seek to limit these risks, no assurance can be given that any change in these factors will not have an adverse impact on our plantation business. 5.5 Fluctuations in CPO prices The prices of palm oil fluctuate over time based on the demand and supply conditions in the global edible oils and fats market. Such other factors are beyond our Group s control. 27

35 Any fluctuation in the prices of CPO will affect our Group s profitability. We seek to mitigate any adverse effect caused by the fluctuations in CPO prices through adopting a more prudent management approach with the objectives of enhancing the cost effectiveness and optimisation of returns and focusing our efforts to improve the overall production efficiency and yield of the Plantation Assets. 5.6 Financing risk We intend to finance the Proposed Acquisition and the capital expenditure to rehabilitate the Estates upon completion of the Proposed Acquisition through a combination of internally generated funds and borrowings. Any utilisation of internal funds is expected to result in a depletion of our working capital, which may have an effect on the cash flow position of our Group. Any additional borrowings to finance the Proposed Acquisition and/or capital expenditure would expose our Group to a financing risk such as fluctuations in interest rates. We will continue to take effective measures such as prudent financial management and conduct to manage our cash flow position and funding requirements, but there is no assurance that such measures would be adequate to address the aforesaid financing risks. 6. EFFECTS OF THE PROPOSED ACQUISITION 6.1 Issued share capital and substantial shareholders shareholdings The Proposed Acquisition will not have any effect on the issued share capital as well as the substantial shareholders shareholdings of our Company because it does not involve any issuance of new shares. 6.2 Earnings and EPS The Proposed Acquisition is not expected to have any material impact on the earnings and EPS of our Group for the current FYE 31 December The Proposed Acquisition is expected to contribute positively to the future earnings of our Group through the implementation of the measures to improve the productivity of the Estates as described in Section 4.3 of Part A of this Circular. For illustrative purposes only, the pro forma effects of the Proposed Acquisition on the earnings of our Group assuming that the Proposed Acquisition has been completed on 1 January 2017, being the beginning of the FYE 31 December 2017, are set out below: Audited for the FYE 31 December 2017 RM 000 After the Proposed Acquisition RM 000 Profit after tax attributable to owners of our 665,238 (1) 654,838 Company Number of ordinary shares in issue ( 000) 1,600,000 1,600,000 Earnings per BPB Share (sen) Note: (1) After taking into consideration the following: (i) the profit from the Plantation Assets of about RM24.7 million for the FYE 30 June For the purpose of this illustration, the profit from the Plantation Assets excludes other operating expenses, depreciation and taxation; and (ii) the interest expense of about RM35.1 million per annum assuming that RM675 million of the Purchase Consideration is funded via existing revolving credit facilities or overdraft facilities to be redrawn and new term loan facilities, as disclosed in Section 2.6 of Part A of this Circular, at an assumed borrowing rate of 5.20% per annum. 28

36 6.3 NA, NA per share and gearing The Proposed Acquisition is not expected to have any material impact on the NA and NA per share of our Group. For illustrative purposes only, based on the audited consolidated statement of financial position of our Company as at 31 December 2017 and on the assumption that the Proposed Acquisition is completed as at that date, the pro forma effects of the Proposed Acquisition on the audited consolidated NA, NA per share and gearing of our Group are set out below: Audited as at 31 December 2017 RM 000 After the Proposed Acquisition RM 000 Share capital 1,422,344 1,422,344 Non-distributable reserves Retained profits 1,124,444 (1) 1,121,444 Shareholders' equity / NA 2,547,161 2,544,161 No. of BPB Shares in issue ( 000) 1,600,000 1,600,000 NA per BPB Share (RM) Total borrowings 140,016 (2) 815,016 Gearing ratio (times) (3) Notes: (1) After deducting estimated expenses of about RM3.0 million in relation to the Proposed Acquisition. (2) Assuming that RM675 million of the Purchase Consideration is funded via existing revolving credit facilities or overdraft facilities to be redrawn and new term loan facilities, as disclosed in Section 2.6 of Part A of this Circular. (3) Gearing is calculated as total borrowings divided by shareholders equity. 7. APPROVALS REQUIRED The Proposed Acquisition is subject to the following approvals: (i) (ii) (iii) our shareholders at the forthcoming EGM; shareholders of DutaLand at an EGM to be convened; and any other relevant authorities and/or parties, if required. 8. CORPORATE PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION Save for the Proposed Acquisition, the Proposed Bonus Issue and the Proposed Sale, our Board is not aware of any other outstanding corporate proposals which have been announced but are pending implementation as at the date of this Circular. The Proposed Acquisition is not conditional upon the Proposed Bonus Issue, the Proposed Sale and any other corporate exercises undertaken or to be undertaken by our Group. 29

37 9. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of our directors and/or major shareholders and/or persons connected with them have any interest, direct or indirect, in the Proposed Acquisition. 10. DIRECTORS STATEMENT Our Board, having considered all aspects of the Proposed Acquisition including but not limited to the Purchase Consideration, the rationale, the terms of the SPA, the valuation on the Plantation Assets and the financial effects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of our Group. Accordingly, our Board recommends that you vote in favour of the resolution pertaining to the Proposed Acquisition to be tabled at the forthcoming EGM. 11. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to the fulfilment of all conditions as set out in the SPA, the Proposed Acquisition is expected to be completed by the 2nd quarter of The tentative timetable for the implementation of the Proposed Acquisition is as follows: Event Date Approval of our shareholders for the Proposed Acquisition 12 April 2018 Completion of the Proposed Acquisition Mid May EGM Our EGM will be held at Mutiara Ballroom, Ground Floor, Royale Chulan Damansara, 2 Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Darul Ehsan on Thursday, 12 April 2018 at 11:00 a.m., or immediately following the conclusion or adjournment (as the case may be) of our 105th Annual General Meeting which will be held at 9:00 a.m. on the same day and at the same venue, or at any adjournment thereof, whichever is later, for the purpose of considering and if thought fit, passing with or without modifications, the ordinary resolution to give effect to the Proposed Acquisition. If you are not able to attend and vote in person at our EGM, you are requested to complete and sign the enclosed Proxy Form, in accordance with the instructions therein. Please return the Proxy Form to our Share Registrar, Tricor Investor & Issuing House Services Sdn Bhd, at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, Kuala Lumpur or its Customer Service Centre at Unit G-3, Ground Floor, Vertical Podium, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, Kuala Lumpur, no later than Tuesday, 10 April 2018 at 11:00 a.m. You are still allowed to attend and vote in person at our forthcoming EGM even if you have submitted the Proxy Form. 30

38 13. FURTHER INFORMATION You are advised to refer to the attached appendices for further information. Yours faithfully For and on behalf of the Board of BOUSTEAD PLANTATIONS BERHAD GEN. TAN SRI DATO MOHD GHAZALI HJ. CHE MAT (R) Non-Independent Non-Executive Chairman 31

39 PART B LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSED BONUS ISSUE

40 BOUSTEAD PLANTATIONS BERHAD (Company No.: 1245-M) (Incorporated in Malaysia) Registered Office: 28th Floor, Menara Boustead 69 Jalan Raja Chulan Kuala Lumpur 28 March 2018 Board of Directors: Gen. Tan Sri Dato Mohd Ghazali Hj. Che Mat (R) (Non-Independent Non-Executive Chairman) Tan Sri Dato Seri Lodin Wok Kamaruddin (Non-Independent Non-Executive Vice Chairman) Dato Mohzani Abdul Wahab (Senior Independent Non-Executive Director) Maj. Gen. Dato Hj. Khairuddin Abu Bakar (R) J.P. (Independent Non-Executive Director) Dr. Raja Abdul Malek Raja Jallaludin (Independent Non-Executive Director) Datuk Zakaria Sharif (Non-Independent Non-Executive Director) To: Our shareholders Dear Sir/Madam, PROPOSED BONUS ISSUE 1. INTRODUCTION On 21 November 2017, Affin Hwang IB, on behalf of our Board, announced that our Company proposes to undertake the Proposed Bonus Issue. On 28 December 2017, Affin Hwang IB, on behalf of our Board, announced that the listing application in relation to the Proposed Bonus Issue had been submitted to Bursa Securities. Bursa Securities had vide its letter dated 9 March 2018, approved the listing of and quotation for up to 640,000,000 Bonus Shares to be issued pursuant to the Proposed Bonus Issue on the Main Market of Bursa Securities, subject to the conditions as set out in Section 6 of Part B of this Circular. Further details on the Proposed Bonus Issue are set out in the ensuing sections. THE PURPOSE OF PART B OF THIS CIRCULAR IS TO PROVIDE YOU WITH DETAILS OF THE PROPOSED BONUS ISSUE AS WELL AS TO SEEK YOUR APPROVAL FOR THE RESOLUTION PERTAINING TO THE PROPOSED BONUS ISSUE TO BE TABLED AT OUR FORTHCOMING EGM. A NOTICE OF THE EGM TOGETHER WITH THE PROXY FORM IS ENCLOSED IN THIS CIRCULAR. YOU ARE ADVISED TO READ AND CAREFULLY CONSIDER THE CONTENTS OF THIS CIRCULAR INCLUDING THE APPENDIX III BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED BONUS ISSUE AT OUR FORTHCOMING EGM. 32

41 2. DETAILS OF THE PROPOSED BONUS ISSUE 2.1 Basis and number of Bonus Shares to be issued The Proposed Bonus Issue will involve the issuance of 640,000,000 Bonus Shares to be credited as fully paid-up on the basis of 2 Bonus Shares for every 5 existing BPB Shares held by the Entitled Shareholders. The issuance of 640,000,000 Bonus Shares was based on our total number of issued shares as at the LPD of 1,600,000,000 BPB Shares. Our Company does not hold any treasury shares as at the LPD. The Entitlement Date will be determined at a later date upon receipt of all relevant approvals for the Proposed Bonus Issue. The Proposed Bonus Issue is not intended to be implemented in stages over a period of time. Fractional entitlements of the Bonus Shares will be disregarded and shall be dealt with in such manner as our Board, in their absolute discretion, thinks fit or expedient and in the best interest of our Company. 2.2 Capitalisation of reserves The Proposed Bonus Issue will be effected by capitalising a total of RM320,000,000 from our Company s share premium account. Based on our Company s latest audited financial statements for the FYE ended 31 December 2017, the proposed capitalisation from the share premium account for the Proposed Bonus Issue is illustrated below: Group/Company level (1) Share premium RM 000 Audited as at 31 December ,344 Less: Amount to be capitalised pursuant to the Proposed Bonus Issue (320,000) After the Proposed Bonus Issue (2) 302,344 Notes: (1) Under the no par regime of the Act which came into effect on 31 January 2017, the concept of share premium will no longer be applicable and any amount standing to the credit of our Company s share premium account shall be consolidated as part of our share capital. However, we intend to take advantage of the 24-month period from 31 January 2017 provided under Section 618 of the Act to use part of our existing share premium account by undertaking the Proposed Bonus Issue. (2) The balance in the share premium account will be consolidated as part of our Company s issued share capital. Our Board confirms that the Proposed Bonus Issue and the implementation of the Proposed Bonus Issue is and will be in full compliance with the Act and Practice Note of the Act issued on 8 February 2017 for the purposes of subsection 618(3) and (4) of the Act. Pursuant to Paragraph 6.30(2)(b) of the Listing Requirements, our Board confirms that our Company has sufficient reserves to cover the capitalisation of the Bonus Shares based on our Company s latest audited consolidated financial statements for the FYE 31 December

42 2.3 Ranking of the Bonus Shares The Bonus Shares will, upon allotment and issuance, rank pari passu in all respects with the existing BPB Shares, save and except that the Bonus Shares will not be entitled to any dividends, rights, allotments and/or other distributions that may be declared, made or paid where the entitlement date precedes the date of allotment and issuance of the Bonus Shares. 2.4 Listing of and quotation for the Bonus Shares Bursa Securities had vide its letter dated 9 March 2018, approved the listing of and quotation for the Bonus Shares on the Main Market of Bursa Securities. Upon receipt of all relevant approvals, the Bonus Shares will be listed and quoted on the Main Market of Bursa Securities on the next market day after the Entitlement Date. The notice of allotment for the Bonus Shares will be issued and despatched to the Entitled Shareholders no later than 4 market days after the date of listing and quotation for the Bonus Shares, or such other period as may be prescribed by Bursa Securities. 3. RATIONALE FOR THE PROPOSED BONUS ISSUE The Proposed Bonus Issue is intended to reward our shareholders for their loyalty and continued support to our Group. After due consideration of the various options available, our Board is of the view that the Proposed Bonus Issue is an appropriate avenue for our Company to reward our shareholders as the Proposed Bonus Issue: (i) (ii) will enable the existing shareholders to have greater participation in the equity of our Company in terms of the number of BPB Shares held, whilst maintaining their percentage of equity interest; and is expected to enhance the marketability and trading liquidity of BPB Shares by way of larger capital base. 4. EFFECTS OF THE PROPOSED BONUS ISSUE For illustrative purposes, the pro forma effects of the Proposed Bonus Issue are set out in the following sections: 4.1 Issued share capital The pro forma effects of the Proposed Bonus Issue on our issued share capital are as follows: No. of BPB Shares Amount 000 RM 000 Issued share capital as at the LPD 1,600,000 1,422,344 Add: No. of Bonus Shares to be issued pursuant to the Proposed Bonus Issue 640,000 * - Enlarged share capital after the Proposed Bonus Issue 2,240,000 1,422,344 Note: * In accordance with the transitional provision set out in Section 618 of the Act, the amount standing to the credit of the share premium account of RM622,344,000 was consolidated as part of our Company s issued share capital. As such, the issuance of the Bonus Shares will not have any impact on our issued share capital. Please refer to Section 2.2 of Part B of this Circular for further information on the capitalisation of reserves in relation to the Proposed Bonus Issue. 34

43 4.2 NA, NA per share and gearing The pro forma effects of the Proposed Bonus Issue on the NA and gearing of our Group based on the latest audited consolidated statement of financial position as at 31 December 2017 and assuming that the Proposed Bonus Issue have been completed on the said date are as follows: Audited as at 31 December 2017 RM 000 After the Proposed Bonus Issue RM 000 Share capital (1) 1,422,344 (2) 1,422,344 Non-distributable reserves Retained profits 1,124,444 (3) 1,124,044 Shareholders equity / NA 2,547,161 2,546,761 No. of BPB Shares in issue ( 000) 1,600,000 (4) 2,240,000 NA per BPB Share (RM) Total borrowings 140, ,016 Gearing (times) (5) Notes: (1) In accordance with the transitional provision set out in Section 618 of the Act, the amount standing to the credit of the share premium account of RM622,344,000 was consolidated as part of our Company s issued share capital. (2) After capitalisation of RM320 million from the share premium account pursuant to the Proposed Bonus Issue, details as set out below: Audited as at 31 December 2017 RM 000 After the Proposed Bonus Issue RM 000 Share capital 800,000 1,120,000 Share premium 622,344 * 302,344 Issued share capital 1,422,344 1,422,344 * The balance in the share premium account will be consolidated as part of our Company s issued share capital. (3) After deduction of estimated expenses amounting to about RM400,000 in relation to the Proposed Bonus Issue. (4) Issuance of 640,000,000 BPB Shares pursuant to the Proposed Bonus Issue. (5) Gearing is calculated as total borrowings divided by shareholders equity. 4.3 Earnings and EPS The Proposed Bonus Issue is not expected to have any material effect on the earnings of our Group for the FYE 31 December Upon completion of the Proposed Bonus Issue, which is expected to be completed by the 2nd quarter of 2018, there will be a corresponding dilution in the EPS of our Group as a result of the increase in the number of BPB Shares arising from the Proposed Bonus Issue. 4.4 Convertible securities As at the LPD, our Company does not have any convertible securities in issue. 35

44 4.5 Substantial shareholders shareholdings The Proposed Bonus Issue will not have any effect on the percentage shareholdings of the substantial shareholders of our Company. However, the number of BPB Shares held by each substantial shareholder will increase proportionately as a result of the Proposed Bonus Issue. 5. HISTORICAL SHARE PRICES The monthly highest and lowest closing transacted prices of the BPB Shares traded on Bursa Securities for the past 12 months preceding the date of this Circular are as follows: Low High RM RM 2017 March April May June July August September October November December January February Last transacted price of BPB Shares as at 20 November (being the latest date prior to the announcement of the Proposed Bonus Issue) Last transacted market price as at the LPD month VWAP of BPB Shares immediately preceding 27 December (being the latest date prior to the submission of the listing application in relation to the Proposed Bonus Issue to Bursa Securities) (Source: Bloomberg) Based on 3-month VWAP of BPB Shares immediately preceding 27 December 2017 of RM1.68, the theoretical ex-bonus price of BPB Shares is RM1.20 ( TEBP ). Pursuant to Paragraph 6.30(1A) of the Listing Requirements, our Board confirms that the TEBP is not less than RM

45 6. APPROVALS REQUIRED The Proposed Bonus Issue is subject to and conditional upon the following approvals being obtained: (i) Bursa Securities, for the listing of and quotation for the Bonus Shares on the Main Market of Bursa Securities, which was obtained via its letter dated 9 March The approval from Bursa Securities is subject to the following conditions: No. Conditions Status of compliance 1. Our Company and Affin Hwang IB must fully comply with the relevant provisions under the Listing Requirement pertaining to the implementation of the Proposed Bonus Issue. 2. Our Company and Affin Hwang IB to inform Bursa Securities upon completion of the Proposed Bonus Issue. 3. Our Company to furnish Bursa Securities with a written confirmation of its compliance with the terms and conditions of Bursa Securities approval once the Proposed Bonus Issue is completed. 4. Our Company and Affin Hwang IB are required to make the relevant announcements for the Proposed Bonus Issue pursuant to Paragraph 6.35(2)(a) and (b) and 6.35(4) of the Listing Requirement. 5. Our Company to furnish Bursa Securities with a certified true copy of the resolution passed by the shareholders in the EGM. Noted To be complied. To be complied. To be complied. To be complied. (ii) (iii) our shareholders at the forthcoming EGM; and any other relevant authorities and/or parties, if required. 7. CORPORATE PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION Save for the Proposed Bonus Issue, the Proposed Acquisition and the Proposed Sale, our Board is not aware of any other outstanding corporate proposals which have been announced but are pending implementation as at the date of this Circular. The Proposed Bonus Issue is not conditional upon the Proposed Acquisition, the Proposed Sale and any other corporate exercises undertaken or to be undertaken by our Group. 8. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of our directors and/or major shareholders and/or persons connected with them have any interest, directly or indirectly, in the Proposed Bonus Issue apart from their respective entitlements to the Bonus Shares as shareholders of our Company, to which all other Entitled Shareholders are similarly entitled to. 37

46 9. DIRECTORS STATEMENT Our Board, having considered all aspects of the Proposed Bonus Issue, including but not limited to the rationale and effects of the Proposed Bonus Issue, is of the view that the Proposed Bonus Issue is in the best interest of our Company and shareholders. Accordingly, our Board recommends that you vote in favour of the resolution pertaining to the Proposed Bonus Issue to be tabled at the forthcoming EGM. 10. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to all required approvals being obtained, the Proposed Bonus Issue is expected to be completed by the 2nd quarter of The tentative timetable for the implementation of the Proposed Bonus Issue is as follows: Event Date Approval of our shareholders for the Proposed Bonus Issue 12 April 2018 Announcement of the Entitlement Date Mid April 2018 Entitlement Date End April 2018 Listing and quotation for the Bonus Shares on the Main Market of Bursa Securities Early May EGM Our EGM will be held at Mutiara Ballroom, Ground Floor, Royale Chulan Damansara, 2 Jalan PJU 7/3, Mutiara Damansara, Petaling Jaya, Selangor Darul Ehsan on Thursday, 12 April 2018 at 11:00 a.m., or immediately following the conclusion or adjournment (as the case may be) of our 105th Annual General Meeting which will be held at 9:00 a.m. on the same day and at the same venue, or at any adjournment thereof, whichever is later, for the purpose of considering and if thought fit, passing with or without modifications, the ordinary resolution to give effect to the Proposed Bonus Issue. If you are not able to attend and vote in person at our EGM, you are requested to complete and sign the enclosed Proxy Form, in accordance with the instructions therein. Please return the Proxy Form to our Share Registrar, Tricor Investor & Issuing House Services Sdn Bhd, at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, Kuala Lumpur or its Customer Service Centre at Unit G-3, Ground Floor, Vertical Podium, Avenue 3, Bangsar South, No.8, Jalan Kerinchi, Kuala Lumpur, no later than Tuesday, 10 April 2018 at 11:00 a.m. You are still allowed to attend and vote in person at our forthcoming EGM even if you have submitted the Proxy Form. 38

47 12. FURTHER INFORMATION You are advised to refer to the attached Appendix III of this Circular for further information. Yours faithfully For and on behalf of the Board of BOUSTEAD PLANTATIONS BERHAD GEN. TAN SRI DATO MOHD GHAZALI HJ. CHE MAT (R) Non-Independent Non-Executive Chairman 39

48 LOCATION OF THE PLANTATION LANDS Ladang Sg Sapa Payau Ladang Pertama Resort Estate Ladang Sg Ruku Ruku Ladang Sg Lokan Baru Ladang Sg Lokan The Plantation Lands Our Group s existing estates (Source: Valuation Reports and the management of our Company) Nak Estate Sutera Estate 40 APPENDIX I

49 APPENDIX II VALUATION CERTIFICATE ON THE PLANTATION ASSETS 41

50 APPENDIX II VALUATION CERTIFICATE ON THE PLANTATION ASSETS (CONT D) 42

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