MAGNA PRIMA BERHAD (Company No P) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE

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1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. Bursa Malaysia Securities Berhad takes no responsibility for its contents, 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. MAGNA PRIMA BERHAD (Company No P) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE (I) (II) (III) PROPOSED BONUS ISSUE OF 166,444,970 WARRANTS IN MAGNA PRIMA BERHAD ( MPB ) ( WARRANTS ) ON THE BASIS OF ONE (1) WARRANT FOR EVERY TWO (2) EXISTING ORDINARY SHARES OF RM0.25 EACH IN MPB ( MPB SHARES ) ON AN ENTITLEMENT DATE TO BE DETERMINED LATER; PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL OF THE COMPANY FROM RM125,400,000 COMPRISING 500,000,000 MPB SHARES AND 40,000,000 REDEEMABLE CONVERTIBLE PREFERENCE SHARES OF RM0.01 EACH ( RCPS ) TO RM200,400,000 COMPRISING 800,000,000 MPB SHARES AND 40,000,000 RCPS ( PROPOSED IASC ); AND PROPOSED AMENDMENTS TO THE COMPANY S MEMORANDUM AND ARTICLES OF ASSOCIATION TO FACILITATE THE IMPLEMENTATION OF THE PROPOSED IASC (COLLECTIVELY, THE PROPOSALS ) AND NOTICE OF EXTRAORDINARY GENERAL MEETING Adviser M&A SECURITIES SDN BHD (15017-H) (A Wholly-Owned Subsidiary of Insas Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) The Notice convening the Extraordinary General Meeting ( EGM ) of MPB in respect of the Proposals to be held at Ideal Convention Centre, Jalan PS 8/3, Taman Prima Selayang, Batu Caves, Selangor Darul Ehsan on Wednesday, 8 July 2015 at a.m. or any adjournment thereof, together with the Proxy Form are enclosed in this Circular. A shareholder entitled to attend and vote at the EGM is entitled to appoint a proxy to attend and vote on his behalf. The Proxy Form must be deposited at the Registered Office of MPB at Lot No. C-10, Block C, Jalan Persiaran Surian, Palm Damansara, Kota Damansara, Petaling Jaya, Selangor Darul Ehsan on or before the date and time indicated below in order for it to be valid. The lodging of the Proxy Form will not preclude a shareholder from attending and voting in person at the EGM should the shareholder subsequently wishes to do so. Last date and time for lodging the Proxy Form : Monday, 6 July 2015 at a.m. Date and time of EGM : Wednesday, 8 July 2015 at a.m. or any adjournment thereof This Circular is dated 12 June 2015

2 DEFINITIONS Except where the context otherwise requires, the following definition shall apply throughout this Circular and the accompanying appendix: Board : Board of Directors of MPB Bursa Depository : Bursa Malaysia Depository Sdn Bhd ( W) Bursa Securities : Bursa Malaysia Securities Berhad ( W) Circular : This circular to shareholders dated 12 June 2015 Deed Poll : The deed poll governing the Warrants to be executed by the Company EGM : Extraordinary general meeting Entitlement Date FYE : Financial year ended LPD Government : Government of Malaysia : A date to be determined and announced later by the Board, as at the close of business on which the shareholders of MPB must be registered in the Record of Depositors of the Company in order to be entitled to participate in the Proposed Bonus Issue of Warrants : 18 May 2015, being the latest practicable date prior to the printing of this Circular M&A Securities : M&A Securities Sdn Bhd (15017-H) Main Market LR : Main Market Listing Requirements of Bursa Securities, as may be amended from time to time MPB or Company : Magna Prima Berhad ( P) MPB Group or Group : MPB and its subsidiaries, collectively MPB Share(s) or Share(s) : Ordinary share(s) of RM0.25 each in MPB Proposals : The Proposed Bonus Issue of Warrants, Proposed IASC and the Proposed Amendments, collectively Proposed Amendments : Proposed amendments to the Company s Memorandum and Articles of Association to facilitate the implementation of the Proposed IASC Proposed Bonus Issue of Warrants Proposed IASC RCPS : Proposed bonus issue of 166,444,970 Warrants in MPB on the basis of one (1) Warrant for every two (2) existing MPB Shares held on the Entitlement Date : Proposed increase in the authorised share capital of the Company from RM125,400,000 comprising 500,000,000 MPB Shares and 40,000,000 RCPS to RM200,400,000 comprising 800,000,000 MPB Shares and 40,000,000 RCPS : Redeemable convertible preference shares of RM0.01 each in MPB expiring on 22 December 2015 Record of Depositors : A record consisting of names of depositors provided by Bursa Depository pursuant to Chapter 24 of the Rules of Bursa Depository, as amended from time to time RM and sen : Ringgit Malaysia and sen, respectively Warrants : 166,444,970 warrants to be issued pursuant to the Proposed Bonus Issue of Warrants i

3 DEFINITIONS (cont d) 5D-VWAP : Five (5)-day volume weighted average market price For the purpose of this Circular, all references to a time of day shall be a reference to Malaysian time unless otherwise stated. In this Circular, words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine gender and vice versa. References to persons shall, where applicable, include a corporation(s). Certain figures included in this Circular have been subject to rounding adjustments. References to we, us, our and ourselves are to the Company save where the context otherwise requires, the subsidiaries and to you or your are to the shareholders of the Company. The remaining of this page is intentionally left blank ii

4 TABLE OF CONTENTS Page LETTER TO THE SHAREHOLDERS OF MPB CONTAINING:- 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSALS 2 3. RATIONALE FOR THE PROPOSALS 7 4. FINANCIAL EFFECTS OF THE PROPOSALS 8 5. INDUSTRY OVERVIEW AND PROSPECTS 9 6. APPROVALS REQUIRED INTER-CONDITIONALITY OF THE PROPOSALS SHARE PRICE PERFORMANCE DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS DIRECTORS RECOMMENDATION ESTIMATED TIMEFRAME FOR COMPLETION OUTSTANDING PROPOSALS ANNOUNCED BUT NOT YET COMPLETED EGM FURTHER INFORMATION 14 APPENDIX I FURTHER INFORMATION 15 NOTICE OF EGM PROXY FORM ENCLOSED ENCLOSED iii

5 MAGNA PRIMA BERHAD (Company No P) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office: Lot No. C-10, Block C Jalan Persiaran Surian Palm Damansara Kota Damansara Petaling Jaya Selangor Darul Ehsan 12 June 2015 Directors: Tan Sri Datuk Adzmi Bin Abdul Wahab (Independent Non-Executive Director, Chairman) Datuk Wira Rahadian Mahmud Bin Mohammad Khalil (Group Managing Director) Ir. Tan Wei Dar (Executive Director) Ong Ah Leng (Independent Non-Executive Director) Sazali Bin Saad (Independent Non-Executive Director) To: The Shareholders of Magna Prima Berhad Dear Sir / Madam, (I) (II) (III) PROPOSED BONUS ISSUE OF WARRANTS; PROPOSED IASC; AND PROPOSED AMENDMENTS 1. INTRODUCTION On 30 April 2015, M&A Securities, on behalf the Board, had announced that the Company intends to undertake the Proposals. On 2 June 2015, M&A Securities, on behalf of the Board, announced that Bursa Securities had vide its letter dated 1 June 2015 approved in-principle the following:- (i) (ii) Admission to the Official List of Bursa Securities and the listing of and quotation for up to 166,444,970 Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants; and Listing of up to 166,444,970 new MPB Shares to be issued pursuant to the exercise of the Warrants. Bursa Securities approval-in-principle is subject to the following conditions:- (a) Conditions MPB and M&A Securities must fully comply with the relevant provisions under the Main Market LR pertaining to the implementation of the Proposed Bonus Issue of Warrants; Compliance To be complied 1

6 (b) Conditions MPB and M&A Securities are to inform Bursa Securities upon the completion of the Proposed Bonus Issue of Warrants; Compliance To be complied (c) MPB to furnish Bursa Securities with a written confirmation of its compliance with the terms and conditions of Bursa Securities approval once the Proposed Bonus Issue of Warrants is completed; To be complied (d) (e) MPB is required to furnish Bursa Securities on a quarterly basis, a summary of the total number of shares listed pursuant to the exercise of Warrants as at the end of each quarter together with a detailed computation of listing fees payable; and To incorporate Bursa Securities comments in respect of the Circular. To be complied Complied The purpose of this Circular is to provide you with the details of the Proposals, to set out the Board s opinion and recommendation in relation to the Proposals and to seek your approval for the resolutions pertaining to the Proposals to be tabled at the forthcoming EGM of the Company, scheduled to be held at Ideal Convention Centre, Jalan PS 8/3, Taman Prima Selayang, Batu Caves, Selangor Darul Ehsan on Wednesday, 8 July 2015 at a.m. or any adjournment thereof. The Notice of EGM together with the Proxy Form are enclosed with this Circular. YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDIX BEFORE VOTING ON THE RESOLUTIONS TO GIVE EFFECT TO THE PROPOSALS AT THE FORTHCOMING EGM. 2. DETAILS OF THE PROPOSALS 2.1 Proposed Bonus Issue of Warrants Basis and number of Warrants to be issued As at the LPD, MPB has an issued and paid-up capital of RM83,622,485 comprising 332,889,940 MPB Shares and 40,000,000 RCPS. Lembaga Tabung Angkatan Tentera had via its letter dated 18 May 2015 to the Company confirmed that it will not convert any or all of the 40,000,000 RCPS held by it into new MPB Shares and that the 40,000,000 RCPS shall be redeemed in full by the Company. In relation thereto, the Proposed Bonus Issue of Warrants will involve an issuance of 166,444,970 Warrants on the basis of one (1) Warrant for every two (2) MPB Shares held by the shareholders of MPB on the Entitlement Date. The Entitlement Date will be determined and announced by the Board after the receipt of all relevant approvals for the Proposed Bonus Issue of Warrants. The Proposed Bonus Issue of Warrants will be implemented in a single issuance Capitalisation of reserves There will not be any capitalisation of reserves arising from the issuance of the Warrants pursuant to the Proposed Bonus Issue of Warrants. Therefore, the requirement to ensure that the necessary reserves required for capitalisation of bonus issues is unimpaired by 2

7 losses of the Company on a consolidated basis pursuant to Paragraph 6.30 of the Main Market LR is not relevant with regards to the Proposed Bonus Issue of Warrants Basis and justification of determining the exercise price of the Warrants The exercise price of the Warrants has been fixed by the Board at RM0.90, after taking into consideration, amongst others, the following: (i) (ii) (iii) (iv) (v) (vi) the historical price movement of MPB Shares; the 5D-VWAP of MPB Shares; the prevailing market conditions; the trading and liquidity of MPB Shares; the par value of MPB Shares of RM0.25 each; and that the Warrants will be issued at no cost to the entitled shareholders of MPB. The Board has determined the exercise price of the Warrants at RM0.90 for each Warrant, representing a discount of approximately 20.09% to the 5D-VWAP of MPB Shares of RM up to 29 April 2015, being the market day immediately preceding the date of the announcement of the Proposals on 30 April Based on the historical share price performance of MPB for the past twelve (12) months, the Board is of the opinion that the exercise price of the Warrants at RM0.90 per Warrant is attractive to the shareholders of MPB Ranking of the Warrants and the new MPB Shares to be issued arising from the exercise of the Warrants The holders of the Warrants will not be entitled to any voting rights or to participate in any distributions, rights, allotments and/or any other offer of further securities in MPB until and unless such holder of the Warrants are issued new MPB Shares arising from the exercise of their Warrants. The new MPB Shares to be issued upon the exercise of the Warrants shall, upon allotment and issue, rank pari passu in all respects with the then existing MPB Shares, save and except that they shall not be entitled to participate in any rights, allotments, dividends and/or other distributions, the entitlement date of which precedes the date of allotment of the said new MPB Shares issued pursuant to the exercise of the Warrants Entitlement to the Warrants The Warrants to be issued will be allotted and issued to the shareholders of MPB whose names appear in the Record of Depositors of the Company on the Entitlement Date. In determining the shareholders entitlement to the Warrants, fractional entitlements, if any, shall be dealt with in such manner as the Board shall in its discretion deems fit and expedient in order to minimise the incidence of odd lots and in the best interest of the Company Indicative salient terms of the Warrants Terms Number of Warrants : Details 166,444,970 Warrants to subscribe for up to 166,444,970 new MPB Shares. 3

8 Terms Form and denomination Details : The Warrants will be issued in registered form and will be constituted by a Deed Poll. Exercise Rights : Each Warrant entitles the registered holder to subscribe for one (1) new MPB Share at the Exercise Price during the Exercise Period and shall be subject to adjustment in accordance with the provisions of the Deed Poll. Exercise Price Exercise Period Expiry date Adjustment in the Exercise Price and/or the number of Warrants Status of the new MPB Shares to be issued pursuant to the exercise of the Warrants Modification of rights of holders of Warrants : The exercise price of the Warrants has been fixed at RM0.90 per Warrant. : The Warrants may be exercised any time during the tenure of the Warrants of five (5) years including and commencing from the issue date and ending at 5.00 p.m. on the Expiry Date. Any Warrants which has not been exercised will lapse and every Warrant not exercised by then will cease to be valid for any purpose. : A date which falls on the day before the fifth (5 th ) anniversary of the issue date, provided that if such day falls on a day which is not a market day, then it shall be the market day immediately preceding the said non-market day. : Subject to the provisions of the Deed Poll, the Exercise Price and/or the number of Warrants held by each holder of Warrants shall be adjusted by the Board in consultation with an approved adviser appointed by the Company or auditors of the Company. : The new MPB Shares to be issued upon the exercise of the Warrants shall, upon allotment and issue, rank pari passu in all respects with the then existing MPB Shares, save and except that they shall not be entitled to participate in any rights, allotments, dividends and/or other distributions, the entitlement date of which precedes the date of allotment of the said new MPB Shares issued pursuant to the exercise of the Warrants. : The Company may, from time to time, without the consent or sanction of the holders of the Warrants but in accordance with the Deed Poll, modify the Deed Poll, if such modification made does not materially prejudice the interests of the holders of the Warrants or is made to correct a manifest error or to comply with the prevailing laws of Malaysia, Rules of Bursa Depository, Securities Industry (Central Depositories) Act, 1991 and/or Main Market LR and other relevant statute or regulation. Subject to the approval of any relevant authority, any modification, alteration or abrogation of the covenants or provisions contained in the Deed Poll proposed or agreed to by the Company must be sanctioned by special resolution of the holders of the Warrants, effected by a deed poll, executed by the Company and expressed to be supplemental and comply with the requirements of the Deed Poll. 4

9 Terms Rights of holders of Warrants Rights in the event of winding up, liquidation or an event of default Details : The holders of Warrants will not be entitled to any voting rights or to participate in any distributions, rights, allotments and/or other offer of further securities in the Company until and unless such holder of Warrants are issued with new MPB Shares arising from the exercise of the Warrants. : Where a resolution has been passed by the Company for a members voluntary winding-up or there is a compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with one (1) or more companies then: (a) for the purpose of such a winding-up, compromise or arrangement (other than consolidation, amalgamation or merger in which the Company is the continuing corporation) to which the holders of Warrants or some persons designated by them for such purposes by special resolution, shall be a party, the terms of such winding-up, compromise or arrangement shall be binding on all the holders of Warrants; and (b) in any other case, every Warrant holder shall be entitled at any time within six (6) weeks after the passing of such resolution for a members voluntary winding up of the Company or six (6) weeks after the granting of the court order approving the compromise or arrangement, by irrevocable surrender of his Warrants together with payment of the relevant subscription monies, to elect to be treated as if he had immediately prior to the commencement of such winding-up, compromise or arrangement, exercised the subscription rights represented by such Warrants to the extent specified in the exercise notice and be entitled to receive out of the assets of the Company which would be available in liquidation if he had on such date been the holder of the new MPB Shares to which he would have become entitled pursuant to such exercise; and the liquidator of the Company shall give effect to such election accordingly. Upon the expiry of the above six (6) weeks, all exercise rights of the Warrants shall lapse and cease to be valid for any purpose. Board lot : The Warrants are tradeable upon listing in board lots of 100 units carrying the right to subscribe for 100 new MPB Shares at any time during the Exercise Period or such other number of units as may be prescribed by Bursa Securities. Listing : The Warrants will be listed on the Main Market of Bursa Securities. Transferability : The Warrants are transferable by transfer prescribed by the Rules of Bursa Depository and in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991 and other relevant statute or regulation. 5

10 Terms Details Governing Law : Laws of Malaysia UTILISATION OF PROCEEDS The Proposed Bonus Issue of Warrants is not expected to raise any immediate funds upon its issuance as the Warrants will be issued at no cost to the entitled shareholders of MPB. The exact quantum of the future proceeds that may be raised by MPB from the exercise of the Warrants would depend upon the actual number of Warrants exercised during the tenure of the Warrants. As such, the exact timeframe for the utilisation of the proceeds is not determinable at this juncture. Assuming full exercise of the Warrants at the exercise price of RM0.90 per Warrant, a total of 166,444,970 new MPB Shares will be issued and the Company could potentially raise gross proceeds of approximately RM149.8 million. The proceeds to be raised, as and when the Warrants are exercised, shall be utilised for repayment of bank borrowings and/or working capital requirements of the MPB Group, which include, operating expenses, such as staff costs, utilities and professional fees. The proceeds to be utilised for each component of working capital and its timeframes are subject to the MPB Group s operating requirements at the time of utilisation and therefore cannot be determined at this juncture. 2.2 Proposed IASC As at the LPD, the authorised share capital of MPB is RM125,400,000 comprising 500,000,000 MPB Shares and 40,000,000 RCPS, of which RM83,622,485 comprising 332,889,940 MPB Shares and 40,000,000 RCPS have been issued and fully paid-up. In order to accommodate the issuance of new MPB Shares arising from the exercise of the Warrants, the Company proposes to increase its authorised share capital to RM200,400,000 comprising 800,000,000 MPB Shares and 40,000,000 RCPS. 2.3 Proposed Amendments The Proposed Amendments involves the consequential amendments to the Memorandum and Articles of Association of MPB to facilitate the implementation of the Proposed IASC. Details of the Proposed Amendments are as follows: Existing Memorandum of Association CLAUSE 5 OF THE MEMORANDUM OF ASSOCIATION The authorised share capital of the Company is RM125,400, divided into 500,000,000 ordinary shares of RM0.25 each and 40,000,000 Redeemable Convertible Preference Shares of RM0.01 each. Proposed Memorandum of Association CLAUSE 5 OF THE MEMORANDUM OF ASSOCIATION The authorised share capital of the Company is RM200,400, divided into 800,000,000 ordinary shares of RM0.25 each and 40,000,000 Redeemable Convertible Preference Shares of RM0.01 each. 6

11 Existing Articles of Association ARTICLE 3 OF THE ARTICLES OF ASSOCIATION The authorised share capital of the Company is RM125,400, divided into 500,000,000 ordinary shares of RM0.25 each and 40,000,000 Redeemable Convertible Preference Shares of RM0.01 each. Proposed Articles of Association ARTICLE 3 OF THE ARTICLES OF ASSOCIATION The authorised share capital of the Company is RM200,400, divided into 800,000,000 ordinary shares of RM0.25 each and 40,000,000 Redeemable Convertible Preference Shares of RM0.01 each. 3. RATIONALE FOR THE PROPOSALS 3.1 Proposed Bonus Issue of Warrants The Company is embarking on the Proposed Bonus Issue of Warrants instead of other available proposals to reward existing shareholders of the Company after taking into cognisance the financial performance and financial position of the Group. The Board is of the view that the Proposed Bonus Issue of Warrants: (i) (ii) serves to reward the existing shareholders of the Company for their support by enabling them to participate in a derivative of the Company without incurring any cost; potentially enhances the Company s capital base; (iii) provides the existing shareholders with an opportunity to increase their equity participation in the Company at a predetermined price during the tenure of the Warrants; (iv) (v) (vi) allows the existing shareholders to further participate in the future prospects and growth of the Company; provides the opportunity to increase the liquidity of MPB s Shares in the market; and provides the Company with additional capital as and when the Warrants are exercised during the tenure of the Warrants without incurring additional financing cost and minimise any potential cash outflow in respect of interest servicing. Part of the proceeds from the exercise of Warrants which shall be utilised for working capital requirements is expected to contribute positively to the Group s profitability. Furthermore, the utilisation of the proceeds as and when the Warrants are exercised towards the paring down of the Group s outstanding banking facilities would allow MPB to reduce its finance cost. The Proposed Bonus Issue of Warrants will involve the issuance of Warrants on a pro-rata basis to all entitled shareholders of the Company on the Entitlement Date. As such, the Proposed Bonus Issue of Warrants will not dilute the existing shareholders equity interest assuming all shareholders fully exercise their Warrants subsequently. Should all shareholders exercise their Warrants, the Company s capital base is expected to increase in terms of size and strength, improving its gearing level and the increased in the paid-up share capital may enhance the liquidity in MPB Shares. Depending on the future performance of MPB Shares, entitled shareholders will be able to enjoy the potential capital appreciation of MPB Shares when they exercise the Warrants, which are issued at no cost to the entitled shareholders. 7

12 3.2 Proposed IASC The Proposed IASC is to accommodate the issuance of the new MPB Shares pursuant to the Proposed Bonus Issue of Warrants as well as to cater for any increase in the share capital of the Company pursuant to any other future corporate exercises. 3.3 Proposed Amendments The Proposed Amendments is to facilitate the Proposed IASC. 4. FINANCIAL EFFECTS OF THE PROPOSALS The Proposed IASC and the Proposed Amendments will not have any effect on the issued and paid-up share capital, net assets, net assets per Share, earnings, earnings per Share, gearing, convertible securities and substantial shareholders shareholdings of the Company. 4.1 Issued and paid-up share capital The pro forma effects of the Proposed Bonus Issue of Warrants on the issued and paid-up share capital of MPB is set out as follows:- No. of MPB Shares 000 RM 000 As at the date of the LPD 332,890 83,222 MPB Shares to be issued pursuant to the full exercise of the 166,445 41,611 Warrants Enlarged share capital 499, , Net assets and gearing Based on the audited consolidated statement of financial position of MPB as at 31 December 2014, the pro forma effects of the Proposed Bonus Issue of Warrants on the net assets and gearing of MPB is set out below: (I) (II) As at After the Proposed Bonus Issue of Warrants After (I) and assuming full exercise of Warrants RM 000 RM 000 RM 000 Share capital 83,222 83, ,833 Share premium 35,566 35, ,755 Foreign currency exchange reserve (10,180) (10,180) (10,180) Capital reserve 19,706 19,706 19,706 Retained profits 13,817 13,667* 10, Shareholders funds/net assets attributable to owners of the Company 142, , ,781 No. of MPB Shares ( 000) 332, , ,335 Net assets per MPB Share (RM) Interest-bearing borrowings 543,328 # 543, ,328 + Gearing^ (times)

13 Notes: # The RCPS was computed as a liability component in accordance with the requirements of the Malaysian Financial Reporting Standards. ^ Calculated as interest-bearing debts over net assets attributable to owners of the Company. * After deducting estimated expenses in relation to the Proposals of RM150, After deducting estimated accrual of dividends in respect of the RCPS of RM3.641 million prior to the expected early redemption of all the RCPS. + After the redemption of all the RCPS by way of cash. 4.3 Earnings and earnings per Share The Proposed Bonus Issue of Warrants is not expected to have an immediate material effect on the earnings and earnings per Share of MPB. Although the exercise of the Warrants is expected to dilute the consolidated earnings per Share as a result of the increase in the number of MPB Shares in issue, the proceeds derived from the exercise of the Warrants are expected to contribute positively to the future earnings of the MPB Group. 4.4 Existing convertible securities The Proposed Bonus Issue of Warrants is not expected to have any effect on the existing convertible securities of MPB as the RCPS is expected to be fully redeemed. 4.5 Substantial shareholders shareholdings The Proposed Bonus Issue of Warrants will not have any effect on the shareholdings of the substantial shareholders of MPB. Assuming full exercise of the Warrants, there is no effect to the percentage shareholdings of the substantial shareholders, but the number of MPB Shares held by each substantial shareholder will increase proportionately. 5. INDUSTRY OVERVIEW AND PROSPECTS 5.1 Overview and prospects of the Malaysian economy The Malaysian economy recorded a stronger growth of 6.0% in 2014 (2013: 4.7%) driven by continued strength of domestic demand, external trade, net exports and continued demand from the region. Private consumption grew by 7.1% supported by favourable income growth, stable labour market conditions, targeted Government transfers to low-andmiddle-income households. Private investment grew by 11.0% due to services and manufacturing sectors. Public investment contracted by 4.9% due to decline in the Federal Government development expenditure and lower capital spending by public enterprises. On the supply side, all economic sectors recorded higher growth rates driven by domestic and external factors. Recovery in advanced economies and continued demand from regional economies resulted in the manufacturing sector recording a growth of 6.2% while the services sector expanded by 6.3% (2013: 5.9%). Headline inflation averaged at 3.2% (2013: 2.1%) due to lower food inflation and fuel price adjustments. Spillovers on prices of other goods and services were contained by subdued global prices, stable domestic demand conditions and firms ability to accommodate the increase in input costs. As such, core inflation averaged at 2.4% (2013:1.8%). The Overnight Policy Rate was raised 25 basis points to 3.25% in July 2014 and in September 2014, the Monetary Policy Committee had capped it at 3.25%. The Malaysian economy is expected to register steady growth of 4.5%-5.5% in 2015, due to sustained expansion in domestic demand. Domestic demand and private consumption is expected to continue to grow in 2015, driven by private sector spending. The implementation of the 9

14 Goods and Services Tax ( GST ) in April is expected to affect spending, but this will be offset by lower fuel prices, favourable labour market conditions and the Government s policies to assist the low and middle income group. Private investment is expected to expand by 9.0% supported by on-going projects and new investments in the manufacturing and services sectors. Public consumption is expected to expand moderately, with lower spending on supplies and services and expected to record positive growth, with higher capital spending by public enterprises. In the external sector, growth of gross exports is projected to moderate, exports of manufactured products are expected to increase and gross imports growth is expected to be higher. On the supply side, the services and manufacturing sectors will remain the key drivers of overall growth. Growth in the mining sector is projected to be sustained while the agriculture sector is expected to record a marginal growth due to lower commodity prices. The construction sector is expected to continue to record high growth and although activity in the residential sub-sector is expected to increase, growth in the non-residential subsector is projected to be sustained while new and existing multi-year civil engineering projects will continue to provide additional support to the sector. Headline inflation is projected to be lower at 2% - 3% in 2015, due to lower global energy and food prices. While the implementation of the GST would result in higher prices for some goods and services, the impact on overall headline is expected to be contained. The inflation rate in 2015 would also be affected by the new pricing mechanism for petrol prices in which there would be a more direct transmission of global oil price volatility into domestic prices given the market-based pricing of domestic fuel products. Nevertheless, the expectation is for underlying inflation to still remain relatively stable, amid modest demand pressures. (Source: Bank Negara Malaysia Annual Report 2014) 5.2 Overview of the property market in Malaysia The Malaysian economic growth at 6.0% in 2014, supported the slight increase in the property sector of 0.8% in market volume and 7.0% in market value. The 11.6% (2013: 10.9%) expansion in the construction sector was in tandem with the uptrend in the construction activities across the sub-sectors. Loans approved for the sector charted a marginal 0.3% growth (2013: -10.5%) whilst the loans disbursed continued to grow by 12.7% (2013: 14.8%). The Consumer Sentiments Index stood at 83.0 points in 2014 s final quarter (2013: points), as cautionary sentiments continued to linger on household finances. The Malaysian Institute on Economic Research s ( MIER ) Business Condition Index thwarted to 86.4 points due to the depreciation of the Ringgit and the falling oil prices. These low note MIER s indicators have in part influenced the level of confidence in the commercial property subsector as volume grew by a marginal 3.6% whereas value dropped by 10.5%. The industrial property sub-sector paves its way with a lower contraction of 3.8% in market activity whilst value shot up by 17.7%. The agricultural sector recorded a marginal growth of 2.6% (2013: 2.1%) supported by higher oil palm production and the agricultural property experienced a turnaround of 2.0% in volume although value moderated by 4.2%. In the leisure sub-sector, market performance remained encouraging with national average occupancy rate of one to five star hotels registered 53.5% (2013: 50.8%) due to the increase in the number of tourist arrivals. The performance of the overall property market recorded a total of 384,060 transactions worth RM billion, marking an increase of 0.8% in volume and 7.0% in value. The highest contribution was by the residential sub-sector (64.4%), agricultural (18.8%), commercial (9.3%), development land (5.5%) and industrial (2.1%). In terms of value, 10

15 residential was 50.4% share, commercial (19.5%), development land (13.3%), industrial (8.9%) and agricultural (7.8%). Residential, commercial and agricultural sub-sectors recorded growths of 0.4%, 3.6% and 2.0% respectively while industrial and development land sub-sectors each recorded a slight downturn of 3.8% and 1.9% respectively against Value of transactions moved independently with residential, industrial and development land sub-sectors recorded double-digit growth of 13.9%, 17.7% and 13.5% respectively whereas commercial and agricultural sub-sectors recorded downfall of 10.5% and 4.3% respectively. Residential property In 2014, transactions worth RM82.06 billion were recorded in the review period, up by 0.4% in volume and 13.9% in value. In the primary market, the number of new launches amounted to 68,351 units (2013: 62,376 units), attributable to the rise in condominiums and service apartments (44.9%) led by Selangor, Kuala Lumpur and Johor. Terrace houses make the majority of new launches at 37.7%. Residential overhang numbers receded to 11,816 units or RM4.04 billion, down by 12.8% in volume and 15.9% in value. Johor accounted for 30.2% of national overhang units. Terraced houses accounted for 42.1% (4,974 units) of the total unsold, majority from Johor (2,183 units; 43.9%), where these houses have remained unsold for more than 24 months. Condominiums/apartments (1,530 units) and service apartments (919 units) formed a combined share of 20.7% of the country s total overhang with Kuala Lumpur holding the bulk of condominiums/apartments overhang (746 units). Commercial property Malaysia registered a moderate 35,528 transactions in 2014, up by 3.6% compared to the same period last year. Value of transactions dropped by 10.5% to record RM31.84 billion. Perak saw a decline of 16.7% in volume. Selangor, Johor and Pulau Pinang recorded a downfall in value - by 1.0%, -42.8% -3.5% respectively while Kuala Lumpur and Perak recorded a better performance, each up by 14.3% and 5.3% respectively. Leisure property There were eighteen (18) hotels and ten (10) resorts transactions recorded in 2014 worth RM million. The leisure sub-sector showed a moderate performance as the three (3) to five (5) star hotels recorded an overall occupancy of 54.8% (2013: 50.4%). The one (1) to five (5) star hotels recorded an increase in the overall occupancy from 53.5% in 2014 (2013: 50.8%). Putrajaya, Selangor, Kuala Lumpur, Pulau Pinang, Pahang and Sabah recorded an overall occupancy of more than 60.0%. A total of 42 new hotels emerged in the market, offering 5,430 rooms (2013: 5,197 rooms). At the end of 2014, there were 2,805 hotels across the country offering 202,829 rooms. (Source: Press Release of the Malaysian Property Market 2014 from the Valuation & Property Services Department dated 24 April Ministry of Finance, Malaysia) 6. APPROVALS REQUIRED The Proposals are subject to the following approvals:- (i) Bursa Securities, which was obtained on 1 June 2015, for:- (a) the admission of the Warrants to the Official List; and 11

16 (b) the listing of and quotation for the Warrants and the new MPB Shares to be issued arising from the exercise of the Warrants, on the Main Market of Bursa Securities; (ii) (iii) the shareholders of MPB at the forthcoming EGM; and any other relevant authority, if required. 7. INTER-CONDITIONALITY OF THE PROPOSALS The Proposed Bonus Issue of Warrants, Proposed IASC and Proposed Amendments are inter-conditional upon each other. The Proposals are not conditional upon any other proposals undertaken or to be undertaken by the Company. 8. SHARE PRICE PERFORMANCE The monthly highest and lowest prices of MPB Shares as traded on Bursa Securities for the past twelve (12) months are as follows: Low High (RM) (RM) 2014 June July August September October November December January February March April May The last transacted price of MPB Shares on 29 April 2015, being the market day immediately preceding the date of the announcement of the Proposals on 30 April 2015 is RM1.09 per Share. The last transacted price of MPB Shares as at the LPD was RM1.12 per Share. (Source: Bloomberg) 9. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors and major shareholders of the Company as well as persons connected with them have any interest, direct and/or indirect, in the Proposals other than their respective entitlements under the Proposed Bonus Issue of Warrants, for which all shareholders of MPB are entitled to. 12

17 10. DIRECTORS RECOMMENDATION After having considered all aspects of the Proposals, including but not limited to the rationale, basis of determining the Exercise Price of the Warrants and the financial effects of the Proposals, the Board is of the opinion that the Proposals are in the best interest of MPB, and accordingly recommends that shareholders vote in favour of the resolutions pertaining the Proposals to be tabled at the forthcoming EGM of the Company. 11. ESTIMATED TIMEFRAME FOR COMPLETION The tentative timetable in relation to the Proposals is as follows: Date Events 8 July 2015 EGM to approve the Proposals Early July 2015 End July 2015 Announcement of the Entitlement Date Listing of and quotation for the Warrants on Bursa Securities Barring any unforeseen circumstances and subject to receipt of all relevant approvals, the Proposals are expected to be completed in the third quarter of OUTSTANDING PROPOSALS ANNOUNCED BUT NOT YET COMPLETED Save for the Proposals, there are no other proposals announced but not yet completed prior to the printing of this Circular. 13. EGM An EGM, the notice of which is enclosed together with this Circular, will be held at Ideal Convention Centre, Jalan PS 8/3, Taman Prima Selayang, Batu Caves, Selangor Darul Ehsan on Wednesday, 8 July 2015 at a.m. or any adjournment thereof for the purpose of considering and, if thought fit, passing the resolutions so as to give effect to the Proposals. If you are unable to attend and vote in person at the EGM, you may complete and return the relevant Proxy Form in accordance with the instructions printed thereon as soon as possible and in any event so as to arrive at the Registered Office of the Company at Lot No. C-10, Block C, Jalan Persiaran Surian, Palm Damansara, Kota Damansara, Petaling Jaya, Selangor Darul Ehsan not later than forty-eight (48) hours before the date and time fixed for the EGM. The lodging of the Proxy Form will not, however, preclude you from attending the EGM and voting in person should you subsequently wish to do so. The remaining of this page is intentionally left blank 13

18 14. FURTHER INFORMATION Please refer to the attached appendix for further information. Yours faithfully, for and on behalf of the Board of Directors of, MAGNA PRIMA BERHAD DATUK WIRA RAHADIAN MAHMUD BIN MOHAMMAD KHALIL Group Managing Director 14

19 APPENDIX I FURTHER INFORMATION 1. DIRECTORS' RESPONSIBILITY STATEMENT This Circular has been seen and approved by the Board and they individually and collectively accept full responsibility for the accuracy of the information given in this Circular and confirm that, after making all enquiries as were reasonable in the circumstances and to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading. 2. CONSENT AND DECLARATION M&A Securities, being the Adviser has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and all references thereon in the form and context in which they appear. M&A Securities has given its confirmation that no conflict of interest exists or is likely to exist in relation to its role as the Adviser for the Proposals. 3. MATERIAL LITIGATION Save as disclosed below, to the best knowledge of the Board, neither MPB nor its subsidiaries are engaged in any material litigation, claims or arbitration as at the LPD, either as plaintiff or defendant, and the Board has no knowledge of any proceedings pending or threatened against the MPB Group or of any facts likely to give rise to any proceeding which may materially and adversely affect the financial position or business of the MPB Group. (a) Kuala Lumpur High Court Suit No.S-22NCVC between Bauer (M) Sdn Bhd ( Bauer or Plaintiff ) and Embassy Court Sdn Bhd ( Embassy ) and MPB (collectively, the Defendants ) In respect of Embassy The above suit was filed by Bauer on 4 March The Plaintiff was praying for specific performance against Embassy, a wholly-owned subsidiary of MPB, to procure or to produce a corporate guarantee from MPB for the outstanding sum of RM18,718, together with interest at the rate of eight percent (8%) per annum until full payment ( Outstanding Sum ) which Embassy is liable pursuant to a concluded arbitration between Bauer and Embassy ( Bauer Arbitration ). The full trial was concluded on 22 February 2013 and the decision was delivered on 27 February 2014 whereby Bauer s claims against Embassy were allowed ( High Court Decision-1 ). As such, Embassy is required to procure a corporate guarantee from MPB. On 26 March 2014, Embassy filed an appeal to the Court of Appeal against the High Court Decision-1 and the said appeal has been fixed for case management on 26 June 2015 and hearing on 20 August Solicitors for Embassy are of the view that Embassy has an arguable case. However the outcome will not have a significant bearing on Embassy because it is still liable to pay Bauer the Outstanding Sum pursuant to the Bauer Arbitration. 15

20 In respect of MPB Briefly, Bauer s claim against the Defendants named in this suit was a result of the Bauer Arbitration. The arbitrator in his award found that MPB has agreed to provide a corporate guarantee in favour of Bauer for the debts owed by Embassy. Subsequently, Bauer initiated this suit to obtain an order for MPB to indemnify and/or to pay Bauer the Outstanding Sum together with interest of four percent (4%) per annum from 27 February 2014 until full payment, in the event Embassy fails to pay the Outstanding Sum. The full trial was concluded on 22 February 2013 and the decision was delivered on 27 February 2014 whereby Bauer s claims against MPB were allowed ( High Court Decision-2 ). On 10 March 2014, MPB filed an appeal to the Court of Appeal against the High Court Decision-2 and the said appeal has been fixed for hearing on 20 August Solicitors for MPB are of the view that MPB has a reasonably good chance in succeeding in the appeal. MPB filed an application for a stay pending an appeal on 12 March 2014 in respect of the High Court Decision-2 and the said application was allowed on 3 April On 18 March 2014, MPB also filed an application for injunction to restrain Bauer from presenting or filing a winding up petition against MPB and the said application was allowed on 5 May (b) Kuala Lumpur High Court Suit No.24C (ARB)-10-07/2014 between Magna Prima Construction Sdn Bhd ( MPC ) and Bina BMK Sdn Bhd ( BMK ) MPC, a wholly-owned subsidiary of MPB, and Perembun (M) Sdn Bhd as joint venture partners awarded BMK sub-contract works for a lump sum of RM54,816, for a project. Subsequently disputes arose between MPC, Perembun (M) Sdn Bhd and BMK which relate to among others, alleged wrongful determination of contract, claim for the balance sum due for works done, claim for the materials left on site and damages. The aforesaid disputes were referred to arbitration and the said arbitration was concluded on 31 July 2012 ( BMK Arbitration ). Pursuant to the decision of the arbitrator in the BMK Arbitration, MPC is required to pay BMK the sum of RM33,972, with interest of eight percent (8%) per annum until full payment ( Decision ). On 5 August 2014, MPC filed the suit against BMK in respect of the Decision. On 13 January 2015, the High Court delivered the decision that the finding of the arbitrator in the BMK Arbitration to be set aside which resulted in BMK being wrongfully entitled to the sum of RM6,202, and allowed cost of RM15, in favour of MPC. Meanwhile, the High Court allowed BMK s application for recognition and enforcement of award for the sum of RM27,770, ( High Court Decision ). On 12 February 2015, MPC filed an appeal against the High Court Decision and the said appeal has been fixed for hearing on 19 August Solicitors for MPC are of the view that MPC has a good chance in succeeding in the appeal. 16

21 On 6 February 2015, Perembun (M) Sdn Bhd filed a separate suit vide Kuala Lumpur High Court Suit No.22NCVC-66-02/2015 against MPB and MPC ( Perembun Suit ) for the following Orders/Declaration:- (i) (ii) (ii) a declaration that MPB and MPC are liable to pay all sums due including the sum of the award amounting to RM27,770,172.00, interest and cost to BMK in the arbitration proceedings between BMK and MPC & Perembun (M) Sdn Bhd based on the award dated 8 May 2014 and the amended award dated 27 June 2014; an order that if MPB and MPC fail to settle the sum demanded by BMK in the arbitration proceedings between BMK and MPC & Perembun (M) Sdn Bhd based on the award dated 8 May 2014 and the amended award dated 27 June 2014 within five (5) days from the date the order is granted, Perembun (M) Sdn Bhd is entitled to judgment for the sum payable to BMK including the sum payable as the award, interest and cost; the sum of RM96, demanded and the legal fees in the Companies Winding-Up Petition No. 28NCC /2014 by BMK against Perembun (M) Sdn Bhd as security deposit in the arbitration proceedings which ought to be paid by MPB and MPC. MPB and MPC have filed a stay of proceedings pending the final outcome of the appeal filed by MPC on 12 February 2015 against the High Court Decision. The said application has been fixed for hearing on 29 June Solicitors for MPB and MPC are of the view that MPB and MPC have a reasonably good chance in succeeding in the application. (c) Kuala Lumpur Originating Summons No.24NCC /2015 between BMK and MPB & MPC This is a claim by BMK against MPB and MPC in respect of a judgment sum amounting to RM27,770, (i.e. the High Court Decision as defined in section 3(b) above). BMK filed the Originating Summons against MPB and MPC on the basis that MPB is the alter ego of MPC who is controlled by MPB as part and parcel of MPB s organisation; and both MPB and MPC are to be treated as one entity. As a result of the foregoing, the judgment sum of RM27,770, due to BMK is to be satisfied by MPB. BMK is claiming for the following:- (i) (ii) (iii) (iv) MPB and MPC be deemed and declared as one entity and to comply with the Order of the High Court; MPB and MPC be declared jointly and severally liable to comply with the Order of the High Court; BMK be at liberty to enforce the sum of RM27,770, against MPB; and MPB and MPC are to bear the costs of and incidental to the application. Solicitors for MPB and MPC are of the view that there are merits in favour of MPB and MPC and the chances of success by MPB and MPC is strong. (d) Kuala Lumpur High Court Suit No.22NCVC /2013 between NV Bina Sdn Bhd ( NV Bina ) and Magna Park Sdn Bhd ( Magna Park ) MPC and Perembun (M) Sdn Bhd (collectively MPC-Perembun JV ) were the main contractor for a project. 17

22 BMK was the main sub-contractor while NV Bina was the subcontractor of BMK and Magna Park was the employer of the said project. On 14 March 2013, NV Bina initiated the suit against Magna Park, a 91%-subsidiary of MPB, claiming for the sum of RM6,041, NV Bina s suit was based on the undertaking by Magna Park pursuant to a letter dated 1 September 2005 to pay NV Bina on behalf of MPC-Perembun JV who were appointed as the main contractor for the said project. On 5 December 2014, the High Court delivered judgment allowing NV Bina s claims against Magna Park for the sum of RM6,041, together with interest at a rate of four percent (4%) per annum from 5 June 2008 until full payment, to be paid by Magna Park ( High Court Decision ). On 8 December 2014, Magna Park filed an appeal against the High Court Decision. On the hearing date on 21 May 2015, the parties to the appeal entered into a Consent Judgment, wherein Magna Park agreed to pay a sum of RM4,800, as full and final settlement to be paid in the following manner: (i) (ii) a sum of RM4,000, to be paid forthwith; and the balance sum of RM800, to be paid in eight (8) equal instalments commencing 30 June 2015 until 31 January (e) Shah Alam High Court Suit No.22NCVC-93-02/2015 between Ibsul Development (Sel) Sdn Bhd ( Ibsul ) and Perbadanan Kemajuan Negeri Selangor ( PKNS ) On 18 February 2015, Ibsul filed a suit against PKNS for an order for specific performance to compel PKNS to perform the sale and purchase agreement dated 5 August 2009 which PKNS has allegedly, wrongfully terminated. Ibsul had also claimed for damages amounting to RM2,416, in lieu of specific performance. The High Court has fixed case management on 22 June 2015 for the parties to file the Bundle of Documents Solicitors for Ibsul is of the view that Ibsul has a reasonably good chance of succeeding in this matter. (f) Kuala Lumpur High Court Suit No.22NCVC /2015 between Dr. Victor Adam & 23 others ( Plaintiffs ) and MPB, Embassy and 3 others ( Defendants ) Embassy is the Developer of the development while MPB is the proprietor of the land on which The KLCC is located. On 27 February 2015, the Plaintiffs filed the suit against, among others, MPB and Embassy for the sum of approximately RM25,000, The Plaintiff s claim is premised on: (i) (ii) alleged poor and defective façade design, low quality materials, poor workmanship, failure to fully rectify the defect in the parcel and common property, structurally unsound construction and breach of the implied term to build and deliver a six star luxurious condominium; and alleged misrepresentations by MPB and Embassy. 18