EASTERN & ORIENTAL BERHAD (Company No: 555-K) (Incorporated in Malaysia under the Companies Enactment, 1917)

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 ( Bursa Securities ) has not perused this Circular prior to its issuance as it is an exempt Circular pursuant to Practice Note 18 of Bursa Securities Main Market Listing Requirements, 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. EASTERN & ORIENTAL BERHAD (Company No: 555-K) (Incorporated in Malaysia under the Companies Enactment, 1917) CIRCULAR TO STOCKHOLDERS IN RELATION TO THE PART A PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE COMPANY AND/OR ITS SUBSIDIARIES TO ENTER INTO RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE; AND PART B STATEMENT IN RELATION TO THE PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE AUTHORITY TO THE COMPANY TO PURCHASE UP TO TEN PERCENT (10%) OF ITS OWN STOCK UNITS IN THE TOTAL NUMBER OF ISSUED STOCK UNITS IN THE COMPANY The resolutions in respect of the above proposals will be tabled as Special Business at the Ninety-First (91 st ) Annual General Meeting ( AGM ) of the Company to be held at Ballroom 1, 1st Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, Kuala Lumpur on Tuesday, 21 August 2018 at a.m. The Notice of AGM, together with the Form of Proxy are enclosed in the Annual Report of the Company for the financial year ended 31 March The Form of Proxy should be lodged at the Company s Registered Office not less than forty-eight (48) hours before the time appointed for holding the meeting. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the AGM should you subsequently wish to do so. The last day and time for lodging the Form of Proxy is on Sunday, 19 August 2018 at a.m. This Circular is dated 24 July 2018

2 DEFINITIONS Unless otherwise indicated, the following definitions apply throughout this Circular:- Act : The Companies Act 2016 as amended from time to time and any reenactment thereof Adaptus Design : Adaptus Design System Sdn Bhd ( U) AGM : Annual General Meeting of E&O Billford : Billford Holdings Limited ( ) BMSB : Bright Milestone Sdn Bhd ( U) Board : Board of Directors of E&O Bursa Securities : Bursa Malaysia Securities Berhad ( W) CMSA : The Capital Markets and Services Act 2007 as amended from time to time and any re-enactment thereof Code : Malaysian Code on Take-overs and Mergers 2016 as amended from time to time and any re-enactment thereof Director : A director as defined in Section 2(1) of the CMSA and includes any person who is or was within the preceding six (6) months of the date on which the terms of the transactions were agreed upon, a director or a chief executive of E&O, its subsidiary or holding company DSTKH : Dato Seri Tham Ka Hon DTEH : Datuk Tee Eng Ho DTOF : Datin Tham Oi Fah E&O or the Company : Eastern & Oriental Berhad (555-K) E&O Group or the Group : E&O and its subsidiaries EPS : Earnings per stock unit GDP Architects : GDP Architects Sdn Bhd ( A) GDP Consultants : GDP Consultants Sdn Bhd ( P) GDP Group : GDP Architects, GDP Consultants, GDP Interiors, GDP Planners, GDP Projects and Adaptus Design collectively GDP Interiors : GDP Interiors Sdn Bhd ( M) GDP Planners : GDP Planners Sdn Bhd ( M) GDP Projects : GDP Projects Sdn Bhd ( A) GMIL : Grand Mission International Limited ( ) IISB : Interiors International (M) Sdn Bhd ( W) Kerjaya : Kerjaya Prospek Group Berhad ( U) Kerjaya Group : Kerjaya and its subsidiaries (including all future subsidiaries which are acquired/incorporated by Kerjaya before the next AGM) as defined in the Act i

3 DEFINITIONS (Cont d.) KHSB KProperty KProperty Group : : : Kerjaya Hotel Sdn Bhd ( M) Kerjaya Prospek Property Sdn Bhd ( D) KProperty and its subsidiaries (including all future subsidiaries which are acquired/incorporated by KProperty before the next AGM) as defined in the Act KM : Kamil Ahmad Merican KPDMSB : Kerjaya Prospek Development (M) Sdn Bhd ( K) Listing Requirements : Main Market Listing Requirements of Bursa Securities as amended from time to time and any re-enactment thereof LPD : 29 June 2018, being the latest practicable date prior to the issuance of this Circular Major Stockholder or Major Shareholder : A person who is or was within the preceding 6 months of the date on which the terms of the transactions were agreed upon, a person who has an interest or interests in one or more voting stocks/shares in E&O, its subsidiary company or holding company and the total number of voting stocks/shares is:- (a) 10% or more of the total number of voting stocks/shares in the corporation; or (b) 5% or more of the total number of voting stocks/shares in the corporation where such person is the largest stockholder/shareholder of the corporation MCSB : Morning Crest Sdn Bhd ( V) Market Day : Any day from Mondays to Fridays (both inclusive) which Bursa Securities is open for the trading of securities NA Person(s) Connected : : Net assets in relation to a Director or Major Stockholder (referred to as said Person ) means such person who falls under any one of the following categories: (a) (b) (c) (d) (e) (f) (g) a family member of the said Person; a trustee of a trust (other than a trustee for a share scheme for employees or pension scheme) under which the said Person, or a family member of the said Person, is the sole beneficiary; a partner of the said Person; a person, or where the person is a body corporate, the body corporate or its directors, who is/are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the said Person; a person, or where the person is a body corporate, the body corporate or its directors, in accordance with whose directions, instructions or wishes the said Person is accustomed or is under an obligation, whether formal or informal, to act; a body corporate in which the said Person, or persons connected with the said Person are entitled to exercise, or control the exercise of, not less than 20% of the votes attached to voting shares in the body corporate; or a body corporate which is a related corporation of the said Person PJSB : Pentas Jasa Sdn Bhd ( H) ii

4 DEFINITIONS (Cont d.) PSSB : Paramount Spring Sdn Bhd ( H) PN 12 : Practice Note No. 12 of the Listing Requirements Purchased Stocks : Stock Units purchased pursuant to the SBB Mandate Recurrent Transactions or RRPT : Transactions of a revenue or trading nature entered into by the E&O Group which are recurrent, involve the interest, direct or indirect, of a Related Party(ies) and which are necessary for its day-to-day operations Related Party(ies) : Director(s), Major Stockholder(s) or persons connected with such Director(s) or Major Stockholder(s) RM and sen : Ringgit Malaysia and sen, the legal currency in Malaysia RRPT Mandate : Proposed renewal of stockholders mandate for the E&O Group to enter into Recurrent Transactions SBB Mandate : Proposed renewal of stockholders mandate for the authority to the Company to purchase up to ten percent (10%) of its own stock units in the total number of issued stock units in the Company SC : Securities Commission SSB : Summerchrome Sdn Bhd ( P) Stock Unit(s) or E&O Stock Unit(s) : Ordinary stocks in the Company Stockholders : Stockholders of E&O Substantial stockholder : A person who has an interest or interests in one or more voting stocks/shares in a company and the total number of voting stocks/shares, is not less than 5% of the total number of voting stocks/shares in the company. For the purpose of this definition, interest in shares shall have the meaning given in Section 8 of the Act. TES : Tee Eng Seng iii

5 TABLE OF CONTENTS PART A LETTER TO THE STOCKHOLDERS OF E&O IN RELATION TO THE PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE COMPANY AND/OR ITS SUBSIDIARIES TO ENTER INTO RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE CONTAINING: PAGE 1. INTRODUCTION 1 2. RRPT MANDATE 2 3. RATIONALE FOR THE RRPT MANDATE 8 4. CONDITIONS OF THE RRPT MANDATE 9 5. FINANCIAL EFFECTS OF THE RRPT MANDATE 9 6. DIRECTORS AND MAJOR STOCKHOLDERS INTERESTS DIRECTORS RECOMMENDATION AGM FURTHER INFORMATION 12 APPENDIX I FURTHER INFORMATION 22 APPENDIX II EXTRACT OF NOTICE OF NINETY-FIRST (91 ST ) AGM 27 iv

6 TABLE OF CONTENTS (Cont d.) PART B STATEMENT TO THE STOCKHOLDERS OF E&O IN RELATION TO THE PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE AUTHORITY TO THE COMPANY TO PURCHASE UP TO TEN PERCENT (10%) OF ITS OWN STOCK UNITS IN THE TOTAL NUMBER OF ISSUED STOCK UNITS IN THE COMPANY CONTAINING: PAGE 1. INTRODUCTION SBB MANDATE RATIONALE FOR THE SBB MANDATE CONDITIONS OF THE SBB MANDATE FINANCIAL EFFECTS OF THE SBB MANDATE IMPLICATIONS RELATING TO THE CODE DIRECTORS AND SUBSTANTIAL STOCKHOLDERS INTERESTS DIRECTORS RECOMMENDATION AGM FURTHER INFORMATION 21 APPENDIX I FURTHER INFORMATION 22 APPENDIX II EXTRACT OF NOTICE OF NINETY-FIRST (91 ST ) AGM 27 v

7 PART A PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE COMPANY AND/OR ITS SUBSIDIARIES TO ENTER INTO RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

8 Board of Directors: EASTERN & ORIENTAL BERHAD (Company No: 555-K) (Incorporated in Malaysia under the Companies Enactment, 1917) Registered Office: Level 3A (Annexe) Menara Milenium 8, Jalan Damanlela Damansara Heights Kuala Lumpur 24 July 2018 Dato Azizan bin Abd Rahman (Chairman/Independent Non-Executive Director) Dato Seri Tham Ka Hon (Executive Deputy Chairman) Kok Tuck Cheong (Managing Director) Kok Meng Chow (Finance Director) Tan Sri Dato Seri Mohd Bakke bin Salleh (Non-Independent Non-Executive Director) Datuk Tee Eng Ho (Non-Independent Non-Executive Director) Kamil Ahmad Merican (Non-Independent Non-Executive Director) Datuk Vijeyaratnam a/l V. Thamotharam Pillay (Independent Non-Executive Director) Datuk Christopher Martin Boyd (Independent Non-Executive Director) Tan Kar Chen Kar Leng (Independent Non-Executive Director) To the Stockholders of E&O, Dear Sir/ Madam, PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE COMPANY AND/OR ITS SUBSIDIARIES TO ENTER INTO RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE 1. INTRODUCTION The Company had on 19 September 2017 obtained a mandate from its stockholders for the renewal of the then existing general mandate and additional general mandate for the E&O Group to enter into Recurrent Transactions, which are necessary for the day-to-day operations of the Group. The stockholders mandate shall lapse at the conclusion of the forthcoming AGM unless authority for its renewal is obtained from the stockholders of the Company at the forthcoming AGM. On 25 May 2018, the Company announced its intention to seek its stockholders approval for the RRPT Mandate. The purpose of this Circular is to set out the relevant details of the RRPT Mandate and to seek your approval for the resolution pertaining to the RRPT Mandate to be tabled at the forthcoming AGM. 1

9 2. RRPT MANDATE Pursuant to Paragraph 10.09, Chapter 10 of the Listing Requirements, a listed company may seek stockholders mandate in respect of related party transactions which involve Recurrent Transactions subject to the following:- (a) (b) (c) (d) (e) the transactions are in the ordinary course of business and are on terms not more favourable to the related party than those generally available to the public; the stockholders mandate is subject to annual renewal and disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the stockholders mandate during the financial year where the aggregate value is equal to or more than the threshold prescribed in Paragraph (1) of the Listing Requirements; the issuance of a circular to stockholders for the stockholders mandate which includes the information as may be prescribed by Bursa Securities, together with a checklist showing compliance with such information when submitting the circular to Bursa Securities; in a meeting to obtain stockholders mandate, the interested Director, interested Major Stockholder or interested person connected with a Director or Major Stockholder; and where it involves the interest of an interested person connected with a Director or Major Stockholder, such Director or Major Stockholder must not vote on the resolution approving the transactions. An interested Director or interested Major Stockholder must ensure that person(s) connected with him abstain from voting on the resolution approving the transactions; and the listed company immediately announces to Bursa Securities when the actual value of a Recurrent Transaction entered into by the listed issuer, exceeds the estimated value of the Recurrent Transaction disclosed in this Circular by 10% or more with the information as may be prescribed by Bursa Securities. The Board herein seeks the approval of the stockholders for the RRPT Mandate. The Recurrent Transactions are entered into in the ordinary course of business between the Group and companies/parties in which certain Directors, Major Stockholders and/or persons connected to them have an interest in. 2.1 Nature of the Recurrent Transactions contemplated under the RRPT Mandate and Related Parties The principal activity of E&O is investment holding and provision of management services to its subsidiaries. E&O Group is principally involved in property development, property investment, property management, investment holding and management of hotel operations. The particulars of its subsidiaries and their principal activities as at 31 March 2018 are detailed in Note 18 contained in page 203 of the annual report issued by E&O on even date. It is anticipated that the E&O Group would, in the ordinary course of business, enter into transactions with various Related Parties. 2

10 2.2 Classes of Related Parties and Nature of Transactions The proposed renewal of stockholders mandate will apply to the Recurrent Transactions by the E&O Group with the following classes of Related Parties, details of which are as follows:- No. Company involved Transacting Parties Categories of Recurrent Transactions Previous estimated value^ Actual value transacted^ Estimated value* Interested Directors / Major Stockholders and Persons Connected to Them (A) E&O Group GDP Consultants, GDP Interiors, GDP Projects, GDP Architects, GDP Planners and Adaptus Design (1) Procurement of interior design and consultancy services, architectural and building consultancy services, project management services and related ancillary services, and graphic design and signage consultancy and 3D perspective rendering works 15,000,000 4,200,000 16,000,000 KM is a Director of E&O and holds 0.16% equity interest in E&O. He is a Director and Major Shareholder of GDP Consultants, GDP Projects, Adaptus Design and is a Person Connected to GDP Architects, GDP Planners and GDP Interiors. (B) E&O Group IISB (2) Procurement of interior design services and the purchase of interior design products 6,000,000-2,000,000 The Directors and shareholders of IISB are DTOF and her spouse. DTOF and her spouse hold 51% and 49% equity interest respectively in IISB. DTOF is the sister of DSTKH. DSTKH is a Director and Major Stockholder of E&O with direct interest of 3.65% and indirect interest of 16.74% in E&O held through PSSB, SSB, PJSB, GMIL, Billford and MCSB. Therefore, DTOF and her spouse are Persons Connected to DSTKH, by virtue of their family relationship. 3

11 No. Company involved (C) E&O Group Transacting Parties Kerjaya Group and KProperty Group (3) Categories of Recurrent Transactions Receipt of services in relation to piling and main building construction works, bridge construction, edge protection and reclamation works at Seri Tanjung Pinang Phase 2 and other E&O projects from the Kerjaya Group and KProperty Group Previous estimated value^ Actual value transacted^ Estimated value* Interested Directors / Major Stockholders and Persons Connected to Them 800,000, ,648,000 1,260,000,000 The Directors and Major Stockholders of Kerjaya Group are DTEH, his spouse (Datin Toh Siew Chuon) and TES. They collectively hold directly and indirectly 70.75% equity interest in Kerjaya Group. DTEH and TES each hold 50% equity interest in KProperty Group. DTEH is a Non-Independent Non-Executive Director and Major Stockholder of E&O. TES is a Major Stockholder of E&O. (D) E&O Group Directors of E&O Group and Persons Connected to them (4) Purchase of properties sold by E&O Group, provided that such transactions do not exceed 10% of the percentage ratios as defined under Chapter 10 of the Listing Requirements ** - ** Directors of E&O Group and Persons Connected to them Notes : (1) GDP Consultants, GDP Interiors, GDP Projects, GDP Architects, GDP Planners and Adaptus Design are principally involved in architectural consultancy, interior designing and consultancy services, architectural consultancy, town planning and designing, and management consultancy, building and architectural consultancy and property management respectively. (2) IISB is principally involved in interior design services and trading of interior design products. (3) Kerjaya Group and KProperty Group are principally involved in investment holding and project management consultancy and property development. 4

12 ^ In respect of the preceding year s circular to stockholders. The actual value pertains to the amounts from the last AGM up to LPD. * It should be noted that the values are estimated, i.e. may vary and are subject to changes. The validity period of the mandate is based on the timeframe from the forthcoming AGM to the next AGM. ** The Directors and/or Related Parties who would be purchasing the properties sold by E&O Group cannot be ascertained at this point in time. Disclosure will be made in the annual report of our Company for the financial year ending 31 March 2019 of the actual breakdown of the aggregate value of transactions contemplated as required under paragraph of the PN 12 of the Listing Requirements. Estimates of the value of this category of transactions cannot be ascertained given the various types of properties sold by the E&O Group, which vary from project to project. However, in accordance with paragraph 3.3(a) of PN 12 of the Listing Requirements, any one of the percentage ratios for the Recurrent Transactions must not exceed 10%. There is no amount due and owing to E&O by its Related Parties as at 31 March

13 2.3 Procedures engaged to determine transaction prices The transaction prices, terms and conditions of the transactions are determined by market forces, under similar commercial terms for transactions with third parties which depend on the demand and supply of the products in the market and with no special treatment accorded to the Related Parties. Transactions entered into will be at prevailing market prices and/or taking into consideration the prevailing market conditions as well as inter-alia, pricing, quality of the products and/or services and the timing of delivery. Tenders or bids for contracts by Related Parties will undergo the usual process of summation costs and adding in a commercial profit margin in arriving at the tender sum. Various factors affect the prices of the E&O properties including but not limited to the prevailing general market condition. The RRPTs conducted are based on prevailing rates/prices according to commercial terms, business practices and policies or in accordance with industry norms. The selling prices of the properties in the ordinary course of business are applicable to all customers of the Group including Related Parties. The discounts given to the Related Parties are similar to those given to the employees of our Group. The E&O Group has implemented procedures to ensure proper identification and reporting of Recurrent Transactions, and to ensure that the Recurrent Transactions are conducted on armslength basis, on prices and terms not more favourable to the Related Parties than those generally available to the public and not to the detriment of the minority stockholders of the Group. The procedures are as follows:- (a) at least 2 other contemporaneous transactions with unrelated parties will be used as comparison (wherever possible) to determine whether the price and terms offered to/by the related parties are fair and reasonable and comparable to those offered to/by other unrelated parties for the same or substantially similar type of products/services and/or quantities (also taking into consideration, amongst other factors the reliability and timeliness of supply, delivery, service and the quality of goods and services). However, in the event that quotations or comparative pricing from unrelated parties cannot be obtained (for instance, if there are no unrelated party vendors/customers of similar products/services or established industry professionals or if the product/services is a proprietary item), the price and terms offered to/by the related parties will be compared with the applicable industry norms, prevailing commercial rates, relevant statutory guidelines, rules and/or industry practices to ensure that the Recurrent Transaction is not detrimental to the E&O Group; (b) records will be maintained by our Company to capture all Recurrent Transactions entered into pursuant to the RRPT Mandate to ensure that relevant approvals have been obtained and review methods and/or procedures in respect of such transactions are adhered to; (c) the internal auditor shall review the Recurrent Transactions entered into pursuant to the RRPT Mandate to ascertain that the procedures established have been complied with, at such frequency as deemed appropriate by the Audit Committee; (d) the Audit Committee shall review the management reports to ascertain that the guidelines, methods and/or procedures established to monitor Recurrent Transactions have been complied with; (e) disclosure will be made in the annual report of our Company of the breakdown of aggregate value of transactions conducted pursuant to the RRPT Mandate during the financial year. Disclosure will also be made in the annual report for subsequent financial years during which the RRPT Mandate remains in force; 6

14 (f) the thresholds for approval of RRPTs within the Group are as follows:- (i) RRPTs up to RM1 million each in value will be reviewed and approved by either the Group Managing Director or the Executive Deputy Chairman or the Board; (ii) RRPTs up to RM10 million each in value will be reviewed and approved by either the Group Managing Director or the Executive Deputy Chairman or the Chairman of the Board or the Board; and (iii) RRPTs above RM10 million each in value will be reviewed and approved by the Board; and (g) for the award of construction contracts in connection with property development and construction projects, the management shall evaluate a tender or quotation, contract received from or proposed to be entered with a Related Party based on, amongst others, the pricing, technical and financial capabilities, quality of deliverables and track record of the tender parties (including the Related Party). Where any Director has an interest (direct or indirect) in any Recurrent Transactions, such Director (or his alternate, where applicable) shall abstain from deliberation and voting on the matter. Where any member of the Audit Committee is interested in any transaction, the member shall abstain from deliberation and voting on any matter relating to any decisions to be taken by the Audit Committee with respect to such transactions. Pursuant to paragraph of Chapter 10 of the Listing Requirements, in a meeting to obtain the RRPT Mandate, the interested Director, interested Major Stockholder or interested Persons Connected with a Director or Major Stockholder and where it involves the interest of an interested Person Connected with a Director or Major Stockholder, such Director or Major Stockholder, must abstain from the deliberation and voting on the resolution approving the transactions. An interested Director or interested Major Stockholder must also ensure that Persons Connected with him abstain from voting on the resolution approving the transactions. Interested Directors shall also abstain from deliberating at board meetings in respect of the Recurrent Transactions in which they are interested. 2.4 Statement by the Audit Committee The Audit Committee of the Company has seen and reviewed the procedures mentioned in Section 2.3 above and is of the view that:- (a) the procedures established are sufficient to ensure that the Recurrent Transactions are:- (i) on terms not more favourable to the Related Parties than those generally available to the public, and (ii) are not to the detriment of the minority stockholders, and (b) the Group has in place adequate procedures and processes to monitor, track and identify Recurrent Transactions in a timely and orderly manner, and such procedures and processes are reviewed on a quarterly basis or whenever the need arises. 7

15 2.5 Validity Tenure of the RRPT Mandate The RRPT Mandate, if approved by the stockholders of E&O at the forthcoming AGM, will take effect from the date of the passing of the resolution proposed at the AGM and is subject to annual renewal. In this respect, the mandate arising therefrom will continue to be in force until:- (a) the conclusion of the next AGM of the Company following the general meeting at which such mandate was passed, at which time it will lapse, unless by an ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions; (b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 340(2) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of Act); or (c) revoked or varied by resolution passed by the stockholders of the Company in general meeting, whichever is the earliest. 2.6 Disclosure in Annual Report Disclosures will be made in the annual report of the Company of the breakdown of the aggregate value of Recurrent Transactions conducted pursuant to the stockholders mandate during the financial year and in the annual report for the subsequent financial year during which the stockholders mandate remain in force containing the following information:- (a) the type of Recurrent Transactions made; and (b) the names of the Related Parties involved in each type of the Recurrent Transactions made and their relationship with the E&O Group. 3. Rationale for the RRPT Mandate The Recurrent Transactions entered or to be entered into by the E&O Group with the Related Parties are in the ordinary course of business on normal commercial terms for the Group s day-to-day operations. They are recurring transactions of a revenue or trading nature which are likely to occur with some degree of frequency and arise at any time and from time to time. The above Recurrent Transactions are either recurring transactions of a revenue or trading nature which will generate income and profitability to the Group and the Related Parties or the receipt of support services which are necessary to facilitate the functions of the Company. Hence, they are of benefit to the E&O Group. The interior design services provided by the Related Parties will enable the Group s Property and Hospitality & Lifestyle Divisions to be more competitive, contributed by the familiarity and experience of the Related Parties in this area. Their expertise will enhance the said Divisions contributions to our Group s profitability. 8

16 As E&O Group is principally involved in property development and property investment, the sale of properties by E&O Group to the Related Parties is in the Group s ordinary course of business. Our Board is of the view that the purchase of properties by the Related Parties reflect their confidence in our Group s property development projects. The sale of properties will also generate revenue and cash flow to E&O Group. The E&O Group has a long-standing business relationship with the Related Parties. The Related Parties are both existing customers of the E&O Group and sub-contractors for the E&O Group with proven track record and reliability. The Related Parties have expertise in their fields which may be required by the E&O Group from time to time. By allowing the Related Parties to participate in tenders and quotations, the E&O Group will have a wider choice for its selection process. The Recurrent Transactions are intended to meet the business needs of the E&O Group at the best possible terms. By transacting with the Related Parties, the E&O Group would have an advantage of familiarity with the background and management of the Related Parties, the E&O Group and the Related Parties have close co-operation and a good understanding of each other s business needs thus providing a platform where all parties can enjoy synergistic benefits from conducting the Recurrent Transactions. By obtaining the stockholders approval for the RRPT Mandate on an annual basis, the E&O Group can pursue business opportunities which are time-sensitive in nature, and will eliminate the need for the Company to make announcements and/or convene separate general meetings from time to time to seek stockholders approval, as and when potential Recurrent Transactions arise, thereby reducing the administrative time, effort and expenses associated with the convening of such meetings. This will allow the human resources and time to be channeled towards attaining the corporate objectives of the E&O Group. The RRPT Mandate is sought to obtain stockholders approval for the mandate to be valid from the forthcoming AGM to the next AGM of the Company. Thereafter, approval from stockholders for a renewal of stockholders mandate for the RRPT Mandate will be sought at each subsequent AGM of E&O, if required. 4. CONDITIONS OF THE RRPT MANDATE The RRPT Mandate is conditional upon the approval being obtained from the stockholders of the Company at the forthcoming AGM. The RRPT Mandate is not conditional upon any other proposal. 5. FINANCIAL EFFECTS OF THE RRPT MANDATE The RRPT Mandate will not have any effect on the share capital or the shareholdings of E&O. The RRPT Mandate is not expected to have any significant impact on the earnings and NA of the E&O Group. 9

17 6. DIRECTORS AND MAJOR STOCKHOLDERS INTERESTS The direct and indirect interests of the Directors and/or Major Stockholders of the Company as at LPD who are interested in the RRPT Mandate are as follows:- Direct Interest Indirect Interest No. of % No. of % Stock Units Stock Units Interested Directors and Major Stockholders of E&O DSTKH 47,404, ,169,666 (i) DTEH ,891,580 (ii) Interested Directors of E&O Dato Azizan bin Abd Rahman 8,190, Kok Tuck Cheong Kok Meng Chow 1,611, Tan Sri Dato Seri Mohd Bakke bin Salleh KM 2,103, Datuk Vijeyaratnam a/l V. Thamotharam Pillay Datuk Christopher Martin Boyd 11,220 negligible - - Tan Kar Chen Kar Leng Interested Major Stockholder of E&O TES ,612,664 (iii) Interested Persons Connected to the Interested Directors and/or Interested Major Stockholder of E&O PSSB 125,978, BMSB ,978,324 (iv) 9.71 KHSB 54,999, KPDMSB 14,635, GMIL ,978,324 (v) 9.71 PJSB ,978,324 (vi) 9.71 SSB ,978,324 (vii) 9.71 MCSB 84,158, Billford 7,033, ,158,034 (viii) 6.49 Datin Toh Siew Chuon 278,

18 Notes:- (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Deemed interest by virtue of Section 8(4) of the Act held through PSSB, SSB, PJSB, GMIL, Billford and MCSB. Deemed interest by virtue of Section 8(4) of the Act held through KHSB, KPDMSB, and SSB, which in turn holds 100% in PSSB and interest of spouse by virtue of Section 59(11)(c) of the Act. Deemed interest by virtue of Section 8(4) of the Act held through KHSB, KPDMSB and SSB, which in turn holds 100% in PSSB. Deemed interest by virtue of Section 8(4) of the Act held through SSB, which in turn holds 100% in PSSB. Deemed interest by virtue of Section 8(4) of the Act held through its shareholding of 100% in PJSB, which in turn holds 55% in SSB, which in turn holds 100% of PSSB. Deemed interest by virtue of Section 8(4) of the Act held through its shareholding of 55% in SSB, which in turn holds 100% of PSSB. Deemed interest by virtue of Section 8(4) of the Act held through PSSB, a whollyowned subsidiary of SSB. Deemed interest by virtue of Section 8(4) of the Act held through MCSB, a whollyowned subsidiary of Billford. KM, DSTKH and DTEH are deemed interested in the RRPT Mandate as disclosed in Sections 2.2(A), (B) and (C) respectively by virtue of their interests as disclosed in Section 2.2 above. Dato Azizan bin Abd Rahman, DSTKH, Kok Tuck Cheong, Kok Meng Chow, Tan Sri Dato Seri Mohd Bakke bin Salleh, DTEH, KM, Datuk Vijeyaratnam a/l V. Thamotharam Pillay, Datuk Christopher Martin Boyd and Tan Kar Chen Kar Leng are deemed potentially interested in the RRPT Mandate as disclosed in Section 2.2(D) by virtue of their position as Director and/or Major Stockholder of E&O as disclosed in Section 2.2 above. In this respect, Dato Azizan bin Abd Rahman, DSTKH, Kok Tuck Cheong, Kok Meng Chow, Tan Sri Dato Seri Mohd Bakke bin Salleh, DTEH, KM, Datuk Vijeyaratnam a/l V. Thamotharam Pillay, Datuk Christopher Martin Boyd and Tan Kar Chen Kar Leng have accordingly abstained and/or will continue to abstain from all Board deliberations and voting in respect of the RRPT Mandate and, save for Kok Tuck Cheong, Tan Sri Dato Seri Mohd Bakke bin Salleh, Datuk Vijeyaratnam a/l V. Thamotharam Pillay and Tan Kar Chen Kar Leng, will abstain from voting in respect of their direct and indirect shareholdings in the Company on the resolution pertaining to the RRPT Mandate to be tabled at the forthcoming AGM. In addition, the aforesaid interested Directors and/or Major Stockholders have undertaken to ensure that all persons connected to them will abstain from voting on the resolution pertaining to the RRPT Mandate at the forthcoming AGM, if any. Save as disclosed above, none of the other Directors, Major Stockholders and/or persons connected with them as defined in the Listing Requirements has any interest, direct or indirect, in the RRPT Mandate. 7. DIRECTORS RECOMMENDATION All the Directors have refrained from forming an opinion and making any recommendation in respect of the proposed Recurrent Transactions under Section 2.2(D) of this Circular. The Board (save for the interested Directors, namely DSTKH, KM and DTEH, who abstain from giving an opinion and make no recommendation on the RRPT Mandate), having taken into consideration all aspects (including the rationale and financial effects) of the RRPT Mandate, is of the opinion that the RRPT Mandate (except for the proposed recurrent transactions under Section 2.2(D) of the Circular), is in the best interest of the Company and its stockholders. Accordingly, the Board (save for the interested Directors, namely DSTKH, KM and DTEH) recommends that you vote in favour of the resolution pertaining to the RRPT Mandate to be tabled at the forthcoming AGM. 11

19 8. AGM The Ninety-First (91 st ) AGM of the Company will be held at Ballroom 1, 1st Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, Kuala Lumpur on Tuesday, 21 August 2018 at a.m. for the purpose of considering and if thought fit, inter-alia, to pass the resolution pertaining to the RRPT Mandate as Special Business. The Notice of AGM, together with the Form of Proxy, are enclosed in the annual report of the Company for the financial year ended 31 March If you are unable to attend and vote at the AGM, you are requested to complete, sign and return the enclosed Form of Proxy in accordance with the instructions contained therein so as to arrive at the Registered Office of the Company as soon as possible and in any event not later than forty-eight (48) hours before the time fixed for the AGM, or any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the AGM should you subsequently wish to do so. 9. FURTHER INFORMATION Stockholders are requested to refer to the Appendices for further information. Yours faithfully, for and on behalf of the Board of Directors of EASTERN & ORIENTAL BERHAD DATO AZIZAN BIN ABD RAHMAN Chairman 12

20 PART B STATEMENT IN RELATION TO THE PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE AUTHORITY TO THE COMPANY TO PURCHASE UP TO TEN PERCENT (10%) OF ITS OWN STOCK UNITS IN THE TOTAL NUMBER OF ISSUED STOCK UNITS IN THE COMPANY

21 Board of Directors: EASTERN & ORIENTAL BERHAD (Company No: 555-K) (Incorporated in Malaysia under the Companies Enactment, 1917) Registered Office: Level 3A (Annexe) Menara Milenium 8, Jalan Damanlela Damansara Heights Kuala Lumpur 24 July 2018 Dato Azizan bin Abd Rahman (Chairman/Independent Non-Executive Director) Dato Seri Tham Ka Hon (Executive Deputy Chairman) Kok Tuck Cheong (Managing Director) Kok Meng Chow (Finance Director) Tan Sri Dato Seri Mohd Bakke bin Salleh (Non-Independent Non-Executive Director) Datuk Tee Eng Ho (Non-Independent Non-Executive Director) Kamil Ahmad Merican (Non-Independent Non-Executive Director) Datuk Vijeyaratnam a/l V. Thamotharam Pillay (Independent Non-Executive Director) Datuk Christopher Martin Boyd (Independent Non-Executive Director) Tan Kar Chen Kar Leng (Independent Non-Executive Director) To the Stockholders of E&O, Dear Sir/Madam, PROPOSED RENEWAL OF STOCKHOLDERS MANDATE FOR THE AUTHORITY TO THE COMPANY TO PURCHASE UP TO TEN PERCENT (10%) OF ITS OWN STOCK UNITS IN THE TOTAL NUMBER OF ISSUED STOCK UNITS IN THE COMPANY 1. INTRODUCTION The Company had on 19 September 2017 obtained a mandate from its stockholders for the Company to purchase and/or hold its own stock units of up to ten percent (10%) of the total number of issued stock units. The existing stockholders mandate shall lapse at the conclusion of the forthcoming AGM unless authority for its renewal is obtained from the stockholders of the Company at the forthcoming AGM. On 25 May 2018, the Company announced its intention to seek its stockholders approval for the SBB Mandate. The purpose of this Circular is to set out the relevant details of the SBB Mandate and to seek your approval for the resolution pertaining to the SBB Mandate to be tabled at the forthcoming AGM. 13

22 2. SBB MANDATE 2.1 Details of the SBB Mandate The Board is seeking the approval of the stockholders to purchase up to ten percent (10%) of the total number of issued stock units of E&O listed on Bursa Securities through stockbrokers appointed by the Company, subject to the Act, Listing Requirements and any prevailing laws, rules, regulations and guidelines issued by the relevant authorities at the time of purchase. The approval from the stockholders for the SBB Mandate would be effective immediately upon the passing of the ordinary resolution for the SBB Mandate at the forthcoming AGM and shall be valid until:- (a) the conclusion of the next AGM of the Company following the general meeting at which such mandate was passed, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions; or (b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 340(2) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or (c) revoked or varied by ordinary resolution passed by the stockholders in a general meeting; whichever is the earliest. 2.2 Quantum Based on the issued share capital of E&O comprising 1,326,706,544 E&O Stock Units as at LPD, a maximum of 132,670,654 E&O Stock Units, representing 10% of the total number of issued stock units of E&O, may be repurchased and/or held as treasury stock units by the Company pursuant to the SBB Mandate. Nevertheless, the actual number of Stock Units in E&O to be purchased by the Company pursuant to the SBB Mandate, the total amount of funds involved for each purchase and the timing of the purchase(s) will depend on inter-alia, the market conditions and sentiments of the stock market as well as the availability of financial resources of the Company and the availability of the retained profits of the Company. 2.3 Maximum Amount of Funds to be Allocated and the Source of Funds The stockholders approval for the SBB Mandate does not impose an obligation on the Company to purchase its own stock units on Bursa Securities. Rather, the SBB Mandate will allow the Board to exercise the power of the Company to purchase its own stock units at any time within the abovementioned time period using the internally generated funds and/or external borrowings. The amount of internally generated funds and/or external borrowings to be utilised will only be determined later depending on the availability of internally generated funds and bank borrowings at the time of the purchase(s), actual number of E&O Stock Units to be purchased, the economic and market conditions and other cost factors. Should the SBB Mandate be financed through bank borrowings, the Company will ensure that it will have sufficient funds to repay such borrowings as and when they are due. The SBB Mandate is expected to reduce the cash flow of the E&O Group. The maximum funds to be utilised for the SBB Mandate shall not exceed the aggregate of retained profits of the Company. Based on the latest audited financial statements for the financial year ended 31 March 2018, the retained profits of E&O was RM million. As at the date of this Circular, the results for the first quarter ended 30 June 2018 has yet to be released. 14

23 2.4 Treatment of Purchased Stocks In accordance with Section 127 of the Act, the Directors are able to deal with any E&O Stock Units pursuant to the SBB Mandate in the following manner: (a) to cancel the E&O Stock Units so purchased; or (b) to retain the E&O Stock Units so purchased as treasury stock units for distribution as dividends to stockholders and/or resell through Bursa Securities in accordance with the relevant rules of Bursa Securities; or (c) combination of (a) and (b) above, or in any other manner as prescribed by the Act, rules, regulations and orders made pursuant to the Act and the requirements of Bursa Securities and any other relevant authority for the time being in force. Upon each purchase of the Stock Units, an immediate announcement will be made to Bursa Securities in respect of the intention of the Board whether to retain the Stock Units as treasury Stock Units or cancel them, or both. An immediate announcement will also be made to Bursa Securities of any resale or cancellation of Stock Units. As at the date of the Circular, the Board has yet to make any decision with regards to the treatment of the Stock Units so purchased in future. Pursuant to Section 127(13) and 127(14) of the Act, where the Directors resolve to cancel the Stock Units so purchased, the Company s issued share capital shall be diminished by the Stock Units so cancelled and the costs of the stock units shall be applied in the reduction of the profits otherwise available for distribution as dividends. 2.5 Ranking While the Stock Units so purchased are held as treasury stock units, the rights attached to them as to voting, dividends and participation in any other distribution or otherwise are suspended and the treasury stock units shall not be taken into account in calculating the number or percentage of Stock Units for any purposes including substantial shareholding, takeovers, notices, the requisition of meetings, the quorum for a meeting and the result of a vote on a resolution at a meeting. 2.6 Purchase Price In compliance with the Listing Requirements, E&O may only purchase its own Stock Units at a price, which is not more than fifteen percent (15%) above the weighted average market price for the five (5) market days immediately preceding the date(s) of the purchase(s). 2.7 Resale Price In the case of a resale of treasury Stock Units, the Company may only resell the Stock Units at a price which is:- (a) not less than the weighted average market price of E&O Stock Units for the five (5) market days immediately prior to the resale; or (b) a discounted price of not more than five percent (5%) to the weighted average market price of E&O Stock Units for five (5) market days immediately prior to the resale provided that: (i) the resale takes place no earlier than 30 days from the date of purchase; and (ii) the resale price is not less than the cost of purchase of E&O Stock Units being resold. 15

24 2.8 Public Shareholding Spread As at LPD, the public shareholding spread of E&O was 53.54%. Assuming that the SBB Mandate is carried out in full, the public shareholding spread of the Company would be potentially reduced to 49.52%. The Board undertakes that the SBB Mandate will be conducted in accordance with the laws prevailing at the time of the purchase including compliance with the Listing Requirements that a public shareholding spread of 25% in the hands of public stockholders. 2.9 Advantages and Disadvantages of the SBB Mandate Advantages (a) the SBB Mandate, if implemented, will enable the Company to stabilise the supply and demand of E&O Stock Units on the Bursa Securities and thereby support the Company s fundamental value; (b) it provides flexibility for the Company in attaining its desired capital structure, in terms of the debt and equity composition and the size of equity; (c) it allows the Company to take preventive measures against excessive speculation, particularly when the Stock Units are undervalued which would in turn stabilise the market price of Stock Units to enhance investors confidence; (d) the resultant reduction of share capital base (if the Stock Units so purchased are then cancelled) is expected to improve the EPS, and may improve the NA per Stock Unit as well as the probability of permitting the Company to declare a higher quantum of dividend in future; (e) the Board would have the opportunity to utilise its financial resources not immediately required for other use to purchase E&O Stock Units. E&O may have the opportunity for potential gains if the purchased E&O stock units which are retained as treasury stock units are resold at prices higher than their purchase price and consequently increase the working capital and NA of the Company; and (f) in the event that the treasury stock units are distributed as dividends by the Company, it may then serve to reward the Stockholders of E&O Disadvantages (a) the purchases may result in a reduction of the quantum of reserves available for distribution as dividends and/or bonus issue(s) to the Stockholders if the Stock Units so purchased are cancelled; (b) the purchase of existing Stock Units will reduce the financial resources of the Company which may otherwise be retained in the business to generate further profits; (c) the funds allocated for the SBB Mandate may result in the E&O Group foregoing other investment opportunities that may emerge in the future; and (d) the working capital of the Group may also be affected, as any purchase of E&O Stock Units will reduce the Group s working capital depending on the actual number of stock units purchased and their purchase price. However, the working capital of the E&O Group may recover and increase upon the reselling of the purchased stock units held as treasury stock units. The Board will be mindful of the interests of the Group and the stockholders in implementing the SBB Mandate. 16

25 3. RATIONALE FOR THE SBB MANDATE The SBB Mandate is to permit a stabilising factor on the supply and demand as well as the price of the Stock Units of E&O on Bursa Securities. Consequently, the fundamental value of the Company may be preserved which may in turn have a favourable impact on the share price of the Company. It is to be carried out when the share price is transacted at levels which do not reflect the potential earnings capabilities and/or underlying asset value of the Group. The SBB Mandate will also enable E&O to utilise its surplus financial resources to purchase the E&O Stock Units as and when the Board deems fit in the interest of its stockholders during the tenure the authority granted is in effect. In addition, the Purchased Stocks may be held as treasury stock units and resold on Bursa Securities with the intention of realising a potential gain without affecting the total issued share capital of the Company. Should any treasury stock units be distributed as share dividends, this would serve to reward the stockholders of the Company. 4. CONDITIONS OF THE SBB MANDATE The SBB Mandate is conditional upon the approval being obtained from the stockholders of the Company at the forthcoming AGM. The SBB Mandate is not conditional upon any other proposal. 5. FINANCIAL EFFECTS OF THE SBB MANDATE The effects of the SBB Mandate on the share capital, Substantial Stockholders and Directors shareholdings, NA, working capital, earnings and dividends are set out below:- 5.1 Share Capital The effects of the SBB Mandate on E&O s share capital will result in a reduction in the number of issued stock units if the Stock Units bought back are cancelled, as set out below:- No. of Stock Units Number of issued stock units as at LPD 1,326,706,544 Less: Maximum number of Stock Units that may be purchased pursuant to the SBB Mandate (assuming all purchased E&O Stock Units are cancelled) 132,670,654* Total number of issued stock units after SBB Mandate is fully implemented 1,194,035,890 * Including 29,361,747 Stock Units which have been purchased by the Company previously and retained as treasury stock units. The SBB Mandate will have no effect on the share capital and the number of issued stock units of the Company if all the purchased E&O Stock Units are not cancelled and are retained as treasury stock units, resold or distributed to the stockholders. However, the rights attached to the stock units as to voting, dividends and participation in other distribution or otherwise, are suspended and the treasury stock units shall not be taken into account in calculating the number or percentage of the Company s Stock Units or of a class of the Company s Stock Units for any purposes including substantial shareholding, takeovers, notices, the requisitioning of meetings, the quorum for a meeting and the result of a vote on a resolution at a meeting. 5.2 Substantial Stockholders and Directors Shareholdings Assuming the SBB Mandate is carried out in full by the Company, the effects on the shareholdings of Substantial Stockholders and Directors of E&O as at LPD are as follows:- 17