MKH BERHAD (50948-T) ( MKH OR THE COMPANY OR THE GROUP ) JOINT VENTURE AGREEMENT BETWEEN SURIA VILLA SDN BHD AND SIM SEE HUA BROTHERS SDN BHD 1.0 INTRODUCTION The Board of Directors of MKH is pleased to announce that its wholly-owned subsidiary company, Suria Villa Sdn Bhd (Company No. 1100726-T) ( SVSB or the Developer ), has on 19 August 2016 entered into a Joint Venture Agreement ( JVA or JV ) with Sim See Hua Brothers Sdn Bhd (Company No. 122585-T) ( SSHBSB or the Landowner ) for the purpose of undertaking the development of housing and/or other type of development as shall be approved by the relevant authorities (collectively referred to as the Development ) on approximately 39.12 acres of land ( the Land ) as defined below and subject to and upon the terms and conditions of the JVA. Proprietor Geran No./ H.S.(D) No. Lot No./ PT No. Mukim/ District SSHBSB GRN 45847 Lot 1935 Semenyih/ Ulu Langat GRN 45848 Lot 1936 Semenyih/ Ulu Langat H.S.(D) 120462 PT 29946 Semenyih/ Ulu Langat State Land Tenure Land Area (Acres) Selangor Freehold 9.67 Selangor Freehold 9.66 Selangor Freehold 19.79 Total : 39.12 (GRN 45847, GRN 45848 and H.S.(D) 120462 hereinafter collectively referred to as the Land ) 2.0 DETAILS OF THE JVA 2.1 Information on SVSB SVSB is a company incorporated in Malaysia under the Companies Act, 1965 and having its registered office at Suite 1, 5 th Floor, Wisma MKH, Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan. The current authorised share capital of SVSB is RM5,000,000 with the issued and paid-up share capital of RM250,000 comprising of 250,000 ordinary shares of RM1/- each. The principal activity of SVSB is property development. 2.2 Information on SSHBSB SSHBSB is a company incorporated in Malaysia under the Companies Act, 1965 and having its registered office at No. 3, Jalan Satu, Taman Maju, Off Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan. The current authorised share capital of SSHBSB is RM10,000,000 with the issued and paid-up share capital of RM10,000,000 comprising of 10,000,000 ordinary shares of RM1/- each. The principal activity of SSHBSB is building and electrical contractors and property developer and trading of building materials.
3.0 SALIENT TERMS OF THE JVA The salient terms of the JVA are as follows: 3.1 Agreement for the Joint Venture The Landowner will provide and make available the Land to the Developer for the Development and shall render reasonable assistance and do all such reasonable acts and things necessary for the Development. The Developer shall be responsible to submit and obtain from the relevant governmental authorities all the necessary approvals required in connection to the Development including but not limited to conversion of the Land, layout, issuance of the sub-divided titles and/or strata titles and building plans for the Development, planning and design, marketing, project management, maintenance of each unit until the completion of the Development and shall do all such things as may be necessary or required to fully and effectively complete the Development. The estimated gross development value ( GDV ) is approximately RM228 million. Nevertheless, the estimated GDV is subject to changes, and the Company is unable to disclose specific details of the Development as the Development s layout/building plans is still pending finalization. 3.2 Landowner s Entitlement The Landowner s shall be entitled to receive from the Developer under or pursuant to the JVA is as follows:- (a) minimum payment of Ringgit Malaysia Sixty One Million and Fifty Thousand Six Hundred and Eighty One (RM61,050,681-00) only to be progressively paid over 7 years to the Landowner in the manner as stipulated in the schedule annexed in Appendix 1(A) ; OR (b) the aggregate of the following percentage of GDV from sale of units under each sale and purchase agreement with the end purchaser entered into between the Landowner, the Developer and end purchaser (hereinafter collectively referred to as Landowner Share of GDV ): (i) (ii) (iii) thirty per centum (30%) for landed development; twenty per centum (20%) for high-rise development of residential units; twenty two point five per centum (22.5%) for townhouse, whichever is higher (hereinafter referred to as the Landowner Entitlement ) and subject to the provisions herein, shall be payable by the Developer to the Landowner progressively as stipulated in the schedule annexed in Appendix 1(B) hereto (hereinafter referred to as the Landowner Share of GDV Schedule ). 3.3 Developer s Entitlement The Developer shall be entitled to all the remaining units of properties in the Development in the following manner: (a) 70% of the remaining GDV for landed development; (b) 80% of remaining GDV for high-rise residential units; and (c) 77.5% of the remaining GDV for townhouse.
3.4 Corporate Guarantee and Indemnity The Developer hereby undertakes to procure the corporate guarantor i.e. MKH, the holding company of the Developer to execute the corporate guarantee and indemnity for the minimum payment in accordance to clause 3.2(a) above in favour of the Landowner to guarantee the performance, observance and compliance of the Developer with the terms and conditions of the JVA on the date hereof. 3.5 Financing for the Development The Developer shall be responsible for all costs incurred or to be incurred in its capacity as the Developer of the Development on the Land. 3.6 Estimated Time Frame for Commencement and Completion of the Development The Developer shall forthwith commence the development and construction work on the Land or part thereof representing the relevant phase of the Development on the date all necessary approvals for launching of Phase 1 of the Development of the Land including from the government authorities and if applicable, including advertisement and sale permit and development licence pursuant to the Housing Development Regulations are obtained by the Developer ( Commencement Date ). The Development shall be completed in accordance to the approved plans and specification by the relevant authorities within six (6) years from the Commencement Date and subject to such extensions of time as provided in the JVA. 4.0 RATIONALE AND PROSPECTS The Land which is within the existing vicinity of Kajang 2 township development undertaken by the Group provides an opportunity for the Group to further strengthen its presence in Kajang and to participate and benefit from the on-going Mass Rapid Transit ( MRT ) development which is strategically located in Kajang-Semenyih corridor, being one of the greater Klang Valley s choice locations underpinned by strong demand for residential houses. The Land is easily accessible from major neighbourhoods such as Kajang, Bangi, Semenyih, Cheras, Putrajaya, Cyberjaya and Serdang via SILK, PLUS, Cheras Grand Saga, LEKAS Highway and Kajang Bypass. It will be connected directly to Bangi via Persiaran Bangi and Jalan Reko junction upon completion of the flyover which is currently under construction and is expected to be completed by end of the year. It will also be served by the KTM Commuter Station which is under construction at Kajang 2 and is linked to Kajang MRT station. The JV is in line with MKH Group s strategy in JV with companies which own strategically located land banks for the Group s future property development projects and is expected to contribute positively to the future earnings of the Group. 5.0 RISK FACTORS As in any business venture, the JV is subject to certain business and operating risks inherent in the property sector that include, among others, changes in demand for housing, retail and/or commercial units, changes in interest rate, variation in building materials and labour cost, shortage of workers and other external factors. The Board of Directors of MKH will monitor these risks and take appropriate measures to mitigate the various business and operating risks identified.
6.0 SOURCE OF FUNDS The Developer will fund the Development through mixture of internally generated funds, bank borrowings and/or other form of fund raising. 7.0 LIABILITIES TO BE ASSUMED There are no liabilities to be assumed by the Company arising from the JV. 8.0 EFFECTS OF THE JV 8.1 On Share Capital and Substantial Shareholders Shareholding The JV will not have any significant effect on the share capital and substantial shareholders shareholdings of the Company for the financial year ending 30 September 2016 ( FYE 2016 ) as the JV does not involve any allotment or issuance of new shares of the Company. 8.2 Net Assets and Gearing The JV will not have any material impact on the consolidated net assets and gearing of MKH for the FYE 2016. 8.3 Earnings and Earnings per Share ( EPS ) The JV will not have any material impact on the EPS of MKH Group for the FYE 2016. 9.0 DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors and/or Major Shareholders of the Company and persons connected with them, have any interest, direct or indirect, in the JV. 10.0 DIRECTORS RECOMMENDATION The Board of Directors, having considered all aspects of the JV, is of the opinion that the JV is fair and reasonable and is in the best interests of the Group. 11.0 PERCENTAGE RATIO The highest percentage ratio applicable to the joint venture pursuant to paragraph 10.02(g) of the Main Market Listing Requirements is 5.53%. 12.0 APPROVALS REQUIRED The JV is not subject to the approvals of the shareholders of the Company or any other relevant authorities. 13.0 DEPARTURE FROM SECURITIES COMMISSION S GUIDELINES ON THE OFFERING OF EQUITY AND EQUITY-LINKED SECURITIES ( SC GUIDELINES ) The JV is not subject to the Securities Commission s approval and hence, it does not fall under the SC Guidelines.
14.0 DOCUMENTS FOR INSPECTION The JVA is available for inspection at the registered office of the Company at Suite 1, 5 th Floor, Wisma MKH, Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan between 8.30 a.m. and 5.45 p.m. from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 19 August 2016.
APPENDIX 1(A) SCHEDULE OF PAYMENT OF THE ADVANCE PAYMENTS No. Calendar Year 1 2016 First Advance Description Due Date Amount To Be Paid To Sim See Hua Brothers Sdn Bhd ( the Landowner ) (RM) Paid 1,000 2 2017 Second Advance 3 2018 Third Advance 4 2019 Fourth Advance 5 2020 Fifth Advance 6 2021 Sixth Advance 7 2022 Seventh Advance 8 2023 Eighth Advance On the last day of the 12th months from this Agreement ( Second Advance Due Date ) On the last day of 12th months from the Second Advance Due Date ( Third Advance Due Date ) On the last day of 12th months from the Third Advance ( Fourth Advance Due Date ) On the last day of 12th months from the Fourth Advance Due Date ( Fifth Advance Due Date ) On the last day of 12th months from Fifth Advance Due Date ( Sixth Advance Due Date ) On the last day of 12th month from the Sixth Advance Due Date ( Seventh Advance Due Date ). On the last day of 12th month from the Seventh Advance Due Date ( Eighth Advance Due Date ) 10,440,366 8,320,093 11,763,882 8,205,300 10,501,159 10,501,159 1,317,722 Total minimum Landowner s Entitlement 61,050,681
APPENDIX 1(B) SCHEDULE OF PAYMENT OF THE LANDOWNER SHARE OF GDV No. Description Amount to be paid to Sim See Hua Brothers Sdn Bhd ( the Landowner ) progressively towards the Landowner Entitlement ( ) 1 First 2 Second 3 Third 4 Fourth 5 Fifth 6 Sixth 7 Seventh to end purchasers as at the First Due Date less the First Advance and Second Advance received by the Landowner to end purchasers as at the Second Due Date less the First, Second and Third Advance s and the First ive received by the Landowner to end purchasers as at the Third Due Date less the First, Second, Third and Fourth Advance s and the First and Second s received by the Landowner to end purchasers as at the Fourth Due Date less the First, Second, Third, Fourth and Fifth Advance s and the First, Second and Third s received by the Landowner to end purchasers as at the Fifth Due Date less the First, Second, Third, Fourth, Fifth and Sixth Advance s and the First, Second, Third and Fourth s received by the Landowner to end purchasers as at the Sixth Due Date less the First, Second, Third, Fourth, Fifth, Sixth and Seventh Advance s and the First, Second, Third, Fourth and Fifth s received by the Landowner to end purchasers as at the Seventh Due Date less the First, Second, Third, Fourth, Fifth, Sixth, Seventh and Eighth Advance s and the First, Second, Third, Fourth, Fifth and Sixth s received by the Landowner Due Date, Subject to Note 2 below On the last day of the 12th months from this Agreement ( First Due Date ) On the last day of 12th months from the First Due Date ( Second Due Date ) On the last day of 12th months from the Second Due Date ( Third Due Date ) On the last day of 12th months from the Third Due Date ( Fourth Due Date ) On the last day of 12th months from Fourth Due Date ( Fifth Due Date ) On the last day of 12th month from the Fifth Due Date ( Sixth Due Date ) On the last day of 12th month from the Sixth Due Date ( Seventh Due Date ).
NOTE 1: NOTE 2: The parties hereto expressly agree that the Landowner Share of GDV as at a relevant Due Date shall be calculated based on the amount of the purchase price for the units actually received from the end purchaser on the relevant Due Date Provided Always that upon the issuance of notice of handing over of vacant possession of such unit the remaining of the Landowner Share of GDV on such unit as at the relevant Due Date shall be paid in a single bullet payment to the Landowner; The parties hereby agree that notwithstanding the Due Dates stipulated in column 4 of this Schedule 1(B), the Developer is entitled to pay the relevant within 14 days from the relevant ive Due Date. Appendix 1(B) - Schedule of of the Landowner Share of GDV