KHEE SAN BERHAD (Company No.: A) (Incorporated in Malaysia)

Transcription

1 THIS STATEMENT/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. If you have sold all your shares in the Company, you should at once hand this Statement and Circular to the agent through whom the sale was contracted for onward transmission to the purchaser. Bursa Malaysia Securities Berhad ( Bursa Securities ) takes no responsibility for the contents in this Statement/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 Statement/Circular. Bursa Securities has not perused the contents of Part A and Part C of this Statement/Circular prior to the issuance as it is an exempt Circular pursuant to Practice Note 18 of the Main Market Listing Requirements of Bursa Securities. KHEE SAN BERHAD (Company No.: A) (Incorporated in Malaysia) PART A - STATEMENT TO SHAREHOLDERS IN RELATION TO THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE FOR SHARE BUY-BACK AUTHORITY PART B - CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE PART C - (I) PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL FROM RM100,000, COMPRISING 100,000,000 ORDINARY SHARES OF RM1.00 EACH TO RM200,000, COMPRISING 200,000,000 ORDINARY SHARES OF RM1.00 EACH; AND (II) PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION The above proposals will be tabled as Special Business at the Twenty First ( 21 st ) Annual General Meeting ( AGM ). The Notice of the 21 st AGM together with the Proxy Form is set out in the abridged form of the Annual Report 2015 of Khee San Berhad ( KSB or the Company ), which will be despatched together with this Statement and Circular. The Proxy Form must be completed in accordance with the instructions thereon and lodged at the Company s Registered Office at 22-2, Jalan 1/64, Off Jalan Kolam Air/Jalan Sultan Azlan Shah, Kuala Lumpur, Malaysia, not less than forty-eight (48) hours before the time of the Meeting or any adjournment thereof. The lodgement of the Proxy Form will not preclude you from attending and voting in person at the Meeting, should you subsequently wish to do so. IMPORTANT NOTES :- Last date and time for lodging the Proxy Form Date and time of 21 st AGM Venue of 21 st AGM : : : Monday, 9 November 2015 at a.m. Wednesday, 11 November 2015 at a.m. Hang Li Po Room, Level 4, Mines Wellness Hotel, Jalan Dulang, Mines Resort City, Seri Kembangan, Selangor Darul Ehsan, Malaysia THIS STATEMENT AND CIRCULAR IS DATED 20 OCTOBER 2015

2 DEFINITIONS For the purpose of this Statement and Circular, except where the context otherwise requires, the following definitions shall apply: Act : The Companies Act, 1965, as amended from time to time and any re-enactment thereof AGM : Annual General Meeting Annual Report 2015 : Annual Report of KSB issued for the financial year ended 30 June 2015 Articles : Articles of Association Audit Committee : Audit Committee of KSB Board : The Board of Directors of KSB Bursa Depository : Bursa Malaysia Depository Sdn Bhd ( W) Bursa Securities or Exchange : Bursa Malaysia Securities Berhad ( W) CMSA or the Code : Capital Markets and Services Act, 2007 Director : Shall have the same meaning given under Section 4 of the Act and includes any person who is or was within the preceding six (6) months of the date on which the terms of transactions were agreed upon, a Director of KSB, or any other company which is its subsidiary or holding company or a Chief Executive Officer of KSB, its subsidiary or holding Company; AND including the meaning given under Section 2 of the CMSA EPS : Earnings per Share KSB or Company : KSB Shares or Shares : Ordinary shares of RM1.00 each in KSB KSFI : Khee San Food Industries Sdn Bhd (27605-H) KSB Group or the Group : KSB and its subsidiary companies, as defined under Section 5 of the Act LBB : London Biscuits Berhad (72057-H) Listing Requirements : The Main Market Listing Requirements of Bursa Securities, including any amendments, modifications and additions thereof that may be made from time to time LPD : 23 September 2015, being the latest practicable date prior to the printing of this Statement and Circular Major Shareholder(s) : A person who has an interest or interests in one (1) or more voting shares in KSB and the nominal amount of that share, or the aggregate of the nominal amounts of those shares, is:- (a) ten percent (10%) or more of the aggregate of the nominal amounts of all the voting shares in KSB; or (b) five percent (5%) or more of the aggregate of the nominal amounts of all the voting shares in KSB where such person is the largest shareholder of KSB. -i-

3 DEFINITIONS (cont d) Major Shareholder(s) (cont d) For the purpose of this definition, interest in shares shall have the meaning given in Section 6A of the Act. Major shareholder(s) shall include any person who is or was within the preceding six (6) months of the date on which the terms of the transaction were agreed upon, a major shareholder of KSB or any other company which is a subsidiary of KSB or a holding company of KSB. Market Day : Any day when Bursa Securities is open for trading of securities Memorandum : Memorandum of Association MGO : Mandatory General Offer NA : Net Assets Person(s) Connected : Such person, in relation to the director or major shareholder, who falls under any one of the following categories:- (a) A member of the director s or major shareholder s family, which family shall have the meaning given in paragraph 1.01 of the Listing Requirements; (b) A trustee of a trust (other than a trustee for a share scheme for employees or pension scheme) under which the director, major shareholder or a member of the director s or major shareholder s family is the sole beneficiary; (c) A partner of the director, major shareholder or a partner of a person connected with that director or major shareholder; (d) A person who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the director or major shareholder; (e) A person in accordance with whose directions, instructions or wishes the director or major shareholder is accustomed or is under an obligation, whether formal or informal, to act; (f) A body corporate or its directors which / who is / are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the director or major shareholder; (g) A body corporate or its directors whose directions, instructions or wishes the director or major shareholder is accustomed or is under an obligation, whether formal or informal, to act; (h) A body corporate in which the director or major shareholder and/or persons connected with him are entitled to exercise, or control the exercise of, not less than fifteen percent (15%) of the votes attached to voting shares in the body corporate; or (i) A body corporate which is a related corporation. -ii-

4 DEFINITIONS (cont d) Proposals : Proposed Share Buy-Back, Proposed RRPTs Renewal, Proposed Increase in Authorised Share Capital, Proposed Amendments to the Memorandum and Articles collectively Proposed Amendments to the Memorandum and Articles Proposed Increase in Authorised Share Capital : Proposed Amendments to the Memorandum and Articles of KSB to facilitate the implementation of Proposed Increase in Authorised Share Capital as set out in Part C : Proposed Increase in Share Capital of KSB from RM100,000, comprising 100,000,000 ordinary shares of RM1.00 each to RM200,000, comprising 200,000,000 ordinary shares of RM1.00 each as set out in Part C Proposed RRPTs Renewal : Proposed Renewal of Shareholders Mandate in respect of the RRPTs as set out in Part B Proposed Share Buy-Back : Proposed Renewal of Shareholders Mandate to enable KSB to purchase its own shares up to ten percent (10%) of the Company s issued and paid-up share capital as set out in Part A Purchased Shares : Shares purchased pursuant to the Proposed Share Buy-Back Recurrent Related Party Transactions or RRPTs : Related party transactions involving recurrent transactions of a revenue or trading nature which are necessary for the Group s day-to-day operations and are in the ordinary course of business of the Group Related Party(ies) : Director(s), major shareholder(s) or person(s) connected with such director(s) or major shareholder(s) as defined in Paragraph 1.01 of the Listing Requirements RM and Sen : Ringgit Malaysia and Sen respectively Substantial Shareholder(s) : A person who has an interest or interests in one or more voting Shares in the Company and the nominal amount of that Share, or the aggregate of the nominal amount of those Shares is not less than five percent (5%) of the aggregate of the nominal amount of all the voting Shares in the Company Treasury Shares : The Purchased Shares which are retained by the Company and shall have the meaning given under Section 67A of the Act Words incorporating the singular shall, where applicable, include the plural and vice versa and words incorporating the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Reference to persons shall include a corporation, unless otherwise specified. Any reference in this Circular to any enactment is a reference to that enactment for the time being amended or re-enacted. -iii-

5 TABLE OF CONTENTS STATEMENT AND CIRCULAR TO THE SHAREHOLDERS OF THE COMPANY CONTAINING: Pages 1. INTRODUCTION 1 2. PART A: STATEMENT IN RELATION TO THE PROPOSED SHARE BUY-BACK 2.1 Background Maximum Amount of Funds to be allocated and the source of funds Treatment of Shares purchased Share Prices Pricing The Public Shareholding Spread Rationale Potential Advantages and Disadvantages of the Proposed Share Buy-Back Purchase and Resale made in the previous twelve (12) months Financial Effects Interested Directors, Substantial Shareholders and Persons Connected to them Directors and Substantial Shareholders Interests Implications of the Code Condition to the Proposed Share Buy-Back 9 3. PART B : CIRCULAR IN RELATION TO THE PROPOSED RRPTS RENEWAL 3.1 Provisions under the Listing Requirements Information on KSB Group Class and Nature of RRPTS Amount due and owing by Related Parties Review of procedures for the RRPTS Excluded Transactions Audit Committee s Statement Disclosure in the Annual Report Rationale and Benefits for the RRPTS Directors and Major Shareholders Interests Condition to the Proposed RRPTs Renewal Financial Effects PART C : (I) PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL (II) PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES 4.1 Details Rationale Financial Effect Interests of Directors and Major Shareholders and Persons Connected to them Condition to the Proposed Increase in Authorised Share Capital and Proposed Amendments to the Memorandum and Articles APPROVAL REQUIRED DIRECTORS RECOMMENDATION AGM ADDITIONAL INFORMATION 16 APPENDICES I - Additional Information 17 II - Extract of Resolutions 18-20

6 KHEE SAN BERHAD (Company No.: A) (Incorporated in Malaysia) Registered Office: 22-2, Jalan 1/64, Off Jalan Kolam Air/ Jalan Sultan Azlan Shah Kuala Lumpur Malaysia 20 October 2015 The Board of Directors Dato Sri Liew Kuek Hin, SSAP, DIMP, PJK, JP (Non Independent Non-Executive Chairman) Dato Sri Liew Yew Chung, SSAP, DIMP (Group Managing Director / CEO) Ms. Liew Yet Mei (Non-Independent Non-Executive Director) Mr. Huang Yan Teo, PIS, PPN (Independent Non-Executive Director) Mr. Leslie Looi Meng (Independent Non-Executive Director) To: The Shareholders of KHEE SAN BERHAD, Dear Sir / Madam, PART A - STATEMENT IN RELATION TO THE PROPOSED SHARE BUY-BACK PART B - CIRCULAR IN RELATION TO THE PROPOSED RRPTS RENEWAL PART C - STATEMENT IN RELATION TO THE PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL, PROPOSED AMENDMENTS TO MEMORANDUM AND ARTICLES 1. INTRODUCTION On 28 August 2015, the Board had announced that it proposes to seek the approval of the Shareholders for the Proposals at the forthcoming 21 st AGM of the Company. The purpose of this Statement and Circular is to provide you with the relevant information on the Proposals together with the recommendation of the Board as well as to seek your approval for the resolutions pertaining to the Proposals to be tabled at the forthcoming 21 st AGM of the Company. The Notice of the 21 st AGM detailing the relevant resolutions for the Proposals is contained in the Annual Report 2015 of the Company. SHAREHOLDERS OF KSB ARE ADVISED TO READ AND CONSIDER CAREFULLY BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE ABOVE PROPOSALS. 1

7 PART A - STATEMENT IN RELATION TO THE PROPOSED SHARE BUY-BACK 2. PROPOSED SHARE BUY-BACK 2.1 BACKGROUND The Company is proposing to seek the approval from KSB s Shareholders, the renewal of the authority for the Company to purchase and/or hold in aggregate of up to ten percent (10%) of its issued and paid-up share capital at any point in time through Bursa Securities. The Proposed Share Buy-Back is subject to compliance with Section 67A of the Act and any prevailing laws, rules and regulations issued by the relevant authorities. On 12 December 2014, the Company obtained its Shareholders approval at its Twentieth ( 20 th ) AGM for the renewal of authority for share buy-back of up to ten percent (10%) of the issued and paid-up capital of the Company. The said authority shall expire at the conclusion of the forthcoming 21 st AGM of the Company. No Shares were purchased todate since the approval was obtained at the 20 th AGM. As at LPD, the total issued and paid-up capital of KSB is RM89,260,500 comprising 89,260,500 Shares. Specifically, the maximum number of Shares which may be purchased by the Company will not be more than 8,926,050 Shares on its issued and paid-up capital of KSB, and the maximum amount of funds to be allocated for the Proposed Share Buy-Back will be limited to the amount of the Audited Retained Profits and Share Premium Account of the Company as at 30 June The authority from the Shareholders, if given, shall be effective upon passing of the Ordinary Resolution relating thereto at the 21 st AGM and will continue to be in force until:- (i) (ii) (iii) the conclusion of the next AGM of the Company following the forthcoming AGM, at which time the said authority will lapse, unless by an Ordinary Resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or the expiration of the period within which the next AGM is required by law to be held; or revoked or varied by an Ordinary Resolution passed by the Shareholders in a general meeting. whichever occurs first ( Proposed Authorised Period ). The Proposed Share Buy-Back will be effected through KSB s appointed stockbrokers. The Shareholders approval for the Proposed Share Buy-Back does not impose an obligation on the Company to purchase its own shares on Bursa Securities. 2.2 MAXIMUM AMOUNT OF FUNDS TO BE ALLOCATED AND THE SOURCE OF FUNDS In accordance with the Listing Requirements, the Proposed Share Buy-Back must be made wholly out of retained profits and/or share premium accounts of the Company. Therefore, the Board proposes that the maximum amount of funds to be utilised for the Proposed Share Buy-Back shall not exceed the retained profits of the Company. Based on the latest audited Financial Statements of the Company as at 30 June 2015, the retained profits is as follows:- As at 30 June 2015 Retained Profits RM1,471, Accordingly, the Proposed Share Buy-Back will allow the Board to exercise the power of the Company to purchase its own ordinary shares at any time within the above mentioned time period using internally generated funds and/or borrowings. The amount to be utilised will depend on the actual number of Shares to be purchased the price of the Shares and the availability of funds involved for each purchase(s) will depend on the market conditions and sentiments of the stock market as well as the retained profits and financial resources available to the Group. 2

8 In the event if the Company purchases and holds its own Shares using external borrowings, the Board will ensure that the Company has sufficient funds to repay the external borrowings and that the repayment will not have a material effect on the cash flow of the Company. 2.3 TREATMENT OF PURCHASED SHARES The Purchased Shares by the Company may be dealt by the Board in accordance with Section 67A of the Act in the following manners:- (i) (ii) (iii) (iv) to cancel the Purchased Shares; and/or to retain the Purchased Shares as Treasury Shares for distribution as share dividends to the Shareholders of the Company, which then may be applied as a reduction of the retained profits of the Company, and/or resell on the market of Bursa Securities in accordance with the relevant rules of Bursa Securities and/or cancel subsequently; and/or to retain part of the Purchased Shares as Treasury Shares and cancel the remainder; and/or any other manner as prescribed by the Act, rules, regulations and orders made pursuant to the Act and the Listing Requirements as well as any other relevant authority for the time being in force. As at the date of this Statement, the Board has yet to decide on the treatment of the Shares so purchased and will take into consideration the effects of such treatment on the Group in arriving at its decision. An immediate announcement will be made to Bursa Securities upon each purchase, cancellation and/or resale of Shares pursuant to the Share Buy-Back. If such Purchased Shares were held as Treasury Shares, the rights attaching to them in relation to voting, dividends and participation in any other distribution or otherwise will be suspended. The Treasury Shares would not be taken into account in calculating the number or percentage of Shares or a class of Shares in the Company for any purposes including the determination of substantial shareholdings, take-overs, notices, the requisitioning of meetings, the quorum for meetings and the result of a vote on resolution(s) at meetings. 2.4 SHARE PRICES The monthly highest and lowest closing prices of the KSB Shares on Bursa Securities for the past twelve (12) months are as follows (Source: Bloomberg): High (RM) Low (RM) 2014 October November December January February March April May June July August September Last transacted market price of KSB Shares on 27 August 2015, being the last RM0.605 trading day prior to the announcement of the Proposed Share Buy-Back Last transacted market price of KSB Shares on 23 September 2015, being the LPD prior to the printing of this Circular RM

9 2.5 PRICING Pursuant to Chapter 12 of the Listing Requirements, KSB shall purchase its own Shares or resell its treasury shares (if applicable) only on the market of the Bursa Securities at a price not be more than fifteen percent (15%) above the weighted average market price of KSB Shares for the five (5) market days immediately preceding the date of purchase. The price for the resale of treasury shares shall:- (a) (b) not be less than the weighted average market price for KSB Shares for five (5) market days immediately prior to the resale; or a discounted price of not more than five percent (5%) to the weighted average market price for KSB Shares for five (5) market days immediately prior to the resale provided that:- (i) (ii) the resale takes place no earlier than thirty (30) days from the date of the purchase; and the resale price is not less than the cost of purchase of the Shares being resold. The aforesaid Treasury Shares shall not be entitled to any of the right attached to the existing Shares of the Company as to voting, dividends and participation in other distribution or otherwise, are suspended and shall not be taken into account in calculating the number or percentage of shares or of a class of shares in the Company for any purposes including, without limiting the generality of Section 67A(3C) of the Act, the Articles of Association of the Company or the Listing Requirements on substantial shareholdings, takeovers, notices, the requisitioning of Meetings, the quorum for Meetings and the result of a vote on a resolution at a Meeting. 2.6 PUBLIC SHAREHOLDING SPREAD Pursuant to Paragraph 8.02(1) of the Listing Requirements, a listed issuer must ensure that at least twenty-five percent (25%) of its total listed shares (excluding Treasury Shares) are in the hands of the public shareholders. The Board undertakes that the Proposed Share Buy-Back will be conducted in accordance with the laws and regulations prevailing at the time of the purchase including compliance with the requirement of the public shareholding spread. As at the LPD, the public shareholding spread of the Company is as follow: After Proposed As at LPD (1) Share Buy-Back (2) No of Shares % No of Shares % Public Shareholding 61,620, ,694, % Notes: (1) Based on the issued and paid-up share capital of 89,260,500 KSB Shares as at LPD. (2) Based on the assumption that:- (a) the Proposed Share Buy-Back involves the aggregate purchase of 8,926,050 KSB Shares, representing ten percent (10%) of the issued and paid-up share capital of the Company as at LPD; (b) the number of KSB Shares held by the Directors of the Group, the Substantial Shareholders of KSB and Persons Connected to them remain unchanged; and (c) the Purchased Shares are from the Shareholders other than the Directors, Substantial Shareholders of KSB and Persons Connected to them. 2.7 RATIONALE The Proposed Share Buy-Back, if implemented will enable KSB to utilise its surplus financial resources more effectively. The Proposed Share Buy-Back is expected to stabilise the supply and demand of KSB Shares as well as the price of KSB Shares. In addition, the Purchased Shares may be held as Treasury Shares and resold on Bursa Securities with the intention of realising a potential gain without affecting the total issued and paid-up share capital of the Company. Should any Treasury Shares be distributed as share dividends, this would serve to reward the Shareholders of the Company. 4

10 Nevertheless, the Board will be mindful of the interest of KSB and its Shareholders in undertaking the Proposed Share Buy-Back and in the subsequent cancellation to the Purchased Shares. 2.8 POTENTIAL ADVANTAGES AND DISADVANTAGES FOR THE PROPOSED SHARE BUY-BACK The potential advantages of the Proposed Share Buy-Back are as follows:- (i) (ii) (iii) (iv) (v) allows the Company to take preventive measures against speculation particularly when its shares are undervalued which would in turn stabilise the market price of the Shares, and hence, enhance the investors confidence; allows the Company, the flexibility in achieving the desired capital structure, in terms of debt, equity composition and size of equity; enhance the EPS of KSB Shares (all things being equal) as it would have a positive impact on the market price of KSB Shares, which would be a benefit to the Shareholders of KSB as a lower number of Shares being used for the purposes of computing the EPS, if the Purchased Shares are subsequently cancelled or during such period, such Shares are held as treasury shares; the Purchased Shares may be held as Treasury Shares and distributed to Shareholders as dividends and/or resold in the open market with the intention of realising a potential capital gain if the Purchased Shares are resold at price(s) higher than their purchase prices(s); and the possibility of exceptional gain if the Purchased Shares which are retained as treasury shares are resold at prices higher than their purchase price or be distributed as share dividends to the Shareholders. The potential disadvantages of the Proposed Share Buy-Back are as follows:- (i) (ii) (iii) reduce the financial resources of the Group and may result in the Group foregoing better investment opportunities and/or earn other income that may be emerge in the future or derived from the funds utilized for the Proposed Share Buy-Back; result in a lower amount of cash reserves available for dividends to be declared to Shareholders as funds are utilised to purchase the Shares; and the Company s net cashflow may decline to the extent of the interest costs associated with such borrowings. The Proposed Share Buy-Back, however, is not expected to have any potential material disadvantages to the Company and its Shareholders, as it will be mitigated by the prospect that the final resources of the Group may increase, if the Shares purchased held as Treasury Shares are re-sold at prices higher than their purchase price. The Board in exercising any decision on the Proposed Share Buy-Back will be mindful of the interest of the Company and its Shareholders. 2.9 PURCHASE OF SHARES AND RESALE AND/OR CANCELLATION OF TREASURY SHARES IN THE PREVIOUS TWELVE (12) MONTHS The Company has not made any purchase, resale or cancellation of any of its own Ordinary Shares in the previous twelve (12) months preceding this Statement. Hence, there is no resale or cancellation of Treasury Shares as at LPD FINANCIAL EFFECTS Assuming that the Company purchases Shares representing ten percent (10%) of its issued and paid-up share capital as at LPD, the effects of the Proposed Share Buy-Back on the share capital, NA, working capital, earnings and dividends are set out as follows:- (i) Share Capital The Proposed Share Buy-Back will result in the reduction of the issued and paid-up share capital of the Company if the Purchased Shares are cancelled. The proforma effects of the Share Buy-Back on the issued and paid-up share capital of KSB as at LPD assuming the Purchase Shares are cancelled, is illustrated below:- 5

11 No of Shares RM Less : Issued and Paid-Up Share Capital as at LPD Maximum number of KSB Shares that may be purchased and cancelled pursuant to the Proposed Share Buy-Back Total issued and paid-up share capital after the Proposed Share Buy-Back 89,260,500 89,260, ( 8,926,050) (8,926,050.00) 80,334,450 80,334, The actual effect of the Share Buy-Back on the issued and paid-up share capital of the Company will depend on whether the Purchased Shares are cancelled or retained as Treasury Shares. There will be no effect on the issued and paid-up share capital of the Company if the Purchased Shares are retained as Treasury Shares, resold or distributed as share dividend to Shareholders. (ii) NA The effect of the Share Buy-Back on the NA of the Group will depend on the purchase prices of the Shares, the number of Shares purchased and the effective funding cost to the Group to finance the purchase of Shares or any loss in interest income to the Group. Depending on the purchase price and number of Shares purchased, the Share Buy- Back will reduce the consolidated NA per Share at the time of purchase if the purchase price exceeds the consolidated NA per Share and conversely will increase the consolidated NA per Share at the time of purchase if the purchase price is less than the consolidated NA per Share. Should the Purchased Shares be resold, the consolidated NA per Share will increase if the Company realises a gain from the resale, and vice versa. If the Purchased Shares which were held as Treasury Shares, are distributed as share dividends, the consolidated NA per share will decrease by the cost of the Treasury Shares. (iii) Gearing The effect of the Share Buy-Back on the gearing of the KSB Group will depend on the proportion of borrowings utilised to fund any purchase of Shares. The utilisation of any borrowings utilised to fund any purchase of Shares. The utilisation of any borrowings to fund the purchase of any Shares will serve to increase the gearing of KSB Group. (iv) Working Capital The implementation of the Share Buy-Back is likely to reduce the working capital and cash flow of the Group, the quantum of which depend on the number of KSB Shares being purchased, the purchase price(s) and the amount of financial resources to be utilised for the purchase of KSB Shares. For the Purchased Shares which are retained as Treasury Shares, upon its resale, the working capital and cash flow of the Company will increase. The quantum of the increase in the working capital and cash flow will depend on the actual selling price(s) of the Treasury Shares resold, the effective gain or interest saving arising and the gain or loss from the disposal. 6

12 (v) EPS The effects of the Share Buy-Back on the EPS of KSB will depend on the purchase price of KSB Shares, the number of Shares purchased and the effective funding cost to the Group to finance the purchase of Shares or any loss in interest income to the Group. Assuming that Purchased Shares are retained as Treasury Shares and resold, the effects on the EPS of KSB will depend on the actual selling price, the number of Treasury Shares resold, and the effective gain or interest saving arising from the exercise. If the Purchased Shares are cancelled, the Share Buy-Back will increase the EPS of KSB provided that the income foregone and interest expenses incurred on the Purchased Shares are less than the EPS before the Share Buy-Back. (vi) Dividends Assuming the Proposed Share Buy-Back is implemented in full and the dividend quantum is maintained at historical levels, the Proposed Share Buy-Back will have the effect of increasing the dividend rate of KSB as a result of the reduction in the issued and paid-up share capital of KSB as described under Section 2.3 above. Nevertheless, the decision to declare and pay dividends in the future would depend on the performance, cash flow position and financing requirements of the KSB Group. As stated in Section 2.3 above, the Board may have the option to distribute future dividends in the form of the Treasury Shares purchased pursuant to the Proposed Renewal of Share Buy-Back INTERESTED DIRECTORS, SUBSTANTIAL SHAREHOLDERS AND PERSONS CONNECTED TO THEM The Purchased Shares by the Company pursuant to the Proposed Share Buy-Back that are retained as Treasury Shares and/or cancelled will result in a proportionate increase in the percentage of shareholdings of the Directors, Substantial Shareholders and Persons connected to them of the Company. In the event that all the Purchased Shares are cancelled and on the assumption that the Proposed Share Buy-Back is exercised in full and that the Company will purchase the Shares from Shareholders other than the Directors, Substantial Shareholders and Persons connected to them, the proforma effects of the Proposed Share Buy-Back on the shareholdings of the Directors, Substantial Shareholders of KSB and persons connected as at LPD, are set out as follows:- Name of Directors No of KSB Shares before Proposed Share Buy-Back # No of KSB Shares after Proposed Share Buy-Back * Direct % Indirect % Direct % Indirect % Dato Sri Liew 30, ,720,300 ^ , ,720,300 ^ Kuek Hin, Dato Sri Liew ,750,300 ^ ,750,300 ^ Yew Chung Liew Yet Mei ,750,300 ^ ,750,300 ^ Huang Yan Teo Leslie Looi Meng The rest of this page has been intentionally left blank 7

13 Name of Substantial Shareholders London Biscuits Berhad Dato Sri Liew Kuek Hin Datin Sri Lim Yook Lan Dato Sri Liew Yew Chung Dato Liew Yew Cheng No of KSB Shares before Proposed Share Buy-Back # No of KSB Shares after Proposed Share Buy-Back * Direct % Indirect % Direct % Indirect % 19,720, ,720, , ,720,300 ^ , ,720,300 ^ ,750, ,750, Liew Yet Mei Dato Liew Yet Lee Meileelanusa ,720,300 ^ ,720,300 ^ Sdn Bhd Lim Pei Liam Ahat Tiam 7,889, ,889, # Based on issued and paid-up share capital of 89,260,500 KSB Shares. * Based on issued and paid-up share capital of 80,334,450 KSB Shares. Notes: i) ^ Deemed interested by virtue of their shareholdings in LBB. ii) Deemed interested through substantial shareholdings in LBB and her spouse, Dato' Sri Liew Kuek Hin. Deemed interested through substantial shareholdings in LBB and his/her parent, Dato Sri Liew Kuek Hin DIRECTORS AND SUBSTANTIAL SHAREHOLDERS INTERESTS Save for the proportionate increase in the percentage (%) of shareholdings and/or voting rights in their capacity as shareholders as a consequence of the Proposed Share Buy-Back, none of the Directors or Substantial Shareholders of the Company or Persons Connected with them has any interest, direct or indirect, in the Proposed Share Buy-Back, or in the resale of the Treasury Shares, if any IMPLICATION OF THE CODE Under Practice Note 9, Part II, 10.1 of the Code, a mandatory offer obligation arises when (a) a person obtains controls in a company as a result of a buy back scheme by the company; (b) a person (holding more than thirty-three percent (33%) but not more than fifty percent (50%) of the voting shares or voting rights of a company), as a result of a buy back scheme by the company, increases his holding of the voting shares or voting rights of the company by more than two percent (2%) in any six (6)months period; (c) a person (holding more than thirty-three percent (33%) but not more than fifty percent (50%) of the voting shares or voting rights of a company) acquires more than two percent (2%) of the voting shares or voting rights of the company when he knows or reasonably ought to know that the company would carry out a buy back scheme. Should such circumstances arises and if required, the Directors and parties acting in concert, are expected to submit an application to the SC for a waiver from implementing a MGO under Practice Note 9, Part II, 24.1 of the Code. In the event, the proposed waiver is not granted by SC, the Company will only proceed with the Proposed Share Buy-Back to the extent that it will not contravene the limit as provided under the Code. In this connection, the Board will be mindful of the requirements when making any purchase of the Shares pursuant to the Proposed Share Buy-Back. 8

14 2.14 CONDITION TO THE PROPOSED SHARE BUY-BACK The Proposed Share Buy-Back is conditional upon the approval of the Shareholders of the Company being obtained at the forthcoming AGM to be convened. Save for the approval of the Shareholders of KSB, there are no other approvals required for the Proposed Share Buy-Back. PART B - CIRCULAR IN RELATION TO THE PROPOSED RRPTS RENEWAL 3. PROPOSED RRPTS RENEWAL 3.1 PROVISIONS UNDER THE LISTING REQUIREMENTS Under Paragraph of the Listing Requirements, a listed issuer may seek a mandate from its Shareholders for RRPTs, 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 Shareholders mandate is subject to annual renewal and disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the Shareholders mandate during the financial year where the aggregate value is equal to or more than the threshold prescribed under subparagraph (vi) of Section 3.5 below; the listed issuer s circular to Shareholders for the Shareholders mandate includes the information as may be prescribed by the Exchange; in a meeting to obtain Shareholders mandate, the interested Director, interested Major Shareholder or interested person connected with a Director or Major Shareholder; and where it involves the interest of an interested person connected with a Director or Major Shareholder, such Director or Major Shareholder, must not vote on the resolution to approve the transactions. An interested Director or interested Major Shareholder must ensure that persons connected with him abstain from voting on the resolution approving the transactions; and the listed issuer immediately announces to the Exchange when the actual value of a Recurrent Related Party Transaction entered into by the listed issuer, exceeds the estimated value of the Recurrent Related Party Transaction disclosed in the circular by ten percent (10%) or more and must include the information as may be prescribed by the Exchange in its announcement. Transactions entered into between a listed issuer (or any of its wholly-owned subsidiary) and its wholly-owned subsidiaries are excluded from the requirements under Chapter 10 of the Listing Requirements. Accordingly, the Company proposes to seek its Shareholders approval for the Proposed RRPTs Renewal to allow the Company to enter into RRPTs as set out on section3.3 below RRPTs are entered into at arms length and on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public and which will not be to detriment of the minority Shareholders. The Proposed RRPTs Renewal, if approved by Shareholders at the forthcoming AGM, will be subject to annual renewal. In this respect, any authority conferred by the Proposed RRPTs Renewal shall only continue to be in force until:- (a) (b) (c) the conclusion of the next AGM of the Company, at which time such mandate it will lapse, unless by a resolution passed at the next AGM, the authority is renewed; or the expiration of the period within which the next AGM of KSB is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by resolution passed by the Shareholders in General Meeting; whichever is earlier. 9

15 Thereafter, the approval of the Shareholders will be sought for a renewal of the Shareholders Mandate for the RRPTs at each subsequent AGM of the Company. 3.2 INFORMATION ON KSB GROUP KSB is principally engaged in investment holding activities and the principal activities of its subsidiaries are as follows:- Name of Subsidiary Companies Country of Incorporation Effective Interest (%) Principal Activities KSFI Malaysia 100 Manufacturer of candy confectionery and wafer products Khee San Marketing Sdn Bhd Malaysia 100 Temporary ceased operations KSB Group has entered/will enter into RRPTs on terms not more favourable to the Related Party than those generally available to the public and which are not detrimental to the interests of the Minority Shareholders. 3.3 CLASS AND NATURE OF THE RRPTS The class and nature of the RRPTs are as follows:- Related Party Principal Activities Nature of Relationship LBB Manufacturing and trading of confectionery and other related foodstuffs LBB is one of the Substantial Shareholders in KSB with 22.09% shareholding as at LPD. The RRPTs as set out below, are general transaction to be entered into by the KSB Group relating to the provision or the obtaining of products and services to or from the Related Parties in the ordinary course of business under the Proposed RRPTs Renewal including the Terms of Transactions:- Renewal of RRPTs by KSFI:- Companies Nature of Transactions Related Party Last Year Mandate (M1) RM 000 Actual Value Transacted (M2) RM 000 Proposed Mandate (M3) RM 000 Relationship KSFI T1 LBB 52,500 NIL 55,000 R1 KSFI T2 LBB 69,300 15,362 75,000 R1 Notes:- * The actual transaction value for the financial year ended 30 June 2015 was used as the yardstick for the Management to forecast the sales volume from 12 November 2015 (i.e. forthcoming AGM) to the next AGM and it will not vary significantly from the financial year ended 30 June M1 Estimate value of transactions from 13 December 2014 to 10 November 2015 as per the Shareholders Mandate dated 18 November M2 Actual value of transactions from 13 December 2014 to 23 September 2015 (being the LPD before the printing of the circular). The actual value of the transactions from 13 December 2014 to 23 September 2015 did not exceed ten percent (10%) or more of the Estimated Value obtained under the Shareholders Mandate during the AGM in M3 T1 T2 Estimated value of transactions from the date of the 21 st AGM on 11 November 2015 to the date of the next AGM in The estimate value is subject to changes. Purchase of assorted raw materials, such as packaging materials, sugar and flavourings on a perpetual basis by KSFI, a subsidiary of KSB, from LBB. Sale of sweets and confectionery products including contract manufacturing of deposited candies, hard and chewy candies/sweets, wafers and chewing gums on a perpetual basis by KSFI, a subsidiary of KSB, to LBB. 10

16 R1 As at 23 September 2015, LBB is one of the Substantial Shareholder in KSB with 22.09% shareholdings. As at 23 September 2015, Dato Sri Liew Kuek Hin is a deemed Substantial Shareholder of KSB through his direct interest of 0.03% in KSB and indirect interest of 22.09% in KSB by virtue of his shareholdings in LBB. Dato Sri Liew Yew Chung is the Group Managing Director / CEO in KSB and a Director in KSFI. He is also the Group Managing Director / CEO in LBB. Dato Sri Liew Yew Chung is a deemed Substantial Shareholder of KSB through his substantial shareholdings in LBB and by virtue of the shareholdings of his parent, Dato Sri Liew Kuek Hin. Ms. Liew Yet Mei is the Non-Independent Non-Executive Director in KSB and Non-Independent Non- Executive Director in LBB. She is also a deemed Substantial Shareholder of KSB through her substantial shareholdings in LBB and by virtue of the shareholdings of her parent, Dato Sri Liew Kuek Hin. 3.4 AMOUNT DUE AND OWING BY RELATED PARTIES As at the financial year ended 30 June 2015, there is no amount due or owing to the Company by its Related Parties arising from the RRPTs which exceeded the credit term of more than one (1) year. 3.5 REVIEW AND DISCLOSURE PROCEDURES FOR THE RRPTS The Company has set out the procedures to ensure the RRPTs are undertaken on an arm s length basis on transaction prices and on the Group s normal commercial terms, which are consistent with the Group s usual business practices and policies, and on terms not more favourable to the Related Parties than those generally available to the public and are not to the detriment of the minority Shareholders. To monitor the RRPTs, the following review and procedures have been implemented:- (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) All companies within the Group are informed of the procedures applicable to RRPTs; A list of Related Parties will be circulated to the Directors and management of the Company and its subsidiaries to notify that all RRPTs are required to be undertaken on an arm s length basis, are on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public and are not detrimental to the minority Shareholders; All RRPTs will be reviewed by the Accountant, Group Chief Operation Officer and the Members of the Audit Committee of the Company, who have no interest in the transactions; A register will be maintained by the Company to record all RRPTs which are entered into pursuant to the Proposed RRPTs Renewal; The Board and the Audit Committee are to review the reports of all RRPTs entered into pursuant to the Proposed RRPTs Renewal and also to monitor that the procedures in respect of such transactions are adhered to; The threshold for approval of recurrent related party transactions is consistent with those transactions entered into with unrelated parties. All recurrent related party transactions are to be reviewed by the Group Accountant and Group Managing Director before approved by Audit Committee; At least two (2) other contemporaneous transactions with unrelated third parties for similar products/services and/or quantities 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 third parties for the same or substantially similar type of products/services and/or quantities. Where quotation or comparative pricing from unrelated third parties cannot be obtained, the transaction price will be determined by the Group based on those offered by/to other unrelated parties for the same or substantially similar type of transaction to ensure that the recurrent related party transaction is not detrimental to the Group; If a Member of the Board of KSB or the Audit Committee has an interest in the transaction to be reviewed by the Board of KSB or the Audit Committee as the case may be, he will abstain from any decision making by the Board or the Audit Committee in respect of that transaction; 11

17 (ix) (x) The transactions with the Related Parties will only be entered into after taking into account the pricing, level of service, quality of product and other related factors such as availability of stock and personnel. The pricing shall be at the prevailing market rates including where appropriate preferential rates and discounts accorded for bulk purchase which are the same as accorded to third party bulk purchase; and The Board and the Audit Committee of KSB shall review and ascertain that the guidelines and procedures established to monitor the RRPTs have been complied with including the overall responsibility for the determination of the review procedures with authority to sub-delegate to individuals or committees with the KSB Group as they may deem appropriate. Such review methods and procedures may be modified, supplemented or replace from time to time by the Audit Committee. 3.6 EXCLUDED TRANSACTIONS Transactions with any related parties, which do not fall within the ambit of the Proposed RRPTs Renewal, will be subject to other applicable provisions of the Listing Requirements, the Act and/or any applicable law, whereby immediate announcement will be required to be made on the RRPTs as follows:- (a) in relation to a listed issuer with an issued and paid-up capital of RM60 million and above:- (i) (ii) the consideration, value of the assets, capital outlay or costs of the Recurrent Related Party Transactions is RM1 million or more; or the percentage ratio of such Recurrent Related Party Transaction is one percent (1%) or more; whichever is the higher. 3.7 STATEMENT BY THE AUDIT COMMITTEE The Audit Committee of KSB, with the overall responsibility in determining the procedures for reviewing all RRPTs, will at least once a year, conduct a review and ascertain that the guidelines and procedures established to monitor the RRPTs have been complied with. The Procedures mentioned in the above paragraph 3.5 have been seen and reviewed by the Audit Committee of the Company and the Committee is of the view that:- i) the said procedures are sufficient to ensure that the Recurrent Transactions are not conducted at arm s length, on normal commercial terms of the Group and on the transaction prices and terms not more favourable to the Related Party than those generally available to the public and are not to the detriment of the minority shareholders; and ii) the Group has in place adequate procedures and processes to monitor, track and identify RRPTs in a timely and orderly manner, and such procedures and processes are reviewed on a yearly basis or whenever the need arises thereat. 3.8 DISCLOSURE IN THE ANNUAL REPORT The Company s Annual Report for the financial year ended 30 June 2015 has made reference to this Circular for the RRPTs during the financial year. 3.9 RATIONALE AND BENEFIT FOR THE RRPTS The RRPTs are in the ordinary course of business of the Group and are undertaken at arm s length on normal commercial terms and on terms not more favourable to the Related Party than those generally available to the public. They are likely to occur to some degree of frequency and arise at any time and from time to time. The Proposed RRPTs Renewal, subject to annual review, will enhance the Group by entering into transactions described in Section 3.3 above with the classes of Related Parties specified above in the ordinary course of the Group s business on normal commercial terms, in a timely fashion, and eliminate the need for the Company on each occasion, pursuant to the financial limits imposed by Paragraph of the Listing Requirements, to seek the Shareholders approval as and when potential transactions with the specified classes of Related Parties arise, thereby reducing substantially the administrative time, inconvenience 12

18 and costs associated with the convening of such Meetings without compromising the corporate objectives and adversely affecting the business opportunities available to the KSB Group. Shareholders of the Company will appreciate that the RRPTs, as outlined in Section 3.3 above are intended to facilitate transactions in the ordinary course of business of KSB Group which are transacted from time to time with Related Parties, are carried out at arm s length basis on normal commercial terms which are not prejudicial to the interest of the Shareholders, not more favourable to the Related Parties than those generally available to the public and not detrimental to the minority Shareholders. The Recurrent Transactions are intended to meet the business needs of the Group at the best possible terms. With the Related Party, the Group would have an advantage of familiarity with the background, financial well-being and management of the Related Party, thus enabling ore informed commercial decisions to be made. The Related Party, i.e., LBB, is one of the Major Shareholders of KSB and intends to continue its business relationship with KSB, as both parties have a good understanding of each other s business needs and expectations thus providing a platform where all parties could benefit from conducting the Recurrent Transactions INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED WITH THEM IN THE PROPOSED RRPTS RENEWAL None of the Directors, Major Shareholders or any Person Connected with them (as defined in the Listing Requirements), have any interest, direct or indirect, in the Proposed RRPTs Renewal, save and except for the following:- (i) (ii) (iii) (iv) (v) LBB is one of the Major Shareholders of KSB with 22.09% shareholdings; Dato Sri Liew Kuek Hin, the Non-Independent Non-Executive Chairman of KSB. Dato Sri Liew Kuek Hin is a deemed Major Shareholder of KSB through his direct interest of 0.03% in KSB and indirect interest of 22.09% in KSB by virtue of his shareholdings in LBB. He is deemed to be interested in the RRPTs; Dato Sri Liew Yew Chung is the Group Managing Director / CEO in KSB and a Director in KSFI. He is also the Group Managing Director / CEO in LBB. Dato Sri Liew Yew Chung is a deemed Major Shareholder of KSB through his substantial shareholdings in LBB and by virtue of the shareholdings of his parent, Dato Sri Liew Kuek Hin. He is deemed to be interested in the RRPTs; Ms. Liew Yet Mei is the Non-Independent Non-Executive Director in KSB and Non- Independent Non-Executive Director in LBB. She is also deemed Major Shareholder of KSB through her substantial shareholdings in LBB and by virtue of the shareholdings of her parent, Dato Sri Liew Kuek Hin and also deemed to be interested in the RRPTs; Datin Sri Lim Yook Lan, the spouse of Dato Sri Liew Kuek Hin, and their children, Dato Liew Yew Cheng and Dato Liew Yet Lee are deemed Major Shareholders of KSB through their direct and indirect shareholdings in LBB and by virtue of the shareholdings of Dato Sri Liew Kuek Hin. They are also deemed to be interested in the RRPTs. All the interested Directors, namely Dato Sri Liew Kuek Hin, Dato Sri Liew Yew Chung and Ms. Liew Yet Mei (hereinafter referred to as Interested Directors ) who are interested in the Proposed RRPTs Renewal, have abstained and will continue to abstain from deliberation and voting at Board Meetings of KSB on the relevant resolution pertaining to the Proposed RRPTs Renewal. The Interested Directors, the Interested Major Shareholders and the Persons Connected named above [Section 3.10 (i) to (v)] will abstain from voting on the resolution approving the Proposed RRPTs Renewal at the forthcoming AGM, in respect of their direct and/or indirect shareholdings. The Interested Directors and the Interested Major Shareholders named above, will undertake to ensure that the Persons Connected with them will abstain from voting on the resolution approving the Proposed RRPTs Renewal at the forthcoming AGM in respect of their direct and/or indirect shareholdings. 13