BIO OSMO BERHAD (Company No.: A) (Incorporated in Malaysia under the Companies Act, 1965)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN ANY DOUBT AS TO THE COURSE OF ACTION TO BE TAKEN, YOU SHOULD CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT 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. Shareholders of Bio Osmo Berhad ( Bio Osmo or Company ) should rely on their own assessment of the merits and risks of the Proposals (as defined herein). BIO OSMO BERHAD (Company No.: A) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE (I) PROPOSED DISPOSAL OF FREEHOLD INDUSTRIAL LAND TOGETHER WITH AN INDUSTRIAL COMPLEX COMPRISING THREE (3) INDUSTRIAL BUILDINGS WITH AN ANNEXED 2-STOREY OFFICE BLOCK AND ANCILLARY BUILDINGS ( FACTORY ) BY AMSHORE HOLDINGS SDN BHD ( AMSHORE ), A WHOLLY-OWNED SUBSIDIARY OF BIO OSMO, TO PENTAS PRISMA SDN BHD ( PPSB OR THE PURCHASER ) FOR A CASH CONSIDERATION OF RM12.0 MILLION ( PROPOSED DISPOSAL ); AND (II) PROPOSED TENANCY OF THE FACTORY BY AMSHORE ( PROPOSED TENANCY ) AND NOTICE OF EXTRAORDINARY GENERAL MEETING The Notice of the Extraordinary General Meeting ("EGM") of our Company to be held at Pinetree Hotel, 36, Jalan Mengkudu, Off, Jalan Bukit Pasir, Batu Pahat, Johor on Tuesday, 27 September 2016 at a.m., or at any adjournment thereof together with the Form of Proxy for the EGM are enclosed in this Circular. If you decide to appoint a proxy or proxies for the EGM, you must complete and lodge the Form of Proxy for the EGM with the registered office of the Company at No. 5-9A, The Boulevard Offices, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur, not less than forty-eight (48) hours before the time appointed for holding the EGM or at any adjournment thereof. The lodging of the Form of Proxy for the EGM will not preclude you from attending and voting in person at the meeting should you subsequently decide to do so. Date and time of the EGM : Tuesday, 27 September 2016 at a.m., or at any adjournment thereof Last date and time for lodging the Form of Proxy : Friday, 23 September 2016 at a.m. This Circular is dated 9 September 2016

2 DEFINITIONS For the purpose of this Circular and the accompanying appendices, except where the context otherwise requires, or where otherwise defined herein, the following words and abbreviations shall apply throughout this Circular and shall have the following meanings: Act : Companies Act, 1965, as amended from time to time including any re-enactment thereof Amshore : Amshore Holdings Sdn Bhd ( P), a wholly-owned subsidiary of Bio Osmo Bio Osmo or the Company Bio Osmo Group or the Group Bio Osmo Shares or Shares : Bio Osmo Berhad ( A) : Bio Osmo and its subsidiaries, collectively : Ordinary shares of RM0.05 each in Bio Osmo Board : Board of Directors of Bio Osmo Bursa Securities : Bursa Malaysia Securities Berhad ( W) Cash Company : PN16 Issuer as prescribed under Practice Note 16 Circular : This circular to shareholders of Bio Osmo dated 9 September 2016 in relation to the Proposals Deposit : The deposit of RM3.0 million payable by the Purchaser to Amshore in the manner as stipulated in the SPA Director(s) : Director(s) of Bio Osmo Disposal Consideration : The cash consideration of RM12.0 million to be paid by the Purchaser to Amshore pursuant to the Proposed Disposal EGM : Extraordinary general meeting EPS : Earnings per share Factory : The freehold industrial land together with an industrial complex comprising three (3) industrial buildings with an annexed 2-storey office block and ancillary buildings FYE : Financial year ended/ending Listing Requirements : Main Market Listing Requirements of Bursa Securities LPD : 2 September 2016, being the latest practicable date prior to the despatch of this Circular Major Shareholder(s) : Any person who has an interest or interests in one or more voting shares in the Company and the nominal amount of that share, or the aggregate of the nominal amounts of those shares, is: (a) (b) 10% or more of the aggregate of the nominal amounts of all the voting shares in the Company; or 5% or more of the aggregate of the nominal amounts of all the voting shares in the Company, where such person is the largest shareholder of the Company. NA : Net assets PN17 : Practice Note 17 For the purpose of this definition, interest in shares shall have the meaning given in Section 6A of the Act i

3 DEFINITIONS PPSB or Purchaser : Pentas Prisma Sdn Bhd ( T) Proposals : Collectively, the Proposed Disposal and Proposed Tenancy Proposed Disposal : The proposed disposal of the Factory by Amshore to the Purchaser for a cash consideration of RM12.0 million Proposed Tenancy : The proposed tenancy of the Factory by Amshore upon the completion of the Proposed Disposal RM and sen : Ringgit Malaysia and Sen respectively SC : Securities Commission Malaysia SPA : The conditional sale and purchase agreement dated 30 May 2016 between Amshore and the Purchaser in relation to the proposed disposal of the Factory to PPSB for a cash consideration of RM12.0 million Substantial Shareholder(s) : Any person who has an interest or interests in one or more voting shares in the company and the nominal amount of that share, or the aggregate of the nominal amounts of those shares, is not less than five percent (5%) of the aggregate of the nominal amounts of all the voting shares in the company, as defined in Section 69D of the Act Tenancy Agreement : The conditional tenancy agreement dated 30 May 2016 between Amshore and PPSB for the proposed tenancy of the Factory Valuer : Messrs Appraisal (Malaysia) Sdn Bhd (11943-W), an independent firm registered with the Board of Valuers, Appraisers & Estate Agents Malaysia appointed by Amshore All references to you in this Circular are to the shareholders of Bio Osmo. Words denoting the singular shall, where applicable, include the plural and vice versa, and words denoting the masculine gender shall, where applicable, include the feminine and/or neuter genders, and vice versa. References to persons shall include corporations, unless otherwise specified. Any reference to any enactment in this Circular is a reference to that enactment as for the time being amended or re-enacted. Any reference to a time of day in this Circular is a reference to Malaysian time, unless otherwise stated. Any discrepancy in the tables between the amounts listed and the totals in this Circular are due to rounding. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK ii

4 TABLE OF CONTENTS LETTER TO THE SHAREHOLDERS CONTAINING: 1. INTRODUCTION DETAILS OF THE PROPOSALS RATIONALE FOR THE PROPOSALS RISK FACTORS EFFECTS OF THE PROPOSALS APPROVALS REQUIRED PAGE 7. PERCENTAGE RATIO APPLICABLE TO THE PROPOSED DISPOSAL PURSUANT TO PARAGRAPH 10.02(G) OF THE LISTING REQUIREMENTS INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM DIRECTORS STATEMENT AND RECOMMENDATION ESTIMATED TIMEFRAME FOR COMPLETION OTHER CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION EGM FURTHER INFORMATION APPENDICES I DETAILS OF THE FACTORY II VALUATION CERTIFICATE ON THE VALUATION OF THE FACTORY III DETAILS OF COMPARABLE PROPERTIES USED BY THE VALUER IN ARRIVING AT THE RENTAL AMOUNT FOR THE FACTORY IV FURTHER INFORMATION NOTICE OF EGM... ENCLOSED FORM OF PROXY...ENCLOSED iii

5 BIO OSMO BERHAD (Company No.: A) (Incorporated in Malaysia under the Companies Act, 1965) Registered office: No. 5-9A, The Boulevard Offices Mid Valley City Lingkaran Syed Putra Kuala Lumpur Malaysia 9 September 2016 Board of Directors: Shahrizal Hisham bin Abdul Halim (Executive Director) Wong Kok Seong (Independent Non-Executive Director) Auzir bin Mohd Yaacob (Independent Non-Executive Director) Prof. Dr. Mohd Amy Azhar bin Haji Mohd Harif (Independent Non-Executive Director) To: The shareholders of Bio Osmo Dear Sir/Madam, (I) (II) PROPOSED DISPOSAL; AND PROPOSED TENANCY 1. INTRODUCTION On 30 May 2016, the Board had announced that Amshore had on even date, entered into two (2) agreements as follows: (i) (ii) a conditional sale and purchase agreement with PPSB in relation to the proposed disposal of the Factory to PPSB for a cash consideration of RM12.0 million; and a conditional tenancy agreement in respect of the Proposed Tenancy. Further details pertaining to the Proposals are set out in the ensuing sections of this Circular. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH THE RELEVANT INFORMATION ON THE PROPOSALS AND TO SEEK YOUR APPROVAL FOR THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY. THE NOTICE OF THE EGM TOGETHER WITH THE FORM OF PROXY ARE ENCLOSED IN THIS CIRCULAR. 1

6 YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR BEFORE VOTING ON THE RESOLUTIONS TO GIVE EFFECT TO THE PROPOSALS AT THE FORTHCOMING EGM OF THE COMPANY. 2. DETAILS OF THE PROPOSALS 2.1 Details of the Proposed Disposal Pursuant to the SPA, Amshore agrees to sell and the Purchaser agrees to purchase the Factory on an as is where is basis, free from all encumbrances but subject to the conditions expressed or implied on the title of the Factory, and upon the terms and conditions set out in the SPA. Upon completion of the Proposed Disposal, there shall be no handing over of vacant possession in respect of the Factory by Amshore to the Purchaser. The Purchaser has agreed that a tenancy in respect of the Factory shall be granted to Amshore on the terms as set out in the Tenancy Agreement upon completion of the Proposed Disposal. Pursuant thereto, Amshore shall be permitted to continue to occupy and to conduct and carry on its existing business on the Factory uninterrupted and unimpeded. Further details of the Factory are set out in Appendix I of this Circular Details of the Purchaser PPSB was incorporated in Malaysia on 10 April 2015 as a private limited company under the Companies Act, It is principally engaged in investment holding. As at the LPD, PPSB has an authorised share capital of 400,000 shares of RM1.00 each, of which 100,000 shares have been issued and fully paid-up. The substantial shareholders of PPSB and their direct and indirect shareholdings in PPSB are as follows: Direct Indirect Nationality No. of PPSB shares % No. of PPSB shares % Leong Siew Keng Malaysia 35, Leong Chee Keong Malaysia 35, Yong Yew Sun Malaysia 30, The directors of PPSB and their direct and indirect shareholdings in PPSB are as follows: Direct Indirect Nationality No. of PPSB shares % No. of PPSB shares % Leong Siew Keng Malaysia 35, Leong Chee Keong Malaysia 35, Salient terms of the SPA The salient terms of the SPA are as follows: (i) Disposal Consideration The disposal consideration for the Factory is RM12.0 million. 2

7 (ii) Deposit The Deposit shall be paid to the appointed solicitors of Amshore as stakeholder ( the Stakeholders ) as a refundable deposit. The deposit of RM3.0 million has already been paid by the Purchaser to the Stakeholders within thirty (30) days of the execution of the SPA and confirmed by the Stakeholders on 30 June (iii) Balance Disposal Consideration The balance of the Disposal Consideration of RM9.0 million ( Balance Purchase Price ) is payable by the Purchaser and/or its lender to the Stakeholders within three (3) months from the date of the SPA ( Completion Period ). (iv) Conditions Precedent The SPA is conditional upon the following being fulfilled and satisfied within six (6) months from the date of the SPA or such later date as may be mutually agreed between the parties in writing ( Conditional Period ): (a) (b) the approval from the shareholders of Bio Osmo, being Amshore s holding company; and the approval from the relevant authorities, if required. (v) Default by the Purchaser In the event that the Purchaser and/or its lender is unable to pay the Balance Purchase Price to Amshore s solicitor as stakeholders within the Completion Period, Amshore agrees that the Completion Period shall be automatically extended by one (1) month from the day following the expiry of the Completion Period ( Extended Completion Period ), provided always that interest shall then be payable by the Purchaser to Amshore on the Balance Purchase Price or such part thereof which remains outstanding to be paid as at the expiry of the Completion Period at the rate of eight per centum (8%) per annum calculated on a day to day basis from the expiry of the Completion Period to the date of actual payment; If the Purchaser fails to settle the Balance Purchase Price fully by the expiry of the Extended Completion Date, provided that Amshore have fulfilled all of its obligations in the SPA, Amshore shall be entitled at its absolute discretion to terminate the SPA by notice in writing to the Purchaser whereupon the Deposit paid by the Purchaser shall be forfeited to Amshore absolutely and the Purchaser shall within seven (7) days of the notice of termination, pay to Amshore an additional sum equivalent to the Deposit, both sums together, as agreed liquidated damages. (vi) Default by Amshore If Amshore fails to complete the sale of the Factory to the Purchaser according to the terms of the SPA, provided that the Purchaser shall have fulfilled all of its obligations in the SPA, the Purchaser shall be entitled at its absolute discretion to the remedy of specific performance and to all reliefs flowing therefrom or to terminate the SPA by notice in writing to Amshore whereupon Amshore shall within seven (7) days of the said notice, pay to the Purchaser agreed liquidated damages in a sum equivalent to the Deposit. 3

8 (vii) Transfer not registrable In the event that the transfer of the Factory in favour of the Purchaser ( Transfer ) is rejected or suspended and the non-registration of the Transfer cannot be rectified or remedied by either party, the Purchaser shall be entitled to terminate the SPA and Amshore shall refund the Deposit and all other moneys which have been paid by the Purchaser and/or its lender pursuant to the SPA free of interest. (viii) Termination If any of the conditions precedent is not fulfilled and satisfied within the Conditional Period, then any party may by notice in writing terminate the SPA, and Amshore shall refund the Deposit to PPSB free of interest within fourteen (14) days thereof in exchange for the following: (a) (b) the Purchaser s duly executed and registrable notice of withdrawal in the prescribed form of any private caveat lodged pursuant to the SPA together with the relevant registration fees; and the return by the Purchaser s and/or the Purchaser s Solicitors of all the documents provided by Amshore to the Purchaser and/or Solicitors in respect of the SPA. Upon such termination, the SPA shall become null and void and cease to be of any further effect, and either party shall have any further claims Basis of and justification for the Disposal Consideration The disposal consideration of RM12.0 million was arrived at on a willing buyer-willing seller basis and after taking into consideration of, amongst others, the following: (i) (ii) the Factory s market value of RM12.45 million, as appraised by the Valuer, in its valuation certificate and valuation report dated 20 May 2016; and the Proposed Tenancy. Valuation of the Factory In deriving the market value of the Factory, the Valuer had only adopted the Cost Method as the method of valuation. Only one method was used as there were no recent sale transactions of properties with similar size and characteristics as the Factory in the vicinity to conduct a reliable Comparison Approach. Due to the scarcity of industrial complexes in Batu Pahat, there is insufficient market data on rentals and outgoings for such properties to conduct a reliable Income Capitalisation Approach. Furthermore, the Factory was custombuilt specifically for the manufacturing of bottled water making it a specialised property. Hence, the Cost Method was adopted in the valuation of the Factory. The Cost Method involves the assessment of the value of the Factory by estimating the cost of reconstruction for the buildings of the Factory after making due allowances for obsolescence and depreciation (also known as the depreciated replacement cost ) which is added to the cost of purchasing the land of the Factory. It assumes that the market value is equal to the total cost of purchasing an alternative but identical land and constructing upon it an identical building using modern equivalents, after making allowances for obsolescence and depreciation. 4

9 The Disposal Consideration is justified after taking into consideration the discount of RM450,000 or approximately 3.6% represented by the Disposal Consideration over the market value of the Factory of RM12.45 million and the rationale for the Proposed Disposal as set out in Section 3 of this Circular. The discount of 3.6% was based on willing-buyer willingseller basis and after taking into consideration of PPSB s willingness to lock in a long term tenancy of nine (9) years of the Factory to Amshore. The salient information of the valuation report is summarised in the valuation certificate prepared by the Valuer dated 20 May 2016 as set out in Appendix II of this Circular Original date and cost of investment The original cost and date of investment of the Factory are as follows: Original cost of investment Date of investment (RM 000) Land 3, March 2006 Factory 11, December 2006 Total 15, Utilisation of proceeds from the Proposed Disposal The gross proceeds of RM12.0 million arising from the Proposed Disposal is intended to be utilised in the following manner: Proposed Utilisation Amount (RM 000) Estimated timeframe for the utilisation of proceeds from the date of completion of the Proposed Disposal Investment and/or acquisition of 7,000 Within twenty-four (24) months new business (1) Rental payments under the 540 Within twelve (12) months Tenancy Agreement (2) Working capital requirements (3) 4,000 Within twelve (12) months Estimated expenses for the 460 Within one (1) month Proposals (4) Total 12,000 Notes: (1) Bio Osmo Group expects to allocate approximately RM7.0 million of the proceeds from the Proposed Disposal for the investment and/or acquisition of new business to improve the Group s financial performance. The Group had obtained approval from its shareholders on 24 February 2016 for the diversification of its existing core businesses to include the businesses of management and operation of hotels and resorts, hotel property investment and hotel development. The potential investment and/or acquisition of new business may include acquisition of strategic investments and/or strategic collaborations, joint ventures or alliances in the hotel management industry and may or may not be in similar or complementary industries to the Group s existing businesses. In the event that no suitable new business opportunities are identified by the Group, the entire amount will be utilised for general working capital purposes. Until such time that the Group has identified any future investments and/or new businesses, the proceeds shall be kept in interest bearing instruments such as bank fixed deposit. 5

10 (2) An amount of RM540,000 is allocated for rental payments under the Tenancy Agreement for a period of 12 months from the date of completion of the Proposed Disposal. Rental payments for the remainder of the terms of Tenancy Agreement shall be funded by internally generated funds of the Group. (3) The proceeds will be utilised for general working capital requirements in respect of the Group s day to day operations to support the Group s business operations which include amongst others, payment to suppliers, salaries, utilities, business development expenses and marketing expenses. The breakdown of proceeds to be utilised for each component of the operating expenses has not been determined at this juncture. The actual utilisation for each component of working capital may differ at the time of utilisation. (4) The estimated expenses includes estimated professional fees, fees payable to regulatory authorities, printing and advertising cost, and any other incidental expenses in connection with the Proposals. Any variation to the amount of estimated expenses in relation to the Proposals will result in an adjustment to the proceeds allocated for general working capital and/or future investments Liabilities to be assumed by the Purchaser There are no liabilities, including contingent liabilities and guarantees, to be assumed by the Purchaser arising from the Proposed Disposal Additional financial commitment Bio Osmo does not expect to incur any additional material financial commitment for the Proposed Disposal Cash Company or PN17 Company The Proposed Disposal is not expected to result in Bio Osmo becoming a Cash Company or a PN 17 company, as defined under the Listing Requirements. 2.2 Details of the Proposed Tenancy Pursuant to the Tenancy Agreement, PPSB agreed to let to Amshore and Amshore agreed to accept the tenancy in respect of the Factory upon the terms and conditions set out in the Tenancy Agreement Salient terms of the Tenancy Agreement The salient terms of the Tenancy Agreement are as follows: (a) Tenancy Term : (i) Three (3) years from the Commencement Date (as defined herein) ( Tenancy Period ) (ii) (iii) Upon the expiry of the Tenancy Period, there shall be an extension of another three (3) years at the option of Amshore ( First Renewed Term ) Upon expiry of the First Renewed Term, there shall be an extension of another three (3) years at the option of Amshore ( Second Renewed Term ) (b) Commencement Date (First Renewed Term and Second Renewed Terms are collectively referred to as the Renewed Term ) : The tenancy in respect of the Factory shall commence on the day legal possession is handed by Amshore to PPSB as set out in the conditional SPA ( Commencement Date ). 6

11 (c) Expiry Date : Nine (9) calendar years calculated from the Commencement Date. (d) Rent : (i) The monthly rental is RM45, for the Tenancy Period. (ii) (iii) (iv) (v) The monthly rental for the First Renewed Term is RM47, per month being an increase of 5% of the last Rent payable for the Tenancy Period. The monthly rental for the Second Renewed Term is RM49, per month being an increase of 5% of the last Rent payable for the First Renewed Term. All payments of rental shall be made in arrears on or before the seventh (7 th ) day of each calendar month. The rental for the Renewed Term may be revised subject to mutual agreement of Amshore and PPSB, failing agreement, the rental to be paid shall be as stated above. (f) Termination : Amshore may terminate the tenancy in respect of the Factory at any time and for any reason whatsoever by giving PPSB three (3) months advance notice in writing Basis of and justification for the rental of the tenancy in respect of the Factory The monthly rental of the tenancy in respect of the factory of RM45,000 was arrived after taking into consideration the rental valuation report which was prepared by the Valuer, in its rental valuation report dated 22 May In deriving the valuation of the Factory, the Valuer had adopted the Comparison Method as the primary method of valuation. The Comparison Method of valuation involves a process of comparing the Factory with the recent rentals of similar properties in the vicinity and making appropriate adjustments to account for differences such as, amongst others, location, building quality, time factor and size. Further details of comparable properties used by the Valuer in arriving at the rental amount for the Factory are set out in Appendix III of this Circular. The rental amount is justified after taking into consideration the discount of RM1,000 or approximately 2% represented by the proposed rental over the market rental of the Factory of RM46, Liabilities to be assumed There are no liabilities, including contingent liabilities and guarantees, to be assumed by Bio Osmo arising from the Proposed Tenancy Additional financial commitment Bio Osmo does not expect to incur any additional material financial commitment for the Proposed Tenancy. 3. RATIONALE FOR THE PROPOSALS The Board is of the view that the Proposed Disposal and Proposed Tenancy are in the best interest of the Company as they represent an opportunity for the Group to re-strategise its financial and capital resources. The Proposed Disposal and Proposed Tenancy will also enable the Company to unlock the value of the Factory without disrupting the operating 7

12 activities of the Group as the Factory will be rented by Amshore upon completion of the Proposed Disposal, under the terms of the Tenancy Agreement. Accordingly, the Tenancy Agreement which is entered into by Amshore with PPSB will ensure the Group to benefit from the continued use of the Factory for its operations. The tenancy in respect of the Factory will also offer the Board the flexibility to introduce future changes, if required, to improve the utilisation of resources and operations of the Group, or to further streamline the operations of the Group. 4. RISK FACTORS Below are some non-exhaustive risk factors that may be inherent to the Bio Osmo Group in relation to the Proposals: 4.1 Completion risk Completion of the Proposal is subject to the fulfilment and/or waiver of the Conditions Precedent and the performance by the parties of their respective obligations as set out in the SPA and Tenancy Agreement. There can be no assurance that the Conditions Precedent will be fulfilled or obtained in timely manner. Notwithstanding this, the Board and Amshore shall use their best endeavours to ensure all the Conditions Precedent are fulfilled, including obtaining the approvals/consents required which are within its control, to facilitate the completion of the Proposals. 4.2 Contractual risk If PPSB has fulfilled all of its obligations under the SPA but Amshore fails to complete the Proposed Disposal according to the terms of the SPA, Amshore may be subjected to certain contractual risks such as remedy of specific performance or payment of agreed liquidated damages as a result of non-fulfilment of its obligations under the SPA. Nevertheless, the Board and Amshore endeavour to ensure full compliance in relation to fulfilment of its part of the obligations under the SPA. 4.3 Tenancy Risk Amshore is given options to renew the tenancy in respect of the Factory for two (2) terms of three (3) years each totaling nine (9) years from the Commencement Date at the Rent upon the same terms and conditions set out in the Tenancy Agreement. Notwithstanding the above, on the expiry of the Second Renewed Term of the Tenancy Agreement, Amshore may not be able to renew its tenancy of the Factory with PPSB or where applicable, with subsequent purchaser of the Factory, on mutually agreed terms and conditions. Failure to enter into a new tenancy agreement upon expiry of the Second Renewed Term of the Tenancy Agreement may cause interruptions to the Bio Osmo Group s business operation at the Factory in the future. In such event, Bio Osmo Group shall identify suitable alternative premises to operate as its factory and office building which may result in the increase in rental expenses. 5. EFFECTS OF THE PROPOSALS 5.1 Issued and paid-up share capital The Proposals will not have any effect on the issued and paid-up share capital of Bio Osmo as they do not involve any issuance of new shares by Bio Osmo. 5.2 Substantial shareholders shareholdings The Proposals will not have any effect on the substantial shareholders shareholdings of Bio Osmo as they do not involve any issuance of new shares by Bio Osmo. 8

13 5.3 NA and gearing The proforma effects of the Proposals on the NA and gearing of the Group based on the audited consolidated financial statements for the FYE 31 December 2014 assuming that the Proposals had been effected at the end of that financial year as follows: Minimum Scenario Audited as at After Proposed Disposal and 31 December 2014 (3) Proposed Tenancy (RM 000) (RM 000) Share capital 99,732 99,732 Share premium Warrants reserve 2,093 2,093 Capital reserve - (1) (2) Accumulated losses (71,023) (71,023) Shareholders funds/na 31,090 31,630 No. of shares in issue ( 000) 498, ,660 NA per share (Sen) Total borrowing - - Gearing (times) - - Notes: (1) After incorporating the estimated one-off gain from the Proposed Disposal of RM1,000,000 and the estimated expenses incidental to the Proposed Disposal of RM460,000 (2) After incorporating the first year rental of the Proposed Tenancy of RM540,000 p.a (RM45,000 per month) assuming the Proposed Tenancy had been effected at the end of FYE 31 December (3) The Group changed its financial period from December to June. Accordingly, the next financial year is from 1 January 2015 to 30 June

14 Maximum Scenario (I) (II) Audited as at After (I), Proposed Disposal 31 December 2014 (4) After full exercise of Warrants and Proposed Tenancy (RM 000) (RM 000) (RM 000) Share capital 99, , ,732 Share premium 288 3,631 3,631 (1) Warrants reserve 2, Capital reserve (2)(3) Accumulated losses (71,023) (71,023) (71,203) Shareholders funds/na 31,090 37,340 37,880 No. of shares in issue ( 000) 498, , ,660 NA per share (Sen) Total borrowing Gearing (times) Notes: (1) After adjusting for the reversal of warrants reserves pursuant to the exercise of all the Warrants. (2) After incorporating the estimated one-off gain from the Proposed Disposal of RM1,000,000 and the estimated expenses incidental to the Proposed Disposal of RM460,000. (3) After incorporating the first year rental of the Proposed Tenancy of RM540,000 p.a (RM45,000 per month) assuming the Proposed Tenancy had been effected at the end of FYE 31 December (4) The Group changed its financial period from December to June. Accordingly, the next financial year is from 1 January 2015 to 30 June

15 5.4 Earnings and EPS The Proposed Disposal is expected to reduce the consolidated losses and loss per share ( LPS ) of the Group for the FYE 30 June 2016 (*). The Group is expected to realise a net gain (after deducting the estimated expenses for the Proposals) of approximately RM540,000 arising from the Proposal Disposal. Thereafter, the Group is required to pay rental of RM45,000 per month effective from the commencement of the tenancy in respect of the Factory. (*) The Group changed its financial period from December to June. Accordingly, the next financial year is from 1 January 2015 to 30 June For illustrative purposes, based on the audited consolidated financial statements of the Group for the FYE 31 December 2014 and assuming that the Proposed Disposal had been effected at the beginning of that financial year the Proposed Disposal will have the following proforma effects on the consolidated losses of the Group: Proforma consolidated losses (RM 000) (2) Proforma consolidated LPS (sen) Net losses for the audited FYE 31 December 2014 (20,127) (4.04) Add: Proforma gain from the Proposed Disposal (1) Less: Estimated expenses for the (460) (0.09) Proposed Disposal Less: 1 st Year Rental (3) (540) (0.11) Proforma net losses for the FYE 31 December 2014 (20,127) (4.04) Notes: (1) Computed based on the Disposal Consideration of RM12.0 million less the aggregate net book value ( NBV ) of the Factory of RM11.0 million as at 31 December (2) Computed based on 498,660,000 ordinary shares held as issued and fully paid-up share capital as at 31 December (3) After incorporating the first year rental of the Proposed Tenancy of RM540,000 p.a (RM45,000 per month) assuming the Proposed Tenancy had been effected at the beginning FYE 31 December The actual gain arising from the Proposed Disposal will depend on, amongst others, the NBV of the Factory at the point of completion of the Proposed Disposal and the actual amount of expenses to be incurred in connection to the Proposals. 6. APPROVALS REQUIRED The Proposals are subject to the following being obtained: (i) (ii) the approval of the shareholders of Bio Osmo at an EGM to be convened in relation to the Proposals; and the consent/approval of any other relevant authorities, if required. The Proposed Disposal and Proposed Tenancy are conditional on each other. 11

16 7. PERCENTAGE RATIO APPLICABLE TO THE PROPOSED DISPOSAL PURSUANT TO PARAGRAPH 10.02(G) OF THE LISTING REQUIREMENTS The highest percentage ratio applicable to the Proposed Disposal pursuant to Paragraph 10.02(g) of the Listing Requirements is 55.0%, computed based on the audited net book value of the Factory as at 31 December 2014 compared to the total assets of the Bio Osmo Group. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, Major Shareholders and/or persons connected to them have any interest, direct or indirect, in the Proposals. 9. DIRECTORS STATEMENT AND RECOMMENDATION The Board, having considered all aspects of the Proposals, including but not limited to the rationale, justification and the financial effects of the Proposals, is of the opinion that the Proposals are in the best interests of the Company. Accordingly, the Board recommends that you vote in favour of the resolutions pertaining to the Proposals at the forthcoming EGM. 10. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstance and subject to the fulfillment of all terms and conditions as set out in the SPA and the Tenancy Agreement, the Proposals are expected to be completed by the fourth (4 th ) quarter of OTHER CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION Save as disclosed below and the Proposals, there are no other outstanding corporate proposals which have been announced and approved by the relevant regulatory authorities but not yet implemented as at the LPD. On 15 September 2015, AmInvestment Bank Berhad ( AmInvestment Bank ) had, on behalf of the Board announced that the Company had proposed to undertake amongst others, the following proposals to growing the drinking water business organically as well as diversifying its business by venturing onto other viable and revenue-generating business: (i) (ii) placement of up to 235,647,000 Bio Osmo Shares, representing up to 45% of the issued and paid-up share capital of Bio Osmo; and subscribe for 18,750,000 new ordinary shares of RM1.00 each in Intra Magnum Sdn Bhd for a total subscription price of RM18.75 million in accordance with the terms and conditions set out in the Subscription Agreement dated 15 September On 14 June 2016, AmInvestment Bank had, on behalf of the Board announced that the conditions precedent to the Subscription Agreement has yet to be fulfilled and the conditional period for the fulfilment of the conditions precedent shall expire on 14 June Pursuant to the terms of the Subscription Agreement, the Subscription Agreement's Conditional Period has been further extended for a period of three (3) months commencing from 15 June 2016 to 15 September As at LPD, Bio Osmo has not made any placement of new Bio Osmo Shares. 12

17 12. EGM The forthcoming EGM, the notice of which is enclosed in this Circular will be held at Pinetree Hotel, 36, Jalan Mengkudu, Off, Jalan Bukit Pasir, Batu Pahat, Johor on Tuesday, 27 September 2016 at a.m., or at any adjournment thereof for the purpose of considering, and if thought fit, passing the resolutions so as to give effect to the Proposals. If you are unable to attend and vote in person at the EGM, you should complete and send the enclosed Form of Proxy in accordance with the instructions printed thereon as soon as possible, so that it arrives at the registered office of Bio Osmo at No. 5-9A, The Boulevard Offices, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur, Malaysia, not later than forty-eight (48) hours before the date and time appointed for holding the EGM or at any adjournment thereof. The lodging of the Form of Proxy will not, however, preclude you from attending and voting in person at the EGM should you wish to subsequently do so. 13. FURTHER INFORMATION You are advised to refer to the attached appendices of this Circular for further information. Yours faithfully, for and on behalf of the Board of BIO OSMO BERHAD SHAHRIZAL HISHAM BIN ABDUL HALIM EXECUTIVE DIRECTOR 13

18 APPENDIX I DETAILS OF THE FACTORY 1. DETAILS OF THE FACTORY The Proposed Disposal entails the disposal of a freehold industrial land measuring approximately hectares together an industrial complex comprising three (3) industrial buildings with an annexed 2-storey office block and ancillary buildings held under GM 5649, Lot 8101, Locality of Sungai Suloh Besar, Mukim of Minyak Beku, District of Batu Pahat, Johor Darul Takzim. The Factory is currently being occupied by Amshore as their factory and office building. Salient information in respect of the Factory is as follows: Identification Details Title Particulars : GM 5649, Lot No within Locality of Sungai Suloh Besar, Mukim of Minyak Beku, District of Batu Pahat, Johor Darul Takzim, Malaysia Land area : hectares (after deducting land acquisition of about hectares) Construction : Factory buildings Mild steel portal frame erected upon reinforced concrete foundations with metal cladding walls / brickwalls and metal deck roofing Office block Reinforced concrete structure with brickwalls and metal deck roofing Main Floors Areas : Factory and office buildings about 8, square metres Ancillary buildings about square metres (excluding unapproved extension / structure of about sq. m.) Ancillary Floor Areas : Factory and office buildings about square metres (excluding unapproved extension of about 1, sq. m.) Approximate age of : 9 years and 8 months buildings Tenure : Freehold Category of land use : Industry Existing use : Processing & manufacturing of bottled reverse osmosis water Express conditions : (i) Tanah ini hendaklah digunakan sebagai kawasan Industri Sederhana untuk tujuan perusahaan Compressor/Cluches and Parts for Conditioning dan kegunaan lain yang berkaitan dengannya, dibina mengikut pelan yang diluluskan oleh Pihak Berkuasa Tempatan yang berkenaan. (ii) Segala kekotoran dan pencemaran akibat daripada aktiviti ini hendaklah disalurkan /dibuang ke tempat-tempat yang telah ditentukan oleh Pihak Berkuasa Berkenaan. Restriction in interest : Nil Encumbrances : Nil Registered proprietor : Amshore (iii) Segala dasar dan syarat yang telah ditetapkan dan dikuatkuasakan dari semasa ke semasa oleh Pihak Berkuasa Berkenaan hendaklah dipatuhi. 14

19 APPENDIX I DETAILS OF THE FACTORY Identification Net book value as at 31 December 2014 (audited) Details : RM11,000,000 Market Value : RM12,450,000 (1) Date of valuation : 9 May 2016 Note: (1) Pursuant to the market value appraised by the Valuer in its valuation certificate and valuation report dated 20 May THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 15

20 APPENDIX II VALUATION CERTIFICATE ON THE VALUATION OF THE FACTORY 16

21 APPENDIX II VALUATION CERTIFICATE ON THE VALUATION OF THE FACTORY 17

22 APPENDIX II VALUATION CERTIFICATE ON THE VALUATION OF THE FACTORY 18

23 APPENDIX II VALUATION CERTIFICATE ON THE VALUATION OF THE FACTORY 19

24 APPENDIX II VALUATION CERTIFICATE ON THE VALUATION OF THE FACTORY 20

25 APPENDIX III DETAILS OF COMPARABLE PROPERTIES USED BY THE VALUER IN ARRIVING AT THE RENTAL AMOUNT FOR THE FACTORY Address Description Land Area Gross Floor Area Monthly Rental No. 16, Jalan Sampan, Tongkang Pecah Industrial Estate, Batu Pahat, Johor Darul Takzim. A single-storey factory cum warehouse 2, sq m (21,775 sq ft) 1, sq m (16,000 sq ft) RM5, (RM0.34 per sq ft) Tenancy Commencement Date 1 July 2007 Address Description Land Area Gross Floor Area Monthly Rental Lot 774, Jalan Jeram Bakri, Muar, Johor Darul Takzim. A single-storey factory 6, sq m (68,060 sq ft) 4, sq m (43,691 sq ft) RM19, (RM0.45 per sq ft) Tenancy Commencement Date 15 April 2013 Address Lot 1833, Jalan Rami 5, Kawasan Perindustrian Bukit Pasir, Sungai Raya, Muar, Johor Darul Takzim. Description Four (4) blocks of single-storey warehouse buildings Land Area 13, sq m (140,481 sq ft) Gross Floor Area 9, sq m (99,375 sq ft) Monthly Rental RM34, (RM0.35 per sq ft) Tenancy Commencement Date 1 September 2012 Address Lot 1908, Jalan Kota Burok, Tanjung Selabu, Muar, Johor Darul Takzim. Description A single-storey warehouse Land Area 5, sq m (59,623 sq ft) Gross Floor Area 5, sq m (60,000 sq ft) Monthly Rental RM21, (RM0.35 per sq ft) Tenancy Commencement Date 1 October 2011 Address Lot 1907, Jalan Kota Burok, Tanjung Selabu, Muar, Johor Darul Takzim. Description A single-storey warehouse building Land Area 12, sq m (131,497 sq ft) Gross Floor Area 5, sq m (64,400 sq ft) Monthly Rental RM22, (RM0.35 per sq ft) Tenancy Commencement Date 1 October

26 APPENDIX IV FURTHER INFORMATION 1. DIRECTORS RESPONSIBILITY STATEMENT This Circular has been seen and approved by the Board who, collectively and individually, accept full responsibility for the accuracy of the information given and confirm that, after making all reasonable enquiries and to the best of their knowledge and belief, there are no other facts, the omission of which would make any information herein misleading. 2. CONSENT AND DECLARATION OF CONFLICT OF INTEREST 2.1 Valuer Appraisal (Malaysia) Sdn Bhd, being the independent valuer for the Proposals, has given and has not subsequently withdrawn its consent to the inclusion in this Circular of its name, its certificate and all references thereto in the form and context in which they appear. Appraisal (Malaysia) Sdn Bhd has also confirmed that it is not aware of any conflict of interests that exists or is likely to exist in its capacity as the independent registered valuer in connection with the Proposals. 3. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES 3.1 Material commitments As at the LPD, the Board is not aware of any material commitments incurred or known to be incurred by the Bio Osmo Group. 3.2 Contingent liabilities As at the LPD, the Board is not aware of any contingent liabilities incurred or known to be incurred by the Group which may, upon becoming enforceable, have a material impact on the Group s profits or NA. 4. MATERIAL LITIGATION, CLAIMS OR ARBITRATION As at the LPD, neither Bio Osmo nor their subsidiaries are engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and the Board is not aware of any proceedings which may materially and adversely affect the financial position or business. 5. MATERIAL CONTRACTS Save as disclosed below, the Bio Osmo Group has not entered into any material contract (not being contracts entered into in the ordinary course of business) for the past two (2) years preceding the LPD. (a) On 15 September 2015, Bio Osmo entered into a subscription agreement with Impiana Sdn Bhd ( Impiana ) and Intra Magnum Sdn Bhd ( IMSB ), a wholly-owned subsidiary of Impiana whereby Bio Osmo will subscribe for 18,750,000 new ordinary shares of RM1.00 each in Intra Magnum Sdn Bhd for a total subscription price of RM18.75 million in accordance with the terms and conditions set out in the subscription agreement. Concurrently, Bio Osmo, Impania and IMSB had also entered into a shareholders agreement to record certain commitments, regulate their rights and obligations as shareholders of IMSB and set out the terms governing the management of IMSB; and 22

27 APPENDIX IV FURTHER INFORMATION (b) On 2 September 2014, Amshore entered into a sale and purchase agreement with BTL Element Sdn Bhd to dispose two (2) pieces of properties together with all factories and buildings erected thereon held under the following title for a total consideration of RM3.0 million ("Disposal"): (i) (ii) Geran , Lot 8351, Mukim Minyak Beku, Daerah Batu Pahat, Negeri Johor measuring approximately 1,250 square meters; and Geran , Lot 8352 Mukim Minyak Beku, Daerah Batu Pahat, Negeri Johor measuring approximately 1,871 square meters. The Disposal was completed on 13 September 2015 upon the presentation of the registration of titles to Pejabat Tanah and Galian Johor by BTL Element Sdn Bhd. 6. DOCUMENTS AVAILABLE FOR INSPECTION The following documents (or copies of the documents) are available for inspection at the registered office of Bio Osmo at No. 5-9A, The Boulevard Office, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur during office hours from Monday to Friday (except public holidays) from the date of this Circular up to and including the date of the EGM: (i) (ii) (iii) (iv) (v) the Memorandum and Articles of Association of Bio Osmo; the audited consolidated financial statements of Bio Osmo for the FYE 31 December 2013 and FYE 31 December 2014 and the latest unaudited consolidated financial results of Bio Osmo for the eighteen (18) months financial period ended 30 June 2016; the SPA and Tenancy Agreement; the valuation report and valuation certificate of the Factory from the Valuer dated 20 May 2016; and the letter of consent and conflict of interest as referred to in Section 2 of this Appendix. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 23

28 BIO OSMO BERHAD (Company No.: A) (Incorporated in Malaysia under the Companies Act, 1965) NOTICE OF EXTRAORDINARY GENERAL MEETING NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting ( EGM ) of Bio Osmo Berhad ( Bio Osmo or the Company ) will be held at Pinetree Hotel, 36, Jalan Mengkudu, Off, Jalan Bukit Pasir, Batu Pahat, Johor on Tuesday, 27 September 2016 at a.m., or at any adjournment thereof, for the purpose of considering and, if thought fit, passing with or without modifications, the following resolutions: ORDINARY RESOLUTION 1 PROPOSED DISPOSAL OF FREEHOLD INDUSTRIAL LAND TOGETHER WITH AN INDUSTRIAL COMPLEX COMPRISING THREE (3) INDUSTRIAL BUILDINGS WITH AN ANNEXED 2-STOREY OFFICE BLOCK AND ANCILLARY BUILDINGS ( FACTORY ) BY AMSHORE HOLDINGS SDN BHD ( AMSHORE ), A WHOLLY-OWNED SUBSIDIARY OF BIO OSMO, TO PENTAS PRISMA SDN BHD ( PPSB OR THE PURCHASER ) FOR A CASH CONSIDERATION OF RM12.0 MILLION ( PROPOSED DISPOSAL ) THAT subject to the passing of Ordinary Resolution 2, and subject to the provisions under the Companies Act, 1965 ( Act ) and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Listing Requirements ), the fulfilment of all conditions precedent and the approvals of all relevant authorities being obtained, if any, for the Proposed Disposal, approval be and is hereby given to Amshore to dispose the Factory to PPSB for a cash consideration of RM12.0 million subject to and in accordance with the terms and conditions of the sale and purchase agreement dated 30 May 2016 entered into between Amshore and the Purchaser. AND THAT the Board of Bio Osmo and/or Amshore be and are hereby authorised to do all acts, deeds and to take all such steps to execute, sign and deliver for and on behalf of the Company all such documents and enter into all other agreements, undertakings, indemnities, transfers, assignments and/or guarantees with any party or parties as they may deem fit, necessary, expedient and/or appropriate in order to implement, finalise and give full effect to the Proposed Disposal with full power to assent to any conditions, modifications, variations and/or amendments as may be required by any relevant authorities and/or as the Board deems fit, appropriate and in the best interest of Company." ORDINARY RESOLUTION 2 PROPOSED TENANCY OF THE FACTORY BY AMSHORE ( PROPOSED TENANCY ) "THAT subject to the passing of Ordinary Resolution 1, and subject to the provisions under the Act and the Listing Requirements, the fulfilment of all conditions precedent and the approvals of all relevant authorities being obtained, if any, for the Proposed Tenancy, approval be and is hereby given to Amshore, to rent the Factory from the Purchaser subject to and in accordance with the terms and conditions of the tenancy agreement dated 30 May 2016 entered into between Amshore and the Purchaser. AND THAT the Board of Bio Osmo and/or Amshore be and are hereby authorised to do all acts, deeds and to take all such steps to execute, sign and deliver for and on behalf of the Company all such documents and enter into all other agreements, undertakings, indemnities, transfers, assignments and/or guarantees with any party or parties as they may deem fit, necessary, expedient and/or appropriate in order to implement, finalise and give full effect to the Proposed Tenancy with full power to assent to any conditions, modifications, variations and/or amendments as may be required by any relevant authorities and/or as the Board deems fit, appropriate and in the best interest of Company."

29 BY ORDER OF THE BOARD SIEW SUET WEI (MAICSA ) Chartered Secretary Kuala Lumpur 9 September 2016 Notes: 1. A member entitled to attend and vote at the EGM is entitled to appoint a proxy or proxies to attend and vote in his stead. The proxy need not be a Member of the Company and Section 149(1)(b) of the Act shall not apply. 2. A member shall be entitled to appoint more than one proxy (subject always to a maximum of two (2) proxies at each meeting) to attend and vote at the same meeting. 3. Where a member appoints more than one (1) proxy (subject always to a maximum of two (2) proxies at each meeting) the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 4. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 it may appoint at least one proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or if such appointer is a corporation under its common seal or the hand of its attorney. 6. The instrument appointing a proxy must be deposited at the Company s Registered Office at No. 5-9A, The Boulevard Offices, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. 7. Depositors whose name appear in the Record of Depositors as at 21 September 2016 shall be regarded as members of the Company entitled to attend the EGM or appoint proxy(ies) to attend and vote on his/her behalf.