TATT GIAP GROUP BERHAD (Company No W) (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 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. TATT GIAP GROUP BERHAD (Company No W) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED DISPOSAL BY THE COMPANY OF 2 PIECES OF ADJOINING LEASEHOLD INDUSTRIAL LAND KNOWN AS LOT NO. PT 2960 AND 2961 HELD UNDER HSD AND HSD RESPECTIVELY, MUKIM 11, SEBERANG PERAI TENGAH, PENANG WITH AREAS MEASURING APPROXIMATELY 42, SQUARE METRES IN TOTAL TOGETHER WITH A 3½ STOREY DETACHED FACTORY BUILDING BEARING MUNICIPAL ADDRESS OF NO LORONG PERUSAHAAN MAJU 6, PRAI INDUSTRIAL ESTATE PHASE IV, PRAI, PENANG FOR A TOTAL DISPOSAL PRICE OF RINGGIT MALAYSIA FORTY ONE MILLION (RM41,000,000) ONLY AND NOTICE OF EXTRAORDINARY GENERAL MEETING The above proposal will be tabled at an Extraordinary General Meeting ( EGM ) of Tatt Giap Group Berhad ( TatGiap or the Company ). Notice of the EGM of the Company together with the Form of Proxy are set out in this Circular. You are requested to complete the Form of Proxy for the EGM and deposit it at the Registered Office of the Company at Suite 16-1 (Penthouse Upper), Menara Penang Garden, 42-A Jalan Sultan Ahmad Shah, Penang, Malaysia, not less than forty-eight (48) hours before the time set for the meeting or any adjournment thereof should you be unable to attend the meeting. 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. Last date and time for lodging the Form of Proxy : Monday, 18 April 2016 at a.m. Date and time of the EGM : Wednesday, 20 April 2016 at a.m. Venue of the EGM : No. 1564, MK12, Jalan Nafiri, Valdor Industrial Estate, Sungai Jawi, Penang This Circular is dated 5 April 2016

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3 DEFINITIONS Except where the context otherwise requires, the following definitions shall apply throughout this Circular: Act : Companies Act, 1965 of Malaysia and any amendments made thereto from time to time Agreement or SPA : The Sale and Purchase Agreement dated 31 December 2015 entered into between Tatt Giap Group Berhad, CSC Steel Sdn Bhd (Company No P) and Tatt Giap Steel Centre Sdn. Bhd. (Company No X) for the disposal of 2 pieces of adjoining leasehold industrial land known as Lot No. PT 2960 and 2961 held under HSD and HSD respectively, Mukim 11, Seberang Perai Tengah, Penang with areas measuring approximately 42, square metres in total together with a 3 ½ storey detached factory building bearing municipal address of No Lorong Perusahaan Maju 6, Prai Industrial Estate Phase IV, Prai, Penang Board : The Board of Directors of TatGiap Bursa Securities : Bursa Malaysia Securities Berhad ( W) CHB CSC Steel Holdings Berhad ( X) Circular : This circular to the shareholders of TatGiap dated 5 April 2016 in relation to the Proposed Disposal Company or TatGiap or the Vendor : Tatt Giap Group Berhad (Company No W) Completion Date : Completion of the sale of the Prai Property shall take place on or before 60 days from the Unconditional Date CSCM or the Purchaser : CSC Steel Sdn Bhd (Company No P) Debt Reduction Exercise : The utilisation of the Disposal Price for the settlement of amount owing by the Company to Maybank and debt owing by TGSC to the Purchaser Disposal Price : RM41,000, EGM : Extraordinary General Meeting EPS : Earnings per Share FPE : Financial period ended/ending FYE : Financial year ended/ending Henry Butcher or the Valuer : Henry Butcher Malaysia (Penang) Sdn Bhd, Independent Registered Valuers The Valuer was appointed on 1 December 2015 Group or TatGiap Group : TatGiap and all its subsidiaries, collectively Listing Requirements : The Main Market Listing Requirements of Bursa Securities, including any amendments to the same that may be made from time to time LPS : Loss per Share - i -

4 DEFINITIONS (cont d) LPD : 15 March 2016, being the latest practicable date prior to the printing of this Circular Maybank : Malayan Banking Berhad (3813-K) NA : Net assets NBV : Net book value PAT : Profit after taxation Prai Property : 2 pieces of adjoining leasehold industrial land known as Lot No. PT 2960 and 2961 held under HSD and HSD respectively, Mukim 11, Seberang Perai Tengah, Penang with areas measuring approximately 42, square metres in total together with a 3 ½ storey detached factory building bearing municipal address of No. 1617, Lorong Perusahaan Maju 6, Prai Industrial Estate Phase IV, Prai, Penang Proposed Disposal : Proposed disposal by TatGiap of the Prai Property at the Disposal Price RM and sen : Ringgit Malaysia and sen, respectively Shareholders Approval : Obtaining the approval of the shareholders of TatGiap for the Proposed Disposal State : The Penang State Authority TatGiap Share(s) : Ordinary shares of RM0.50 each TGSC : Tatt Giap Steel Centre Sdn Bhd (Company No X) Transfer Consent : Consent of the State Authority to the transfer of the Prai Property to the Purchaser Unconditional Date : The date when all the Conditions Precedent are fulfilled more particularly spelt out under the SPA or under section in this Circular Valuation Report : Valuation report dated 5 January 2016 prepared by the Valuer Any reference in this Circular to any enactment or guidelines is a reference to that enactment or guidelines as for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to Malaysian time, unless otherwise specified. 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. Reference to persons shall include corporations, unless otherwise specified. Any discrepancies in the tables included in this Circular between the amount listed, actual figures and the totals thereof are due to rounding. All reference to you in this Circular are to the shareholders of TatGiap. - ii -

5 TABLE OF CONTENTS CIRCULAR TO THE SHAREHOLDERS OF TATGIAP IN RELATION TO THE PROPOSED DISPOSAL CONTAINING: 1. INTRODUCTION 1 2. THE PROPOSED DISPOSAL Details of the Proposed Disposal Details of the Debt Reduction Exercise Background Information on CSCM and TGSC Disposal Price Information on the Prai Property Salient features of valuation report Salient Terms and Conditions of the SPA Particulars of All Liabilities to be Assumed Utilisation of Proceeds Cash Company or PN17 Company RATIONALE FOR THE PROPOSED DISPOSAL RISK FACTORS FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL Share Capital and Substantial Shareholders Shareholding Earnings and EPS Net Assets and Gearing APPROVALS REQUIRED ESTIMATED TIME FRAME FOR COMPLETION INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS 17 CONNECTED TO THEM 9. DIRECTORS RECOMMENDATION OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING COMPLETION EGM FURTHER INFORMATION 18 Page APPENDICES APPENDIX A APPENDIX B APPENDIX C VALUATION CERTIFICATE FOR THE PRAI PROPERTY FURTHER INFORMATION LOCATION MAP OF THE PRAI PROPERTY NOTICE OF EGM FORM OF PROXY ENCLOSED ENCLOSED - iii -

6 TATT GIAP GROUP BERHAD (Company No W) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office: Suite 16-1 (Penthouse Upper), Menara Penang Garden 42A, Jalan Sultan Ahmad Shah, Penang 5 April 2016 Board of Directors: Dato Siah Kok Poay (Chairman/President) Tan Lu Eng (Executive Director) Foo Kee Fatt (Independent Non-Executive Director) Loh Eng Wee (Independent Non-Executive Director) Siah Lee Beng, Michael (Non-Independent Non-Executive Director) Siah Chin Hoo (Alternate Director to Dato Siah Kok Poay, Steven) Siah Chin Soon (Alternate Director to Siah Lee Beng, Michael) To: The Shareholders of Tatt Giap Group Berhad Dear Sir/ Madam, PROPOSED DISPOSAL BY THE COMPANY OF 2 PIECES OF ADJOINING LEASEHOLD INDUSTRIAL LAND KNOWN AS LOT NO. PT 2960 AND 2961 HELD UNDER HSD AND HSD RESPECTIVELY, MUKIM 11, SEBERANG PERAI TENGAH, PENANG WITH AREAS MEASURING APPROXIMATELY 42, SQUARE METRES IN TOTAL TOGETHER WITH A 3½ STOREY DETACHED FACTORY BUILDING BEARING MUNICIPAL ADDRESS OF NO LORONG PERUSAHAAN MAJU 6, PRAI INDUSTRIAL ESTATE PHASE IV, PRAI, PENANG FOR A TOTAL DISPOSAL PRICE OF RINGGIT MALAYSIA FORTY ONE MILLION (RM41,000,000) ONLY 1. INTRODUCTION On 31 December 2015 and 6 January 2016, the Board announced to Bursa Securities that TatGiap had, on 31 December 2015, entered into a SPA with CSCM and TGSC for the proposed disposal of the Prai Property to CSCM for a total consideration of RM41,000, only. The Proposed Disposal entails a Debt Reduction Exercise embarked upon by the Company and TGSC with details more particularly spelt out under sub-section 2.2 below and the SPA. The purpose of this Circular is to provide you with the details and information pertaining to the Proposed Disposal and to seek your approval on the ordinary resolution to be tabled at the forthcoming EGM of the Company. The Notice of EGM together with the Form of Proxy is enclosed in this Circular

7 SHAREHOLDERS OF TATGIAP ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED DISPOSAL AT THE FORTHCOMING EGM. 2. THE PROPOSED DISPOSAL 2.1 Details of the Proposed Disposal The Proposed Disposal involves the disposal of the Prai Property by TatGiap to CSCM at the Disposal Price. 2.2 Details of the Debt Reduction Exercise The Vendor has created legal charges over the Prai Property as security to Maybank for banking facilities granted to TGSC ( the Maybank Facilities ) as well as other companies within the Group The Vendor has requested Maybank to release its security and legal charges over the Prai Property for a redemption sum of RM20,000, ( the Redemption Sum ) which is to be utilised solely to reduce the Maybank Facilities granted to TGSC. Maybank granted the approval vide a letter dated 16 December 2015 obtained on 17 December The Purchaser is supplying cold rolled and hot rolled coils to TGSC and TGSC is indebted to the Purchaser in the sum of RM21,835, as at LPD ( TGSC s Trade Debts owing to the Purchaser ). The non-repayment of the outstanding sum was mainly due to tightened cash flow within the Group following reduction to the limit of banking facilities granted to the Group The Vendor would sell the Prai Property to the Purchaser for a sum of RM41,000, TGSC will then utilise the full amount of RM41,000, to settle the Redemption Sum of RM20,000, to Maybank and reduce the TGSC s Trade Debts to the Purchaser by RM21,000, Upon completion of the Proposed Disposal, the Vendor s Group Indebtedness to TGSC would be deemed to be reduced by the sum of RM41,000,000. The Vendor s Group Indebtedness to TGSC refers to the outstanding receivables due from TatGiap Group totalling RM53,858, as at LPD. Summary of the Vendor s Group Indebtedness to TGSC and the outstanding receivables from the Vendor and its group of companies are as below: No. Company Amount Indebted to TGSC as at LPD (RM) Outstanding receivables as at LPD (RM) (a) TatGiap 4,102, (b) Tatt Giap Hardware Sdn Bhd 11,955, (c) Superinox Pipe Industry Sdn Bhd 37,316, ,858, (d) Superinox International Sdn Bhd 453, (e) Superinox Max Fittings Industry Sdn Bhd. 30, Total 53,858, ,858,

8 2.3 Background Information on CSCM and TGSC Background information on CSCM CSCM, a supplier to TGSC, was incorporated in Malaysia on 14 November 1991 as a private limited company under the Act. The present authorised share capital of CSCM is RM220,000, comprising 220,000,000 Ordinary Shares of RM1.00 each which were issued and fully-paid-up. As at LPD, CSCM is a wholly-owned subsidiary CHB, a company listed on the Main Market of Bursa Securities. CHB is a major shareholder, with a 20% stake, in TGSC. The principal activity of CSCM is manufacturing and marketing of steel products. As at LPD, the Directors of CSCM are Chen, Chung-Te, Liu, Jih-Gang, Lee, Samuel Lee, Ou, Jenq-Jang and Chen, Huo-Kun Background information on TGSC TGSC was incorporated in Malaysia on 9 August 1994 under the Act as a private limited company under the name of Tatt Giap Metal Services Sdn. Bhd. and assumed its present name on 20 August The present authorised share capital of TGSC is RM50,000,000 comprising 50,000,000 Ordinary Shares of RM1.00 each of which 40,000,000 Ordinary Shares of RM1.00 each were issued and fully paid-up. TGSC is a metal processing centre and is principally involved in slitting and shearing of ferrous and non-ferrous metal products for domestic market mainly in the automotive as well as electronic and electrical industries. As at LPD, the shareholding structure in TGSC is tabulated as below: Equity Holder Shareholding in TGSC No. of TGSC OS % TatGiap 20,400, CHB 8,000, Hanwa Co. Ltd. 6,000, CSGT International Corporation 5,600, Total 40,000, As at LPD, the Directors of TGSC are Dato Siah Kok Poay, Ms Tan Lu Eng, Mr Siah Chin Hoo, Mr Siah Chin Soon, Mr Teh Swee Seng, Mr Shinichi Matsumura, Mr Fan Chiang, Chin-Kang and Mr Chang, Che-Chia. 2.4 Disposal Price Basis and Justification of Arriving at the Disposal Price The Prai Property is sold on an as it where is basis with Disposal Price arrived at on a willing buyer and willing seller basis after having considered the following: (a) The indicative market value of the Prai Property of RM43,000,000 as reported by the Valuer using cost method as well as investment method as countercheck in formulating their opinion as set out in the Valuation Certificate under Appendix A to this Circular. The said indicative market value excluded the following unauthorised buildings and structures (collectively referred to as Excluded Assets ), - 3 -

9 No. Building Description Cost of investment as at LPD (RM) *Fair value as at LPD (RM) NBV (RM) Age of building (years) Buildup area (sq ft) (i) (ii) (iii) Toilet block Single-storey building Double-storey detached switchcum transformer room Double-storey building with ground floor for transformer room and first floor for switch room Other temporary structures and lean-to sheds Chemical store, empty IBC tank store, hydrogen store, water storage area, pump and compressor area, temporary shed and temporary store. 25,950 25, , , , , , , , ,044 Total 1,326,142 1,326, ,795 Note: (b) (c) (d) * The basis for arriving the total cost of investment and fair value is based on actual cost incurred. The total value of the Prai Property based on the market value of RM43,000,000 and fair value of the Excluded Assets of RM1,326,142 is RM44,326,142. The Disposal Price represents a discount of RM2 million or 4.65% from the market value. Any delay in the disposal of the Prai Property will cause the Group to incur interest expense of RM223, per month which is derived from overdue interest imposed by the Purchaser at 8% per annum on the outstanding amount due and finance cost of trade line facilities maintained with Maybank at an average rate of 5% per annum; Debt Reduction Exercise aimed at improving the Group s financial position; The 13 units of overhead cranes and 1 unit weight bridge have a fair value of approximately RM454,000, which are attached to the factory building and form part of the Prai Property. The fair value of RM454,000 was arrived at based on the NBV as at LPD. There are no comparative figures available in the market. Description Overhead Crane Weight Bridge Number of unit 13 units 1 unit Year of purchase Total cost of purchase RM1,473,029 RM69,801 Total accumulative depreciation RM1,047,585 RM41,

10 Description Overhead Crane Weight Bridge NBV* RM425,444 RM28,328 Note: * RM454,000 is derived from the rounding up of the fair value of RM453,772 As at LPD, the NBV of overhead cranes and weight bridge were RM372,467 and RM26,873 respectively Manner of Payment The Disposal Price shall be settled by the Purchaser in the following manner on Completion Date: No. Description Amount (RM) 1. Remit the Redemption Sum of RM20,000, to Maybank; and 20,000, Credit its account with the remaining RM21,000, as deemed repayment of RM21,000, by TGSC towards TGSC s Trade Debts to the Purchaser 21,000,000 Total 41,000, Information on the Prai Property The Land The subject site comprises two adjoining lots that are PT Nos and 2961, forming an irregular-shaped land with a combined titled land area of approximately 42, sq. metres (456,135 sq. ft. or acres). The title land areas of the component lots and description are tabulated as follows: Title Land Area Lot No. Description Sq. metres Sq. feet Acre PT2960 PT2961 This is an L-shaped land with a frontage of about metres ( feet) onto Lorong Perusahaan Maju 6. Its northern boundary which measures approximately metres ( feet) adjoins the neighbouring PT 2961 (part of the subject property) whilst its south-western boundary has a length of about metres ( feet) abuts onto the existing Sungai Juru (Juru River). This land is irregular in shape with a combined frontage of about metres ( feet) onto Lorong Perusahaan Maju 6. Its south-eastern boundary which measures approximately metres ( feet) adjoins the neighbouring PT 2960 (part of the subject property) whilst its western boundary has a combined length of about metres ( feet) abuts onto the existing Sungai Juru (Juru River). 16, , , , Total 42, ,

11 The Prai Property plan with the subject site shown edged in grey is attached as Appendix C. The Land is generally flat in terrain and lies at about the same level with the existing metalled road. Internal circulation within the site is tarmacadamised with provision of surface parking bays. The Prai Property accommodates industrial premises of about 18 years old comprising the following: (a) a three-storey detached office block (Building A); (b) a single-storey detached factory (Building B); (c) a single-storey detached factory (Building C); (d) a single-storey detached factory (Building D); (e) two guard houses (Building Nos. E1 & E2); (f) a motorcycle parking shed (Building F); (g) a pump house (Building G); (h) a locker room (Building H); (i) a toilet block (Building I); (j) a double-storey detached switch-cum-transformer room (Building J); (k) a single-storey detached storage tank building (Building K); and (l) other temporary structures erected by either the tenants or owner Floor area Source: Valuation Report - 6 -

12 2.5.3 Occupation status Part of the Prai Property are production and office areas which rented to various tenants whilst the remaining portions of the Prai Property are presently owner occupied. Brief details of the tenancies are as below:- (a) Tenant : Nippon EGALV Steel Sdn Bhd Date of Agreement : 1 July 2014 Tenancy period : 3 years Date of commencement : 1 January 2014 Date of expiration : 30 June 2017 Lettable area Total Monthly Rental 1 st year (1 July 2014 to 30 June 2015) 2 nd year (1 July 2015 to 30 June 2016) 3 rd year (1 July 2016 to 30 June 2017) Production area (161, sq ft) Office area 1 (5, sq ft) Office area 1 (1, sq ft) RM80, RM121, RM161, RM5, RM7, RM10, RM2, RM3, RM4, (b) Tenant : Nippon EGALV Steel Sdn. Bhd. Date of Agreement : 1 January 2015 Lettable Area : 4, sq. metres (46,800 sq. ft.) Tenancy period : 2 years and 6 months Date of commencement : 1 January 2015 Date of expiration : 30 June 2017 Tenancy Period Total Monthly Rental (RM) 1 st Year (1 January 2015 to 30 June 2015) 23,400 2 nd Year (1 July 2015 to 30 June 2016) 35,100 3 rd Year (1 July 2016 to 30 June 2017) 46,800 (c) Tenant : Nippon EGALV Steel Sdn. Bhd. Date of Agreement : 1 July 2015 Lettable Area : sq. metres (335 sq. ft.) Tenancy period : 2 years Date of commencement : 1 January 2015 Date of expiration : 30 June 2017 Tenancy Period Total Monthly Rental (RM) 1 st Year (1 July 2015 to 30 June 2016) nd Year (1 July 2016 to 30 June 2017) 1,

13 (d) Tenant : MSM Prai Bhd Date of Agreement : 1 February 2015 Lettable Area : 7, sq. metres (80,850 sq. ft.) Tenancy period : 1 year Total monthly rental : RM97,020 Date of commencement : 1 February 2015 Date of expiration : 31 July Title Particulars Item (I) (II) Title No. HSD HSD Lot/PT No. PT 2961 PT 2960 Tenure of Prai Property Leasehold for 60 years expiring on 6 December 2052 Town Area/Mukim Mukim 11 Daerah State Category of Land Use Seberang Perai Tengah Pulau Pinang Perusahaan/Perindustrian Area (approximate) 26, sq metres 16, sq metres Gross floor area (approximate) Building description Age of building (approximate) Restriction in interest Express Condition 30, sq metres ( 330,189 sq. feet) A 3 ½ storey detached factory buildings bearing the municipal address of No. 1617, Lorong Perusahaan Maju 6, Prai Industrial Estate Phase IV, Prai, Penang 18 years based on Certificate of Fitness for Occupation issued on 6 August (i) Tanah yang diberi milik ini tidak boleh dipindah milik, cagar, pajak atau dilupuskan tanpa kebenaran bertulis daripada Pihak Berkuasa Negeri. (ii) Tanah yang diberi milik ini tidak boleh dipecah sempadan atau dipecah sebahagian. Pemilik yang berdafter selepas Perbadanan Pembangunan Pulau Pinang hendaklah: (i) Dalam tempoh masa 2 tahun dari tarikh diberi milik atau dalam jangka masa yang ditetapkan yang diluluskan oleh Pihak Berkuasa Negeri, mendirikan bangunan kilang atau bangunan-bangunan kilang diatas tanah yang diberi milik itu mengikut pelan yang diluluskan oleh Pihak Berkuasa Tempatan dan hendaklah memelihara bangunan atau bangunan yang telah didirikan itu dengan memuaskan Pihak Berkuasa Tempatan - 8 -

14 Item (I) (II) (ii) Membersihkan, melupuskan atau mengambil tindakan pembersihan dan perlupusan efluents perdagangan dalam bentuk atau cara yang memuaskan pihak-pihak berkuasa yang berkenaan (iii) Membayar dan menjelaskan semua cukai, kadar-kadar bayaran hasil dan lain-lain bayaran yang dinilaikan pada masa itu terhadap tanah yang diberi milik tersebut atau mana-mana bahagian yang berkenaan yang dikenakan oleh Majlis Perbandaran Seberang Perai (iv) Memastikan bahawa 30% daripada pekerja-pekerja yang diambil dalam perniagaan untuk tanah yang diberi milik ini hendaklah terdiri dari kaum Bumiputra Registered Proprietor Encumbrances Tatt Giap Group Berhad The property is charged to Malayan Banking Berhad ( Maybank ) vide the following Presentation Nos.: (i) 0799SC dated (ii) 0799SC dated (iii) 0799SC dated (iv) 0799SC dated Other Endorsement(s) Nil Lease of part of the land to Tenaga Nasional Berhad (Company No W) vide Presentation No. 0799SC dated The Property shall be disposed on as is where is basis free from all encumbrances but without vacant possession upon the terms and conditions in the SPA and subject to all conditions and category of land use express or implied upon relating to or affecting the Prai Property or any part thereof. The Prai Property was acquired by TGSC in 2005 at a cost of approximately RM9,700,000 and revalued in 2008 for RM26,000,000. TGSC sold the Prai Property to TatGiap in 2012 for RM28,000,000 of which there was no recognition of gain or loss by either party in line with a valuation in the same year for RM28,000,000. The NBV of the Prai Property is RM22,173,752 based on the audited financial statements of TatGiap as at FYE 31 December 2014 and is inclusive of land cost of RM4,440,485. A valuation report dated 5 January 2016 was issued by the Valuer, an independent firm of professional valuers registered with The Board of Valuers, Appraisers and Estate Agents, Malaysia. The Valuer have assessed the Market Value of the Prai Property at RM43,000,000. The Valuer relied on the following evidence of value in arriving at its opinion: Comparison Method Comparable 1 Comparable 2 Comparable 3 Address of property PT 2946, Mukim 1 1, District of Seberang Perai Tengah, Penang Location Located along Lorong Perusahaan Maju 6, Kawasan Perusahaan Perai P.T. 1286, Mukim 13, District of Seberang Perai Tengah, Penang Along Jalan Perindustrian Bukit Minyak 18, Bukit P.T. 1224, Mukim 1 3, District of Seberang Perai Tengah, Penang Along Jalan Perindustrian Bukit Minyak 18, - 9 -

15 Comparable 1 Comparable 2 Comparable 3 Minyak Industrial Park Penang Science Park, Bukit Minyak Industrial Park, Penang Type of property Industrial land Industrial land Industrial land Transaction date 21 May September June 2013 Tenure 60-year leasehold interest expiring on 29 th June year leasehold interest expiring on 18 th August year leasehold interest expiring on 7 th July 2074 Land area (sq ft) 43, ,285 87,306 Consideration (RM) 2,000, ,825,069 2,754,083 Analysis base on gross built up area (RM/sq ft) RM45.90 per sq.ft RM35.00 per sq.ft RM31.55 per sq.ft Depreciated Replacement Cost Method and Investment Method The Market Value was derived using the Depreciated Replacement Cost Method and Investment Method is only used as a check method of valuation as below: No. Method of Valuation Market Value (RM) (a) Depreciated Replacement Cost Method 43,000,000 (b) Investment Method 40,100,000 The Prai Property is a purpose-built industrial premises which is individually designed and constructed for a specific purpose to meet a specific requirement, therefore the Depreciated Replacement Cost Method is a more appropriate and suitable method of valuation to be used to provide a better reflection of the Market Value of the subject property. The Investment Method involves the conversion of an income flow from property into an appropriate capital sum. The assessment of a rental value is therefore an important process and a reasonably accurate estimate is therefore vital. The Investment Method of valuation has limitations due to the availability of sufficient rental evidence to justify the rental derived from the subject property. Taking into account the relative strengths and weaknesses of both methods of valuation, the Valuer is of the opinion that greater weightage should be given to the Depreciation Replacement Cost Method. 2.6 Salient features of Valuation Report The market value of the Prai Property in its existing condition is RM43,000, Two adjoining Lot Nos. PT 2960 and 2961 held under HSD and HSD respectively, Mukim 11, Seberang Perai Tengah, Penang with areas measuring approximately 42, square metres in total together with a 3½ storey detached factory building bearing municipal address of No. 1617, Lorong Perusahaan Maju 6, Prai Industrial Estate Phase IV, Prai, Penang (60-year leasehold interest expiring on 6 December 2052) The Valuer has adopted the Depreciated Replacement Cost Method and Comparison Method in formulating their opinion of the Market Value of the Prai Property. As countercheck, the Valuer has also used the Investment Method of valuation

16 2.6.4 The Depreciated Replacement Cost Method is based on an estimate of current market value of land which is arrived at by the Comparison Method for its existing use plus the current gross replacement (or reproduction) cost of improvements less allowance for physical deterioration and all relevant forms of obsolesces and optimization. Valuation using the DRC method is made on the assumption that the entity will continue in operational existence for the foreseeable future and is subject to adequate potential profitability of the enterprise The Comparison Method is the Market Approach of comparing the subject property with similar properties that were transacted recently within the same location or other comparable localities. The comparable sale evidences have been sourced from Jabatan Penilaian Dan Perkhidmatan Harta (JPPH). In comparing properties, due consideration is given to factors such as location, size, building differences, improvements and amenities, time element and other relevant factors to arrive at our opinion of value In Investment Method, the capital value is derived from an estimate of the Market Rental, which the subject property can reasonably be let for. Outgoings, such as property tax, repairs and maintenance, insurance and management are then deducted from the annual rental income. The net annum rental income is capitalised at an appropriate current market yield to arrive at its indicative capital value. 2.7 Salient Terms and Conditions of the SPA The salient terms of the SPA, as extracted from the SPA, are as set out below Conditions Precedent The Agreement is subject to and conditional upon the fulfillment by the Vendor of the following conditions precedent:- (a) (b) (c) (d) the Vendor obtaining the Transfer Consent in accordance with the terms and conditions set out in SCHEDULE 3 in the SPA; the Vendor obtaining the redemption letter ( the Redemption Letter ) from Maybank for the Redemption Sum which is to be utilised solely to reduce the Maybank Facilities granted by Maybank to TGSC and the Redemption Letter shall be and remain valid for a period of not less than 30 days from the Unconditional Date; Nippon Egalv Steel Sdn Bhd, an existing tenant of a portion of the Prai Property, shall have given its written confirmation to both the Vendor and the Purchaser, that:- (i) (ii) (iii) (iv) it has waived its right, under the terms of its Tenancy Agreement with the Vendor, to purchase the Prai Property; it consents to the sale of the Prai Property herein by the Vendor to the Purchaser; it has paid to the Vendor the sum of RM294, as refundable Deposit under the terms of the Tenancy Agreement and Supplemental Agreement described in SCHEDULE 4 in the SPA; it will, with effect from the Completion Date as notified to it by the Purchaser s solicitors, remit to the Purchaser all rental payments due by it under the Tenancy Agreement and Supplemental Agreement commencing from the Completion Date; MSM Prai Bhd, an existing tenant of another portion of the Prai Property, shall have given its written confirmation to both the Vendor and the Purchaser that (i) (ii) it has paid to the Vendor the sum of RM194,040 as refundable Deposit under the terms of the Tenancy Agreement described in SCHEDULE 4 in the SPA; it will, with effect from the Completion Date as notified to it by the Purchaser s solicitors, remit to the Purchaser all rental payments due by it under the Tenancy Agreement commencing from the Completion Date;

17 (e) (f) the Board of Directors of the Vendor, Purchaser and TGSC shall have respectively passed all appropriate resolutions sanctioning their respective entry into of the Agreement and giving effect to the provisions of the Agreement in so far as same is applicable to them; the Vendor shall have deposited with the Purchaser s solicitors the sum of RM1,718, made up as follows:- No. Description RM (i) Real Property Gain Tax retention sum 1,230, (ii) (iii) Release of the refundable Deposits paid by Nippon Egalv Steel Sdn Bhd Release of the refundable Deposit paid by MSM Prai Bhd 294, , Total 1,718, (g) the passing at an extraordinary general meeting of the Vendor of a resolution to approve the transactions contemplated under the Agreement in accordance with the terms of the Agreement; Unless the Purchaser otherwise agrees in writing, the Conditions Precedent shall be required to be fulfilled with the following terms:- (a) (b) (c) in respect of Condition Precedent item (b)(c)(d) and (e) in respect of Condition Precedent item (a) and (g) in respect of Condition Precedent item (f) within 30 days from the date of the Agreement within 6 months from the date of the Agreement within 14 days from the date of obtaining the consent of the Penang State Authority to the transfer of the Prai Property to the Purchaser The Purchaser shall be at liberty as its sole discretion to either grant further accommodation or to treat the Agreement as lapsed and of no further effect if any of the deadlines above stated for fulfilment of the Conditions Precedent is not fulfilled for any reason whatsoever. The date when all the Conditions Precedent are fulfilled shall be referred to as the Unconditional Date Disposal Price The Disposal Price for the Prai Property shall be the sum of RM41,000, only Payment of the Disposal Price The Purchaser shall be at liberty as its sole discretion to either grant further accommodation or to treat the Agreement as lapsed and of no further effect if any of the deadlines above stated for fulfilment of the Conditions Precedent is not fulfilled for any reason whatsoever. The date when all the Conditions Precedent are fulfilled shall be referred to as the Unconditional Date On Completion Date, (a) (b) the Purchaser shall utilise the Disposal Price as follows:- (i) (ii) remit the Redemption Sum of RM20,000, to Maybank; credit its account with the remaining RM21,000, as deemed repayment of RM21,000, by TGSC towards TGSC s Trade Debts to the Purchaser. TGSC shall treat the Vendor s Group Indebtedness to TGSC as reduced by the Disposal Price amount of RM41,000,

18 Upon the fulfilment of the matters referred to in item above, (a) (b) (c) (d) (e) the Purchaser shall be deemed to have fully paid to the Vendor the Disposal Price of RM41,000,000-00, the Vendor s Group Indebtedness to TGSC shall be deemed to have been reduced by the sum of RM41,000,000-00; the Maybank Facilities granted to TGSC shall be reduced by RM20,000,000-00; TGSC s Trade Debts to the Purchaser shall be deemed to have been reduced by the sum of RM21,000,000-00; the Debt Reduction Exercise shall be deemed completed PROVIDED THAT nothing herein shall (i) (ii) release the Vendor and its Group from their continuing obligations to settle the balance of the Vendor s Group Indebtedness to TGSC still outstanding; release TGSC from its continuing obligation to settle the balance of TGSC s Trade Debts to the Purchaser still outstanding Discharge of Charge The Vendor shall direct and authorise Maybank to (a) to furnish to the Purchaser s solicitors all relevant correspondences and undertakings in relation to the redemption of the Prai Property; and (b) on the Purchaser s settlement of the Redemption Sum, to deliver directly to the Purchaser s solicitors the issue documents of title to the Prai Property, duplicate copies of all legal charges created over the Prai Property whether as security for the benefit of TGSC or any other borrowers, Form 40 issued by Companies Commission of Malaysia together with all release of charge forms as well as the discharge of all legal charges duly executed by Maybank The Vendor further undertakes that it shall not after the date of the Agreement create or allow any charge, lien, liabilities, indebtedness or encumbrance to be created over the Prai Property save with the consent in writing of the Purchaser Non-Registration of Transfer In the event that the sale and transfer of the Prai Property herein contemplated cannot be carried out or be perfected for whatsoever reason in accordance with the provisions of the Agreement without any fault on the part of the Vendor or Purchaser, each party hereto shall use its best endeavours:- (a) (b) (c) to ascertain the cause or reason for such non-registration; to rectify, remedy and/or overcome such cause or impediment; to cause the transfer to be registered. If notwithstanding the aforesaid, such cause or impediment is not rectified, remedied and/or overcome within a period of three (3) months from the date such non-registration is made known to the parties hereto without any fault or default of the Vendor, Purchaser and/or TGSC, then the Purchaser shall be entitled at its discretion to terminate the Agreement by written notice to the Vendor whereupon the Agreement shall forthwith terminate and cease to be of any further effect save as otherwise expressly provided in this Clause and:- (a) the Vendor shall within 14 days refund and/or cause to be refunded to the Purchaser, free of interest, the Disposal Price of RM41,000, in exchange for the Purchaser:- (i) withdrawing or causing to be withdrawn or removed, at the Purchaser s own cost and expense, all encumbrances in relation to the Prai Property (including but not limited to caveats, prohibitory orders and injunctions) attributable to the Purchaser and/or any person claiming through or under the Purchaser;

19 (b) (ii) returning the original issue document of title to the Prai Property, if the same has been delivered to the Purchaser together with all the documents forwarded to the Purchaser (if any) (with the Vendor s interest intact); thereafter neither Party shall have any claim against the other in respect of the Agreement or at law in respect of the subject matter of the Agreement Parties Default/Specific Performance In the event, either of the party shall breach or fail to observe or perform any of the terms, stipulations and obligations herein contained on its part to be observed or performed, then the non-defaulting party shall on performing all the terms and conditions and stipulations herein contained on its part to be performed be entitled either to the remedy at law for specific performance against the defaulting party and to all relief flowing there from or to terminate this Agreement and claim damages and all costs and expenses incurred in exercising such right shall be borne and paid by the defaulting party. 2.8 Particulars of All Liabilities to be Assumed There are no liabilities, including contingent liabilities and guarantees to be assumed by TatGiap and the Purchaser pursuant to the Proposed Disposal. 2.9 Utilisation of Proceeds The proceeds arising from the Proposed Disposal would be fully utilised immediately in the following manner on Completion Date: No. Description Amount (RM) (a) Remit the Redemption Sum of RM20,000,000 to Maybank; and 20,000, (b) Credit its account with the remaining RM21,000,000 as deemed repayment of RM21,000,000 by TGSC towards TGSC s Trade Debts to the Purchaser 21,000, Total 41,000, Upon Completion Date, the Company would be able to record interest savings of RM2.68 million per annum Cash Company or Practice Note 17 ( PN17 ) Company The Proposed Disposal is not expected to result in the Company becoming a cash company or PN17 company. 3. RATIONALE FOR THE PROPOSED DISPOSAL The Proposed Disposal provides an avenue for TatGiap to unlock and realise the value of the Prai Property. The Disposal Price of RM41,000, represents an appreciation in the value of the Prai Property since its acquisition and subsequent revaluation. The subsequent revaluation was carried out by Raine and Horne International Zaki & Partners Sdn. Bhd. on 8 January 2008 with indicative market value of RM26,000,000.00, the revaluation surplus of RM16,100, was incorporated in the financial statements for FYE 31 December Upon completion, the Proposed Disposal is expected to result in a net gain of RM15,885,982 representing about 10 sen per ordinary share based on TatGiap s issued and paid-up share capital as at LPD. Detailed information is as outlined under section 5.2 in this Circular. The crystallisation of the value of the Prai Property will enable the Group to strengthen its financial position by reducing bank borrowing and amount owing to creditor. The proforma effects of the Proposed Disposal on improved gearing of the Group are set out under section 5.3 of this Circular

20 4. RISK FACTORS The Proposed Disposal is not expected to change the risk profile of TatGiap. However, the Proposed Disposal is subject to various risks as outlined below: 4.1 Failure and / or Delay in the Approval from The Authorities and / or Parties The completion of the Proposed Disposal is conditional upon, inter-alia, the obligations and covenants of the SPA as stated in section 2.7 of this Circular being satisfied and/or varied as the case maybe. There can be no assurance that the Proposed Disposal will not be exposed to risks such as the inability to fulfil the obligations and conditions and/or inability to obtain the approvals from the relevant authorities, if any. If any of the conditions precedent of the SPA is not fulfilled or not waived by the respective parties, including the failure to secure the approval from the shareholders of the Company or the relevant authorities within the period of time set out in the SPA, the Proposed Disposal may be delayed or terminated. Nevertheless, the management shall use its best endeavours to ensure every effort is made to satisfy the conditions precedent amongst others, to obtain the approval from the shareholders of the Company for the Proposed Disposal in a timely manner. 4.2 Contractual Risk The Group may be subjected to certain contractual risks such as specific performance or payment of liquidated damages as a result of non-fulfilment of its obligations under the SPA. Nevertheless the Group will endeavour to ensure full compliance in relation to its part of the obligations under the SPA. 5. FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL 5.1 Share Capital and Substantial Shareholders Shareholding The Proposed Disposal will not have any effect on the issued and paid-up share capital of TatGiap and the substantial shareholders shareholding in TatGiap as no new TatGiap Shares will be issued pursuant to the Proposed Disposal. 5.2 Earnings and EPS The Proposed Disposal is expected to have no material effect on the EPS of TatGiap Group save for a one-off net gain on disposal of about RM15,885,982. The said net gain will be recognised, upon completion in May 2016, in the 17 months FPE 31 May The basis of arriving at the gain from the Proposed Disposal and the effect on the EPS are as follows: Amount (RM) Disposal Price 41,000,000 less: Carrying value of the Prai Property and related expenditure Estimated provision for income tax / real property gains tax (net of deferred tax) 22,604,076 2,259,942 Estimated expenses in relation to Proposed Disposal 250,000 Net gain from Proposed Disposal 15,885,982 Share capital as to-date Issued share capital EPS from Proposed Disposal (sen) 155,103,

21 Based on the audited consolidated financial statements of TatGiap for the FYE 31 December 2014, the pro forma effects of the Proposed Disposal on the consolidated gain and EPS of the TatGiap Group, assuming the Proposed Disposal had been effected at the beginning of the said financial year end are as follows: Description Audited as at 31 December 2014 After the Proposed Disposal Loss attributable to the owners of the Company (RM 16,662, ,965 Weighted average no of shares in issue 112,214, ,214,111 LPS (sen) The above was arrived after taking into consideration the gain of RM15,885,982 arising from the Proposed Disposal based on the Disposal Price after netting of the audited NBV of the Prai Property as at 31 December 2014 of RM22,604,076 and estimated expenses in relation to the Proposed Disposal of approximately RM2,509, Net Assets and Gearing The Proposed Disposal is expected to have no material effects on the NA of TatGiap Group save for a gain/loss on disposal as mentioned above. The Group s finance costs will be reduced due to the full utilisation of the proceeds raised from the Proposed Disposal for the repayment of borrowings and the gearing ratio is expected to be further improved accordingly. The proforma effects of the Proposed Disposal on the consolidated net assets and gearing of TatGiap Group based on its audited consolidated financial statements for the FYE 31 December 2014 are as set below: Audited as at 31 December 2014 After the Proposed Disposal Share capital 60,988,849 (a) 77,551,702 Reserves (12,464,015) (7,745,178) Total equity attributable to owners of the Company 48,524,834 69,806,524 No. of TatGiap Shares in issue 121,977,698 (a) 155,103,402 Net assets per share (RM) Total borrowings 163,093, ,093,514 Gearing ratio (times) Note: (a) Increase in share capital and number of TatGiap Shares in issue following mandatory conversion of irredeemable convertible unsecured loan stocks ( ICULS ) upon its maturity on 3 June APPROVALS REQUIRED The Proposed Disposal is subject to the following approvals being obtained: (a) (b) (c) Shareholders of TatGiap at an EGM to be convened; State Government consent on transfer of title; and Any other relevant authorities, as required. The Proposed Disposal is not conditional or inter-conditional upon any other corporate exercise/scheme

22 7. ESTIMATED TIME FRAME FOR COMPLETION The applications to the relevant authorities are expected to be made within the expected time frame from the date of the announcement made to Bursa Securities. Barring any unforeseen circumstances and subject to the fulfilment of all conditions precedent as set out in the SPA, the Board expects the Proposed Disposal to be completed by May The tentative timetable in relation to the Proposed Disposal is as follows: Tentative date Event 20 April 2016 EGM 31 May 2016 Completion of the Proposed Disposal 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM Save as disclosed below, none of the Directors and/or major shareholders and/or persons connected to Directors and/or persons connected to the major shareholders of the Company and of the Group has any interest, direct or indirect, in the Proposed Disposal: The Proposed Disposal is a related party transaction exempted under paragraph 10.08(9) of the Listing Requirements by virtue of CHB being a common major shareholder of TGSC and CSCM, and Mr Teh Swee Seng being the Director representing CHB in TGSC (the Interested Parties ). However, TatGiap will seek shareholders approval at forthcoming EGM to be convened as its highest applicable percentage ratio is in excess of 25%. Accordingly, the Interested Parties will abstain and have undertaken to ensure that any persons connected with them will abstain from voting in respect of their direct and/or indirect shareholdings in TatGiap, if any, on the resolution pertaining to the Proposed Disposal at the forthcoming EGM to be convened. 9. DIRECTORS RECOMMENDATION The Board, having considered all aspects of the Proposed Disposal and in particular to the rationale for the Proposed Disposal set out in Section 3 of this Circular is of the opinion that the Proposed Disposal is in the best interest of the TatGiap Group and is not detrimental to the shareholders of TatGiap. Accordingly, the Board recommends that you vote in favour of the resolution pertaining to the Proposed Disposal to be tabled at the forthcoming EGM. 10. OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING COMPLETION As at the LPD, save for the Proposed Disposal, there are no other proposals which have been announced but pending completion. 11. EGM The Notice convening the EGM is enclosed together with this Circular. The EGM will be held at No. 1564, MK12, Jalan Nafiri, Valdor Industrial Estate, Sungai Jawi, Penang on Wednesday, 20 April 2016 for the purpose of considering and, if thought fit, passing the resolution to give effect to the Proposed Disposal. If you are unable to attend and vote in person at the EGM, please complete, sign and return the enclosed Form of Proxy for the EGM in accordance with the instruction thereon, to reach the Company s Registered Office at Suite 16-1 (Penthouse Upper), Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, Penang not less than forty-eight (48) hours before the time stipulated for holding the EGM or at 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

23 12. FURTHER INFORMATION Shareholders are advised to refer to the attached Appendices in this Circular for further information. Yours faithfully For and on behalf of the Board of TATT GIAP GROUP BERHAD Foo Kee Fatt Independent Non-Executive Director

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25 APPENDICES

26 APPENDIX A VALUATION CERTIFICATE ON THE PRAI PROPERTY

27 APPENDIX A VALUATION CERTIFICATE ON THE PROPERTY (CONT D)

28 APPENDIX A VALUATION CERTIFICATE ON THE PROPERTY (CONT D)

29 APPENDIX A VALUATION CERTIFICATE ON THE PROPERTY (CONT D)

30 APPENDIX A VALUATION CERTIFICATE ON THE PROPERTY (CONT D)

31 APPENDIX A VALUATION CERTIFICATE ON THE PROPERTY (CONT D)

32 APPENDIX A VALUATION CERTIFICATE ON THE PROPERTY (CONT D)