DKLS INDUSTRIES BERHAD (Company No P) (Incorporated in Malaysia)

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to the course of action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents in this Circular. DKLS INDUSTRIES BERHAD (Company No. 369472-P) (Incorporated in Malaysia) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED ACQUISITION OF TOWER 8, AVENUE 5, THE HORIZON, PHASE 2, BANGSAR SOUTH, KUALA LUMPUR BY DKLS EQUITY SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF DKLS INDUSTRIES BERHAD FROM NASIB UNGGUL SDN BHD FOR A TOTAL CASH CONSIDERATION OF RM93,800,000 AND NOTICE OF EXTRAORDINARY GENERAL MEETING The Notice of Extraordinary General Meeting ( EGM ) of DKLS to be held at 17th Floor, Ipoh Tower, Jalan Dato Seri Ahmad Said, 30450 Ipoh, Perak Darul Ridzuan on Monday, 22 October 2012 at 9.30 am together with the Form of Proxy are enclosed in this Circular. The Form of Proxy should be lodged at the Registered Office of DKLS at D-3-7, Greentown Square, Jalan Dato Seri Ahmad Said, 30450 Ipoh, Perak Darul Ridzuan not later than 48 hours before the time set for the meeting or at any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the meeting should you subsequently wish to do so. Last date and time for lodging of the Form of Proxy : Saturday, 20 October 2012 at 9.30 am Date and time of the EGM : Monday, 22 October 2012 at 9.30 am This Circular is dated 5 October 2012

DEFINITIONS Except where the context otherwise requires, the following definitions shall apply throughout this Circular: Act - The Companies Act, 1965, as amended from time to time and any reenactment thereof Balance Deposit - RM7,504,000 only Balance Purchase Consideration - RM75,040,000 only Board - Board of Directors of DKLS Bursa Securities - Bursa Malaysia Securities Berhad (635998-W) Circular - This circular to shareholders of DKLS dated 5 October 2012 in relation to the Proposed Acquisition Corporate Guarantee - The corporate guarantee to be issued by DKLS in the form and content that is acceptable to the Vendor to guarantee the payment of the Balance Purchase Consideration on or before the Completion Date as defined herein DESB - DKLS Equity Sdn Bhd (988654-P), a wholly-owned subsidiary of DKLS DKLS / the Company - DKLS Industries Berhad (369472-P) DKLS Group / the Group - DKLS and its subsidiaries, collectively EGM - Extraordinary General Meeting First Deposit - RM9,380,000 only comprising: (i) Earnest deposit of RM1,876,000 only paid to the Vendor on 20 April 2012 upon acceptance of the offer for the Proposed Acquisition; and Late Payment Interest - Rate of 10% per annum (ii) Balance Deposit of RM7,504,000 only paid on 23 May 2012 upon the execution of the SPA Listing Requirements - Bursa Securities Main Market Listing Requirements NUSB / Vendor - Nasib Unggul Sdn Bhd (812625-M), the vendor of the Property Parties - DESB, the Vendor and the Proprietor and Party shall, where the context admits, means any one of them PPC International / Valuer - PPC International Sdn Bhd (405011-U) PPSB / Proprietor - Paramount Properties Sdn Bhd (686757-K), the proprietor of the Property Property - Tower 8, The Horizon, Phase 2, bearing a postal address of Tower 8, Avenue 5, The Horizon, Phase 2, Bangsar South, No 8, Jalan Kerinchi, 59200 Kuala Lumpur, erected on the parcel of commercial land held under Master Title Pajakan Negeri 46338, Lot No 58190, Mukim and District of Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur Proposed Acquisition - Proposed acquisition of the Property by DESB from NUSB Purchase Consideration - RM93,800,000 only Relevant Documents - All the documentary proof evidencing up to date payment of electricity, water, indah water charges, telephone and internet imposed and payable in respect of the Property Retention Sum - RM1,876,000 only RM - Ringgit Malaysia

Second Payment - Further sum of RM9,380,000 only SPA - Sale and purchase agreement dated 23 May 2012 entered into between DESB, the Vendor and the Proprietor and shall include the amendment by mutual agreement on 11 September 2012 Valuation Report - Valuation report dated 25 May 2012 in respect of the Property as appraised by the Valuer Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Reference to persons shall include corporations. Any reference in this Circular to any enactment 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 shall be a reference to Malaysian time, unless otherwise stated.

CONTENTS LETTER TO THE SHAREHOLDERS OF DKLS IN RELATION TO THE PROPOSED ACQUISITION SECTION PAGE 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED ACQUISITION 2 3. RATIONALE FOR THE PROPOSED ACQUISITION 8 4. INDUSTRY OUTLOOK AND PROSPECTS 9 5. RISK FACTORS 12 6. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 12 7. APPROVALS REQUIRED 13 8. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST 13 9. DIRECTORS RECOMMENDATION 13 10. CORPORATE EXERCISE ANNOUNCED BUT NOT YET COMPLETED 13 11. TENTATIVE TIMELINE FOR THE IMPLEMENTATION OF THE PROPOSED ACQUISITION 13 12. EGM 14 13. FURTHER INFORMATION 14 APPENDICES I VALUATION CERTIFICATE FROM THE VALUER ON THE PROPERTY 15 II FURTHER INFORMATION 21 NOTICE OF EGM FORM OF PROXY Enclosed Enclosed

DKLS INDUSTRIES BERHAD (369472-P) (Incorporated in Malaysia) Registered Office D-3-7 Greentown Square Jalan Dato Seri Ahmad Said 30450 Ipoh Perak Darul Ridzuan 5 October 2012 Board of Directors: Dato Ding Pei Chai (Chairman) Ding Poi Bor (Managing Director) Ir Sam Tuck Wah (Executive Director) Ding Soo King (Executive Director) Dato Ir Lim Choo Boon (Senior Independent Non-Executive Director) Dato Seri Haji Omar bin Haji Ahmad (Independent Non-Executive Director) Soh Yoke Yan (Independent Non-Executive Director) To: The Shareholders of DKLS Industries Berhad Dear Sir/Madam PROPOSED ACQUISITION OF TOWER 8, AVENUE 5, THE HORIZON, PHASE 2, BANGSAR SOUTH, KUALA LUMPUR BY DESB, A WHOLLY-OWNED SUBSIDIARY OF DKLS FROM NUSB FOR A TOTAL CASH CONSIDERATION OF RM93,800,000 1. INTRODUCTION On 20 April 2012, the Board announced that the Company has accepted an offer from the Vendor to acquire the Property for a total purchase consideration of RM93,800,000. On 23 May 2012, the Board announced that DESB has entered into a sale and purchase agreement with the Vendor and the Proprietor for the acquisition of the Property for a total cash consideration of RM93,800,000. Subsequently, on 11 September 2012, the Board announced that DESB, the Vendor and the Proprietor have mutually agreed in writing to amend the said sale and purchase agreement, in particular to vary one (1) of the Conditions Precedent as set out in Section 2.6.2(c) herein. The purpose of this Circular is to provide the shareholders with the relevant information on the Proposed Acquisition and to seek the shareholders approval for the resolution on the Proposed Acquisition to be tabled at the forthcoming EGM of the Company. The Notice of EGM together with the Proxy Form are enclosed in this Circular. SHAREHOLDERS ARE ADVISED TO READ THE CONTENTS AND APPENDICES OF THIS CIRCULAR CAREFULLY BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED ACQUISITION AT THE FORTHCOMING EGM. 1

2. DETAILS OF THE PROPOSED ACQUISITION On 23 May 2012, DESB has entered into the SPA with the Vendor and the Proprietor for the acquisition of the Property for a total cash consideration of RM93,800,000. 2.1 Information on DESB DESB, bearing Company no. 988654-P, was incorporated in Malaysia under the Act as a private limited company on 27 April 2012. The authorised share capital of DESB amounts to RM100,000 comprising 100,000 ordinary shares of RM1.00 each, all of which are issued and credited as fully paid-up. The principal activity of DESB is that of property and investment holdings. The Directors of DESB are Mr Ding Poi Bor, Ir Sam Tuck Wah and Ms Ding Soo King. 2.2 Information on the Vendor NUSB, bearing Company no. 812625-M, was incorporated in Malaysia under the Act as a private limited company on 7 April 2008. The authorised share capital of the Vendor amounts to RM100,000 comprising 100,000 ordinary shares of RM1.00 each, of which 2 ordinary shares are issued and fully paid-up. The Vendor is a wholly owned subsidiary of UOA Properties Sdn Bhd which in turn is a wholly owned subsidiary of UOA Development Berhad, a public company listed on the Main Market of Bursa Securities. The principal activity of the Vendor is that of property investment holding. The Vendor is the beneficial owner of the Property. The Directors of the Vendor are Mr Kong Chong Soon @ Chi Suim and Mr Kong Pak Lim. 2.3 Information on the Proprietor PPSB, bearing Company no. 686757-K, was incorporated in Malaysia under the Act as a private limited company on 31 March 2005. The authorised share capital of the Proprietor amounts to RM500,000 comprising 500,000 ordinary shares of RM1.00 each, of which 250,000 ordinary shares are issued and credited as fully paid-up. The Proprietor is a wholly owned subsidiary of UOA Development Berhad. The principal activity of the Proprietor is that of property development. The Directors of the Proprietor are Mr Kong Chong Soon @ Chi Suim and Mr Kong Pak Lim. By way of two (2) sale and purchase agreements both dated 7 April 2008 and three (3) supplemental agreements dated 26 November 2008, 1 October 2010 and 3 January 2012 entered into between the Vendor and the Proprietor (collectively referred to as the Principal Sale Agreement ), the Proprietor has sold two (2) provisional parcel of commercial lands to the Vendor on which the building in relation to the Property was constructed by the Vendor. The provisional parcel of commercial lands measured a combined area of approximately 7,564 square feet ( sq ft ) was disposed of for a total consideration of RM1,361,520. 2.4 Information on the Property The Property is identified as Tower 8, The Horizon, Phase 2, bearing a postal address of Tower 8, Avenue 5, The Horizon, Phase 2, Bangsar South, No 8, Jalan Kerinchi, 59200 Kuala Lumpur, erected on part of the parcel of commercial land held under Master Title Pajakan Negeri 46338, Lot No 58190, Mukim and District of Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur. The Master Title of the Property conveys a 99-year leasehold interest expiring on 16 August 2106 with a land area of 111,400 square metres ( sq m ). The Property, comprises a 14-storey corner stratified boutique office building, was completed in 2011 and was subsequently issued with the Certificate of Completion and Compliance on 27 June 2011. 2

The Property, in which the approximate age is 1 year, is currently unoccupied as it was the intention of the Vendor to sell the Property en bloc. The gross floor area ( GFA ) and the net lettable area ( NLA ) of the Property are approximately 138,073 sq ft and 96,257 sq ft respectively. The Property is strategically located within the precinct known as Bangsar South between Bangsar, Kuala Lumpur and Petaling Jaya within a ten-minutes travelling time radius. Bangsar South is situated off Jalan Kerinchi, Kuala Lumpur. It is located about 5 kilometres (3.12 miles) to the south-west of the Kuala Lumpur city centre. The location of the Property provides excellent access to all modes of public transport such as Light Rail Transit ( LRT ) station and Rapid bus services. The two LRT stations situated nearby are the Universiti and Kerinchi Stations. The latter is connected to the Bangsar South development via a covered pedestrian walkway. Shopping, banking, retailing, educational, recreational and public facilities are available in the locality. The immediate neighbourhood of the Property comprises boutique office buildings (The Horizon, Phase 1 and 2), purpose-built show gallery (The Village), a lifestyle shopping mall (The Sphere) and high-rise condominiums (Park Residences). The Property is located within the boundary of the Multi-media Super Corridor ( MSC ) Malaysia Cybercentre where Bangsar South has been awarded the MSC Malaysia Cybercentre status in 2010. In addition to the MSC status, the Property has been awarded with the latest reputable benchmark, Gold certification of Green Building Index ( GBI ). The Property is equipped with the green features that maximise energy efficiency, indoor environmental quality, water efficiency and innovation. Based on the audited financial statements of the Vendor as at 31 December 2011, the net book value of the Property is RM68,000,000. 2.5 Basis and Justification of the Purchase Consideration The Purchase Consideration for the Property was arrived at on a willing-buyer willing-seller basis after taking into consideration the cost of the purchase based on the gross area of the Property, the strategic location of the Property and the prevailing market value of the commercial properties in the surrounding areas. In addition, based on the Valuation Report on the valuation carried out on the Property on 22 May 2012, the market value of the Property is RM94,000,000 as appraised by the Valuer using the Comparison Method. The valuation certificate for the Property is set out in Appendix I of this Circular. 2.6 Salient Terms of the SPA The salient terms of the SPA include, inter-alia, the following:- 2.6.1 Condition of Sale The sale and purchase of the Property is subject to the following: (a) (b) (c) (d) the Property is free from all encumbrances; the Property is subject to any express conditions in the strata title; which is expected to be issued within two (2) years from the date of the SPA; the Property is subject to the additional easements created as set out in the SPA; and the Vendor continues to maintain and keep in good repair the Property until the delivery of the vacant possession of the Property to DESB. 3

2.6.2 Conditions Precedent The SPA is conditional upon the following conditions precedent ( Conditions Precedent ) being fulfilled and obtained by DESB as the purchaser: (a) the approval of the loan to part finance the Proposed Acquisition ( Loan ) from a financial institution ( Financier ) within ninety (90) days from the date of the SPA; (b) (c) the receipt of the Valuation Report confirming that the market value of the Property is at least RM93,800,000 within ninety (90) days from the date of the SPA; and the approval of the shareholders of DKLS for the Proposed Acquisition is obtained within five (5) months from the date of the SPA. In the event that the Conditions Precedent are not fulfilled within the stipulated periods, as the case may be, the SPA shall become null and void whereupon:- (a) the First Deposit and all other monies paid by DESB to the Vendor pursuant to the Purchase Consideration shall be refunded to DESB free of interest within fourteen (14) days therefrom; and (b) all document deposited with DESB s Solicitors pursuant to the SPA shall be returned to the Vendor with the Proprietor s and/or Vendor interest therein remaining intact; Thereafter, the SPA ceases to have any effect and becomes null and void and neither of the Parties have any claims against the other save and except for any antecedent breach. Each party will bear its own costs and expenses (including their respective solicitors fees) in respect of the matters incidental to the SPA. The SPA shall become unconditional when all of the Conditions Precedent have been obtained or waived by DESB to the extent permitted by law. The unconditional date shall be the business day on which the Vendor or the Vendor s and Proprietor s Solicitors receives written notification and documentary evidence from DESB or DESB s Solicitors that the last of the Conditions Precedent has been fulfilled ( Unconditional Date ). DESB reserves the right to waive any of the Conditions Precedent and thereafter the Parties will proceed to the completion subject to any remaining Conditions Precedent being satisfied or fulfilled. The Vendor shall within seven (7) working days from the date of receipt of the Second Payment deliver vacant possession of the Property to DESB subject always that DESB has deposited the Corporate Guarantee duly executed by DKLS with the Vendor s and the Proprietor s Solicitors. The completion shall take place on or before a date falling within the period of eighteen (18) months, being the grace period granted by the Vendor commencing from the date of the SPA ( Completion Period ) when the Vendor receives the bank draft made in favour of the Vendor for the Balance Purchase Consideration in full from DESB or the Financier ( Completion Date ). 2.6.3 Terms of Payment of the Purchase Consideration The Purchase Consideration of the Property shall be paid at the time and in the manner as follows: (a) Earnest deposit of RM1,876,000 was paid on 20 April 2012 to the Vendor upon acceptance of the offer for the Proposed Acquisition; (b) Balance Deposit less the Retention Sum of RM5,628,000 (net) was paid on 23 May 2012 to the Vendor upon the execution of the SPA as deposit; (c) Retention Sum of RM1,876,000 was paid on 23 May 2012 to DESB s Solicitors as stakeholders in respect of the Real Property Gain tax payable upon the execution of the SPA; 4

(d) (e) Second Payment of RM9,380,000 shall be paid to the Vendor within two (2) months from the Unconditional Date; Balance Purchase Consideration of RM75,040,000 shall be paid to the Vendor within the Completion Period subject always that : (i) DESB shall have delivered to the Vendor the Corporate Guarantee, duly executed by DKLS, to guarantee the payment of the Balance Purchase Consideration within fourteen (14) days after the Unconditional Date; (ii) In the event DESB is granted the Loan by the Financier to finance the Proposed Acquisition, DESB shall on or before the Completion Period, deposit with the Vendor s and Proprietor s Solicitor the differential sum between the Balance Purchase Consideration and the Loan, and a letter of undertaking from the Financier or its solicitors in favour of the Vendor to pay the Loan to the Vendor; (f) In the event DESB fails to pay the Second Payment within two (2) months from the Unconditional Date then DESB shall pay the Late Payment Interest per annum with daily rest on the outstanding Second Payment calculated from the expiry of the due date until the date the Second Payment is actually deposited with the Vendor unless the Vendor exercises its right under Section 2.6.6 (b) herein; and (g) In the event DESB fails to pay the Balance Purchase Consideration on or before the Completion Period, the consequences in Section 2.6.6 herein shall apply. In respect of Section 2.6.3 (e)(ii), the amount of the Loan granted by the Financier is the same as the Balance Purchase Consideration. Hence, no differential sum is required to be deposited by DESB. 2.6.4 Deed of Assignment Upon the execution of the SPA, the Vendor has executed a Deed of Assignment in favour of DESB to assign all its rights title and interest in and to the Property under the Principal Sale Agreement. The Proprietor has endorsed its consent on the Deed of Assignment. DESB shall execute the Deed of Assignment after all the Conditions Precedent are fulfilled but before the expiry of the Completion Period. 2.6.5 Failure to remedy breach by the Vendor or Proprietor If the Vendor and/or the Proprietor fail to remedy the relevant default or breach within fourteen (14) days of the receipt of the notice in writing from DESB specifying the default or breach, DESB shall be entitled to terminate the SPA by notice in writing to the Vendor and/or the Proprietor ( Termination Notice ). If a Termination Notice is duly given: (a) the Vendor shall refund the First Deposit and the Second Payment together with all other sums paid by DESB towards payment of the Balance Purchase Consideration free of interest within fourteen (14) days after their receipt of the Termination Notice, failing which Late Payment Interest shall be payable on the unpaid amount; (b) the Vendor shall in addition to the refund, pay to DESB a sum equivalent to the First Deposit within fourteen (14) days as agreed liquidated damages after the Vendor s receipt of the Termination Notice; (c) in exchange for compliance by the Vendor of its obligations under the sub-sections 2.6.5(a) and 2.6.5(b) hereof, DESB s Solicitors shall and are hereby authorised to simultaneously to return the Deed of Assignment, the original Principal Sale Agreement and such other documents received by DESB or DESB s Solicitors or the Financier and/or its solicitors, to the Vendor within fourteen (14) days after the Vendor s receipt of the Termination Notice with the Vendor s and/or the Proprietor s interest therein remaining intact; and 5

(d) simultaneously in exchange for compliance by the Vendor of its obligations under the sub- Sections 2.6.5(a) and 2.6.5(b) hereof, if vacant possession of the Property shall have been delivered to DESB, DESB shall re-deliver vacant possession of the Property to the Vendor in the same state and condition as when the vacant possession of the Property was first delivered to DESB, fair wear and tear excepted, together with the Relevant Documents. Notwithstanding anything contained in the SPA, DESB shall be entitled to apply for an order of specific performance if either the Vendor and/or the Proprietor default in performing any of their obligations under the SPA. 2.6.6 Failure to remedy breach by DESB If DESB and/or DKLS fail to remedy the relevant default or breach within fourteen (14) days of the receipt of the notice in writing from the Vendor specifying the default or breach, the Vendor shall be entitled at its sole and absolute discretion decides without prejudice to any other rights or remedies the Vendor may be entitled to against DKLS either: (a) (b) to the remedy of specific performance of the SPA together with such legal remedies and all costs and expenses incurred by the Vendor in connection therewith (including the solicitors fees on a solicitors-client basis) shall be borne by DESB; or to terminate the SPA by giving Termination Notice in writing to DESB without prejudice to any other right of the Vendor to enforce without prejudice to any other rights or remedies the Vendor may be entitled to against DESB. If a Termination Notice is duly given: (i) the First Deposit and the Second Payment shall be absolutely forfeited to the Vendor as agreed liquidated damages; (ii) the Vendor shall refund and cause to be refunded to DESB any other sums paid by DESB to the Vendor towards payment of Balance Purchase Consideration free of interest within fourteen (14) days after their issuance of the notice to terminate the SPA; (iii) in the exchange for compliance by the Vendor of its obligations under sub-section 2.6.6(ii) hereof, DESB shall return or cause to be returned the Deed of Assignment, the original Principal Sale Agreement and/or such other relevant documents received by DESB or DESB s Solicitors or the Financier and/or its solicitors to the Vendor with the Vendor s and/or the Proprietor s interest therein remaining intact; and (iv) simultaneously in exchange for compliance by the Vendor of its obligations under the sub- Section 2.6.6(ii) hereof, if vacant possession of the Property shall have been delivered to DESB, DESB shall, re-deliver vacant possession of the Property to the Vendor in the same state and condition as when the vacant possession of the Property was first delivered to DESB, fair wear and tear excepted, together with the Relevant Documents. 2.6.7 Non-Perfection of the Deed of Assignment In the event the Deed of Assignment cannot be perfected for any reasons whatsoever not caused or occasioned by either Parties and all necessary remedial action has been exhausted, then: (a) (b) the Vendor shall on notification thereof forthwith refund to DESB the First Deposit, the Second Payment and all other monies paid by DESB towards the Purchase Consideration free of interest within fourteen (14) days therefrom; in exchange for the aforesaid refund, DESB shall return or cause to be returned the Deed of Assignment, the original Principal Sale Agreement and such other documents deposited with DESB s Solicitors and/or the Financier and/or its solicitors pursuant to the SPA to the Vendor with the Vendor s and/or the Proprietor s interest therein remaining intact; 6

(c) (d) simultaneously in exchange for compliance by the Vendor of its obligations under the sub- Section 2.6.7(a) and 2.6.7(b) hereof, if vacant possession of the Property shall have been delivered to DESB, DESB shall re-deliver vacant possession of the Property to the Vendor in the same state and condition as when the vacant possession of the Property was first delivered to DESB, fair wear and tear expected, together with the Relevant Documents; and thereafter the SPA shall then be deemed terminated and rendered null and void and be of no further force or effect and the Parties shall have no claim against the other in respect of any matter hereto save and except for antecedent breach. 2.7 Source of Funding The Purchase Consideration for the Proposed Acquisition is expected to be funded through a combination of DKLS Group s internally generated funds of approximately 20% and the remainder approximately 80% via the Loan, which is the maximum financing limit offered by the Financier to DESB. On 31 July 2012, DESB has been granted the approval in principle for the Loan totalling RM75,040,000 from the Financier to part finance the Proposed Acquisition subject to the salient terms and conditions of the offer. 2.8 Liabilities to be assumed and Encumbrances Saved for the Loan from the Financier to be undertaken to part finance the Proposed Acquisition, the corporate guarantee as may be required by the Financier to be issued to secure the Loan and the Corporate Guarantee, there are no other liabilities, including contingent liabilities and guarantees, to be assumed by DKLS Group arising from the Proposed Acquisition. The Property shall be acquired free from all charges, mortgages, assignments, caveat, lien and encumbrances and with all rights, title and interest attached thereto on as-is-where-is basis with vacant possession subject to the conditions expressed or implied in the strata title to the Property when issued. 2.9 Valuation Report Pursuant to Paragraph 10.04 of the Listing Requirements, the Company has appointed PPC International to prepare an independent valuation report on the Property for the purpose of submission to Bursa Securities. The salient features of the Valuation Report are as follows: (a) The valuation of the Property was undertaken in accordance with the Securities Commission Asset Valuation Guidelines and Malaysian Valuation Standards issued by the Board of Valuers, Appraisers and Estate Agents, Malaysia for the sole purpose of submission to Bursa Securities; (b) The basis of valuation adopted for the Property is the Market Value. Market Value is defined as the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion; (c) The Valuer has adopted the following methods in assessing the Market Value of the Property: Comparison Method which entails comparing the Property with comparable properties which have been sold or are being offered for sale and making adjustments for factors which affect value such as location and accessibility, market conditions, size, shape and terrain of land, tenurial interest and restrictions if any, occupancy status, built-up area, building construction, finishes and services, age and condition of building and other relevant characteristic. 7

Income Capitalisation Method which entails the valuation of an income producing properties which is held for investment purposes. The Income Capitalisation Method involves the following steps:- (i) (ii) (iii) (iv) Estimate the gross income receivable from the Property. Estimate annual outgoings and service charges to cover annual expenditures such as quit rent, assessment rates, repairs and maintenance, insurance, water and electricity, cleaning, pest control, management, etc. The estimated net income is obtained by deducting (ii) from (i). The estimated net income is then capitalised by using an appropriate rate of interest (yield) reflecting the security of future incomes in relation to the use that the Property is being put to; and (d) Market Value per the Valuation Report are as follows: 2.10 Feasibility Report The Market Value arrived at by using the Comparison Method and Income Capitalisation Method are RM94,000,000 and RM90,000,000 respectively. The Valuer is of the opinion that the office market in Bangsar South has been active over the past three (3) years and as such, there are adequate market sale evidences to adopt the Comparison Method as the primary approach and arrived at the Market Value of RM94,000,000. There is no feasibility report prepared in relation to the Proposed Acquisition and there are no additional financial commitments required in putting the Property acquired on-stream. 3. RATIONALE FOR THE PROPOSED ACQUISITION The principal activities of the Company are that of investment holding and provision of management services while its subsidiaries are involved in property development, quarry master, construction, manufacturing and sales of pre-cast concrete products, trading of construction materials, hardware, kitchen and sanitary wares and investment holding and provision of management and consultancy services. The Proposed Acquisition is in line with DKLS Group s corporate strategy to pursue new business opportunities by venturing into viable revenue-generating businesses to enhance the profile and earnings of the Group. The Property is acquired with the intention of deriving rental income as regular and steady revenue stream for the Group. As the Property will be held as a long term investment, it is also expected to give the Group the added benefit of capital appreciation in the future. DKLS will be negotiating with interested parties to secure a long term tenancy to rent out the Property. The rental evidence of the concluded rental rates within Bangsar South are as follows: Building /Unit No Tenant Net floor area (sq ft) Concluded en bloc rental Tower 3, Avenue 5, Phase 1 Dagang Net Technologies Sdn Bhd Monthly rental (RM) Analysis (RM per sq ft per month) 38,106 219,504.00 5.76 Tower 3A, Avenue 3, Phase 1 Tower 2A, Avenue 5, Phase 2 F-Secure Corporation (M) Sdn Bhd Air Products Shared Services Sdn Bhd 36,335 239,153.20 6.58 59,044 309,585.60 5.24 8

Building /Unit No Tenant Net floor area (sq ft) Concluded individual unit rental Unit 3A-2, Tower 9, Avenue 5, Acsuss Technologies Phase 1 Sdn Bhd Monthly rental (RM) Analysis (RM per sq ft per month) 1,380 8,280.00 6.00 Unit G-1, Tower 6, Avenue 5, Phase 2 Unit 5-1, Tower 9, Avenue 5, Phase 2 (Source : PPC International) Agel Enterprises International Sdn Bhd White Quest Technologies Sdn Bhd 2,842 17,052.00 6.00 3,767 21,848.60 5.80 The rental evidence of the current asking rental rates of comparable properties in Kuala Lumpur are as follows: Office Building Storey Location Available space (sq ft) Asking rental rate (RM per sq ft per month) MSC Status Office Petronas Twin Tower 88 KLCC 3,000-16,000 12.00-14.00 The Gardens 33 Mid Valley 2,083-32,000 6.50-7.00 The Horizon, Bangsar South 11 Bangsar 3,615-120,000 5.50-7.00* (based on GFA) Menara TM (Telekom) 55 Bangsar 2,000-50,000 6.00-6.50 1 Tech Park 7 Bandar Utama 10,000 4.80-5.50 Grade A Building Without MSC Status Office Menara KLK NA Mutiara Damansara 11,000-33,000 4.20-4.30 Centrepoint 19 KL Sentral NA 5.50-6.00 Mid Valley Signature Office (Boulevard) Menara UOA Bangsar (Tower A & B) 11 Mid Valley 2,000-3,200 3.50-3.80 39 & 21 Bangsar 900-5,000 3.80-5.50 (Source : PPC International) Note : * Based on the estimated NLA (efficiency rate of 30%), the asking rental analyses to about RM7.50 to RM10.00 per sq ft. Based on the above tables, the concluded rental rates within Bangsar South for en bloc and individual tenants are between RM5.24 to RM6.58 per sq ft whilst the current asking rentals of offices with MSC status are between RM4.80 to RM14.00 per sq ft and offices without MSC status are between RM3.50 to RM6.00 per sq ft. In line with the above analysis, if DKLS proposes to rent out the Property at a rental rate in the region of RM5.80 per sq ft, this will generate a gross annual rental income of approximately RM6.7 million. On the assuming the annual outgoings of the Property is approximately RM1.3 million (RM1.10 per sq ft per month), the expected yield of the Property is approximately 5.7%. 4. INDUSTRY OUTLOOK AND PROSPECTS 4.1 Outlook of the Industry The construction sector expanded 2.1% during the first half of 2011 (January - June 2010 : 6.2%) led by the recovery in residential construction as well as increased activity in the nonresidential sub-sectors. 9

Construction in the non-residential sub-sector continued to expand in line with higher business activity. Following the strong business sentiment, demand for office space especially in Kuala Lumpur, Pulau Pinang, Selangor, and Johor was buoyant, with an average occupancy rate of 80%, 78.2%, 77.9% and 77.4% respectively. As a result, the national occupancy rate of office space remained high at 83.2% (end - June 2010 : 84.4%). Meanwhile, office space under construction surged significantly by 34.9% to 2.84 million sq m (January - June 2010 : 6.7%; 2.11 million sq m), mostly in the Klang Valley. Likewise, total existing space in shopping complexes increased from 10.37 million sq m to 10.78 million sq m, contributed by 4 new buildings. During the first half of 2011, 15 malls with total spaces of 191,168 sq m were under construction (January - June 2010 : 23 malls; 281,368 sq m) including 2 malls each in Johor and Pulau Pinang, as well as 1 mall each in Kuala Lumpur and Selangor. The overall occupancy rate remained stable at 81% (end - June 2010 : 81%) supported by favourable business activities and increased consumer spending. The construction sector is projected to grow strongly by 7% in 2012 (2011: 3.4%) driven by the commencement of large infrastructure projects and vibrant housing construction activities. The civil engineering sub-sector will be supported by the implementation of development projects to enhance the long-term potential growth of the economy. Meanwhile, the residential sub-sector is expected to expand further supported by stronger demand for housing in line with improving household income, accommodative financing and the Government s continuous support for home ownership, in particular the Program Perumahan Rakyat 1Malaysia (PR1MA) project. Likewise, the non-residential sub-sector is envisaged to remain active, benefiting from the favourable business environment. (Source : Economic Report 2011/2012, Ministry of Finance Malaysia) On the overall property market performance for 2012, the residential sub-sector will be sustained. Higher housing starts and building plans approvals in 2011 signify confidence of developers and investors in the development activity. The vacant space in the office and retail sub-sectors is foreseen to be absorbed as more space is taken up when Economic Transformation Programme takes place. Development in the various regional economic corridors and Greater Kuala Lumpur/Klang Valley would continue to give positive impacts on property development and the market in the coming years. The banking system would continue to support market activities with ample and accommodative funding. (Source : Press Release-Malaysian Property Market 2011, Valuation and Property Services Department, Ministry of Finance Malaysia) Premised on the above, the outlook of the property market is expected to be favourable. 4.2 Prospects of the Property and Future Plans The prospect of the Property will be favourable as, amongst others, the Property is strategically located in a matured area with high traffic flows within the Kuala Lumpur city centre, equipped with the MSC and GBI status. The strategic location of the Property provides for a connection between the capital, Kuala Lumpur city centre and Petaling Jaya. Present approach to the Property from the Kuala Lumpur city centre is via Jalan Bangsar, Jalan Pantai Baru and thence onto Jalan Kerinchi which leads to Bangsar South within which the Property is located. An alternative access to Bangsar South is via the New Pantai Expressway ( NPE ) and thence onto Jalan Kerinchi. The Property is uniquely situated close to Universiti and Kerinchi LRT stations and just few minutes drive to Bangsar, MidValley shopping mall, KL Sentral transportation hub, and easy access via Federal Highway, NPE Highway, Sprint Highway and LDP Highway. The Property is located within the boundary of the MSC Malaysia Cybercentre at Bangsar South. Amongst some of the benefits being MSC Malaysia Cybercentre status are as follows: (i) (ii) Capitalise on Cyberjaya s infrastructure and facilities via Bangsar South - Cyberjaya dedicated link; Resilient Gigabit fibre optic backbone with service level availability; 10

(iii) (iv) (v) 24/7 Cybercentre Management Office and One-stop-centre; Infra and info-structure plans are streamlined with the MSC Malaysian Mission Critical Performance Standards, which are benchmarked against international standards; and 100% redundant power storage, international telephony infrastructure and 99.9% electrical reliability rating. The Property has been awarded GBI status, of which some of its specifications are as follows: (i) (ii) (iii) (iv) Energy Efficiency - Double glazed unit with reflective glass - Photocell sensor provided at perimeter zone for office area - Power meter linked to the building control system Indoor Environment Quality - Carbon dioxide sensor install within office area - Low volatile organic compounds paint - T5 lighting with high frequency ballasts Water Efficiency - Rainwater harvesting from rooftop for serving the water closets and urinals for the toilets - Use of efficient water closets and urinals Innovation - Condensate water recovery from fan coil units - Refrigerant leak detection system for chiller plant - Non chemical treatment system for condenser water at cooling tower - Regenerative lift system - Heat recovery wheel at roof level to pre-cool fresh air The unique development of the Property equipped with the MSC and GBI Status is in line with the global market trends where prospective tenants are choosing intelligent office buildings which are energy efficient and provide high-speed internet access. Hence, the Property would be able to attract and retain tenancies for domestic market as well as global companies despite in the competitive office leasing environment. Based on the Valuation Report, the yield and rental income of the surrounding and selected office buildings are as follows: Office building NLA (sq ft) Transacted price (RM) Date of transaction Estimated net yield Menara UOA Bangsar Parcel B 307,926 289,000,000 16 April 2010 5.0% Wisma UOA Damansara 296,851 211,000,000 16 April 2011 5.3% Bangunan Shell 212,860 105,000,000 5 November 2009 4.5% Darul Takaful 99,021 63,000,000 27 March 2009 6.0% The Icon East Wing 278,182 226,510,000 24 December 2009 5.5% (Source : PPC International) From the above table, the net yields ranged from 4.5% to 6.0%. For the purpose of evaluating the prospect of the Property, the expected net yield of 5.7% as set out in Section 3 herein is in tandem with the market yield for leasehold office building in Klang Valley. Premised on the above, the Board is of the view that the Property will be in the position to benefit from favourable market demand and appreciation its values and as a result, will contribute positively to the future earnings of the Group. 11

5. RISK FACTORS 5.1 Non-completion of the Proposed Acquisition The Proposed Acquisition is subject to the full payment of the Purchase Consideration by DESB to the Vendor within the stipulated timeframe as specified in the SPA and the fulfilment of the respective obligations of the Parties pursuant to the terms and conditions as stipulated in the SPA. Upon any non-fulfilment of any condition or necessary procedure by the Vendor and/or Proprietor or by DESB, the Proposed Acquisition may not be completed. Notwithstanding the above, DKLS shall endeavour to ensure that the Proposed Acquisition is completed in accordance with the terms and conditions of the SPA. 5.2 Financial Risks DESB shall partially fund the purchase of the Property through the Loan. As such, any significant fluctuation in interest rates may increase the cost of borrowings. DKLS will monitor closely the fluctuations in interest rate and will negotiate with the Financier for an attractive and cost effective financing package. 5.3 Political, Economic and Regulatory Risks Like all other business ventures, changes in political, economic and regulatory conditions could materially and adversely affect the financial and business prospects of the Proposed Acquisition. Amongst the political, economic and regulatory uncertainties are the changes in the general economic condition, business and credit conditions as well as the availability of supply in the market. While DKLS Group will seek to limit the impact of such risk to its business, there is no assurance that any change in the above factors will not have a material adverse effect on the Proposed Acquisition. 6. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION The financial effects of the Proposed Acquisition are as follows: 6.1 Share capital and substantial shareholders shareholdings The Proposed Acquisition will not have any effect on the issued and paid-up share capital of DKLS and the substantial shareholders shareholdings of DKLS. 6.2 Earnings and Earnings per share For illustrative purposes, the proforma effects of the Proposed Acquisition on the earnings and earnings per share of DKLS for the financial year ended 31 December 2011 (being the most recently completed financial period for which audited consolidated financial statements are available) on the assumption that the Proposed Acquisition had been effected at that beginning of the financial year are set out below: Audited as at 31 December 2011 RM 000 After the Proposed Acquisition RM 000 Turnover 183,865 190,565 Profit before taxation 24,686 26,738* Less : taxation (7,142) (7,655) Net profit after tax 17,544 19,083 No of ordinary shares issued 92,700 92,700 Earnings per share (sen) 18.93 20.59 Notes: * Assuming the annual gross rental of the Property is RM6.7 million (based on RM5.80 per sq ft), the annual outgoings is RM1.3 million and the interest on the Loan is RM3.4 million. 12

6.3 Net assets per share and Gearing For illustrative purposes, the proforma effects of the Proposed Acquisition on the net assets per share and gearing of DKLS based on the latest audited financial statements for the financial year ended 31 December 2011 on the assumption that the Proposed Acquisition had been effected on that date are set out below: Audited as at 31 December 2011 RM 000 After the Proposed Acquisition RM 000 Share Capital 92,700 92,700 Share Premium 8,757 8,757 Other reserves 1,500 1,500 Retained earnings 163,026 159,426# Net assets 265,983 262,383 Minority interest 9,213 9,213 Total equity 275,196 271,596 Total borrowings RM25,501 RM100,501* Net assets per share RM2.87 RM2.83 Gearing ratio 0.096 times 0.383 times Notes: # After deducting estimated expenses, inclusive of stamp duty, for the Proposed Acquisition of RM3.6 million. * Approximately RM75.0 million of the Purchase Consideration is funded through the Loan. 7. APPROVALS REQUIRED The Proposed Acquisition is subject to the approval of the shareholders of DKLS at an EGM to be convened. The Proposed Acquisition is not subject to any governmental authorities approval. 8. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors, major shareholders of DKLS and/or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition. 9. DIRECTORS RECOMMENDATION Your Board having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the Group. Accordingly, your Board recommends that you vote in favour of the ordinary resolution for the Proposed Acquisition to be tabled at the forthcoming EGM. 10. CORPORATE EXERCISE ANNOUNCED BUT NOT YET COMPLETED There are no outstanding corporate proposals which have been announced to Bursa Securities by the Company but not yet completed prior to the printing of this Circular. 11. TENTATIVE TIMELINE FOR THE IMPLEMENTATION OF THE PROPOSED ACQUISITION Barring any unforeseen circumstances and subject to the fulfilment of all the Conditions Precedent, the Proposed Acquisition is expected to be implemented within the timeline: Events Tentative Date EGM 22 October 2012 Proposed Acquisition becoming unconditional 22 October 2012 Completion of the Proposed Acquisition 22 November 2013 13

12. EGM The EGM, in which the notice is enclosed in this Circular, will be held at 17th Floor, Ipoh Tower, Jalan Dato Seri Ahmad Said, 30450 Ipoh, Perak Darul Ridzuan on Monday, 22 October 2012 at 9.30 am or any adjournment thereof for the purpose of considering and, if thought fit, to pass the ordinary resolution contained herein to give effect to the Proposed Acquisition. If you are unable to attend and vote in person at the EGM, you may complete and return the enclosed Form of Proxy in accordance with the instructions printed thereon to the registered office of the Company at D-3-7, Greentown Square, Jalan Dato Seri Ahmad Said, 30450 Ipoh, Perak Darul Ridzuan at least forty-eight (48) hours before the time appointed for holding the EGM or any adjournment thereof. The lodging 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. 13. FURTHER INFORMATION Shareholders are requested to refer to the attached Appendices for further information. Yours faithfully For and on behalf of the Board of DKLS INDUSTRIES BERHAD Dato Ding Pei Chai Chairman 14

APPENDIX II FURTHER INFORMATION 1. Responsibility Statement This Circular has been seen and approved by the Directors of DKLS who, collectively and individually, accept full responsibility for the accuracy of the information given, so far as it relates to DKLS Group, and confirm that, after making all reasonable enquiries, to the best of their knowledge and belief, there are no other facts the omission of which would make any information herein misleading. 2. Material Commitments and Contingent Liabilities 2.1 Material commitments There are no material commitments incurred or known to be incurred by DKLS Group except for the Loan from the Financier to be undertaken to part finance the Proposed Acquisition by DESB. 2.2 Contingent liabilities There are no contingent liabilities incurred or known to be incurred by DKLS Group except for certain corporate guarantees issued to secure financial facilities in favour of its subsidiaries, the corporate guarantee as may be required by the Financier to be issued to secure the Loan and the Corporate Guarantee. Based on the audited financial statements of DKLS as at 31 December 2011, the corporate guarantees given to financial institutions for credit facilities granted to its subsidiaries amounted to RM59,057.984. 3. Consent and Conflict of Interest The Valuer has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name, letters, and all references thereto where relevant, in the form and context in which they appear. The Valuer has also confirmed that there are no conflict of interest exists or likely to exist in relation to its role in respect of the Proposed Acquisition. 4. Material Contracts Save as disclosed below, there are no material contracts (not being contracts entered into in the ordinary course of business) which have been entered into by DKLS and its subsidiary companies within the two (2) years immediately preceding the date of this Circular: (i) (ii) On 1 April 2011, the Company has entered into a Sale and Purchase Agreement with Ipoh Tower Sdn Bhd to acquire eight (8) units of penthouse business suites at Ipoh Tower for a total purchase consideration of RM3,500,000. On 15 June 2011, DKLS Premierhome Sdn Bhd, a wholly-owned subsidiary of the Company, has entered into five (5) separate Sale and Purchase Agreements (collectively referred to as SPAs ) with the following vendors (collectively referred to as Vendors ) to acquire parcels of leasehold land measuring approximately 155.73 acres in total and held under their respective titles, all situated at Kampong Razak in Mukim Hulu Kinta, Daerah Kinta, Perak Darul Ridzuan, for a total cash consideration of RM51,825,280. SPAs SPA I SPA II SPA III SPA IV SPA V Vendors Para Development Sdn Bhd Sanjung Sempurna Sdn Bhd Taman Rama Rama Sdn Bhd Wangsa Aras Sdn Bhd Preciglobe (M) Sdn Bhd and Ganda Utama Sdn Bhd 21

(iii) On 14 November 2011, the Company has subscribed for 550 units of unit trust of AUD 1 each in DKLS Aust Trust, representing 55% of the total issued unit trust in DKLS Aust Trust for a total consideration of AUD550 (equivalent to approximately RM1,780) with the intention to participate in the acquisition of a property bearing address as 472-478 Bourke Street, Melbourne, Australia ( Australian Property ). The total purchase consideration of the Australian Property is AUD13.3 million (equivalent to approximately RM43.04 million) ( Purchase Price ). On 8 December 2011, the Company has increased its share of the Purchase Price to AUD10.67 million (equivalent to approximately RM34.36 million) by acquiring an additional 252 units of unit trust of AUD1 each in DKLS Aust Trust for a cash consideration of AUD252 (equivalent to approximately RM811) making up the Company holding 802 units of unit trust of AUD1 each, representing 80.2% of the total issued unit trust of DKLS Aust Trust. (iv) On 23 May 2012, DKLS Equity Sdn Bhd, a wholly-owned subsidiary of the Company, has entered into a Sale and Purchase Agreement with Nasib Unggul Sdn Bhd and Paramount Properties Sdn Bhd to acquire a property identified as Tower 8, Horizon Phase 2, bearing postal address of Tower 8, Avenue 5, The Horizon, Phase 2, Bangsar South, No 8, Jalan Kerinchi, 59200 Kuala Lumpur for a total cash consideration of RM93,800,000. Subsequently, on 11 September 2012, DESB, the Vendor and the Proprietor have mutually agreed in writing to amend the said Sale and Purchase Agreement, in particular to vary one (1) of the Conditions Precedent as set out in Section 2.6.2(c) of this Circular. 5. Material Litigation, Claims and Arbitration Neither DKLS nor any of its subsidiaries is engaged in any material litigation, claims and arbitration either as plaintiff or defendant, and the Directors of DKLS have no knowledge of any proceedings pending or threatened against DKLS and/or its subsidiaries or any facts likely to give rise to any proceeding which may materially affect the financial position and business of DKLS Group, as at the date of this Circular. In addition, the Directors of DKLS are not aware of any material litigation, claims or arbitration involving the Property as at the date of this Circular. 6. Documents for Inspection Copies of the following documents will be made available for inspection during normal office hours on any weekday (except public holidays) at the Registered Office of the Company at D-3-7, Greentown Square, Jalan Dato Seri Ahmad Said, 30450 Ipoh, Perak Darul Ridzuan from the date of this Circular to and including the time and date of the EGM: (i) Memorandum and Articles of Association of DKLS; (ii) The audited consolidated financial statements of DKLS for the two (2) financial years ended 31 December 2010 and 2011; (iii) The unaudited quarterly results of DKLS Group for the quarter ended 30 June 2012; (iv) Form of Acceptance in respect of the Proposed Acquisition; (v) The SPA dated 23 May 2012 and the letter documenting the amendment of the SPA dated 11 September 2012; (vi) The Valuation Report prepared by the Valuer dated 25 May 2012 and the Valuation Certificate dated 25 May 2012 in respect of the Property as set out in Appendix I of this Circular; (vii) The letter of consent referred to in Section 3 above; and (viii) The material contracts referred to in Section 4 above. 22