APPENDIX I 1. INTRODUCTION Pursuant to Paragraph 10.06 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( MMLR ), the Board of Directors of Kimlun ( the Board ) wishes to announce that on 20 December 2017, its indirect wholly owned subsidiary, Kii Morris Sdn Bhd ("KMRSB"), has entered into a sale and purchase agreement ( Agreement ) with Nusajaya Greens Sdn Bhd ( NGSB or Vendor ) to purchase all that freehold agriculture land held under HS (D) 458296 PTD 166915, in the Mukim of Pulai, District of Johor Bahru, State of Johor with land area of approximately 11.734 hectares ( Land ) from NGSB for a total cash purchase consideration of RM82,097,421.25 ( Purchase Consideration ). 2. INFORMATION ON KMRSB KMRSB was incorporated in Malaysia on 6 November 2017 under the Companies Act 2016 as a private limited company. The principal activities of KMRSB are investment holding, property investment and development. The issued share capital of KMRSB is RM1.00 comprising of 1 ordinary share. KMRSB is a wholly owned subsidiary of Kimlun Land Sdn Bhd, which in turn is a wholly owned subsidiary of KIMLUN. 3. INFORMATION ON NGSB NGSB, an indirect wholly owned subsidiary of UEM Sunrise Berhad (830144-W), was incorporated in Malaysia on 26 June 1995 under the Companies Act, 1965 as a private limited company. NGSB is principally engaged in property development, land trading and investment holding. The present issued share capital of NGSB is RM2,600,000.00 comprising 2,600,000 ordinary shares. 4. INFORMATION ON THE LAND The freehold Land is located along Jalan Kampung Lalang, off Lebuh Kota Iskandar, near Horizon Hill, Eco Botanic and Taman Nusa Sentral, within Iskandar Puteri, Johor Bahru, Johor. It is approximately 5 kilometers by road due north-west of Kota Iskandar. The Land is free from all encumbrances and is currently used for temporary workers quarters which are to be demolished by NGSB prior to the completion of the Proposed Acquisition. It is endorsed with the following expressed condition: i) Tanah ini hendaklah ditanam dengan tanaman Kelapa Sawit. ii) Pemilik tanah hendaklah sepanjang masa mengambil langkah-langkah menurut perintah yang dikehendaki oleh Pentadbir Tanah, menjaga tanah ini daripada hakisan The Land is zoned for commercial use.
5. DETAILS OF THE PROPOSED ACQUISITION 5.1 Salient Terms of Agreement (1) Economic Planning Unit s Approval (1.1) The Acquisition is conditional upon and subject to KMRSB obtaining the approval from the Economic Planning Unit of the Prime Minister s Department for the sale and transfer of the Land by NGSB to KMRSB ( EPU Approval ) within six (6) months from the date of the Agreement ( Approval Period ). (1.2) In the event the EPU Approval has yet to be obtained within the Approval Period, NGSB and KMRSB ( the Parties or Party ) agree to extend the Approval Period to a further period of three (3) months from the expiration of the Approval Period ( Extended Approval Period ). (1.3) In the event that the EPU Approval is granted subject to conditions ( Conditional Approval ) affecting or are unacceptable to the affected Party ( the Affected Party ) ( Unacceptable Conditions ), the Affected Party shall then appeal against the Unacceptable Conditions within 14 days from the date of receipt of notification of the Conditional Approval, failing which the conditions imposed shall be regarded to be acceptable to the Affected Party. (1.4) Where the appeal is not subsequently allowed or partially allowed, the Affected Party shall have the option to elect to: accept the Unacceptable Conditions imposed as modified (if at all) and in such event the Conditional Approval in respect of which such Unacceptable Conditions are imposed shall be deemed to have been obtained; or reject the Unacceptable Conditions imposed as modified (if at all) and in such event the Conditional Approval in respect of which the Unacceptable Conditions are imposed shall be deemed not to have been obtained. (1.5) If: (a) (b) (c) the EPU s Approval is rejected or not obtained by the expiry of the Extended Approval Period; the outcome of the appeal by the Affected Party against Unacceptable Conditions is not obtained by the expiry of the Extended Approval Period; or after the appeal, the Affected Party rejects the Unacceptable Conditions under Section 5.1(1) above, the Vendor or KMRSB shall be at absolute liberty to terminate the Agreement in which case the Deposit Sum (as defined in Section 5.1(2) below) shall be refunded by the Vendor to KMRSB.
(1.6) The date on which: (a) (b) (c) (d) the Vendor s Solicitors are in receipt of a copy of the EPU Approval granted without any conditions; the Vendor s Solicitors are in receipt of a copy of the Conditional Approval granted with conditions acceptable to the Vendor and KMRSB; the Vendor s Solicitors or KMRSB s Solicitors are in receipt of the notification that the Unacceptable Conditions have been fully waived upon the appeal lodged by the Affected Party; or the Vendor s Solicitors or KMRSB s Solicitors are in receipt of the notification that the Unacceptable Conditions (whether modified, partially modified or otherwise) have been accepted by the Affected Party; as the case may be, shall hereinafter be referred to as the Approval Date. (2) Payment of Purchase Consideration The Purchase Consideration will be satisfied in the following manner:- 10% of the Purchase Consideration (RM8,209,742.13) shall be paid to the Vendor upon the execution of the Agreement ( Deposit Sum ); 90% of the Purchase Consideration (RM73,887,679.12) ( Balance Purchase Price ) shall be payable to the Vendor within ninety (90) days from the Approval Date ( Completion Date ) with an automatic extension of thirty (30) days from the expiry of the Completion Period subject to KMRSB paying late payment interest on the unpaid balance calculated on a daily basis on the Balance Purchase Price at the rate of eight per centum (8%) per annum. 5.2 Basis of Arriving at and Justification for the Purchase Consideration The Purchase Consideration of the Land was arrived at after taking into consideration various factors as follows:- (iii) The market value of the Land of RM83,000,000.00 ( Market Value ) as appraised by Messrs. Henry Butcher Malaysia (Pontian) Sdn Bhd, the independent registered valuer appointed by KMRSB, using the comparison method of valuation as per its valuation certificate dated 14 December 2017; The strategic location of the Land; and The Land will be purchased free from all encumbrances and with vacant possession. 5.3 Source of Funds The Purchase Consideration will be satisfied wholly in cash from internally generated funds and/or external borrowings, breakdown of which is not finalised at this juncture.
5.4 Liabilities to be Assumed There are no liabilities, including contingent liabilities and guarantees to be assumed by KIMLUN and its subsidiaries ( Group ) arising from the Proposed Acquisition. 5.5 Estimated Time Frame for Completion Barring unforeseen circumstances, the Proposed Acquisition is expected to be completed in the fourth quarter of year 2018. 5.6 Net Book Value ( NBV ) KIMLUN Group is unable to disclose the latest audited NBV of the Land as it is not privy to such information. 6. RATIONALE AND BENEFIT FOR THE PROPOSED ACQUISITION The Proposed Acquisition provides an opportunity for the Group to increase the size of its land bank in strategic location in order to enhance its future revenue and earnings. KMRSB plans to apply to the Johor State Authority ( State Authority ) for the conversion of land use of the Land from agriculture to commercial ( Conversion Application ) within one (1) year after the completion of the Proposed Acquisition. The Board estimates that the processing timeframe of our conversion application by the State Authority will be approximately six (6) months from the date of application. KMRSB plans to build commercial properties on the Land for sale. Development application will be submitted to the relevant authorities for approval after the approval from the State Authority on the Conversion Application being obtained and finalisation of the development planning. The source of funds to finance the development is likely to be from internally generated funds and bank borrowings. As the development potential has yet to be detailed or finalised at this preliminary stage, the total development revenue/cost, expected commencement and completion date or expected profits to be derived cannot be readily ascertained. Given the strategic location of the Land as described in Section 4 above, the management is confident that the commercial development to be carried out on the Land will be well received by the general public. 7. ECONOMIC OUTLOOK AND PROSPECTS The Malaysian economy recorded a sterling growth of 5.7% during the first six (6) months of 2017 underpinned by strong domestic demand and reinforced by improved external sector. Given the robust economic growth during the first half, real gross domestic product ( GDP ) for the year is expected to strengthen further between 5.2% and 5.7% (2016: 4.2%), surpassing the earlier estimates. Accordingly, gross national income (GNI) at current prices is estimated to expand 9.1% to RM1.3 trillion (2016: 6.2%; RM1.2 trillion), with income per capita increasing 7.7% to RM40,713 (2016: 4.7%; RM37,791).
The real estate segment expanded 4.9% (January June 2016: 4.6%). Growth was partly due to strong performance in the construction sector, incentives and rebates offered by developers, increase in civil servants housing loan eligibility and flexibility in purchasing homes under 1Malaysia Civil Servants Housing (PPA1M) scheme. For the whole year, the subsector is anticipated to increase 7.2% (2016: 6.9%). Prospect for 2018 The Malaysian economy is projected to continue its strong growth momentum with real GDP expanding between 5% and 5.5% in 2018 (2017: 5.2% to 5.7%). Growth will be mainly driven by resilient domestic demand amid favourable external sector. Given the robust economic development, GNI per capita is estimated to increase 5.1% to RM42,777 (2017: 7.7%; RM40,713) (Source: Economic Report 2017-2018) In light of these factors, the Board is of the view that the prospects for property development activities in Malaysia will remain positive. 8. RISK FACTORS The Board is not aware of any risk factors arising from the Proposed Acquisition other than the following: There is no assurance that the approval from the relevant authority will be granted on KMRSB s proposed development or such approval being granted on conditions which are capable of compliance by KMRSB. Normal market and global economic risks. 9. EFFECTS OF THE PROPOSED ACQUISITION 9.1 Share Capital and Substantial Shareholders The Proposed Acquisition which will be satisfied entirely in cash will not have any effect on the share capital and substantial shareholders shareholding of the Company. 9.2 Earnings and Net Assets ("NA") The Proposed Acquisition is not expected to have any material effect on KIMLUN Group's earnings and Net Assets ( NA ) for the financial year ending 31 December 2017. However, the Proposed Acquisition is expected to contribute positively to the future earnings and NA of KIMLUN Group.
9.3 Gearing The Purchase Consideration is expected to be satisfied by internally generated funds and/or bank borrowings. The exact mix of internally generated funds and bank borrowings has not been finalised at this juncture. However, for the purpose of this announcement and for illustrative purposes, based on the audited total equity of KIMLUN Group as at 31 December 2016 and the assumption that RM50 million, representing approximately 60% of the Purchase Consideration are financed through external borrowings to be procured by KIMLUN Group for the Proposed Acquisition, the gearing ratio of KIMLUN Group is expected to increase by 0.09 times. 10. PERCENTAGE RATIOS The highest percentage ratio applicable to the Proposed Acquisition is 15.22% pursuant to Paragraph 10.02(g) of the MMLR calculated based on the audited consolidated financial statements of KIMLUN for the financial year ended 31 December 2016. 11. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the directors, major shareholders of KIMLUN and/or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition. 12. DIRECTORS STATEMENT The Board, after having considered the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the KIMLUN Group. 13. APPROVALS REQUIRED The Acquisition is not subject to the approval of the shareholders of the Company. However, the Proposed Acquisition is subject to the EPU Approval. The Company is expected to submit the application to obtain the EPU Approval within two (2) months from the date of the Agreement. 14. DOCUMENT FOR INSPECTION Copies of the Agreement and Valuation Certificate are available for inspection by members of the Company at the registered office of the Company at Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur during business hours from Mondays to Fridays (except Public Holidays) for a period of 3 months from the date of this announcement. This announcement is dated 20 December 2017.