AMTEL HOLDINGS BERHAD (Company No A) (Incorporated in Malaysia under the Companies Act, 1965)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action you should take, please consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. AMTEL HOLDINGS BERHAD (Company No A) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE (I) (II) PROPOSED CAPITAL REDUCTION EXERCISE PURSUANT TO SECTION 117 OF THE COMPANIES ACT, 2016 BY REDUCING AND CANCELLING THE SHARE CAPITAL OF AMTEL HOLDINGS BERHAD ( AHB OR THE COMPANY ) FROM RM54,051,731 TO RM29,245,803 TO OFFSET AGAINST THE ACCUMULATED LOSSES OF THE COMPANY; AND PROPOSED VARIATION TO THE FINANCIAL ASSISTANCE PROVIDED TO MILAN UTAMA SDN BHD, A 35% OWNED ASSOCIATED COMPANY OF AHB, OF UP TO AN AGGREGATE AMOUNT OF RM15,000,000 OR 30% OF THE LATEST AVAILABLE CONSOLIDATED NET TANGIBLE ASSETS OF AHB AND ITS SUBSIDIARIES IN THE RELEVANT PERIOD, WHICHEVER IS HIGHER TO INCLUDE AMTEL NETWORKS SDN BHD, A 40% OWNED ASSOCIATED COMPANY OF AMTEL RESOURCES SDN BHD, WHICH IN TURN IS A 76.92% OWNED SUBSIDIARY OF AHB, ON A POOL BASIS AND NOTICE OF EXTRAORDINARY GENERAL MEETING Adviser RHB Investment Bank Berhad (Company No P) (A Participating Organisation of Bursa Malaysia Securities Berhad) The Notice of the Extraordinary General Meeting ("EGM") of AHB to be held at Bilik Petaling, Kelab Shah Alam Selangor, No. 1A, Jalan Aerobik 13/43, Persiaran Kayangan, Shah Alam, Selangor Darul Ehsan, on Wednesday, 17 May 2017 at a.m., or immediately following the conclusion or adjournment (as the case may be) of the 20 th Annual General Meeting ( AGM ) of the Company, scheduled to be held at the same venue and on the same date at a.m., whichever shall be earlier, together with the accompanying Form of Proxy are enclosed with this Circular. A member entitled to attend and vote at the EGM is entitled to appoint a proxy or proxies to attend and to vote for on his/her behalf. In such event, the Form of Proxy should be lodged at the registered office of the Company at No.7, Jalan PJS 7/19, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan on or before the date and time indicated below, or at any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the EGM should you subsequently wish to do so. Last date and time for lodging the Form of Proxy... : Date and time of the EGM... : Monday, 15 May 2017 at a.m. Wednesday, 17 May 2017 at a.m. or immediately following the conclusion or adjournment of the AGM, whichever shall be earlier This Circular is dated 25 April 2017

2 DEFINITIONS Except where the context otherwise requires, the following definitions shall apply throughout this Circular: AHB Group AHB or the Company AHB Shares ANSB ANSB Shares ARSB AVLS AVLS Business Board : AHB and its subsidiary companies, collectively : Amtel Holdings Berhad (Company No A) : Ordinary shares in AHB : Amtel Networks Sdn Bhd (Company No P) : Ordinary shares in ANSB : Amtel Resources Sdn Bhd (Company No P) : Automatic vehicle location system : The business of ANSB as a service provider to secure customers for Telekom s AVLS : Board of Directors of AHB CA 2016 : The Companies Act, 2016 Circular EGM EPS Felda Prodata Felda Project Financial Assistance FYE GAM LPD MUSB NA Projects Proposals : This circular to shareholders dated 25 April 2017 in relation to the Proposals : Extraordinary general meeting : Earnings per share : Felda Prodata Systems Sdn Bhd (Company No K) : The project undertaken on behalf of Felda Prodata to expand the fibre optic infrastructure network in rural and remote areas to increase the broadband coverage : The existing financial assistance mandate allowing AHB Group to provide to MUSB, a 35% owned associated company of AHB, of up to an aggregate amount of RM15,000,000 or 30% of the latest available consolidated net tangible assets of AHB Group in the relevant period, whichever is higher : Financial year ending/ended, as the case may be : Go Automobile Manufacturing Sdn Bhd (Company No V) : 31 March 2017, being the latest practicable date prior to the printing of this Circular : Milan Utama Sdn Bhd (Company No W) : Net assets : The Felda Project, Telekom Project and AVLS Business, collectively : The Proposed Capital Reduction and Proposed Variation to the Financial Assistance, collectively i

3 DEFINITIONS (CONT D) Proposed Reduction Capital : Proposed capital reduction exercise pursuant to Section 117 of CA 2016 by reducing and cancelling the share capital of AHB from RM54,051,731 to RM29,245,803 to offset against the accumulated losses of the Company Proposed Variation to the Financial Assistance RHBIB RM and sen SP Telekom Telekom Project : Proposed variation to the Financial Assistance to include ANSB, a 40% owned associated company of ARSB, which in turn is a 76.92% owned subsidiary of AHB, on a pool basis : RHB Investment Bank Berhad (Company No P) : Ringgit Malaysia and sen, respectively : Strategic partners : Telekom Malaysia Berhad (Company No P) : The project undertaken on behalf of Telekom to lay fibre optic and copper cables, and to undertake civil works which includes plinth, road works and trenching in the central region of Malaysia All references to you or your in this Circular are to the shareholders of AHB. Unless specifically referred to, words denoting the singular shall include the plural and vice versa and words denoting the masculine gender shall include the feminine and neuter gender and vice versa. References to persons shall include corporations. Any discrepancies in the tables included in this Circular between the amounts listed, actual figures and the totals thereof are due to rounding. Any reference to time of day in this Circular is a reference to Malaysian time, unless otherwise stated. Any reference in this Circular to any enactment or guidelines is a reference to that enactment or guidelines as for the time being amended or re-enacted. Certain statements in this Circular may be forward-looking in nature, which are subject to uncertainties and contingencies. Forward-looking statements may contain estimates and assumptions made by the Board after due enquiry, which are nevertheless subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in such forward-looking statements. In light of these and other uncertainties, the inclusion of a forward-looking statement in this Circular should not be regarded as a representation or warranty that AHB s plans and objectives will be achieved. ii

4 TABLE OF CONTENTS LETTER TO THE SHAREHOLDERS OF AHB IN RELATION TO THE PROPOSALS SECTION PAGE 1. INTRODUCTION 1 2. PROPOSED CAPITAL REDUCTION 2 3. PROPOSED VARIATION TO THE FINANCIAL ASSISTANCE 4 4. INDUSTRY OVERVIEW AND PROSPECTS OF ANSB 9 5. CONDITIONS OF THE PROPOSALS CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION INTER-CONDITIONALITY INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM DIRECTORS' RECOMMENDATION ESTIMATED TIMEFRAME FOR COMPLETION EGM FURTHER INFORMATION 12 APPENDICES I. INFORMATION ON ANSB 13 II. FURTHER INFORMATION 16 NOTICE OF EGM PROXY FORM ENCLOSED ENCLOSED iii

5 AMTEL HOLDINGS BERHAD (Company No A) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office No. 7, Jalan PJS 7/19 Bandar Sunway Subang Jaya Selangor Darul Ehsan 25 April 2017 Board of Directors YTM. Tunku Dato Seri Kamel Bin Tunku Rijaludin (Independent Non-Executive Chairman) Dato Koid Hun Kian (Group Managing Director) Tan Woon Huei (Executive Director) Siow Hock Lee (Independent Non-Executive Director) Chang Pak Hing (Independent Non-Executive Director) Ir. Chew Yook Boo (Independent Non-Executive Director) To: The shareholders of Amtel Holdings Berhad Dear Sir/Madam, I. PROPOSED CAPITAL REDUCTION; AND II. PROPOSED VARIATION TO THE FINANCIAL ASSISTANCE 1. INTRODUCTION On 23 March 2017, RHBIB had, on behalf of the Board, announced that the Company proposes to undertake the Proposals. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH THE DETAILS OF THE PROPOSALS AND TO SEEK YOUR APPROVAL ON THE RELEVANT RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE COMPANY'S FORTHCOMING EGM. THE NOTICE OF THE FORTHCOMING EGM AND THE FORM OF PROXY ARE ENCLOSED TOGETHER WITH THIS CIRCULAR. YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDIX CONTAINED HEREIN BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM. 1

6 2. PROPOSED CAPITAL REDUCTION 2.1 Details of the Proposed Capital Reduction The Proposed Capital Reduction entails a reduction of the share capital of AHB with the intention to offset the credit arising against the entire accumulated losses of AHB in accordance with Section 117 of CA As at the LPD, the share capital of the Company is RM54,051,731 * comprising 49,277,066 AHB Shares. The share capital of AHB will be reduced and cancelled by RM24,805,928 which is equivalent to the audited accumulated losses of AHB as at 30 November 2016 at the Company level. Note: * As required by Section 618(2) of CA 2016 which came into force on 31 January 2017, the share capital includes share premium of RM4,774,665. The Proposed Capital Reduction will be effective when the Registrar of Companies has recorded the information lodged in the appropriate register in accordance with Section 119 of CA Based on the above, the Proposed Capital Reduction will have the following effect on the accumulated losses of AHB: Audited As at 30 November 2016 AHB Group level RM Company level RM Accumulated losses (10,180,171) (24,805,928) Add: Credit arising from the Proposed 24,805,928 24,805,928 Capital Reduction Less: Estimated expenses incurred for the Proposals (200,000) (200,000) Resultant retained earnings/ 14,425,757 (200,000) accumulated losses For the avoidance of doubt, the Proposed Capital Reduction will not result in any adjustment to the share price of the Company or the number of shares held by the Company s existing shareholders. 2.2 Rationale for the Proposed Capital Reduction The Proposed Capital Reduction will: (i) (ii) (iii) rationalise the statement of financial position of AHB by eliminating the entire accumulated losses of the Company via cancellation of the existing share capital of the Company to reflect more accurately the value of its underlying assets and the financial position of the Company; eliminate the deficit in retained earnings thereby allowing the Company to be in a better position to retain profits and enhance their ability to pay dividends out of its retained earnings in the future; and encourage efficiency of capital usage, which consequently improves financial ratios (i.e. return on equity) and increases the Company s attractiveness amongst investors. 2

7 2.3 Risk Factors for the Proposed Capital Reduction There are no material risks associated with the Proposed Capital Reduction. 2.4 Financial Effects for the Proposed Capital Reduction The proforma effects of the Proposed Capital Reduction on the share capital and substantial shareholders shareholdings of AHB and NA, gearing, earnings and EPS of AHB Group are as follows: Share capital The proforma effects of the Proposed Capital Reduction on the share capital of AHB are as follows: No. of AHB Shares RM Share capital as at the LPD 49,277,066 (1) 54,051,731 To be reduced pursuant to the Proposed - (2) (24,805,928) Capital Reduction After the Proposed Capital Reduction 49,277,066 29,245,803 Note: (1) As required by Section 618(2) of CA 2016 which came into force on 31 January 2017, the share capital includes share premium of RM4,774,665. (2) Based on the audited accumulated losses of the Company as at 30 November NA and gearing The proforma effects of the Proposed Capital Reduction on the NA and gearing of AHB Group based on the latest audited consolidated statement of financial position of the Company as at 30 November 2016 and on the assumption that the Proposed Capital Reduction had been effected on that date are as follows: Audited as at 30 November 2016 RM Proforma I After the Proposed Capital Reduction RM Share capital 49,277,066 (1) 29,245,803 Share premium 4,774,665 (1) - Fair value adjustment reserve 159, ,000 Exchange reserves 13,627 13,627 Accumulated losses/retained earnings (10,180,171) (2) 14,425,757 Shareholders fund/na 44,044,187 43,844,187 No. of AHB Shares 49,277,066 49,277,066 NA per AHB Share (RM) Total borrowings (RM) 663, ,005 Gearing (times) Notes: (1) As required by Section 618(2) of CA 2016 which came into force on 31 January 2017, the share capital includes share premium of RM4,774,665. (2) After deducting the estimated expenses for the Proposals of approximately RM200,000. 3

8 2.4.3 Earnings and EPS The Proposed Capital Reduction will not have any effect on the earnings and EPS of AHB Group for the FYE 30 November Substantial shareholders shareholdings The Proposed Capital Reduction will not have any effect on the substantial shareholders shareholdings in AHB Convertible Securities As at the LPD, AHB does not have any convertible securities. 3. PROPOSED VARIATION TO THE FINANCIAL ASSISTANCE Under Paragraph 8.23(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Listing Requirements ), the provision of financial assistance by a listed issuer or its unlisted subsidiaries in favour of the subsidiaries or associated companies of the listed issuer, the listed issuer (in the case of the subsidiaries providing the financial assistance) or its immediate holding company which is listed, is deemed to be a provision of financial assistance. Further to the above, under Paragraph 8.23(2)(c) of the Listing Requirements, where the provision of financial assistance is to an associated company, and the aggregate amount provided or to be provided at any time to each associated company compared to the net tangible assets of AHB Group is 5% or more, the listed issuer must issue a circular to its shareholders and seek its shareholders approval in a general meeting for such proposed provision of financial assistance. In this respect, the Proposed Variation to the Financial Assistance falls under Paragraphs 8.23(1) and 8.23(2)(c) of the Listing Requirements. 3.1 Proposed Variation to the Financial Assistance ANSB is principally engaged in: (i) (ii) (iii) installation, testing and commissioning of utilities, telecommunication and fibre optic cables; associated civil works; and trading and distribution of information and communication technology products and services. Currently, ANSB has been engaged by: (i) (ii) (iii) Felda Prodata as a contractor for the Felda Project; Telekom as a consortium partner for the Telekom Project; and Telekom for the AVLS Business. Further information on the Projects are set out in Section 3.2 of this Circular. 4

9 AHB Group will be required to provide financial assistance in the form of advances and corporate guarantees to ANSB in order for ANSB to undertake the Projects and other future projects which may include the projects that ANSB is currently tendering for. Further details on the existing utilisation of the Financial Assistance are set out in Section of this Circular Details of the Proposed Variation to the Financial Assistance At the EGM of the Company which was held on 10 July 2014, AHB had obtained a mandate from its shareholders for the Financial Assistance. AHB proposes to vary the Financial Assistance to include ANSB. As at the LPD, AHB Group has provided financial assistance amounting to RM6,576,000 to MUSB in the following manner: No. Granted by Type of financial assistance 1. AHB Corporate guarantee 2. Amtel Cellular Sdn Bhd, a wholly owned subsidiary of AHB 3. Metrarama Sdn Bhd, a wholly owned subsidiary of AHB Purpose Guarantee for credit facilities granted to MUSB Cash advance Setting up costs for assembly line at GAM s factory (1) 3 rd party pledge of fixed deposit 3 rd party pledge for credit facilities granted to MUSB Amount granted RM 3,600,000 1,976,000 1,000,000 Total 6,576,000 Note: (1) The tier-0 vendor programme deploys a factory-in-factory concept where vendors supply directly to the automotive manufacturers through a common facility shared with other tier-0 vendors. MUSB is a tier-0 vendor of GAM that: (i) (ii) supplies the components and accessories, including but not limited to, navigation software and local maps for Global Positioning System (GPS) navigation products and car accessories for passenger cars/vehicles; and conducts quality assurance, final inspection and pre-delivery inspection of passenger cars/vehicles at GAM s factory in Gurun, Kedah to ensure that the passenger cars/vehicles have passed all the necessary quality control checks before it is delivered to customers. Based on the amount of RM6,576,000 that has already been utilised by MUSB and assuming MUSB does not utilise any additional amount of Financial Assistance, AHB is able to provide financial assistance to ANSB of up to RM8,424,000. For the avoidance of doubt, the entire Financial Assistance of RM15,000,000 or 30% of the latest available consolidated net tangible assets of AHB Group in the relevant period (being RM12,540,956 as at 30 November 2016), whichever is higher, would be utilised by MUSB and ANSB on a shared pool basis. 5

10 The utilisation of the Financial Assistance which was granted to MUSB will depend on the requirements of MUSB and may not be fully utilised if MUSB has sufficient cash flow generated from its existing businesses. The unutilised amount of the Financial Assistance amounts to RM8,424,000 as at the LPD, and is proposed to be utilised in the following manner: Utilisation Estimated timeframe of utilisation (1) Estimated Amount (2) RM Working capital requirements for MUSB and ANSB (3) Within 24 months 4,424,000 Corporate guarantee for ANSB (4) Within 24 months 4,000,000 Total 8,424,000 Notes: (1) The estimated timeframe of the utlisation will commence from the date of the Company s shareholders approval for the Proposed Variation to the Financial Assistance. (2) These are based on the management s estimate and may be subject to change. For avoidance of doubt, the estimated amount will be in the form of cash advances, corporate guarantees or collaterals for banking facilities to be obtained from the financial institutions. (3) The working capital requirements will be used on a shared pool basis between MUSB and ANSB for the following: (i) (ii) purchase of car accessories (i.e. around view cameras, double-din multimedia devices and rear view mirror incorporated with SmartTAG), raw materials, payment of wages and other direct and indirect overhead costs (i.e. office equipment and expenses, rental and electricity) for MUSB projects; and purchase of tracking devices and related accessories, machineries, tools, personal protective equipment, payment of wages and other direct and indirect overhead costs (i.e. office equipment and expenses, rental and electricity) for ANSB projects. As at the LPD, the apportionment of the amount to be used for working capital requirements between MUSB and ANSB is yet to be determined and will be based on the needs of either company at the relevant point in time. (4) As at the LPD, ANSB has applied for banking facilities from financial institutions which are estimated to be RM10.0 million whereby AHB is expected to provide corporate guarantees based on ARSB s shareholding of 40% in ANSB, which amounts to RM4.0 million. These banking facilities will be utilised for working capital requirements for the purposes disclosed in Note 3(ii) above. For information purposes, the RM4.0 million to be utilised as a corporate guarantee for ANSB will not affect the ability of MUSB to fund its existing businesses as MUSB has sufficient cash flow generated from their existing businesses Background information on ANSB ANSB was incorporated in Malaysia on 2 April 1985 under the Companies Act, ANSB is a 40% owned associated company of ARSB, which in turn is a 76.92% owned subsidiary of AHB. The issued share capital of ANSB is RM1,000,000 comprising 1,000,000 ANSB Shares. Further details of ANSB are set out in Appendix I of this Circular. 6

11 3.2 Rationale for the Proposed Variation to the Financial Assistance Over the past year, the management of ANSB has been preparing and positioning itself to take up more projects to consolidate its position in this competitive market. In 2016, ANSB has successfully procured the Felda Project and the contract for the AVLS Business has been renewed for another 3 years. In 2017, Telekom has approved ANSB as one of their consortium partners, details of which are set out below. ANSB is also in the midst of tendering as a contractor for new projects with various parties. In addition, ANSB is working closely with Telekom to secure more fleet management services projects for the AVLS Business. The Proposed Variation to the Financial Assistance will allow ANSB to undertake the following projects: (i) Felda Project In October 2016, ANSB was appointed as a contractor by Felda Prodata to expand the coverage area of fibre infrastructure to the rural and remote areas. This 1 year appointment is valued at approximately RM10 million and may be extended at the sole discretion of Felda Prodata. The Felda Project is estimated to take 1 year to complete. This project will require ANSB to lay the fibre optic cables (which include civil works) in 4 identified routes in Perak, Pahang and Terengganu totaling approximately 154 kilometers in length. Upon the successful completion of this project, ANSB is expected to secure further contracts from Felda Prodata. The Proposed Variation to the Financial Assistance is to part finance the Felda Project, where necessary, and to enable ANSB to mobilise funds to finance the acquisition of relevant machineries and tools (i.e. lorries, horizontal directional drilling machines and splicing machines) as well as to provide working capital to facilitate the smooth completion of the Felda Project. As at the LPD, ANSB is unable to determine the amount of machineries and tools that will be acquired. (ii) Telekom Project Telekom has appointed SPs to manage and deliver its network development projects which include the laying of fibre optics and copper cables and civil works (i.e. plinth, road works and trenching) for Telekom. The role of a SP is to manage the projects awarded by Telekom and to distribute the work and payments to its consortium partners such as ANSB. On 15 March 2017, ANSB signed a teaming agreement with the SP to be a consortium partner to undertake the Telekom Project for the central region of Malaysia. This project requires ANSB to lay fibre optic and copper cables, and to undertake civil works which includes plinth, road works and trenching. This agreement is effective until renewal or extension of the contract between Telekom and the SP, which is at the sole discretion of Telekom. The Proposed Variation to the Financial Assistance will provide the necessary financial support to ANSB to purchase machineries (i.e. lorries with crane, horizontal directional drilling machines, backhoe and cement mixer) and tools (i.e. concrete cutter, power drill and chain saw) for the Telekom Project. As at the LPD, ANSB is unable to determine the amount of machineries and tools that will be acquired. 7

12 (iii) AVLS Business In 2014, ANSB was appointed by Telekom as a service provider to secure customers by way of approaching corporate companies and/or government and government link companies to subscribe for Telekom s AVLS. On 17 March 2017, ANSB s appointment was renewed for another 3 years up to December 2019 and may be further renewed, subject to the sole prerogative of Telekom. Telekom s AVLS is mainly used by companies which rely on transportation in business to track their fleet of vehicles to better manage their fleet for improved efficiency and productivity. ANSB has been working closely with Telekom since the appointment to better service its clients and to expand its customer base. The Proposed Variation to the Financial Assistance will provide the necessary financial support to ANSB to purchase the necessary tracking devices and related accessories to supply to the potential customers. The amount of tracking devices and related accessories that will be acquired depends on orders received from customers. In view of the Projects and other potential projects of ANSB, the management of AHB proposes to vary the existing Financial Assistance granted to MUSB to include ANSB as a recipient of the Financial Assistance to allow ANSB to gain access to available funds to facilitate the implementation of these projects. By including ANSB as a recipient of the Financial Assistance, it will be beneficial to AHB Group in the longer term as the Projects and other potential projects are expected to contribute positively to the future profits and earnings of AHB Group. 3.3 Risk factors for the Proposed Variation to the Financial Assistance Save as disclosed below and apart from the general business risks faced by ANSB, the Board does not envisage any material risks associated with the Proposed Variation to the Financial Assistance: (i) (ii) The corporate guarantee to be provided to ANSB will not have direct financial impact to the financial position of AHB Group. However, in the event that ANSB defaults on its debt obligations, the corporate guarantee may be called upon by the financial institutions resulting in a liability for AHB Group. Such an event of default will have a material and adverse impact on the financial position of AHB Group as funds in AHB Group will be depleted to serve ANSB s debt obligations as well as indemnity payments. Should ANSB fail to repay its obligations, this may also pose a credit risk to AHB Group. Any adverse changes to ANSB s business and/or operations may affect its ability to service its repayment obligations to AHB Group pursuant to the Proposed Variation to the Financial Assistance. As a mitigating factor, the Board would be consulted and notified on all utilisation of monies for which the Proposed Variation to the Financial Assistance is intended for, in addition to monitoring the performance and cash flow position of ASNB at the Board s regular meetings. 3.4 Financial effects for the Proposed Variation to the Financial Assistance The Proposed Variation to the Financial Assistance will not have any material effect on the share capital and substantial shareholders shareholdings of AHB and NA, gearing, earnings and EPS of AHB Group for the FYE 30 November

13 4. INDUSTRY OVERVIEW AND PROSPECTS OF ANSB 4.1 Overview and outlook of the Malaysian economy In 2016, the Malaysian economy recorded a growth of 4.2% (2015: 5.0%) despite considerable external and domestic headwinds. The global economic landscape was challenging given the subdued global demand and low commodity prices. Domestically, the economy continued to face headwinds from the higher cost of living amid soft employment conditions. Concurrently, business and consumer sentiments were affected by a confluence of global and domestic factors, including the heightened volatility in financial markets and the significant underperformance of the ringgit. Domestic demand continued to anchor growth, supported mainly by private sector spending. Private consumption growth, in particular, was sustained at 6.1% (2015: 6.0%), supported by continued employment and wage growth following the increase in minimum wage and civil servant salaries. Government measures to boost disposable income such as the temporary reduction in employees contribution to the Employees Provident Fund (EPF), higher Bantuan Rakyat 1Malaysia (BR1M) payouts and tax relief to lower-income tax payers also supported household spending. Public consumption growth moderated to 1.0% (2015: 4.4%) following the expenditure rationalisation adopted by the Government in early 2016 given the lower petroleum related revenue because of low crude oil prices. On the supply side, all economic sectors continued to expand in 2016, with the exception of the agriculture sector. Agriculture production declined by 5.1% (2015: 1.2%), as crude palm oil (CPO) output was affected by the El Nino weather phenomenon. While growth in the services sector was higher at 5.6% (2015: 5.1%) following sustained demand in the consumer-related sectors, other sectors expanded more moderately. (Source: Annual Report 2016, Bank Negara Malaysia) 4.2 Overview and outlook of the information and communication subsector of the Malaysian economy The information and communication subsector continued to record a strong growth of 8.7% during the first six months of The communication segment remained as the major contributor to growth, sustaining its pace at 10.1% (January June 2015: 10.1%) following new and expansion of internet based applications as well as enhanced data plans. This was supported by growing number of information and communications technology (ICT) devices as well as continuous initiatives to enhance network coverage and communication access. Growth of the subsector was partly driven by infrastructure expansion to cater for the rising demand for reliable and high-speed internet, including 4G Long-Term Evolution (LTE) network and fibre optic. As at end-august 2016, 432 kilometre of fibre optic cables were installed in Peninsular Malaysia to transmit data at a faster rate, while 160,688 ports were installed in suburban and rural areas to further boost broadband penetration rate. The subsector is expected to sustain its strong growth momentum expanding 9.4% in 2016 (2015: 9.4%). For 2017, the information and communication subsector is anticipated to expand 9.6% driven by growing adoption of digital services and devices by small and medium enterprises as well as households (2016: 9.4%). (Source: Chapter 3, Economic Report 2016/2017, Ministry of Finance Malaysia) 9

14 4.3 Overview and outlook of the construction sector of the Malaysian economy The civil engineering subsector recorded a double-digit growth of 21.4% in 2016, supported by investment in petrochemical industries and ongoing infrastructure works (January June 2015: 2.9%). These include the construction of Refinery and Petrochemical Integrated Development (RAPID); Independent Deepwater Petroleum Terminal Phase 2 Pengerang; and Petronas LNG Complex Bintulu. The upgrading of Klang Valley Double Track Rawang Salak Selaran Line; construction of new Deep Water Terminal at Kuantan Port, Pan Borneo Highway Phase 1 and Water Supply Scheme Kuala Terengganu North; as well as road upgrading works, especially in Selangor, Pahang and Johor are expected to further augment growth in this subsector. For 2017, the construction sector is projected to grow 8.3% (2016: 8.7%) mainly supported by the commencement of large infrastructure projects such as MRT Sungai Buloh Serdang Putrajaya Line, Pan Borneo Highway, Sungai Besi Ulu Klang Elevated Expressway and Damansara Shah Alam Elevated Expressway. The upgrading road works from Klang Container Terminal North Port and the construction of infrastructure in Malaysia Vision Valley are expected to further support the sector. (Source: Chapter 3, Economic Report 2016/2017, Ministry of Finance Malaysia) 4.4 Prospects of ANSB ANSB will continue to focus in its areas of expertise particularly in installation, testing and commissioning of telecommunication cables and associated civil works and will be positioned to participate in infrastructure projects such as the East Coast Rail Line project (ECRL) which connects the ports on the east and west coasts of Peninsular Malaysia, Kuala Lumpur Singapore High Speed Rail project (HSR) and Mass Rapid Transit system (MRT). Furthermore, in view of the positive outlook for both the information and communication subsector and construction sector, ANSB s prospects going forward is promising. (Source: Management of AHB) 5. CONDITIONS OF THE PROPOSALS The Proposals are subject to and conditional upon the following: (i) (ii) approval of shareholders of AHB at an EGM to be convened; no application having been made for the cancellation of the approval from shareholders of AHB for the Proposed Capital Reduction ( Capital Reduction Resolution ) by any creditor of the Company within the timeframe prescribed in CA 2016; (iii) lodgement of the relevant documents with the Registrar of Companies after the end of 6 weeks (but before the end of 8 weeks) beginning with the date of the Capital Reduction Resolution; and (iv) approvals or consents of any relevant authorities and/or parties, if required. 6. CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION As at the LPD, there are no other corporate exercises which have been announced by AHB but pending completion. 10

15 7. INTER-CONDITIONALITY The conditionality of the Proposals are set out below: (i) (ii) the Proposed Capital Reduction is not conditional upon the Proposed Variation to the Financial Assistance, and vice versa; and the Proposals are not conditional upon any other corporate exercises being undertaken by the Company. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of the Directors and/or major shareholders of the Company as well as persons connected with them has any interest, direct and/or indirect, in the Proposals. 9. DIRECTORS RECOMMENDATION The Board, after having considered and deliberated on all aspects of the Proposals, including the rationale, risk factors, financial effects, and the utilisation of the funds for the Proposed Variation to the Financial Assistance, is of the opinion that the Proposals are in the best interest of AHB. The Board recommends that you vote in favour of the resolutions pertaining to the Proposals to be tabled at the forthcoming EGM. 10. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposals are expected to be completed by the 3 rd quarter of EGM The EGM, the notice of which is set out in this Circular, will be held at Bilik Petaling, Kelab Shah Alam Selangor, No. 1A, Jalan Aerobik 13/43, Persiaran Kayangan, Shah Alam, Selangor Darul Ehsan, on Wednesday, 17 May 2017 at a.m., or immediately following the conclusion or adjournment (as the case may be) of the 20 th Annual General Meeting of the Company scheduled to be held at the same venue and on the same date at a.m., whichever shall be earlier, for the purpose of considering and, if thought fit, passing the relevant resolutions to give effect to the Proposals. If you are unable to attend and vote in person at the EGM, you should complete, sign and return the enclosed Form of Proxy in accordance with the instructions therein as soon as possible, and in any event so as to arrive at the registered office of the Company at No.7, Jalan PJS 7/19, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan not less than 48 hours before the time set for the EGM, or at any adjournment thereof. The lodging of the Form of Proxy does not preclude you from attending and voting in person at the EGM should you subsequently wish to do so. 11

16 12. FURTHER INFORMATION You are advised to refer to the appendices set out in this Circular for further information. Yours faithfully, For and on behalf of the Board of Directors of AMTEL HOLDINGS BERHAD YTM. TUNKU DATO SERI KAMEL BIN TUNKU RIJALUDIN INDEPENDENT NON-EXECUTIVE CHAIRMAN 12

17 APPENDIX I INFORMATION ON ANSB 1. HISTORY AND BUSINESS ANSB was incorporated in Malaysia on 2 April 1985 under the Companies Act, ANSB is a 40% owned associated company of ARSB, which in turn is a 76.92% owned subsidiary of AHB. 2. SHARE CAPITAL As at the LPD, the issued share capital of ANSB is RM1,000,000 comprising 1,000,000 ANSB Shares. 3. SUBSTANTIAL SHAREHOLDERS The substantial shareholders of ANSB and their direct and indirect shareholdings in ANSB based as at the LPD are as follows: Direct shareholdings Indirect shareholdings No. of ANSB No. of ANSB % Substantial shareholders Shares Shares % Dato Wan Mohamad Saleh Bin Wan 90, Mahmood Zahairinizal Bin Zakaria 470, ARSB, a 76.92% owned subsidiary 400, of AHB AHB - - (1) 400, Note: (1) Deemed interested by virtue of its interest in ARSB pursuant to Section 8 of CA DIRECTORS The directors of ANSB and their direct and indirect shareholdings in ANSB as at LPD are as follows: Direct Indirect No. of ANSB No. of ANSB % % Shares held Shares held Directors Nationality Designation Dato Wan Mohamad Malaysian Director 90, Saleh Bin Wan Mahmood Wan Mohd Shukri Bin Wan Yusoff Zahairinizal Zakaria Bin Malaysian Director 40, Malaysian Director 470, SUBSIDIARY AND ASSOCIATED COMPANY As at the LPD, ANSB does not have any subsidiary and associated company. 13

18 APPENDIX I INFORMATION ON ANSB (CONT D) 6. FINANCIAL SUMMARY The summary of key financial information of ANSB based on its audited financial statements for the past 3 years up to the FYE 30 November 2016 are as follows: < Audited FYE 30 November > RM RM RM Services rendered 307, , ,475 Contract revenue 1,543, , ,912 Total Revenue 1,851,115 1,422,969 1,771,387 Other income 177,834 92, ,756 Profit before tax ( PBT ) 42, ,164 73,759 Profit after tax 42, ,069 46,761 Number of ordinary shares 600, ,000 1,000,000 Shareholders funds/na 99, , ,163 Total borrowings NA per share Gross EPS Net EPS Current ratio Gearing (times) N/A N/A N/A For the past financial period of ANSB: (i) (ii) (iii) there were no exceptional or extraordinary items; there were no accounting policies adopted by ANSB which are peculiar to ANSB because of the nature of its business or the industry in which it is involved in; and there were no audit qualifications of the financial statements of ANSB. Commentary on past performance: FYE 30 November 2014 For the financial year under review, the revenue from services rendered was derived mainly from the contract of manpower for map testing and survey works and the AVLS Business. Meanwhile, this was also the first year that ANSB was awarded a major sub-contract job to perform telecommunication works to supply, install and relocate fibre optic cables for the road widening project at New Klang Valley Expressway, from Bukit Lanjan to Jalan Duta, to include a 4 th lane ( Widening Project ). Other income for the financial year under review increased by RM60,130 as compared to FYE 30 November 2013 which is due to a combination of management fees and commission obtained from the AVLS Business. ANSB s PBT for the financial year under review increased by RM59,666 as compared to loss before tax of RM16,872 for FYE 30 November The increase in PBT was in tandem with the increase in revenue. 14

19 APPENDIX I INFORMATION ON ANSB (CONT D) FYE 30 November 2015 For the financial year under review, higher revenue was recorded from services rendered mainly due to the AVLS Business, being the first full year of services provided. Meanwhile, the contract revenue was lower in comparison to FYE 30 November 2014 as there were no other major contracts awarded during the financial year, while the billings received from the Widening Project was minimal. Other income for the financial year under review decreased by RM85,704 as compared to FYE 30 November 2014 as the commission it obtained from the AVLS Business was mostly paid in ANSB s PBT for the financial year under review increased by RM155,370 as compared to PBT for FYE 30 November The increase in PBT was mainly due to the increase in revenue from services rendered from AVLS Business. FYE 30 November 2016 For the financial year under review, higher revenue was reported mainly due to the billings received from the Widening Project. The Widening Project was completed in December Other income for the financial year under review increased by RM28,626 as compared to FYE 30 November 2015 mainly due to rebates that ANSB has obtained from the AVLS subscription charges for its role in handling and assisting with potential AVLS Business. ANSB s PBT for the financial year under review decreased by RM124,405 as compared to PBT for FYE 30 November The decrease in PBT was mainly due to lower margins on new contract projects in view of the competitive market. During the financial year, the Company issued 400,000 new ANSB Shares at a price of RM1.00 per ANSB Share for cash, for working capital purposes. 7. MATERIAL LITIGATION, CLAIMS OR ARBITRATION As at the LPD, ANSB is not engaged in any material litigation, claims or arbitration, either as a plaintiff or defendant, and ANSB does not have any knowledge of any proceedings, pending or threatened against ANSB, or of any fact likely to give rise to any proceedings which may materially and adversely affect the financial position or business of ANSB. 8. MATERIAL COMMITMENTS As at the LPD, there are no material commitments incurred or known to be incurred by ANSB that has not been provided for, which upon becoming enforceable, may have a material impact on the financial results/position of ANSB. 9. CONTINGENT LIABILITIES As at the LPD, there are no contingent liabilities incurred or known to be incurred by ANSB, which upon becoming enforceable, may have a material impact on the financial results/position of ANSB. 10. MATERIAL CONTRACTS ANSB has not entered into any material contracts, not being contracts entered into in the ordinary course of business, within the past two (2) years immediately preceding the date of this Circular. 15

20 APPENDIX II FURTHER INFORMATION 1. DIRECTORS' RESPONSIBILITY STATEMENT This Circular has been seen and approved by the Board who collectively and individually accept full responsibility for the accuracy of the information contained in this Circular and confirm that, after making all reasonable enquiries and to the best of their knowledge and belief, there are no false or misleading statement contained in this Circular, or other material facts the omission of which would make any statement herein false or misleading. 2. CONSENT RHBIB has given and has not subsequently withdrawn its written consent to the inclusion of its name and all references thereto in the form and context in which they appear in this Circular. 3. DECLARATION OF CONFLICT OF INTERESTS Save as disclosed below, RHBIB has given its written confirmation that as at the date of this Circular, there are no equity, financial or any other relationship or circumstances with AHB Group and/or its directors and/or substantial shareholders, that has resulted in or may result in a situation of conflict of interest which exist or is likely to exist in its role as the adviser to the Company for the Proposals. RHB Bank Berhad, the holding company of RHBIB and/or its related companies ( RHB Banking Group ) had, in its ordinary course of business, extended various credit and/or financing facilities with a combined limit of up to an aggregate amount of approximately RM1.1 million to AHB Group ( Credit Facilities ) and RM0.9 million to MUSB as at the LPD. Notwithstanding the above, RHBIB is of the opinion that concerns of any possible conflict of interests that exists or is likely to exist in relation to its capacity as the adviser to the Company for the Proposals is mitigated by the following: (i) (ii) (iii) (iv) (v) the Credit Facilities were granted on an arm s length basis and not material when compared to the RHB Banking Group s audited consolidated loans, advances and financing as at 31 December 2016; RHBIB is a licensed investment bank and its appointment as the adviser to AHB is in the ordinary course of its business. In addition, RHBIB does not receive and/or derive any financial interest or benefit save for the professional fees received in relation to its appointment as the adviser for the Proposals; RHB Banking Group s loan exposure to AHB Group and MUSB represents 0.001% of RHB Banking Group s audited total assets of RM236.7 billion as at the financial year ended 31 December 2016; the Company and MUSB has no representative on the board of RHBIB. Further, RHB Banking Group has no representative on the Board of Directors of AHB and MUSB; the corporate finance division of RHBIB is required under its investment banking license to comply with strict policies and guidelines issued by the Securities Commission Malaysia, Bursa Malaysia Securities Berhad and Bank Negara Malaysia governing its advisory operations. These guidelines require, amongst others, the establishment of Chinese wall policies, clear segregation between dealing and advisory activities and the formation of an independent committee to review its business operations; 16

21 APPENDIX II FURTHER INFORMATION (CONT D) (vi) (vii) the Credit Facilities have been provided by RHB Bank Berhad (as part of RHB Banking Group) in the ordinary course of business and are not conditional upon RHBIB being appointed as the adviser for the Proposals or upon any other proposal(s) being undertaken by any entitiy(ies) within RHB Banking Group. In addition, the department in-charge of the Proposals in RHBIB is independent from the department handling the Credit Facilities; and the conduct of RHB Banking Group s business is regulated strictly by the Financial Services Act, 2013, Capital Markets and Services Act, 2007 and RHB Banking Group s own internal controls and checks including segregation of reporting structures, in that its activities are monitored and reviewed by independent parties and committees. 4. MATERIAL LITIGATION, CLAIMS OR ARBITRATION Save as disclosed below, the Board has confirmed that, as at the LPD, AHB Group is not engaged in any material litigation, claims or arbitration, either as a plaintiff or defendant, and the Board does not have any knowledge of any proceedings, pending or threatened against AHB Group, or of any fact likely to give rise to any proceedings which may materially and adversely affect the financial position or business of AHB Group: Amtel Cellular Sdn Bhd ( AMCSB ), the wholly-owned subsidiary of AHB, had on 2 September 2015 filed an application to the Shenzhen Luoho District People s Court ( Court ) to seek judgment and claim against Shi Jian Bing ( SJB ) for SJB s failure to deliver the new navigation software engine within the prescribed timeline pursuant to an agreement dated 25 November 2013 made between AMCSB, SJB and Another Party ( AP ) ( Agreement ). AP had made an application earlier on 31 March 2015 to the Court to seek similar judgment and claim against SJB, in relation thereto. AMCSB is a Joint-Plaintiff with AP against SJB in claiming the development costs of Chinese Renminbi ( RMB ) 1,677, together with interest thereon, the cost of legal proceedings and others as specified in AHB s announcement dated 4 September The first court hearing was held from 9 October 2015 to 10 October 2015 at the Court. However no decision was formed by the Judge at the conclusion of the first trial. Another hearing was held on 25 April AMCSB had on 26 June 2016 received the following decisions and judgement from the Court in respect of AMCSB s claims against SJB: (i) the Court agreed that the Agreement entered between AMCSB, SJB and AP dated 25 November 2013 has been terminated; (ii) (iii) (iv) SJB was ordered to pay 40% of AMCSB s claims of RMB1,677, and 40% of AP s permitted claims of RMB400, totalling RMB831, to AMCSB and AP; SJB is immediately refrain from using, developing, disclosing, transferring or licensing and return all relevant materials for the purpose of software development; and the claim for cost of legal proceedings against SJB was unsuccessful. AMCSB s solicitor in the People s Republic of China has successfully filed an appeal on 15 July 2016 to the Court s decision to seek for higher compensation after taking into consideration the advice by AMCSB s solicitor. AHB is awaiting the advice from the said solicitor on the appeal. 17

22 APPENDIX II FURTHER INFORMATION (CONT D) 5. MATERIAL COMMITMENTS As at the LPD, the Board is not aware of any material commitments incurred or known to be incurred by AHB Group that has not been provided for, which upon becoming enforceable, may have a material impact on the financial results/position of AHB Group. 6. CONTINGENT LIABILITIES Save as disclosed below, as at the LPD, the Board is not aware of any contingent liabilities incurred or known to be incurred by AHB Group, which upon becoming enforceable, may have a material impact on the financial results/position of AHB Group: RM Corporate guarantees given by AHB to financial institutions for banking/credit facilities to: (i) its subsidiary companies; and 661,000 (ii) its associated companies. 550,000 Total 1,211, DOCUMENTS AVAILABLE FOR INSPECTION The following documents are available for inspection at the registered office of AHB at No. 7, Jalan PJS 7/19, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan, during normal business hours from Monday to Friday (except public holidays) from the date of this Circular up to and including the date of the forthcoming EGM, or at any adjournment thereof: (i) (ii) Constitution of AHB and ANSB; Audited consolidated financial statements of AHB for the past 2 FYE 30 November 2015 and 30 November 2016; (iii) Audited financial statements of ANSB for the past 2 FYE 30 November 2015 and 30 November 2016; (iv) (v) (vi) The letter of consent as referred to in Section 2 of this Appendix; The declaration of conflict of interest as referred to in Section 3 of this Appendix; and The cause papers in respect of the material litigation as referred to in Section 4 of this Appendix. 18