CIRCULAR TO SHAREHOLDERS IN RELATION TO PART A

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action you should take, 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 or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. MAJUPERAK HOLDINGS BERHAD (Company No.: X) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO PART A PROPOSED DISPOSAL BY MAJUPERAK HOLDINGS BERHAD TO THE PERAK STATE AGRICULTURAL DEVELOPMENT CORPORATION OF A PIECE OF LEASEHOLD LAND HELD UNDER PT 829, H.S.(D) 4413, MUKIM LENGGONG, DAERAH HULU PERAK, NEGERI PERAK MEASURING A TOTAL AREA OF APPROXIMATELY 2,023 HECTARES FOR A DISPOSAL CONSIDERATION OF RM42.50 MILLION TO BE SATISFIED FULLY IN CASH ( PROPOSED DISPOSAL ) PART B INDEPENDENT ADVICE LETTER TO THE NON-INTERESTED SHAREHOLDERS OF MAJUPERAK HOLDINGS BERHAD IN RELATION TO THE PROPOSED DISPOSAL AND NOTICE OF EXTRAORDINARY GENERAL MEETING Independent Adviser for Part B The Notice of Extraordinary General Meeting ( EGM ) of MHB to be held at Amanjaya Convention Centre, Jalan Meru Casuarina, Bandar Meru Raya, Ipoh, Perak Darul Ridzuan on Friday, 12 June 2015 at 4:30 p.m., or such time immediately after the conclusion or adjournment of the 12 th Annual General Meeting ( AGM ) of the Company to be held at 3:30 p.m. whichever is later, together with the Form of Proxy are set out in this Circular. You are advised to refer to the Notice of the EGM and the accompanying Form of Proxy. If you decide to appoint a proxy to attend and vote on your behalf at the EGM, the Form of Proxy must be completed and lodged at the Registered Office of the Company at Aras 3, No. 1-A, Blok A, Menara PKNP, Jalan Meru Casuarina, Bandar Meru Raya, Ipoh, Perak Darul Ridzuan not later than forty-eight (48) hours before the time appointed for holding the meeting or at any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the meeting should you subsequently wish to do so. Day and time of EGM : Friday, 12 June 2015 at 4:30 p.m., or such time immediately after the conclusion or adjournment of the 12 th AGM of the Company to be held at 3:30 p.m., whichever is later Last date and time for lodging the Form of Proxy : Wednesday, 10 June 2015 at 4:30 p.m. This Circular is dated 28 May 2015

2 DEFINITIONS In this Circular, unless otherwise indicated, the following words and abbreviations shall have the following meanings:- Balance Disposal Consideration : Balance disposal consideration of RM34,000,000 to be paid within one (1) month from the date of the Vendor fulfils all the conditions precedent under the SPA Board : Board of Directors of MHB Bursa Depository : Bursa Malaysia Depository Sdn Bhd (Company No.: W) Bursa Securities : Bursa Malaysia Securities Berhad (Company No.: W) Circular : This Circular dated 28 May 2015 to the shareholders of MHB in relation to the Proposed Disposal Companies Act : Companies Act, 1965 Completion Date : The date when the full Disposal Consideration is paid by the Purchaser to the Vendor Completion Period : A period of one (1) month from the date of the Vendor fulfils all the conditions precedent under the SPA Deposit : a sum of RM8,500,000 to be paid by the Purchaser to the Stakeholder upon execution of the SPA Disposal Consideration : A total cash consideration of RM42,500,000 being the disposal consideration in relation to the Disposal EGM : Extraordinary General Meeting Encumbrance : Charge over the Land under National Land Code, 1965 in favour of Bank Pertanian Malaysia Berhad vide presentation No /2012 dated 3 April 2012 EPS : Earnings per share Extended Completion Date : The date falling one (1) month after the expiry of the Completion Period FYE : Financial year ended or ending, as the case may be IAL : Independent Advice Letter dated 28 May 2015 to the Non- Interested Shareholders of MHB in relation to the Proposed Disposal ICPS : Irredeemable convertible preference share(s) of RM0.50 each in the Company Interested Director(s) : Dato Mohd Khusairi bin Abdul Talib, Dato Aminuddin bin Md Desa, Encik Jamal bin Mohd Aris and Encik Mustapha bin Mohamed KAF Investment or Independent Adviser : KAF Investment Bank Berhad (Company No.: W) Land : A piece of leasehold land held under PT 829, H.S.(D) 4413, Mukim Lenggong, Daerah Hulu Perak, Negeri Perak measuring a total area of approximately 2,023 hectares i

3 DEFINITIONS (CONT D) LPD : 13 May 2015, being the latest practicable date prior to the issuance of this Circular Maximum Scenario : Assuming the 103,165,442 outstanding ICPS as at the LPD are converted into new MHB Share(s) prior to the Completion Date Minimum Scenario : Assuming the 103,165,442 outstanding ICPS as at the LPD are not converted into new MHB Share(s) prior to the Completion Date MHB or Company or Vendor : Majuperak Holdings Berhad (Company No.: X) MHB Group : MHB and its subsidiary companies, collectively MHB Share(s) or Share(s) : Ordinary share(s) of RM0.50 each in the Company MMLR : Main Market Listing Requirements of Bursa Securities MOT : Memorandum of transfer in an instrument in Form 14A of the National Land Code, 1965 in respect of the Land NA : Net assets Non-Interested Director : All the directors of MHB other than the Interested Directors Non-Interested Shareholders PKNP or Interested Major Shareholder All the shareholders of MHB other than the Interested Major Shareholder : Perbadanan Kemajuan Negeri Perak Proposed Disposal : Proposed disposal by MHB to PSADC of the Land for the Disposal Consideration to be satisfied fully in cash PSADC or Purchaser : Perak State Agricutural Development Corporation Record of Depositors : A record of depositors established by Bursa Depository under the Rules of Bursa Depository RM and sen : Ringgit Malaysia and sen, respectively RPGT : Real Property Gains Tax, being the tax charged by the Inland Revenue Board of Malaysia pursuant to the Real Property Gains Tax Act, 1976 Rules of Bursa Depository : The rules of Bursa Depository as issued pursuant to the Securities Industry (Central Depositories) Act, 1991 as amended from time to time, including the Securities Industry (Central Depositories) Amendment Act, 1998 SPA : The sale and purchase agreement dated 23 February 2015, entered into between MHB and PSADC in relation to the Proposed Disposal Stakeholder : The Purchaser s solicitors, Messrs. Ram Reza & Muhammad ii

4 DEFINITIONS (CONT D) Suleiman & Co or Valuer : Messrs. Suleiman & Co Property Consultants Sdn Bhd (Company No.: X) Valuation Report : Valuation report dated 19 January 2015 prepared by Suleiman & Co in relation to the Land Words denoting the singular number only shall include the plural and vice-versa and words denoting the masculine gender shall, where applicable, include the feminine gender, neuter gender and vice versa. Reference to persons shall include a body of persons, corporate or unincorporated (including a trust). Any reference to a time of day shall be a reference to Malaysian time, unless otherwise stated. Any reference to any statute is a reference to that statute as for the time being amended or reenacted. [ The remainder of this page has been intentionally left blank ] iii

5 CONTENTS PART A PAGE LETTER TO THE SHAREHOLDERS OF MHB IN RELATION TO THE PROPOSED DISPOSAL:- 1.0 INTRODUCTION BACKGROUND DETAILS RATIONALE FINANCIAL EFFECTS RISK FACTORS APPROVALS REQUIRED AND CONDITIONALITY OUTSTANDING CORPORATE EXERCISES INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED DIRECTORS STATEMENT AND RECOMMENDATION AUDIT COMMITTEE STATEMENT TOTAL AMOUNT TRANSACTED WITH THE SAME RELATED PARTY FOR THE PRECEDING TWELVE (12) MONTHS ESTIMATED TIME FRAME FOR COMPLETION EGM FURTHER INFORMATION PART B INDEPENDENT ADVICE LETTER FROM KAF INVESTMENT TO THE NON-INTERESTED SHAREHOLDERS OF MHB IN RELATION TO THE PROPOSED DISPOSAL APPENDICES I VALUATION CERTIFICATE II FURTHER INFORMATION NOTICE OF EGM... ENCLOSED FORM OF PROXY... ENCLOSED iv

6 PART A LETTER TO THE SHAREHOLDERS OF MHB IN RELATION TO THE PROPOSED DISPOSAL

7 MAJUPERAK HOLDINGS BERHAD (Company No.: X) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office:- Aras 3, No. 1-A, Blok A, Menara PKNP, Jalan Meru Casuarina, Bandar Meru Raya, Ipoh, Perak Darul Ridzuan. 28 May 2015 BOARD OF DIRECTORS Y. Bhg. Tan Sri Dato Seri Megat Najmuddin bin Datuk Seri Dr. Haji Megat Khas (Chairman, Senior Independent Non-Executive Director) Encik Mustapha bin Mohamed (Independent Non-Executive Director) Y.B. Dato Haji Mohd Zolkafly bin Haji Harun (Independent Non-Executive Director) Y.M. Dato Seri Dr. Raja Ahmad Zainuddin bin (Non-Independent Non-Executive Director) Raja Haji Omar Y.B. Dato Mohd Khusairi bin Abdul Talib (Non-Independent Non-Executive Director) Y. Bhg. Dato Aminuddin bin Md Desa (Non-Independent Non-Executive Director) Y. Bhg. Dato Mohd Azmi bin Hj Othman (Independent Non-Executive Director) Encik Jamal bin Mohd Aris (Managing Director/Chief Executive Officer) To: The Shareholders of MHB Dear Sirs, PROPOSED DISPOSAL 1.0 INTRODUCTION 1.1 On 23 February 2015, the Board announced that the Company had on even date entered into the SPA. 1.2 In view of the interests of certain Directors and/or major shareholder of MHB as disclosed in Section 8 of Part A of this Circular, the Proposed Disposal is deemed a related party transaction. Accordingly, pursuant to the requirements of Paragraph 10.08(2) of the MMLR, KAF Investment has been appointed on 2 February 2015 to act as the Independent Adviser to advise the Non Interested-Directors and Non-Interested Shareholders of MHB in respect of the Proposed Disposal. The IAL from KAF Investment in relation to the Proposed Disposal is set out in Part B of this Circular. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH DETAILS OF THE PROPOSED DISPOSAL AND TO SEEK YOUR APPROVAL ON THE RESOLUTION TO BE TABLED AT THE FORTHCOMING EGM. THE NOTICE OF THE FORTHCOMING EGM TOGETHER WITH THE FORM OF PROXY IS ENCLOSED IN THIS CIRCULAR. 1

8 YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES CONTAINED HEREIN BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED DISPOSAL AT THE FORTHCOMING EGM. 2.0 BACKGROUND DETAILS 2.1 Details of the Proposed Disposal The Proposed Disposal entails the disposal by MHB to PSADC of a piece of leasehold land held under PT 829, H.S.(D) 4413, Mukim Lenggong, Daerah Hulu Perak, Negeri Perak measuring a total area of approximately 2,023 hectares for the Disposal Consideration to be satisfied fully in cash. The Land is sold on an as is where is basis and free from Encumbrance. 2.2 Details of the Land Details and current status of the Land are set out below:- Registered owner : Majuperak Holdings Berhad (Company No X). Title : PT 829, H.S.(D) 4413, Mukim Lenggong, Daerah Hulu Perak, Negeri Perak. Tenure : Leasehold interest with a term of 99 years expiring on 12 October Category of land use : Agriculture. Present usage : Vacant land. Future usage : To develop into commercial palm oil plantation. Express conditions : Tanaman komersial Kelapa Sawit. Restriction-ininterest : Tanah ini hanya boleh dipindahmilik, dipajak atau digadai kepada orang yang memberi kebenaran bertulis oleh Pihak Berkuasa Negeri. Encumbrance : Charged to Bank Pertanian Malaysia Berhad vide presentation No /2012 dated 3 April Endorsements: : Nil. Land area : Approximately 2,023 hectares (about 5,000 acres). Description : The Land is a piece of agricultural land situated on the western bank of Sungai Piah and to its north and west is the Sungai Piah Forest Reserve. It was formerly part of Sungai Piah Forest Reserve and to be developed into an oil palm estate. The estate with a total land area of 2,027.3 hectares comprised of four (4) development phases further subdivided into 43 blocks. Each phase 1, phase 2, phase 3 and phase 4 contains 12 blocks, 13 blocks, 11 blocks and 7 blocks respectively. 2

9 Phase 1 comprises block 1 to block 12. The whole block 1 to block 9 has been cleared, terraced and constructed with main and collection roads, whilst only part of block 10 to block 12 have been cleared, terraced and provided with the service roads. The rest of the Land under Phase 2, Phase 3 and Phase 4 still comprises of uncleared jungle. The northern portion of block 1 Phase 1 has been cleared and built up with six (6) units of cabin for site office and quarters purposes. As the Land was alienated to MHB by the State Government of Perak in 2009 for development into an oil palm estate, part of the Land has been cleared and developed as mentioned above. However, in 2014 the MHB Group realigned its strategic direction with strategic focus on property and realty business. The Proposed Disposal is in line with this strategy. Location : The Land is located about 18 kilometres to the east of Lenggong Town centre. The approximate location of the Land is illustrated below. (Source: Valuation Report) 3

10 Accessibility : The Land is accessible from the Lenggong town via Kuala Kangsar/Grik Expressway, Jalan Bukit Sapi/Air Karah and thence through a secondary forest via laterite access roads leading to the Land. The Land is also accessible from Sungai Siput town via Jalan Sungai Siput/Lasah/Kg. Pauh and again through a secondary forest via laterite access roads which leads to the Land. The Land as a whole is an interior lot and its northern portion is accessible via Lenggong whilst its southern portion is accessible via Sungai Siput. Surrounding : To the north of the Land are Hutan Simpan Papulut, Kemajuan Tanah Papulut Peringkat 1 & 2, Kemajuan Tanah Padang Jeri/Changkat Lobak, Kemajuan Tanah Lawin Peringkat 1 & 2 and Kemajuan Tanah Malau. The plantations are mostly under rubber and oil palm. Settlement areas further north of the Land, located along Jalan Lenggong/Gerik are Kg. Sawa, Kg. Tanjong Lobak, Kg. Bagan Lawin, Kg. Ayer Jada and Lawin Village Centre. To the south of the Land are Hutan Rizab Chior, Kemajuan Tanah Perlop 1 to 8, Kemajuan Tanah Lasah, Pos Gapeh, Pos Poi, Kg. Pauh and Kg. Lintang. Proposed projects by Federal Government of Malaysia located to the south of the Land are Lenggong Agro Valley occupying about 2,746 acres and Taman Kekal Pengeluaran Makanan Negara occupying about 5,683 acres. To the west of the Land are Hutan Rizab Piah, Kemajuan Tanah Ayer Kala, Kemajuan Tanah Ayer Ibul 1 & 2, Kemajuan Tanah Ayer Karah and Ladang Hup Seng. Located along Jalan Kuala Kangsar/Lenggong main road are Kg. Baru Padang Gerus, Kg. Baru Selat Pagar, Kg. Baharu Ayer Kala and Kg. Bt. Sapi. Sungai Piah runs in a north to south direction along the eastern boundary of the Land, whilst the remaining land ia the most under Hutan Rizab Piah. Public services : Main water supplies and electricity are not available in the locality. They can be connected to the Land by using pipe wells and generator sets. Public transport facilities such as buses and taxis are available along the main road. Market value : RM42,500,000 (as appraised by Suleiman & Co on 15 December 2014). Valuer : Suleiman & Co, an independent firm of registered valuers has been appointed by the Company via a letter dated 13 October 2014 (acceptance of appointment by Valuer on 14 October 2014) to carry out valuation on the Land. Method of valuation : Comparison Approach. Date and original cost of investment : 13 October 2011 / RM4,314,697. 4

11 Latest audited net book value : RM4.18 million as at 31 December (Sources: Valuation Report and the management of MHB) 2.3 Settlement of the Disposal Consideration The Disposal Consideration shall be satisfied by PSADC to MHB in the following manner:- Amount (RM 000) Mode and timing of settlement Deposit (i) 8,500 Cash payment to be paid by PSADC to the Stakeholder upon signing of the SPA. The Stakeholder shall retain 3% of the Purchase Price from the Deposit and remit together with relevant documents to the Inland Revenue Board of Malaysia. The Stakeholder shall release the balance Deposit after the consent being obtained from the relevant authority to transfer the Land to PSADC by MHB. Balance Disposal Consideration 34,000 Cash payment to be deposited by PSADC to the Stakeholder within the Completion Period. If PSADC is unable to deposit the Balance Disposal Consideration in accordance to the above, MHB shall grant an extension period of one (1) month only from the expiry of the Completion Period. Upon receipt the Balance Disposal Consideration, the Stakeholder is authorised to:- (a) settle for and pay on behalf of MHB the redemption sum of approximately RM2,000,000 to Bank Pertanian Malaysia Berhad for the purpose of removing the Encumbrance on the Land; (b) pay all fees charges expenses and other payment which is due to be paid by MHB in respect of the Land; and Total 42,500 (c) to hold the remaining Balance Disposal Consideration and release to MHB after the expiry of seven (7) days of the date the presentation of the stamped MOT for registration in favour of PSADC and vacant possession to the Land having delivered or upon expiry of fourteen (14) from the date of receipt of the discharge documents by the Stakeholder, whichever is earlier. Note:- (i) The payment of the Deposit was made by PSADC to the Stakeholder on 3 March

12 2.4 Basis of arriving at and justification for the Disposal Consideration The Disposal Consideration was arrived at on a willing-buyer willing-seller basis and taking into consideration the market value of the Land of RM42,500,000 as appraised by the Valuer. The valuation was carried out based on Comparison Approach method of valuation. The brief summary of the Comparison Approach is as follows:- Method of valuation : Comparison Approach (i) Description : The approach involves the comparison of recent sales of similar properties in the area. Adjustments however are made for differences in location, size and shape of lot, site facilities available, time element, and other adjustments in order for the Valuer to arrive at a common basis for comparison. Comparable land : Six (6) comparable lands located within the vicinity of the Land. The Valuer has used the the sales evidences of the comparable lands from 2003 to 2013 since there are not many recent transactions for similar lands located within the locality. Adjusments are made for differences in location, size, physical, scattered land, plantation, road, infrastructure, land restriction and time element. Adjusted market value of the comparable lands : The adjusted market values of the comparable lands are as follows:- Comparable lands Adjusted market value per hectare (RM) Comparable 1 21,826 Comparable 2 18,703 Comparable 3 23,750 Comparable 4 84,606 Comparable 5 36,124 Comparable 6 22,619 The Valuer has relied only on Comparable 1, 2 and 3 as they are the nearest comparable lands located to the Land with adjustments made for planted and vacant lands. Conclusion : Based on the Comparison Approach, the Valuer has adopted RM21,000 per hectare as the base land value. Hence, the market value of the Land is RM42,500,000. (Sources:Valuation Certificate and Valuation Report) 6

13 Note:- (i) The Asset Valuation Guidelines of the Securities Commission Malaysia require at least two (2) valuation approaches are to be adopted. However, the Valuer has adopted only one (1) method of valuation as the Land is a vacant agricultural land. Kindly refer to Appendix I of this Circular for further details on the Valuation Certificate. 2.5 Salient terms and conditions of the SPA (i) Basis of sale The Land is sold on an as is where is basis and free from Encumbrance. (ii) Consideration and Payment of the Disposal Consideration The purchase price payable by the Purchaser to the Vendor for the Land under the SPA shall be RM42,500,000. (a) Payment The Disposal Consideration shall be paid in accordance with the following manner:- (aa) (bb) a sum of RM8,500,000 to be paid by the Purchaser to the Stakeholder upon execution of the SPA. the Purchaser shall pay a sum of RM34,000,000 being the balance disposal consideration to the Stakeholder within one (1) month from the date the Vendor fulfils all the conditions precedent. The Stakeholder shall deal with the Balance Disposal Consideration in accordance with the Application and Release of the Balance Disposal Consideration clause below. (b) Application and Release of the Balance Disposal Consideration The Stakeholder is irrevocably authorised by the Vendor and the Purchaser to utilise and deal with the Balance Disposal Consideration upon receipt thereof in the following manner:- (aa) (bb) (cc) to settle for and pay on behalf of the Vendor the redemption sum to the existing chargee of the Land for the purpose of removing the Encumbrance on the Land; to pay all fees charges expenses and other payment which is due to be paid by the Vendor in respect of the Land, if any; and to hold the remaining Balance Disposal Consideration, if any, and release the same to the Vendor after the expiry of seven (7) days of the date the presentation of the stamped MOT for registration in favour of the Purchaser and vacant possession to the Land having been delivered to the Purchaser or upon expiry of fourteen (14) days from the date of receipt of the discharge documents by the Stakeholder or the Purchaser s financier's solicitors (as the case may be) from the chargee, whichever is earlier. 7

14 (c) Extended Completion Date If the Purchaser shall be unable to deposit the Balance Disposal Consideration by the Completion Date, the Vendor shall grant to the Purchaser an extension period of one (1) month only from the expiry of the Completion Date to pay the Balance Disposal Consideration during which extension period the Purchaser shall pay to the Vendor interest at the rate of eight per centum (8%) per annum* on the Balance Disposal Consideration or any part thereof remaining unpaid to be calculated on a daily basis from the expiry of the Completion Date until the date of full payment of the Balance Disposal Consideration provided always that if there shall be any delay attributable to the Vendor resulting the Purchaser not being able to deposit the Balance Disposal Consideration by the Completion Date, the extension of the Completion Date shall not render the Purchaser being liable for the payment of interest during and for period of the delay or the Extended Completion Date as the case may be, shall also be extended by a period equivalent to the aggregate period delay. Note:- * The interest rate of eight per centum (8%) per annum is derived based on negotiations between the Vendor and the Purchaser prior to entering into the SPA. (iii) Conditions Precedent The sale and purchase of the Land shall be conditional upon following being obtained by the Vendor:- (a) (b) the consent from the relevant authority; the Vendor s shareholders approval for the sale of the Land in accordance with the provisions of the SPA. In the event that the conditions precedent are not being fulfilled by the Vendor within six (6) months from the date of the SPA, the Purchaser shall be entitled to terminate the SPA by notice in writing to the Vendor and upon receipt of such notice by the Vendor, the SPA shall lapse and be of no further effect and in such event the Vendor shall within fourteen (14) days thereof refund to the Purchaser all monies paid inclusive of the Deposit free of interest and thereafter the Vendor shall be at liberty to resell or otherwise deal with the Land as the Vendor shall think fit. (iv) Default (a) Default by Purchaser If the Purchaser shall fail to pay the Balance Disposal Consideration or defaults in any provisions of the SPA and such failure or breach has not been remedied by the Purchaser within fourteen (14) days after receipt of the Vendor's written notice, then the Vendor shall be entitled to take such action to enforce the SPA by specific performance and/or to claim for any loss or damage and costs incurred or suffered by the Vendor and/or:- (aa) the Vendor shall be entitled to forfeit absolutely as liquidated damages a sum representing ten per cent (10%) of the Disposal Consideration and thereafter the Vendor shall within fourteen (14) days from the date the Vendor exercise the right of forfeiture refund to the Purchaser the balance of all other moneys paid by the Purchaser, if any, free of interest; 8

15 (bb) (cc) (dd) upon confirmation of such refund (if any) pursuant to the paragraph above such quit rent and assessment receipts of title, MOT and all other relevant documents (if delivered to the Purchaser or the Stakeholder) shall be returned immediately to the Vendor and if the Land has already been delivered to the Purchaser, to redeliver vacant possession of the Land in good tenantable condition; the Purchaser shall remove or cause to be removed immediately any private caveat or other encumbrance lodged by or on behalf of the Purchaser (if any); and thereafter the SPA shall become null and void and be of no further effect. (b) Default by Vendor** In the event the Vendor breaches any of the provisions of the SPA and/or fails to complete the sale of the Land and such failure or breach has not been remedied by the Vendor within fourteen (14) days after being notified by the Purchaser, then the Purchaser be entitled to:- (aa) (bb) (cc) to sue for the remedy of specific performance of the sale and purchase of the Land and, in addition to or in lieu of specific performance, for damages for breach of contract. All costs and expenses incurred by the Purchaser in connection therewith shall be borne and paid by the Vendor; or by notice in writing served on the Vendor, elect to accept a sum representing ten per cent (10%)*** of the Disposal Consideration as agreed liquidated damages from the Vendor who shall on or before the expiry of fourteen (14) days from the date of the written notice pay the agreed liquidated damages to the Purchaser together with a refund of all moneys paid by the Purchaser pursuant to the SPA free of interest. All costs and expenses incurred by the Purchaser in connection therewith shall be borne by the Vendor upon demand of the Purchaser or the Stakeholder; thereafter the SPA shall become null and void and be of no further effect. Note: ** In the event of default by the Vendor, if the Purchaser elects to: - sue for specific performance, the Vendor is required to complete the sale of the Land to the Vendor and pay for damages for breach of contract. The Vendor is also required to bear all costs and expenses incurred by the Purchaser; or - sue for damages for breach of contract, the Vendor is required to pay to the Purchaser the damages after the court has decided on the quantum. The Vendor is also required to bear all costs and expenses incurred by the Purchaser; or - accept agreed liquidated damages (a sum which represents 10% of the Disposal Consideration), the Vendor is required to pay the agreed liquidated damages to the Purchaser together with a refund of all moneys paid by the Purchaser pursuant to the SPA free of interest. The Vendor is also required to bear all costs and expenses incurred by the Purchaser. To prevent the occurrence of event of default by the Vendor, the Vendor will manage the Proposed Disposal effectively, perform its obligations under the SPA and ensure compliance with the terms and conditions of the SPA. 9

16 2.6 Information on the Purchaser *** the liquidated damages fixed at ten per centum (10%) of the Disposal Consideration payable by the Vendor in the event of default by the Vendor is to be made consistent with the liquidated damages at ten per centum (10%) of the Disposal Consideration payable by the Purchaser in the event of default by the Purchaser. PSADC is a statutory body which was established on 14 February 1973 under the Enakmen Perbadanan Pembangunan Pertanian Negeri Perak, bil. 2 tahun 1973 (asal), pin. bil. 9 (1974) and pin. bil. 7 (1981). The board of directors of PSADC as at the LPD are:- (i) Y.A.B. Dato Seri Diraja Dr. Zambry bin Abd. Kadir; (ii) Y.A.B. Dato Seri Abdul Puhat bin Mat Nayan; (iii) Y.B. Puan Rohana Binti Abd Malek; (iv) Y.B. Dato Saarani bin Mohamad; (v) Y.B. Dato Haji Mohd Gazali bin Jalal; (vi) Y.Bhg. Dato Hasim bin Haji Hasan; (vii) Y.B. Dato Siti Salmah binti Mat Jusak; (viii) Y.Bhg. Dato Syed Mokhtar bin Syed Iddris; (ix) Y.Bhg. Datuk Haji Ahmad Shalimin bin Haji Ahmad Shaffie; (x) Y.B. Dato Dr Zabri bin Abd Wahid; (xi) Y.Bhg. Dato Rahim bin Abu Bakar; and (xii) Encik Rosli bin Yaakub. The functions of PSADC are:- (i) (ii) (iii) to promote agricultural industry or development in the Perak State; to carry out all activities either directly or indirectly or for the purpose of assisting any person, company or agency, in the promotion of any agricultural industry or development in the Perak State; and to do all such other matters and things as are necessary for the exercise of all or any of the powers of PSADC. 2.7 Utilisation of Proceeds The cash proceeds arising from the Proposed Disposal amounting to RM42.50 million will be utilised in the following manner:- Purpose of utilisation (RM 000) * Estimated time frame for utilisation of the Disposal Consideration Repayment of borrowings and other charges (i) **2,000 Within one (1) month Repayment of inter-company advances and **13,878 Within six (6) months accrued interest (ii) Dividend payment (iii) **5,529 Within one (1) month Working capital (iv) 17,067 Within twelve (12) months Payment for RPGT (v) **3,663 Within six (6) months Estimated expenses relating to the Proposed **363 Within one (1) month Disposal (vi) Total gross proceeds 42,500 10

17 Notes:- * From the date of completion of the Proposed Disposal. ** Any unutilised amount would be reallocated to working capital. (i) (ii) (iii) (iv) Consist of proposed repayment of borrowing from Bank Pertanian Malaysia Berhad (Agrobank) of RM1.83 million and estimated charges for early settlement of the said borrowing of approximately RM0.17 million. The proposed repayment of borrowing is expected to contribute to interest savings of approximately RM0.19 million per annum based on an estimated average annual interest rate of 10.60%. Consist of repayment of advances from holding corporation, PKNP of RM13.47 million and the accrued interest of RM0.41 million. The proposed repayment of borrowing is expected to contribute to interest savings of approximately RM0.40 million per annum based on an estimated average annual interest rate of 3.00%. The Company propose to declare a special dividend in respect of the FYE 31 December 2015 of approximately RM5.53 million. Comprising day-to-day operations related expenses estimated as follows:- Operating expenses (RM 000) Working capital for future projects # 17,067 Total 17,067 # Working capital to be incurred for the following future projects:- Projects (RM 000) Refurbishment of Silveritage Galleria Complex in Medan Gopeng 11,600 Other future development to be identified 5,467 Total 17,067 The actual composition of the above utilisation of proceeds for working capital may differ subject to timing and cash flow requirements of the MHB Group. (v) (vi) Payment for RPGT in relation to the disposal of the Land. The amount of the payment for the RPGT is based on the estimation by the management of the Company and subject to further changes. The estimated expenses include estimated professional fees and fees payable to the relevant authorities in relation to the Proposed Disposal. The proceeds from the Proposed Disposal will be placed in deposits with financial institutions and/or short-term money market instrument(s) in the event that the proceeds are not immediately utilised. 2.8 Expected gain from the Proposed Disposal The Proposed Disposal is expected to result in a one-off gain of approximately RM30.57 million to MHB. The expected gain arising from the Proposed Disposal is computed as follows:- (RM 000) Proceeds from Proposed Disposal 42,500 Less: Audited net book value of the Land as at 31 December 2014 (4,185) Less: Cumulative development costs as at 31 December 2014 (7,745) Expected gain from the Proposed Disposal 30,570 11

18 Subject to the completion of the Proposed Disposal, such gain is expected to be recognised by MHB during the FYE 31 December Liabilities to be assumed Save for the obligations and liabilities in and arising from, pursuant to or in connection with the SPA, there are no other liabilities including contingent liabilities and/or guarantees to be assumed by MHB and/or PSADC from the Proposed Disposal. 3.0 RATIONALE The Proposed Disposal is a rationalisation of business activity at MHB whereby the MHB Group will focus on property and realty business. The MHB Group has decided to divest the Land as it is not of a sizable scale for development into oil palm plantation nor it is strategically located for immediate development. The Proposed Disposal will enable the Company to realise its investment on the Land and raise funds for, among others, repayment of bank borrowing, repayment of inter-company advances and its working capital as detailed in Section 2.7 of this Circular. The Board is of the view that the Proposed Disposal is a good opportunity for MHB to realise its investment and register a gain on disposal of approximately RM30.57 million. It also serves as an immediate step to partially reduce the MHB Group s gearing position and assist the MHB Group to improve its current financial position while providing cash flow for its working capital requirements as well as cost savings in relation to interest expenses incurred on bank borrowings and inter-company advances. 4.0 FINANCIAL EFFECTS For illustrative purposes, the proforma effects of the Proposed Disposal on the share capital, substantial shareholders shareholdings, NA per share and gearing and earnings and EPS of the MHB Group are set out in the two (2) scenarios below:- Minimum scenario Maximum scenario : Assuming the 103,165,442 outstanding ICPS as at the LPD are not converted into new MHB Share(s) prior to the Completion Date. : Assuming the 103,165,442 outstanding ICPS as at the LPD are converted into new MHB Share(s) prior to the Completion Date. 4.1 Share capital and Substantial shareholders shareholding The Proposed Disposal would not have any effect on the issued and paid-up share capital and the substantial shareholders shareholding of MHB. 4.2 NA per share and gearing For illustrative purposes, the proforma effects of the Proposed Disposal on the audited consolidated NA and gearing of the MHB Group as at 31 December 2014, assuming the Proposed Disposal was implemented on that date, are set out below:- [ The remainder of this page has been intentionally left blank ] 12

19 Minimum Scenario Audited as at 31 December 2014 As at the LPD I After the Proposed Disposal (RM 000) (RM 000) (RM 000) (a) Share capital 92,156 92,418 92,418 (b) ICPS 51,957 51,583 51,583 (b) Share premium 35,479 35,591 35,591 Investment revaluation 1,059 1,059 1,059 reserve Accumulated profit 30,572 30,572 (c) 51,587 Shareholder s equity 211, , ,238 No. of shares ( 000) 184, , ,837 NA per share (RM) (d) Borrowings (RM 000) 20,225 17,996 2,672 Gearing (times) Notes:- (a) 524,300 new MHB Shares issued arising from the conversion of 749,000 ICPS subsequent to 31 December 2014 and up to the LPD. (b) (c) (d) After conversion of 749,000 ICPS subsequent to 31 December 2014 and up to the LPD. After taking into consideration the RPGT of approximately RM3.66 million, proposed special dividend in respect of the FYE 31 December 2015 of approximately RM5.53 million, gain on disposal of the Land of approximately RM30.57 million and the estimated expenses of the Proposed Disposal of approximately RM0.36 million. The amount of the RPGT is based on the estimation by the management of the Company and subject to further changes. After taking into consideration the repayment of the amount due to holding corporation and borrowings of approximately RM13.47 million and RM1.83 million respectively. Maximum Scenario Audited as at 31 December 2014 As at the LPD Assuming full conversion of 103,165,442 ICPS into new MHB Shares I After the Proposed Disposal (RM 000) (RM 000) (RM 000) (RM 000) (a) Share capital 92,156 92, , ,526 (b) (d ICPS 51,957 51, (b) (d) Share premium 35,479 35,591 51,066 51,066 Investment revaluation 1,059 1,059 1,059 1,059 reserve Accumulated profit 30,572 30,572 30,572 (e) 51,587 Shareholder s equity 211, , , ,238 No. of shares ( 000) 184, , , ,053 NA per share (RM) (f) Borrowings (RM 000) 20,225 17,996 17,996 2,672 Gearing (times) Notes:- (a) 524,300 new MHB Shares issued arising from the conversion of 749,000 ICPS subsequent to 31 December 2014 and up to the LPD. (b) After conversion of 749,000 ICPS subsequent to 31 December 2014 and up to the LPD. 13

20 (c) (d) (e) (f) Assuming 72,215,809 new MHB Shares issued arising from the full conversion of 103,165,442 ICPS prior to the completion of the Proposed Disposal. Assuming after full conversion of 103,165,442 ICPS prior to the completion of the Proposed Disposal. After taking into consideration the RPGT of approximately RM3.66 million, proposed special dividend in respect of the FYE 31 December 2015 of approximately RM5.53 million, gain on disposal of the Land of approximately RM30.57 million and the estimated expenses of the Proposed Disposal of approximately RM0.36 million. The amount of the RPGT is based on the estimation by the management of the Company and subject to further changes. After taking into consideration the repayment of the amount due to holding corporation and borrowings of approximately RM13.47 million and RM1.83 million respectively. 4.3 Earnings and EPS For illustrative purposes, based on the audited net book value of the Land as at 31 December 2014, the Proposed Disposal is expected to result in an estimated gain of approximately RM30.57 million which upon completion, latest in September 2015 will be recognised in the financial year ending 31 December The effect on the EPS are as follows:- Minimum Scenario Maximum Scenario Estimated gain on disposal (RM 000) 30,570 30,570 Weighted average share capital ( 000) 184, ,053 EPS from the Proposed Disposal (sen) The savings in interest expense from the repayment of bank borrowings arising from the proceeds of the Proposed Disposal is approximately RM0.19 million per annum, based on an estimated average annual interest rate of 10.60%. The savings in interest expense from the repayment of amount due to holding corporation arising from the proceeds of the Proposed Disposal is approximately RM0.40 million per annum, based on an estimated average annual interest rate of 3.00%. 4.4 Dividend The Board does not expect the Proposed Disposal to materially affect the dividend policy of the MHB Group. Any dividends to be declared by MHB in the future would depend on, inter-alia, the financial performance, cash flow position and financing requirements of the MHB Group. 4.5 Convertible Securities Save for the 103,165,442 outstanding ICPS, MHB does not have any other convertible securities as at the LPD. [ The remainder of this page has been intentionally left blank ] 14

21 5.0 RISK FACTOR (i) Completion risks The completion of the Proposed Disposal is subject to, inter-alia, the fulfilment of conditions precedent, the details of which are set out in Section 2.5(iii) of Part A of this Circular. In the event the conditions precedent are not met, the Proposed Disposal will not be completed, which will result in the failure of the MHB Group to achieve the objectives and benefits of the Proposed Disposal. (ii) Failure or delay in the approval from relevant authorities and/or parties The Proposed Disposal is conditional upon the approvals received from the relevant authorities. The Proposed Disposal is also conditional upon the approvals received from the shareholders of MHB at an EGM to be convened. In the event that approvals are not obtained within the permitted period, MHB and PSADC may either mutually extend the stipulated period or failing which, terminate the SPA. 6.0 APPROVALS REQUIRED AND CONDITIONALITY The Proposed Disposal is subject to the following being obtained:- (i) (ii) the approval of the shareholders of MHB for the Proposed Disposal at the EGM to be convened; and the approvals of any other authorities or parties deemed necessary by the parties to the SPA. The completion of the Proposed Disposal is not conditional upon any other corporate proposals of the Company. 7.0 OUTSTANDING CORPORATE EXERCISES There are no intended corporate exercises/schemes which have been announced but yet to be completed by the MHB Group prior to the issuance of this Circular. 8.0 INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED Save as disclosed below, none of the other Directors and/or major shareholders of MHB and/or persons connected to them have any interest, either direct or indirect, in the Proposed Disposal:- (i) The major shareholder of MHB, namely PKNP is a statutory body which was incorporated under the Enakmen Perbadanan Pembangunan Negeri Perak 1967 (State Development Corporation Enactment, 1967) and is under the purview of the Chief Minister of the Perak State Government. The Purchaser in relation to the Proposed Disposal, namely PSADC is also a statutory body which is under the purview of the Chief Minister of the Perak State Government. Therefore, PKNP is deemed interested in the Proposed Disposal by virtue of PKNP and PSADC both being statutory bodies under the purview of the Chief Minister of the Perak State Government. 15

22 (ii) (iii) (iv) Dato Mohd Khusairi bin Abdul Talib is the Chairman of Ladang Lekir Sdn Bhd, a subsidiary of PSADC. He is deemed interested in the Proposed Disposal by virtue of him being a Non-Independent Non-Executive Director of MHB. Dato Aminuddin bin Md Desa is the Chief Executive of PKNP. He is deemed interested in the Proposed Disposal by virtue of him being a Non-Independent Non-Executive Director of MHB. Encik Jamal bin Mohd Aris is the Deputy Chief Executive of PKNP. He is deemed interested in the Proposed Disposal by virtue of him being a Managing Director cum Group Chief Executive Officer of MHB. Accordingly, Dato Mohd Khusairi bin Abdul Talib, Dato Aminuddin bin Md Desa and Encik Jamal bin Mohd Aris are deemed interested in the Proposed Disposal. The Interested Directors have abstained and will continue to abstain from any deliberation and voting in meetings of the Board to consider the Proposed Disposal. The Interested Major Shareholder shall abstain from voting in respect of its direct interest in the Company on the ordinary resolution pertaining to the Proposed Disposal at the EGM of the Company to be convened. The direct and indirect interests of the Interested Directors and major shareholder as at the LPD are as follows:- Name MHB Shares ICPS Direct Indirect Direct Indirect No. of MHB Shares % No. of MHB Shares % No. of ICPS % No. of ICPS % PKNP 93,853, ,326, DIRECTORS STATEMENT AND RECOMMENDATION The Board (save for the Interested Directors), after having considered all aspects of the Proposed Disposal (including but not limited to the rationale and the financial effects of the Proposed Disposal, the value of the Land as ascribed by the Valuer as well as the independent advice from the Independent Adviser for the Proposed Disposal) and after careful deliberation, is of the opinion that the Proposed Disposal is:- (i) (ii) (iii) fair and reasonable; in the best interests of the MHB Group; and not detrimental to the interest of the minority shareholders of MHB. Accordingly, the Board recommends that shareholders vote in favour of the resolution pertaining to the Proposed Disposal at the forthcoming EGM. [ The remainder of this page has been intentionally left blank ] 16

23 10.0 AUDIT COMMITTEE S STATEMENT The Audit Committee of MHB, having considered all aspects of the Proposed Disposal (including but not limited to the rationale and the financial effects of the Proposed Disposal, the value of the Land as ascribed by the Valuer as well as the independent advice from the Independent Adviser for the Proposed Disposal) and after careful deliberation, is of the opinion that the Proposed Disposal is:- (i) (ii) (iii) fair and reasonable; in the best interests of the MHB Group; and not detrimental to the interest of the minority shareholders of MHB TOTAL AMOUNT TRANSACTED WITH THE SAME RELATED PARTY FOR THE PRECEDING TWELVE (12) MONTHS There are no other transactions with PKNP for the preceding twelve (12) months from the date of this Circular ESTIMATED TIME FRAME FOR COMPLETION Subject to the approvals as stated in Section 6.0 of Part A of this Circular and barring any unforeseen circumstances, the Proposed Disposal is expected to be completed latest by the third quarter of The tentative timetable in relation to the implementation of the Proposed Disposal is set out below:- Events Tentative Date EGM of the Company Mid June 2015 Completion of Proposed Disposal Mid September EGM The EGM, the notice of which is enclosed in this Circular, will be held at Amanjaya Convention Centre, Jalan Meru Casuarina, Bandar Meru Raya, Ipoh, Perak Darul Ridzuan on Friday, 12 June 2015 at 4:30 p.m., or such time immediately after the conclusion or adjournment of the 12 th AGM of the Company to be held at 3:30 p.m. whichever is later, for the purpose of considering and, if thought fit, passing the relevant resolution with or without modification or addition to give effect to the Proposed Disposal. If you are unable to attend and vote in person at the EGM, you should complete, sign and return the Form of Proxy enclosed with this Circular in accordance with the instructions printed therein as soon as possible so as to arrive at the Registered Office of MHB at Aras 3, No. 1-A, Blok A, Menara PKNP, Jalan Meru Casuarina, Bandar Meru Raya, Ipoh, Perak Darul Ridzuan no later than forty-eight (48) hours before the time appointed for holding the EGM or any adjournment thereof. The lodgement of the Form of Proxy will not preclude you from attending and voting in person at the EGM should you subsequently wish to do so FURTHER INFORMATION Shareholders are advised to refer to the attached Appendices for further information. 17

24 Yours faithfully For and on behalf of the Board of Directors of MAJUPERAK HOLDINGS BERHAD Y. Bhg. Tan Sri Dato Seri Megat Najmuddin bin Datuk Seri Dr. Haji Megat Khas Chairman, Senior Independent Non-Executive Director 18

25 PART B INDEPENDENT ADVICE LETTER TO THE NON-INTERESTED SHAREHOLDERS OF MHB IN RELATION TO THE PROPOSED DISPOSAL 19

26 Registered Office: Level 14 Chulan Tower No. 3 Jalan Conlay Kuala Lumpur Malaysia 28 May 2015 To: The Non-Interested Shareholders of Majuperak Holdings Berhad Dear Sir/Madam, INDEPENDENT ADVICE LETTER TO THE NON-INTERESTED SHAREHOLDERS OF MAJUPERAK HOLDINGS BERHAD IN RELATION TO THE PROPOSED DISPOSAL 1. INTRODUCTION 1.1 This IAL is prepared for inclusion in this Circular. Definitions used in this IAL shall have the same meanings as the definitions used in Part A of this Circular, except where the context otherwise requires or where otherwise defined herein. All references to you are references to the Non- Interested Shareholders of the Company, whilst references to we, us or our are references to KAF Investment, being the Independent Adviser for the Proposed Disposal. 1.2 On 23 February 2015, the Board announced the Proposed Disposal. 1.3 In view of the interests of the Interested Directors and Interested Major Shareholder of MHB as specified in Section 8 of Part A of this Circular, the Proposed Disposal is deemed to be a related party transaction. Accordingly, pursuant to the requirements of Paragraph 10.08(2)(c) of the Listing Requirements, the Board had, on 2 February 2015, appointed KAF Investment as the Independent Adviser to advise the Non-Interested Directors and the Non-Interested Shareholders of MHB in relation to the Proposed Disposal. 1.4 The purpose of this IAL is to provide the Non-Interested Shareholders of MHB with an independent evaluation on the fairness and reasonableness of the terms of the Proposed Disposal as well as whether the Proposed Disposal is detrimental to the Non-Interested Shareholders of MHB together with our recommendation on the voting of the ordinary resolution pertaining to the Proposed Disposal, subject to the limitations of our role and evaluation as specified herein. 1.5 This IAL is prepared solely for the use of the Non-Interested Shareholders of MHB for the purpose of considering the Proposed Disposal, and should not be used or relied upon by any other party for any other purposes whatsoever. NON-INTERESTED SHAREHOLDERS OF MHB ARE ADVISED TO READ AND FULLY UNDERSTAND BOTH THIS IAL AND THE LETTER FROM THE BOARD AS SET OUT IN PART A OF THIS CIRCULAR TOGETHER WITH THE ACCOMPANYING APPENDICES, AND TO CONSIDER CAREFULLY THE RECOMMENDATIONS CONTAINED IN BOTH LETTERS BEFORE VOTING ON THE RESOLUTION TO GIVE EFFECT TO THE PROPOSED DISPOSAL TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY. IF YOU ARE IN ANY DOUBT AS TO THE COURSE OF ACTION TO BE TAKEN, YOU SHOULD CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER IMMEDIATELY. 1

27 2. DETAILS OF THE PROPOSED DISPOSAL The full details of the Proposed Disposal are set out in Part A of this Circular and should be read and fully understood in their entirety by the Non-Interested Shareholders of MHB. The Proposed Disposal is not conditional upon any other proposals undertaken or to be undertaken by the Company. 3. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED We note from Section 8 of Part A of this Circular that:- Save as disclosed below, none of the other Directors and/or major shareholders of MHB and/or persons connected to them have any interest, either direct or indirect, in the Proposed Disposal:- (i) The major shareholder of MHB, namely PKNP is a statutory body which was incorporated under the Enakmen Perbadanan Pembangunan Negeri Perak 1967 (State Development Corporation Enactment, 1967) and is under the purview of the Chief Minister of the Perak State Government. The Purchaser in relation to the Proposed Disposal, namely PSADC is also a statutory body which is under the purview of the Chief Minister of the Perak State Government. Therefore, PKNP is deemed interested in the Proposed Disposal by virtue of PKNP and PSADC both being statutory bodies under the purview of the Chief Minister of the Perak State Government. (ii) (iii) (iv) Dato Mohd Khusairi bin Abdul Talib is the Chairman of Ladang Lekir Sdn Bhd, a subsidiary of PSADC. He is deemed interested in the Proposed Disposal by virtue of him being a Non- Independent Non-Executive Director of MHB. Dato Aminuddin bin Md Desa is the Chief Executive of PKNP. He is deemed interested in the Proposed Disposal by virtue of him being a Non-Independent Non-Executive Director of MHB. Encik Jamal bin Mohd Aris is the Deputy Chief Executive of PKNP. He is deemed interested in the Proposed Disposal by virtue of him being a Managing Director cum Group Chief Executive Officer of MHB. Accordingly, Dato Mohd Khusairi bin Abdul Talib, Dato Aminuddin bin Md Desa and Encik Jamal bin Mohd Aris are deemed interested in the Proposed Disposal. The Interested Directors have abstained and will continue to abstain from any deliberation and voting in meetings of the Board to consider the Proposed Disposal. The Interested Major Shareholder shall abstain from voting in respect of its direct interest in the Company on the ordinary resolution pertaining to the Proposed Disposal at the EGM of the Company to be convened. The direct and indirect interests of the Interested Directors and major shareholder as at the LPD are as follows:- Name MHB Shares ICPS Direct Indirect Direct Indirect No. of MHB Shares % No. of MHB Shares % No. of ICPS % No. of ICPS % PKNP 93,853, ,326,

28 4. SCOPE AND LIMITATIONS OF OUR EVALUATION 4.1 KAF Investment has not been involved in any negotiation on the terms and conditions of the Proposed Disposal nor has it participated in the Board s deliberation of the Proposed Disposal. KAF Investment s scope as Independent Adviser is limited to expressing an independent opinion on the fairness and reasonableness of the terms of the Proposed Disposal from a financial point of view, based on and in reliance upon information, documents and representations/confirmations provided or made available to us (the accuracy of which the Board or other advisers of MHB are solely responsible), including but not limited to the following:- (i) (ii) (iii) (iv) (v) (vi) the Valuation Report; the SPA; this Circular and the accompanying appendices in relation to the Proposed Disposal; information provided by MHB, as well as representations/confirmations obtained in or derived from discussions with the management of MHB; audited financial statements of the MHB Group for the FYE 31 December 2014; and other publicly available information which we deem relevant. In view of the appointment of the Valuer by the Company to independently assess the market value of the Land, we have no intention of soliciting alternative appraisal on the Land. In line with our role and scope of work, notwithstanding that KAF Investment may make reasonable enquiries in the course of preparing this IAL, KAF Investment is not responsible or liable in any manner to independently verify the accuracy, validity or completeness of any of the abovementioned information, documents and representations used, referred to and/or relied upon by KAF Investment for the purpose of this IAL. KAF Investment is not responsible in any manner for the accuracy, validity or completeness of any such information, documents and representations, expressed or implied. Accordingly, KAF Investment shall not be under any responsibility or liability whatsoever to any party for any inaccuracies, misstatements of facts or omissions therein. We have also obtained written confirmation from the Board that the directors of the Company collectively and individually accept full responsibility for the accuracy of the information given in the IAL (save and except for opinions expressed by KAF Investment which do not contain factual information provided by MHB and information procured or developed by KAF Investment independently of MHB) and confirm that after making all reasonable enquiries, to the best of their knowledge and belief, there are no facts, the omission of which would make any statement herein misleading. The Board has also provided written confirmation that all material facts and information in respect of the Company and the Land relevant to KAF Investment s evaluation of the Proposed Disposal have been disclosed to KAF Investment, and that there are no facts or information, the omission of which would make any written information supplied to us misleading in any material respect. Based on due enquiries made, we are satisfied with the information provided by MHB and are not aware of any fact or matter not disclosed which renders any such information untrue, inaccurate or misleading or the disclosure of which might reasonably affect our evaluation and opinion as set out in this IAL. KAF Investment, as the Independent Adviser, has evaluated the Proposed Disposal. We have taken into consideration pertinent matters which are made known to us and which we believe are of general importance to an assessment of the financial implications of the Proposed Disposal and would be of significant relevance and general concern to the shareholders of MHB as a whole in arriving at our advice. 3

29 The scope of KAF Investment s responsibility with regards to its evaluation and opinion contained herein is confined to the financial terms and implications arising from the Proposed Disposal. Where our comments or points of consideration are included on certain pertinent matters which may be qualitative or commercial in nature, these are incidental to our overall financial evaluation and concern matters which we may deem material for disclosure and/or which may have possible financial implications on the MHB Group. KAF Investment s opinion contained in this IAL is provided to the Non-Interested Shareholders of MHB at large and not to any shareholder individually. Hence, we have not given regard to the specific investment or financial objectives, financial situation and/or particular needs of any individual shareholder or any specific group of shareholders. We recommend that any individual shareholder or specific group of shareholders who require specific advice within the context of their individual objectives, financial situation and particular needs to consult their stockbroker, bank manager, solicitor, accountant or other professional advisers at their own costs. 4.2 In the event, after the issuance of this IAL and up to the date of the forthcoming EGM, KAF Investment becomes aware that the information relied upon by us during our engagement has significantly changed or a material statement in this IAL is false, misleading and/or deceptive, KAF Investment shall inform the Company s shareholders as soon as practicable of any material change in information that would affect their decision to vote on the resolution pertaining to the Proposed Disposal. KAF Investment, together with the Company, is obliged and responsible to ensure that the said change is communicated appropriately to the Company s shareholders. If circumstances require, a supplementary IAL shall be issued and/or the EGM shall be postponed to provide the Company s shareholders with sufficient time to re-evaluate their decision in light of the new information. 4.3 We confirm that there is no conflict of interest situation or potential conflict of interest situation arising from us carrying out the role of Independent Adviser to advise the Non-Interested Shareholders of MHB in respect of the Proposed Disposal and that there was no professional relationships between KAF Investment and MHB in the past two (2) years prior to the date of this IAL. 4.4 KAF Investment is an investment bank in Malaysia with a strong reputation in the dealing of money market instruments and trading of debt securities. KAF Investment is also involved in providing capital market advisory services such as fund raising via the issuance of private debt securities, equity and equity-linked securities. The credentials and experience of KAF Investment as an Independent Adviser, where we have been appointed in the past one (1) year prior to the date of the SPA, include, among others, the following proposals:- (i) (ii) (iii) proposed acquisitions by Microlink Solutions Berhad of the entire equity interests held by Formis Holdings Berhad, Omesti Berhad (formerly known as Formis Resources Berhad) and Man Yau Holdings Berhad in Applied Business Systems Sdn Bhd, Formis Systems & Technology Sdn Bhd, Formis Computer Services Sdn Bhd, First Solution Sdn Bhd and Formis Advanced Systems Sdn Bhd for a total consideration of RM50.00 million, satisfied via a combination of cash and the issuance of redeemable preference shares; proposed acquisition by Mycron Steel Berhad of the entire equity interest in Melewar Steel Tube Sdn Bhd from Melewar Industrial Group Berhad for a purchase consideration of RM70.00 million, satisfied via a combination of issuance of new ordinary shares and assumption of trade debt; proposed disposals by Tecnic Group Berhad of the entire equity interests in Plastictecnic (M) Sdn Bhd, Sun Tong Seng Mould-Tech Sdn Bhd and Bangi Plastics Sdn Bhd to SKP Resources Bhd for a total consideration of RM million, satisfied via a combination of cash and the issuance of new ordinary shares; and 4

30 (iv) proposed disposals by Puncak Niaga Holdings Berhad of the entire equity interest and cumulative convertible redeemable preference shares held in Puncak Niaga (M) Sdn Bhd as well as 70.00% equity interest and RM million nominal value of redeemable convertible unsecured loan stocks held in Syarikat Bekalan Air Selangor Sdn Bhd to Pengurusan Air Selangor Sdn Bhd (formerly known as Temasek Tiasa Sdn Bhd). Premised on the foregoing, KAF Investment is capable and competent in carrying out its role and responsibilities as the Independent Adviser to advise the Non-Interested Shareholders of MHB in relation to the Proposed Disposal. 5. EVALUATION OF THE PROPOSED DISPOSAL In our evaluation of the Proposed Disposal, we have considered the following factors:- (i) (ii) (iii) (iv) (v) Rationale for the Proposed Disposal; Basis and justification of arriving at the Disposal Consideration; Salient terms of the SPA; Risk factors associated with the Proposed Disposal; and Financial effects of the Proposed Disposal. 5.1 Rationale for the Proposed Disposal We take note of the following as extracted from Section 3 of Part A of this Circular:- The Proposed Disposal is a rationalisation of business activity at MHB whereby the MHB Group will focus on property and realty business. The MHB Group has decided to divest the Land as it is not of a sizable scale for development into oil palm plantation nor it is strategically located for immediate development. The Proposed Disposal will enable the Company to realise its investment on the Land and raise funds for, among others, repayment of bank borrowing, repayment of inter-company advances and its working capital as detailed in Section 2.7 of this Circular. The Board is of the view that the Proposed Disposal is a good opportunity for MHB to realise its investment and register a gain on disposal of approximately RM30.57 million. It also serves as an immediate step to partially reduce the MHB Group s gearing position and assist the MHB Group to improve its current financial position while providing cash flow for its working capital requirements as well as cost savings in relation to interest expenses incurred on bank borrowings and inter-company advances. KAF Investment s comments:- We note that MHB Group is involved in property development, property management and management services. We note a few important highlights on the Land as follows: (i) Development of the Land into an oil palm estate The Land is an agricultural land alienated to MHB by the State Government of Perak on 25 November 2009 and intended to be developed into an oil palm estate to be known as Ladang Sungai Piah. The development was undertaken by Syarikat Majuperak Berhad, a wholly owned subsidiary company of MHB. The status of the approvals for development into oil palm estate are as follows:- 5

31 (a) (b) (c) (d) (e) Jabatan Kerja Raya has granted MHB the right to use secondary laterite access road to the Land on 9 July Jabatan Alam Sekitar Negeri Perak had approved the EIA report for the development of the Land into oil palm estate on 9 August Jabatan Alam Sekitar Negeri Perak had also approved the Environmental Management Plan for the proposed oil palm development on the Land on 4 February Jabatan Pengairan Dan Saliran Negeri Perak had no objections for the proposed oil palm development on the Land via its letter dated 21 January Jabatan Perhutanan, Pengairan Dan Saliran Negeri Perak had no objections to the use access road for the proposed oil palm development via its letter dated 5 February The development is slated for 4 phases as follows:- (Source: Valuation Report) Based on the inspection made by the Valuer on 28 October 2014, major portion of the Land is still under secondary jungle except for Phase 1. As per the Valuation Report, the total land that has been cleared and terraced is about 1,146 acres or 23% of the total Land area. Development cost incurred by Syarikat Majuperak Berhad for the Land is approximately RM7.745 million as at 31 December We note from Section 2.2 of Part A of this Circular that part of the Land has been cleared in line with the initial intention under the alienation of the Land to the Company by the State Government of Perak. [ The remainder of this page has been intentionally left blank ] 6

32 The proposed land use of the estate is as follows:- Land use Hectares Percentage Plantable area 1, % Non-Agriculture and Non-Productive Area (1) % Total 2, % Notes:- (1) The non-agriculture and non-productive area includes those areas designated for office buildings and workers quarter, road, non-planted terrain (more than 25 degree gradient), river and forest reserve and trenches. Hence, based on the above, only 1,483.1 hectares or 3,664.8 acres or 73.2% of the total Land area is suitable for development into oil palm estate. Area-wise, oil palm estate is typically a contiguous land area often in excess of 2,000 hectares at each location in order to achieve economies of scale and ensure the management team is employed at an optimum level. Hence, the total area does not command sufficient scale for development into estate for an optimum level of operation. (ii) Suitability for Immediate Development into Commercial/Residential Area We note the following points on the location of the Land:- (a) (b) (c) The Land is located at Sungai Piah Forest Reserve, Off Jalan Bukit Sapi, Lenggong, Perak. It is an interior lot whereby part of it was extracted from Sungai Piah Forest Reserve. 3,854 acres or 77% of the Land area is still under secondary forest. Access to the Land in the north is via Lenggong and in the south is via Sungai Siput, both through a secondary forest via laterite access road. The locality within which the Land is sited is predominantly an agricultural area with economic activity within the locality is largely agriculture in nature, as follows:- To the north of the Land are Hutan Simpan Papulut, Kemajuan Tanah Papulut, Kemajuan Tanah Padang Jeri/Changkat Lobak, Kemajuan Tanah Lawin and Kemajuan Tanah Malau, To the south of the Land are Hutan Rizab Chior, Kemajuan Tanah Perlop, Kemajuan Tanah Lasah, To the west of the Land are Hutan Rizab Piah, Kemajuan Tanah Ayer Kala, Kemajuan Tanah Ayer Ibul, Kemajuan Tanah Ayer Karah and Ladang Hup Seng. Sungai Piah runs in a north south direction along the eastern boundry of the Land. (d) Based on the information from Perak State Government official website, the population within the Lenggong Municipal Council is approximately 19,500 people. Premised on the above, we concur with the management of MHB that the Land is not strategically located for an immediate development into a large scale commercial and residential area. 7

33 (iii) Rationalisation Exercise We were informed by the management of MHB that whilst the Proposed Disposal represents a rationalisation exercise at MHB (as plantation is not within the core business activity of MHB), the Proposed Disposal also stems from the rationalisation intent at the Perak state level whereby the Land will be consolidated with the existing plantation land under PSADC. In addition, MHB Group is involved in property development, property management and management services. If MHB decides to pursue further the development of the Land into an oil palm estate, it would represent an investment into a non-core business. Such diversification into a new business carries risks that are significantly different from its current core business. (iv) Unlocking the Value of the Land The Land is currently held as an investment property and does not contribute any revenue or generate any profits to MHB Group. Therefore, the Proposed Disposal would enable MHB to unlock the value of the Land at the disposal price of RM42.50 million which is equal to the prevailing market value as appraised by the Valuer. Furthermore, MHB would not have to incur further development, maintenance costs and expenses if the Company was to continue to hold the Land. We further note from the Chairman s Statement in the Annual Report 2013 of the MHB Group for the FYE 31 December 2013 that the Company is actively seeking opportunities to acquire strategic land banks to further strengthen the growth of their property segment in terms of sales, profit and market share. Based on the Malaysian Economic Report 2014/2015, the real estate and business services are projected to grow by 7.1% in 2015 (2014: 7.5%). Premised on the above, we are of the opinion that the rationale for the Proposed Disposal is reasonable. 5.2 Basis and justification of arriving at the Disposal Consideration As stated in Section 2.4 of Part A of this Circular:- The Disposal Consideration was arrived at on a willing-buyer willing-seller basis and taking into consideration the market value of the Land of RM42,500,000 as appraised by the Valuer. The valuation was carried out based on Comparison Approach method of valuation. The brief summary of the Comparison Approach is as follows:- Method of valuation Comparison Approach (i) Description The approach involves the comparison of recent sales of similar properties in the area. Adjustments however are made for differences in location, size and shape of lot, site facilities available, time element, and other adjustments in order for the Valuer to arrive at a common basis for comparison. Comparable land Six (6) comparable lands located within the vicinity of the Land. The Valuer has used the the sales evidences of the comparable lands from 2003 to 2013 since there are not many recent transactions for similar lands located within the locality. 8

34 Adjusments are made for differences in location, size, physical, scattered land, plantation, road, infrastructure, land restriction and time element. Adjusted market value of the comparable lands The adjusted market values of the comparable lands are as follows:- Comparable lands Adjusted market value per hectare (RM) Comparable 1 21,826 Comparable 2 18,703 Comparable 3 23,750 Comparable 4 84,606 Comparable 5 36,124 Comparable 6 22,619 The Valuer has relied only on Comparable 1, 2 and 3 as they are the nearest comparable lands located to the Land with adjustments made for planted and vacant lands. Conclusion Based on the Comparison Approach, the Valuer has adopted RM21,000 per hectare as the base land value. Hence, the market value of the Land is RM42,500,000. (Sources:Valuation Certificate and Valuation Report) Note:- (i) The Asset Valuation Guidelines of the Securities Commission Malaysia require at least two (2) valuation approaches are to be adopted. However, the Valuer has adopted only one (1) method of valuation as the Land is a vacant agricultural land. KAF Investment s comments:- We note from the Valuation Report that in arriving at the market value for the Land, the Valuer has adopted only the Comparison Approach method of valuation since the Land is a vacant agricultural land. The Comparison method involves the comparison of recent sales of similar properties in the area. Adjustments however are made for differences in location size, shape of lot, site facilities available, time element and other adjustments in order to arrive at a common basis for comparison. In arriving at the open market value, the Valuer has taken into account factors such as legal and legislative constraints, time element, physical and other factors likely to affect the value of the Land. [ The remainder of this page has been intentionally left blank ] 9

35 The following table summarises the sales evidence used in the Comparison Method of valuation to determine the market value of Land:- Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 (i) Comparison Method Property Details / Locality 1196 and 26 other lots, GRN 9350 and 26 other titles, Mukim Chegar Galah, Daerah Kuala Kangsar, Perak Vendor Tan Phaik Eow and 26 others 3973 and 15 other lots, GRN and 15 other titles, Mukim Bukit Gantang, Daerah Larut Matang, Perak Boustead Holdings Berhad 1625, GRN 42492, Mukim Kampong Buaya, Daerah Kuala Kangsar, Perak Kasi a/l K.L. Palaniappan PT 335, HSD 238/88, Mukim Lambor Kiri, Daerah Perak Tengah, Perak Ladang Gabungan Pekebun Kechil- Kemasik (Perak) Sdn Bhd PT 1023, HSD 2568, Mukim Sungkai, Daerah Batang Padang, Perak Perak Fruits & Development Corporation Sdn Bhd 11445, PN , Mukim Durian Sebatang, Daerah Hilir Perak, Perak Not available Purchaser Concept Rubber Products Sdn Bhd CIMB Islamic Trustee Berhad Tan Kim Lai and Toh Ai Seng Ladang Jalong Sdn Bhd Seni Perintis Sdn Bhd Maple Amalgamated Sdn Bhd Date of transaction /10/ /02/ /08/2006 Land Area (acres) 1, , , , , Tenure Open title / Freehold Open title / Freehold Open title / Freehold Malay Reservation Land / Freehold Open title / Leasehold interest expiring on 12/05/2095 Open title / Leasehold interest for 99 years expiring on 18/08/2107 Land Use Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture Plantation Old rubbers Oil palms with old mill Vacant Vacant Vacant Vacant Transaction Price (RM) 14,967,959 64,499,999 9,276,250 61,630,520 23,000,000 42,071,566 Land value (RM per 13,642 17,673 25,000 41,533 22,918 14,380 acre) Time Adjustment -50% -30% -30% -10% -50% -50% Location Adjustment -10% -15% -5% -10% -15% -15% Size -7% -2% -40% -5% -7% -3% Physical -15% -15% -10% -25% -15% -25% Plantation -20% -30% 0% 0% 0% 0% Road Infrastructure -20% -20% -15% -15% -20% -15% Scattered Land +15% +15% 0% 0% 0% 0% Restriction 0% 0% 0% 30% 0% 0% Adjusted Land value 8,833 7,569 9,612 34,240 14,619 9,154 (RM per acre) (Source: Valuation Report) 10

36 We note that the Valuer has used the sales evidences from 2003 to 2013 since there are not many latest transactions for similar properties located within the locality. The Valuer has adopted Comparable 1, 2 and 3 in arriving at the land value as they are located within the locality of the Land and the value adopted is RM21,000 per hectare or RM8,500 per acre. Our observation is as follow:- Adopted value per hectare Land area Market value of the Land based on the Comparison method Round up to RM21,000 2,023 hectares RM42,483,000 RM42,500,000 From the above analysis, the Valuer has adopted the market value of the Land, free from Encumbrance and with the benefit of vacant possession of RM42,500,000 or RM21,008 per hectare (or RM8,500 per acre). Premised on the above, we are of the view that the Disposal Consideration of RM42,500,000 is fair and reasonable as it is:- (i) (ii) at par to the Market Value of the Land of RM42,500,000; and within the sales evidence value range of the comparable lands. 5.3 Salient terms of the SPA Our commentaries on the salient terms of the SPA as set out in Section 2.5 of Part A of this Circular are as follows:- Salient terms KAF Investment s comments (i) Basis of sale The Land is sold on an as is where is basis and free from Encumbrance. : This is a common term for property transactions. (ii) Consideration and Payment of the Disposal Consideration The purchase price payable by the Purchaser to the Vendor for the Land under the SPA shall be RM42,500,000. (a) Payment The Disposal Consideration shall be paid in accordance with the following manner:- (aa) a sum of RM8,500,000 to be paid by the Purchaser to the Stakeholder upon execution of the SPA. : This is a reasonable and common term for property transactions, where the deposit payment indicates the commitment of PSADC towards the Proposed Disposal. The deposit of RM8,500,000, as mentioned in Section 5.3(ii)(a)(aa) which represents 20% of the Disposal Consideration, is 11

37 Salient terms KAF Investment s comments reasonable based on our observation of the deposit paid (at the point of signing an agreement) in property transactions of a similar nature of between two percent (2%) to ten percent (10%). We note from the SPA that the Deposit will only be released by the Stakeholder to MHB after the consent being obtained from the relevant authority to transfer the Land to PSADC by MHB. (bb) the Purchaser shall pay a sum of RM34,000,000 being the balance disposal consideration to the Stakeholder within one (1) month from the date the Vendor fulfils all the conditions precedent. The Stakeholder shall deal with the Balance Disposal Consideration in accordance with the Application and Release of the Balance Disposal Consideration clause below. : The clause as per Section 5.3(ii)(a)(bb) of this IAL is a common commercial term to ensure the payment of the Balance Disposal Consideration are made by PSADC to MHB in accordance with the agreed payment schedule and so as to compensate MHB opportunity loss due to any delay in receiving the payment due. (b) Application and Release of the Balance Disposal Consideration The Stakeholder is irrevocably authorised by the Vendor and the Purchaser to utilise and deal with the Balance Disposal Consideration upon receipt thereof in the following manner:- (aa) (bb) to settle for and pay on behalf of the Vendor the redemption sum to the existing chargee of the Land for the purpose of removing the Encumbrance on the Land; to pay all fees charges expenses and other payment which is due to be paid by the Vendor in respect of the Land, if any; and : The clause as per Section 5.3(ii)(b) is reasonable as the Stakeholder will release the Disposal Consideration of RM34,000,000 which represents 80% of the Disposal Consideration after the transfer of the Land in favor of PSADC and delivery of the vacant land, settlement of the redemption sum and other fees and expenses which due to be paid by MHB in respect of the Land. (cc) to hold the remaining Balance Disposal Consideration, if any, and release the same to the Vendor after the expiry of seven (7) days of the date the presentation of the stamped MOT for registration in favour of the Purchaser and vacant possession to the Land having been delivered to the Purchaser or upon expiry of fourteen (14) days from the date of receipt of the discharge documents by the Stakeholder or the Purchaser s financier's solicitors (as the case may be) from the chargee, whichever is earlier. 12

38 Salient terms KAF Investment s comments (c) Extended Completion Date If the Purchaser shall be unable to deposit the Balance Disposal Consideration by the Completion Date, the Vendor shall grant to the Purchaser an extension period of one (1) month only from the expiry of the Completion Date to pay the Balance Disposal Consideration during which extension period the Purchaser shall pay to the Vendor interest at the rate of eight per centum (8%) per annum on the Balance Disposal Consideration or any part thereof remaining unpaid to be calculated on a daily basis from the expiry of the Completion Date until the date of full payment of the Balance Disposal Consideration provided always that if there shall be any delay attributable to the Vendor resulting the Purchaser not being able to deposit the Balance Disposal Consideration by the Completion Date, the extension of the Completion Date shall not render the Purchaser being liable for the payment of interest during and for period of the delay or the Extended Completion date as the case may be, shall also be extended by a period equivalent to the aggregate period delay. : The Clause as per Section 5.3(ii)(c) is reasonable as it accounts for continuity of the agreement in the event of any delay of the Completion Date and PSADC shall pay to MHB the Balance Disposal Consideration together with interest of 8% per annum for the one (1) month automatic extension period. The rate of eight percent (8%) per annum calculated on a daily basis is mutually agreed between the parties and is reasonable based on our observation of the rates applied in property transactions of a similar nature of between six percent (6%) to eight percent (8%). Note:- * The interest rate of eight per centum (8%) per annum is derived based on negotiations between the Vendor and the Purchaser prior to entering into the SPA. (iii) Condition Precedent The sale and purchase of the Land shall be conditional upon following being obtained by the Vendor:- (a) (b) the consent from the relevant authority; the Vendor s shareholders approval for the sale of the Land in accordance with the provisions of the SPA. In the event that the conditions precedent are not being fulfilled by the Vendor within six (6) months from the date of the SPA, the Purchaser shall be entitled to terminate the SPA by notice in writing to the Vendor and upon receipt of such notice by the Vendor, the SPA shall lapse and be of no further effect and in such event the Vendor shall within fourteen (14) days thereof refund to the Purchaser all monies paid inclusive of the Deposit free of interest and thereafter the Vendor shall be at liberty to resell or otherwise deal with the Land as the Vendor shall think fit. : These are common and reasonable terms as they require both MHB and PSADC to procure the relevant requisite approvals and in compliance with the applicable laws and regulatory requirements within 6 months from the date of the SPA. The period of fourteen (14) days for MHB to refund PSADC all monies paid inclusive the Deposit free of interest is reasonable based on our observation of the period applied in other property transactions. 13

39 Salient terms KAF Investment s comments (iv) Default (a) Default by Purchaser If the Purchaser shall fail to pay the Balance Disposal Consideration or defaults in any provisions of the SPA and such failure or breach has not been remedied by the Purchaser within fourteen (14) days after receipt of the Vendor's written notice, then the Vendor shall be entitled to take such action to enforce the SPA by specific performance and/or to claim for any loss or damage and costs incurred or suffered by the Vendor and/or:- (aa) the Vendor shall be entitled to forfeit absolutely as liquidated damages a sum representing ten per cent (10%) of the Disposal Consideration and thereafter the Vendor shall within fourteen (14) days from the date the Vendor exercise the right of forfeiture refund to the Purchaser the balance of all other moneys paid by the Purchaser, if any, free of interest; : These are common and reasonable terms which serve to safeguard the interests of MHB to the contract in the event of default by PSADC. The period of fourteen (14) days for PSADC to remedy the breach of any provisions of the SPA and the liquidated damages a sum representing ten per cent (10%) of the Disposal Consideration are reasonable based on our observation of the period and rate applied in property transactions of a similar nature. (bb) (cc) (dd) upon confirmation of such refund (if any) pursuant to the paragraph above such quit rent and assessment receipts of title, MOT and all other relevant documents (if delivered to the Purchaser or the Stakeholder) shall be returned immediately to the Vendor and if the Land has already been delivered to the Purchaser, to redeliver vacant possession of the Land in good tenantable condition; the Purchaser shall remove or cause to be removed immediately any private caveat or other encumbrance lodged by or on behalf of the Purchaser (if any); and thereafter the SPA shall become null and void and be of no further effect. (b) Default by Vendor** In the event the Vendor breaches any of the provisions of the SPA and/or fails to complete the sale of the Land and such failure or breach has not been remedied by the Vendor within fourteen (14) days after being notified by the Purchaser, then the Purchaser be entitled to:- : These are common and reasonable terms which serve to safeguard the interests of PSADC to the contract in the event of default by MHB. The period of fourteen (14) days for MHB to remedy the breach of any provisions of the SPA is reasonable based on our observation of the period applied in property transactions of a similar nature. 14

40 Salient terms KAF Investment s comments (aa) to sue for the remedy of specific performance of the sale and purchase of the Land and, in addition to or in lieu of specific performance, for damages for breach of contract. All costs and expenses incurred by the Purchaser in connection therewith shall be borne and paid by the Vendor; or : These are the reciprocate terms to Section 5.3(iv)(a) of this IAL and typical to transaction of such nature, where in the event the Vendor breaches any material provisions of the SPA, the Purchaser is entitled to either:- (i) sue for specific performance; or (bb) by notice in writing served on the Vendor, elect to accept a sum representing ten per cent (10%)*** of the Disposal Consideration as agreed liquidated damages from the Vendor who shall on or before the expiry of fourteen (14) days from the date of the written notice pay the agreed liquidated damages to the Purchaser together with a refund of all moneys paid by the Purchaser pursuant to the SPA free of interest. All costs and expenses incurred by the Purchaser in connection therewith shall be borne by the Vendor upon demand of the Purchaser or the Stakeholder; (ii) terminate the SPA and the Vendor shall refund all monies paid by the Purchaser and claim liquidated damages equivalent to ten per cent (10%) of the Disposal Consideration. (cc) thereafter the SPA shall become null and void and be of no further effect. Note: ** In the event of default by the Vendor, if the Purchaser elects to:- - sue for specific performance, the Vendor is required to complete the sale of the Land to the Vendor and pay for damages for breach of contract. The Vendor is also required to bear all costs and expenses incurred by the Purchaser; or - sue for damages for breach of contract, the Vendor is required to pay to the Purchaser the damages after the court has decided on the quantum of damages. The Vendor is also required to bear all costs and expenses incurred by the Purchaser; or - accept agreed liquidated damages (a sum which represents 10% of the Disposal Consideration), the Vendor is required to pay the agreed liquidated damages to the Purchaser together with a refund of all moneys paid by the Purchaser pursuant to the SPA free of interest. The Vendor is also required to bear all costs and expenses incurred by the Purchaser. 15

41 Salient terms KAF Investment s comments (Source: Circular) To prevent the occurrence of event of default by the Vendor, the Vendor will manage the Proposed Disposal effectively, perform its obligations under the SPA and ensure compliance with the terms and conditions of the SPA. *** the liquidated damages fixed at ten per centum (10%) of the Disposal Consideration payable by the Vendor in the event of default by the Vendor is to be made consistent with the liquidated damages at ten per centum (10%) of the Disposal Consideration payable by the Purchaser in the event of default by the Purchaser. KAF Investment s comments:- Based on our evaluation of the salient terms of the SPA as above, we are of the view that the salient terms and conditions of the SPA are considered reasonable and are not detrimental to the interest of the non-interested shareholders of MHB. 5.4 Risk Factors associated with the Proposed Disposal In considering the Proposed Disposal, the Non-Interested Shareholders of MHB are advised to give due and careful regard to the various risk factors as mentioned in Section 5 of Part A of this Circular before voting on the Proposed Disposal at the forthcoming EGM. KAF Investment s comments:- As mentioned in Section 5.3(iv)(b) of this IAL that in the event of default by the Vendor, if the Purchaser elects to:- (i) (ii) (iii) sue for specific performance, the Vendor is required to complete the sale of the Land to the Vendor and pay for damages for breach of contract. The Vendor is also required to bear all costs and expenses incurred by the Purchaser; or sue for damages for breach of contract, the Vendor is required to pay to the Purchaser the damages after the court has decided on the quantum of damages. The Vendor is also required to bear all costs and expenses incurred by the Purchaser; or accept agreed liquidated damages (a sum which represents 10% of the Disposal Consideration), the Vendor is required to pay the agreed liquidated damages to the Purchaser together with a refund of all moneys paid by the Purchaser pursuant to the SPA free of interest. The Vendor is also required to bear all costs and expenses incurred by the Purchaser. We made to understand that in order for the Company to prevent the occurrence of event of default by MHB, MHB will manage the Proposed Disposal effectively, perform its obligations under the SPA and ensure compliance with the terms and conditions of the SPA. We note that although measures may be taken by the Board to attempt to limit such risks, no assurance can be given that one or a combination of such risk factors will not crystallise, and give rise to material and adverse impact on the financial performance/position or prospects of the MHB Group. 16

42 5.5 Financial Effects of the Proposed Disposal We note the financial effects of the Proposed Disposal on the share capital, the substantial shareholders shareholding, NA, NA per share and gearing and earnings and EPS of MHB as set out in Section 4 of Part A of this Circular. KAF Investment s comments- We note the following:- (i) (ii) (iii) the Proposed Disposal will not have any effect on the issued and paid-up share capital of the Company as well as the substantial shareholders shareholdings; based on the audited consolidated financial results for the FYE 31 December 2014 of MHB and assuming the Proposed Disposal had been completed on 31 December 2014, the NA of MHB will increase by approximately RM21.02 million from RM million to RM million due to, among others, the net gain on disposal of RM30.57 million from the Proposed Disposal. Further the NA per Share will increase from RM1.15 to RM1.26 under the Minimum Scenario, but will drop to RM0.90 under the maximum Scenario, assuming the 103,165,442 outstanding ICPS as at the LPD are converted into new MHB Share(s) prior to the Completion Date; and as stated in Section 2.7 of Part A of this Circular, the Company intends to utilize the Disposal Consideration partly to repay the estimated bank borrowings and intercompany advances of RM1.83 million and RM13.47 million respectively. Therefore, based on the proforma effects of the Proposed Disposal as at 31 December 2014, the gearing of the Group will decrease from 0.10 times to 0.01 times after the completion of the Proposed Disposal. MHB is expected to enjoy interest savings of total approximately RM0.59 million per annum through the repayment of the existing bank borrowings and inter-company advances. Premised on the above, we are of the view that the proforma financial effects of the Proposed Disposal are not detrimental to the interest of the Non-Interested Shareholders of MHB. 6. FURTHER INFORMATION Non-Interested Shareholders of MHB are advised to refer to Part A of this Circular and the appendices thereof for further information. 7. KAF INVESTMENT S OPINION Before arriving at the decision to vote on the relevant resolution pertaining to the Proposed Disposal, it is imperative that the Non-Interested Shareholders of MHB consider carefully all relevant issues and implications raised in this IAL and those set out by the Board in its letter to the shareholders in Part A of this Circular, as well as the information contained in the various appendices in this Circular. In our evaluation of the Proposed Disposal, and in arriving at our opinion, we have taken into consideration various factors which are summarised as follows:- (i) (ii) (iii) (iv) the rationale of the Proposed Disposal, which, in our opinion, is considered reasonable; the basis and justification of arriving at the Disposal Consideration, which, in our opinion, is considered fair and reasonable; the salient terms of the SPA which in our opinion, are considered reasonable; the risk factors associated with the Proposed Disposal; and 17

43 (v) the financial effects of the Proposed Disposal on the MHB Group, which, in our opinion, are not detrimental to the interest of the Non-Interested Shareholders of MHB. Based on our scope of work and evaluation as set out above in this IAL, we are of the opinion that, taken as a whole, the terms of the Proposed Disposal are fair and reasonable, and are not detrimental to the interest of the Non-Interested Shareholders of MHB. Accordingly, we recommend that the Non-Interested Shareholders of MHB vote in favour of the ordinary resolution pertaining to the Proposed Disposal to be tabled at the forthcoming EGM. Yours faithfully, For and on behalf of KAF INVESTMENT BANK BERHAD ROHAIZAD ISMAIL Deputy Chief Executive Officer Investment Banking AHMAD FAZLEE AZIZ Director Corporate Finance 18

44 APPENDIX I VALUATION CERTIFICATE 38

45

46

47

48

49