SUNWAY BERHAD (Company No D) (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 adviser 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. You should rely on your own evaluation to assess the merits and risks of the Proposed DRS (as defined herein). SUNWAY BERHAD (Company No D) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED DIVIDEND REINVESTMENT SCHEME THAT PROVIDES THE SHAREHOLDERS OF SUNWAY BERHAD ( SUNWAY ) THE OPTION TO ELECT TO REINVEST THEIR CASH DIVIDEND IN NEW ORDINARY SHARES OF RM1.00 EACH IN SUNWAY ( PROPOSED DRS ) Adviser KENANGA INVESTMENT BANK BERHAD (Company No: H) (A Participating Organisation of Bursa Malaysia Securities Berhad) The Notice of Extraordinary General Meeting ( EGM ) in respect of the Proposed DRS together with the Proxy Form are enclosed in this Circular. The EGM will be held as follows: Date and time : Thursday, 26 June 2014 at 4.00 p.m. or immediately following the conclusion or adjournment (as the case may be) of the Fourth Annual General Meeting of the Company which will be held at 3.30 p.m. on the same day and at the same venue, whichever is later, or at any adjournment thereof Venue : Grand Bahamas, Level 12, Sunway Resort Hotel & Spa, Persiaran Lagoon, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan Details for lodging the Proxy Form Last date and time for lodgement : Tuesday, 24 June 2014 at 4.00 p.m. To be deposited at our registered office : Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan The lodging of the Proxy Form will not preclude you from attending and voting in person at our EGM should you subsequently wish to do so, in which case the Form of Proxy deposited shall be deemed withdrawn and the proxy shall not be entitled to be present or vote at the EGM. This Circular is dated a 11 June 2014

2 DEFINITIONS For the purpose of this Circular, except where the context otherwise requires, the definitions shall apply throughout this Circular: Act : The Companies Act, 1965 AGM : Annual general meeting Allotment Date : Date of allotment and issuance of New Shares which falls within eight (8) Market Days from the Expiry Date or such date as may be prescribed by Bursa Securities Board : The Board of Directors of Sunway Books Closure Date : Books closure date in relation to a Dividend to which the Proposed DRS applies Bursa Securities : Bursa Malaysia Securities Berhad Circular : This circular to Shareholders dated 11 June 2014 CMSA : Capital Markets and Services Act 2007 Code : Malaysian Code on Take-Overs and Mergers 2010 Directors : Directors of Sunway as at the LPD Dividends : Cash dividends declared by the Company, whether interim, final, special or any other cash dividend Dividend Payment Account : The bank account opened by Sunway to facilitate the payment of Dividends EGM : Extraordinary general meeting Electable Portion : The whole or a portion of a Dividend that may be declared by Sunway to which the Board, at its discretion, determines that the Reinvestment Option applies EPS : Earnings per Share Expiry Date : The last day (which will be a date to be fixed and announced by the Board) by which an election made by a Shareholder in relation to the Electable Portion must be received by the Share Registrar FYE : Financial years ended/ending, as the case may be Illustrative Dividend : For illustration purposes only, assuming a final net dividend of 10% or 10 sen per Share Issue Price : The issue price of the New Shares to be issued pursuant to the Proposed DRS in accordance with the provisions set out in Section 2.3 of this Circular Kenanga IB : Kenanga Investment Bank Berhad LPD : 15 May 2014, being the latest practicable date prior to the printing of this Circular i

3 DEFINITIONS (Cont d) Listing Requirements : The Main Market Listing Requirements of Bursa Securities including all amendments thereto and any Practice Notes issued in relation thereto Market Days : Any day between Monday and Friday (both days inclusive) which is not a public holiday and on which Bursa Securities is open for trading of securities NA : Net assets New Shares : New Sunway Shares to be issued pursuant to the Proposed DRS Non-Electable Portion : The remaining portion of the Dividend (where the Electable Portion is not for the entire amount of the Dividend declared) which will be paid to Shareholders in cash Notice of Election : The notice of election (in such form as the Board may approve) in relation to the Reinvestment Option by which Shareholders confirm their exercise of the Reinvestment Option Outstanding ESOS Options : The 28,881,900 options over the Sunway Shares under the Employee Share Option Scheme of the Company that have been vested to employees and not exercised as at the LPD. Outstanding Warrants 2011/2016 : The 289,599,049 Warrants 2011/2016 that have yet to be exercised as at the LPD Price Fixing Date : A date to be determined by the Board on which the Issue Price will be determined Proposed DRS : The proposed recurrent dividend reinvestment scheme that provides Shareholders the Reinvestment Option in accordance with the terms set out in Appendix I of this Circular Reinvestment Option : The option given to Shareholders pursuant to the Proposed DRS, to reinvest the Electable Portion in New Shares, as the Board may, at its discretion, make available Remaining Portion : The remaining portion of the Electable Portion, where the Shareholders elect to participate only part of the Electable Portion in New Shares RM and sen : Ringgit Malaysia and sen respectively ROD : Record of Depositors Shares or Sunway Shares : Ordinary shares of RM1.00 each in Sunway Shareholders : Shareholders of Sunway Substantial Shareholders : A person who has an interest or interests in one or more voting Shares in the Company and the nominal amount of that Share, or aggregate of the nominal amounts of those shares, is not less than 5% of the aggregate of the nominal amounts of all the voting Shares in the Company Sunway or the Company : Sunway Berhad ii

4 DEFINITIONS (Cont d) Sunway Group or the Group : Sunway and its subsidiaries, collectively VWAP : Volume weighted average market price Warrants 2011/2016 : Warrants issued by the Company on 18 May 2011 and expiring on 17 May 2016 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 and neuter gender and vice versa. Reference to persons shall include corporations, unless otherwise specified. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to Malaysian time, unless otherwise stated. References to we, us, our and ourselves are to our Company save where the context otherwise requires, our subsidiaries and to you or your are to the shareholders of Sunway. [The rest of this page has been intentionally left blank] iii

5 TABLE OF CONTENTS LETTER FROM THE BOARD TO THE SHAREHOLDERS OF SUNWAY CONTAINING: Page 1. INTRODUCTION DETAILS OF THE PROPOSED DRS Overview Election to reinvest Dividends into New Shares Pricing of New Shares Eligibility Odd Lots Modification, suspension and termination of the Proposed DRS Maximum number of New Shares Ranking of the New Shares Taxation Utilisation of cash retained arising from the Proposed DRS General IMPLICATIONS OF THE CODE AND LISTING REQUIREMENTS The Code Other shareholding limits RATIONALE FOR THE PROPOSED DRS EFFECTS OF THE PROPOSED DRS Share Capital Substantial Shareholders Shareholdings NA and Gearing EPS Convertible Securities SHARE PRICES APPROVALS REQUIRED INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM DIRECTORS RECOMMENDATION CORPORATE PROPOSALS ANNOUNCED BUT PENDING COMPLETION ESTIMATED TIMEFRAME FOR THE IMPLEMENTATION OF THE PROPOSED DRS EGM FURTHER INFORMATION iv

6 TABLE OF CONTENTS (Cont d) APPENDICES Page APPENDIX I DIVIDEND REINVESTMENT SCHEME STATEMENT APPENDIX II FURTHER INFORMATION NOTICE OF EGM... Enclosed FORM OF PROXY... Enclosed [The rest of this page has been intentionally left blank] v

7 SUNWAY BERHAD (Company No D) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office: Level 16, Menara Sunway Jalan Lagoon Timur Bandar Sunway Subang Jaya Selangor Darul Ehsan 11 June 2014 Board of Directors Tan Sri Dato Seri Dr Jeffrey Cheah Fook Ling, AO (Executive Chairman, Non-Independent Executive Director) Tan Sri Datuk Seri Razman M Hashim (Deputy Executive Chairman, Non-Independent Executive Director) Dato Chew Chee Kin (President, Non-Independent Executive Director) Sarena Cheah Yean Tih (Non-Independent Executive Director) Wong Chin Mun (Senior Independent Non-Executive Director) Lim Swe Guan (Independent Non-Executive Director) Datuk Seri Yam Kong Choy (Independent Non-Executive Director) To: The Shareholders of Sunway Dear Sir/Madam PROPOSED DIVIDEND REINVESTMENT SCHEME 1. INTRODUCTION On 23 May 2014, on behalf of the Board, Kenanga IB had announced to Bursa Securities that the Company proposes to undertake a recurrent dividend reinvestment scheme that provides Shareholders the option, as may be determined by the Board, to elect to reinvest their Dividends in New Shares. This scheme would allow the Board, at its absolute discretion, to offer either the Proposed DRS or pay in full cash for Dividends as and when it deems appropriate vis-à-vis Sunway s capital strategy and plans. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE SHAREHOLDERS WITH THE RELEVANT INFORMATION ON THE PROPOSED DRS, TO SET OUT THE BOARD S RECOMMENDATION THEREON AND TO SEEK YOUR APPROVAL FOR THE RESOLUTION PERTAINING TO THE PROPOSED DRS TO BE TABLED AT THE FORTHCOMING EGM. THE NOTICE OF THE EGM TOGETHER WITH THE FORM OF PROXY ARE ENCLOSED IN THIS CIRCULAR. 1

8 YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES ATTACHED BEFORE VOTING ON THE RESOLUTION IN RELATION TO THE PROPOSED DRS TO BE TABLED AT THE FORTHCOMING EGM. 2. DETAILS OF THE PROPOSED DRS 2.1 Overview The Proposed DRS provides Shareholders with an opportunity to reinvest their Dividends in New Shares in lieu of receiving cash. In relation to Dividends to be declared, the Board may, at its discretion, determine whether to offer Shareholders the Reinvestment Option and where applicable, the size of the Electable Portion. You should note that the Company is not obliged to make available the Proposed DRS for every Dividend declared. In this respect, the Electable Portion may apply to the whole or part of the Dividend declared. In the event the Electable Portion is applicable for part of the Dividend declared, the Non-Electable Portion will be paid entirely in cash. The Memorandum and Articles of Association of Sunway as well as the Act do not prohibit the implementation of any dividend reinvestment scheme. Unless the Board has determined that the Reinvestment Option will apply to a particular Dividend declared (whether in whole or in part), all Dividends as may be declared by Sunway will be paid entirely in cash to the Shareholders in the usual manner through a Dividend Payment Account. 2.2 Election to reinvest Dividends into New Shares Shareholders will have the following options in respect of the Proposed DRS as may be made available by the Board in its discretion: (i) Option 1 Elect to exercise the Reinvestment Option by reinvesting the whole or part of the Electable Portion of the New Shares at the Issue Price and, in the event that the Shareholders elect to reinvest only part of the Electable Portion, Shareholders shall receive cash for the Remaining Portion; or (ii) Option 2 Elect not to exercise the Reinvestment Option and thereby receive the entire Dividend (where applicable, both the Electable Portion and Non-Electable Portion) entirely in cash. An approval for the listing of and quotation for the New Shares on the Main Market of Bursa Securities will be sought from Bursa Securities and the announcement of the Books Closure Date will be made after receiving such approval from Bursa Securities. The Issue Price shall be announced on the same day or before the announcement is made of the Books Closure Date. 2

9 Subsequent to the Books Closure Date, a Notice of Election will be despatched to Shareholders as Sunway is required pursuant to Paragraph 6.45(C)(2) of the Listing Requirements to allow its Shareholders to elect whether to participate in the Proposed DRS and give its Shareholders at least fourteen (14) days from the despatch of the Notice of Election to submit the completed Notice of Election. The Notice of Election will specify, amongst others, the Expiry Date. Instructions will be provided in the Notice of Election in respect of the action to be taken by Shareholders should they wish to exercise the Reinvestment Option. After the Expiry Date, the Company shall deposit funds amounting to the total net Dividends (i.e. after the deduction of any applicable income tax) from its account to a Dividend Payment Account held in trust for the Shareholders. The Company will make an announcement in respect of the day on which the New Shares will be listed and quoted on the Main Market of Bursa Securities. In accordance with Paragraph 6.09 of the Listing Requirements, Sunway will within eight (8) Market Days from the Expiry Date or such other date as may be prescribed by Bursa Securities, allot and issue the New Shares and despatch notices of allotment to Shareholders who have elected to exercise their Reinvestment Option. Further, in accordance with Paragraphs 8.26(2) and 9.19(2)(a)(ii) of the Listing Requirements, a dividend (in cash, by share or both) will be paid within one (1) month from the Books Closure Date and in any event, within three (3) months from the date of the declaration of the dividend or the date on which the approval is obtained in a general meeting of the Company, whichever is applicable. For the avoidance of doubt, Dividends for the Shareholders who do not exercise their Reinvestment Option will also be paid concurrently in the usual manner as prescribed above. Dividend warrants, which will be made for the full amount of each Shareholder s entitlement to the Dividends, will be despatched to the Shareholders in the usual manner. Other than funds to be deposited from a Dividend Payment Account in respect of Dividends which have been elected by the Shareholders for reinvestment in New Shares, there will be no new funds to be raised under the Proposed DRS. The New Shares to be issued pursuant to the Proposed DRS will not be underwritten. Shareholders will receive the Electable Portion in cash if they do not expressly elect in writing to exercise the Reinvestment Option by the Expiry Date. As such, Shareholders are not required to take any action with regard to the Notice of Election if they wish to receive their Dividends entirely in cash. 2.3 Pricing of New Shares The Issue Price of the New Shares which will be determined by the Board on the Price Fixing Date, and shall be the higher of: (i) (ii) an issue price of not more than ten percent (10%) discount to the adjusted five (5)-Market Day VWAP of Sunway Shares immediately preceding the Price Fixing Date. The VWAP shall be adjusted ex-dividend before applying the aforementioned discount in fixing the Issue Price; or the par value of Sunway Shares at the material time. The New Shares will be issued free of any brokerage fees or other related transaction costs to the Shareholders unless otherwise provided by any statute, law or regulation. 3

10 2.4 Eligibility All Shareholders are eligible to participate in the Proposed DRS provided that such participation will not result in a breach of any restrictions on such Shareholder s holding of Sunway Shares which may be imposed by any contractual obligation of such Shareholder, or by statute, law or regulation in force in Malaysia or any other relevant jurisdiction, or by any relevant authorities, as the case may be or as prescribed in the Memorandum and Articles of Association of the Company. To avoid any violation on the part of the Company of any securities laws applicable outside Malaysia, the Notice of Election will not be sent to Shareholders whose address in the Company s ROD is not in Malaysia. Shareholders who currently do not have a registered address in Malaysia and who wish to participate in the Proposed DRS are advised to provide the share registrar of Sunway, namely Sunway Management Sdn Bhd located at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan with a registered address in Malaysia no later than three (3) Market Days before the relevant Books Closure Date in respect of any particular Dividend to which the Reinvestment Option is made available by the Board. 2.5 Odd lots Under the Proposed DRS, Shareholders who exercise the Reinvestment Option and receive New Shares shall be allotted such New Shares in multiples of and not less than one hundred (100) New Shares. The amount of the Dividends relating to the entitlement of New Shares of less than one hundred (100) Shares will be added to the Non-Electable Portion and paid in cash to the Shareholders in the usual manner through the Dividend Payment Account. Shareholders shall not be allotted and issued with odd lots of New Shares arising from their election to exercise the Reinvestment Option. 2.6 Modification, suspension and termination of the Proposed DRS Subject to any requirement or provision imposed by any statute, law or regulation in force in Malaysia, the Board is entitled at any time as it deems fit or expedient to modify, suspend (in whole or in part) or terminate the Proposed DRS by giving notice in writing to all Shareholders in such manner as the Board deems fit, irrespective of whether the Board has announced a Dividend or whether an election to exercise the Reinvestment Option has been made by a Shareholder. In the event the Board decides to cancel the application of the Proposed DRS in relation to the Electable Portion, Shareholders will receive the Electable Portion in cash in the usual manner from the Dividend Payment Account. 2.7 Maximum number of New Shares The maximum number of New Shares to be allotted and issued pursuant to the Proposed DRS will depend on amongst others: (i) (ii) (iii) (iv) the quantum of the Dividend; the Board s decision on the proportion/size of the Electable Portion; the Issue Price in respect of the New Shares; the number of Shareholders who elect to exercise the Reinvestment Option and the extent of their election; and 4

11 (v) any necessary downward adjustment by the Board to the final number of New Shares to be allotted and issued to any of the Shareholders as referred to in Section 3.2 of this Circular. Under the Proposed DRS, Shareholders who elect to exercise the Reinvestment Option shall not be allotted fractional Shares. As such, the amount of the Dividends relating to such fractional entitlement of New Shares will be added to the Non- Electable Portion or the Remaining Portion, as the case may be, and shall be paid in cash to the Shareholders in the usual manner through a Dividend Payment Account. 2.8 Ranking of the New Shares The New Shares to be issued pursuant to the Proposed DRS will rank pari passu in all respects with the then existing Sunway Shares, save and except that the holders of New Shares shall not be entitled to any dividends, rights, allotments and/or any other distributions which may be declared, made or paid to the Shareholders, the entitlement date of which is prior to the Allotment Date. As the New Shares to be issued pursuant to the Proposed DRS are prescribed securities, the New Shares will be credited directly into the respective Central Depository System accounts of the Shareholders who have elected to reinvest the Electable Portion. No physical share certificates will be issued. 2.9 Taxation Irrespective of whether an election is made by a Shareholder, a tax voucher will be despatched to all Shareholders. For income tax purposes, Shareholders shall be treated as having received a cash distribution equivalent to the amount of the Dividends declared. Hence, the election for the Reinvestment Option does not relieve the Shareholder of any income tax obligation (if applicable) and there is no tax advantage to be gained in exercising the Reinvestment Option or otherwise Utilisation of cash retained arising from the Proposed DRS The amount of cash retained arising from the Proposed DRS is subject to the factors set out in Section 2.7 herein and hence cannot be ascertained at this juncture. Accordingly, the time frame for the utilisation of such proceeds may only be determined subsequently. Nonetheless, the net proceeds retained from the Proposed DRS (after deducting estimated expenses for the Proposed DRS) will be utilised for working capital and/or other requirements of Sunway Group as the Board may, in their absolute discretion, deem fit in the interest of the Group. For information purposes, the estimated expenses in relation to the Proposed DRS in the first year of implementation amounts to approximately RM180,000. [The rest of this page has been intentionally left blank] 5

12 2.11 General The right to participate in the Proposed DRS will be granted to all Shareholders, including the Directors, Substantial Shareholders and other interested persons (including persons connected with a Director or Substantial Shareholder) who hold Sunway Shares, subject to restrictions referred to in Section 2.4 of this Circular and the terms and conditions of the Proposed DRS as set out in Appendix I of this Circular. Shareholders approval for the Proposed DRS will be sought at the forthcoming EGM. The first Shareholders approval for the issuance of such number of New Shares as may be required pursuant to the exercise of the Reinvestment Option by Shareholders will be sought at the said EGM and such approval shall, except in respect of the issuance of New Shares in connection with an Reinvestment Option which has already been offered by the Company to Shareholder, continue to be in full force until the conclusion of the next AGM. Subsequent approvals for any future issuances of New Shares pursuant to the Proposed DRS will be sought at the AGM on an annual basis, where applicable. For avoidance of doubt, the specific approval to be obtained from the Shareholders for the issuance of New Shares arising from the Proposed DRS is in addition to any general mandate obtained under Section 132D of the Act, for general purposes, where the Sunway Shares to be issued shall not exceed ten percent (10%) of the nominal value of the total issued and paid-up share capital of the Company, to be sought (if applicable) at the AGM on an annual basis. The percentage shareholding of a Shareholder will be diluted if he/she/it does not exercise the Reinvestment Option. However, the extent of the dilution will depend on the number of New Shares to be issued by the Company pursuant to the level of exercise of the Reinvestment Option by the other Shareholders as a whole. Amendments to the Memorandum and Articles of Association of Sunway are not required in respect of the implementation of the Proposed DRS as the Memorandum and Articles of Association of Sunway as well as the Act do not prohibit the implementation of any dividend reinvestment scheme. [The rest of this page has been intentionally left blank] 6

13 3. IMPLICATIONS OF THE CODE AND LISTING REQUIREMENTS 3.1 The Code Under Section 9(1) of Part III of the Code and Section 217 of the CMSA, a Shareholder should note that he may be under an obligation to extend a mandatory take-over offer for the remaining Sunway Shares in the Company not already owned by him and persons acting in concert with him (collectively, the Affected Parties ), if: (i) (ii) by participating in the Proposed DRS in relation to the reinvestment of the Electable Portion, the Affected Parties have obtained control via the acquisition or holding of, or entitlement to exercise or control the exercise of voting shares or rights of thirty-three percent (33%) or more, or such other amount as may be prescribed in the Code, in the Company, howsoever effected; or the Affected Parties acquire (including by participating in the Proposed DRS in relation to any Electable Portion) more than two percent (2%) of the voting shares or voting rights of the Company in any six (6) months period, and the Affected Parties hold more than thirty-three percent (33%) but not more than fifty percent (50%) of the voting shares or voting rights of the Company during the said six (6) months period. Therefore, in the event an obligation to undertake a mandatory take-over offer is expected to arise resulting from the exercise of the Reinvestment Option, the Affected Parties may make an application to the Securities Commission of Malaysia for a waiver from the obligation to undertake a mandatory offer pursuant to the Code prior to exercising their Reinvestment Option. The statements herein do not purport to be a comprehensive or exhaustive description of all the relevant provisions of, or all implications that may arise under, the Code or any other relevant legislation or regulations in force in Malaysia. Shareholders who are in doubt as to whether they would incur any obligation to make a mandatory take-over offer under the Code as a result of any subscription of New Shares through their participation in the Proposed DRS are advised to consult their professional advisers at the earliest opportunity. 3.2 Other shareholding limits Shareholders are reminded to ensure that their participation will not result in a breach of any restrictions on their respective holding of Sunway Shares which may be imposed by any of the Shareholders contractual obligations, or by statute, law or regulation in force in Malaysia or any other relevant jurisdiction, or by any relevant authorities, as the case may be (unless the requisite approvals under the relevant statute, law or regulation or from the relevant authorities are first obtained or the relevant contractual obligation is otherwise waived in accordance with the terms and conditions of the relevant contracts), or as prescribed in the Company s Memorandum and Articles of Association. In view of the shareholding limits referred to in Section 3.2 of this Circular, the Board shall be entitled but not obliged to (save and except where required by law) reduce or limit the number of New Shares to be issued to any Shareholder should the Board be aware or be informed of any expected breach of such shareholding limits as a result of the exercise of the Reinvestment Option by such Shareholder. Based on Sunway s ROD as at the LPD, Sunway has a public shareholding spread of 35.26%, representing 607,681,408 Shares held by public shareholders. 7

14 The Board is mindful of the requirement under the Listing Requirements that any issuance of New Shares pursuant to the Proposed DRS by the Company must not result in the public shareholding spread of the Company falling below twenty-five percent (25%) of its total listed Shares (excluding treasury shares). In the event that the public shareholding spread of the Company is not met arising from the implementation of the Proposed DRS, the Company will endeavour to rectify the shortfall in the public shareholding spread and/or seek an extension of time from Bursa Securities to rectify the situation. 4. RATIONALE FOR THE PROPOSED DRS 4.1 Capital management strategy The Proposed DRS will provide Sunway with additional flexibility in managing its capital position as part of Sunway s capital management strategy. In addition, the election by the Shareholders for New Shares will enlarge the share capital base of Sunway. Under the Proposed DRS, the cash to be retained which would otherwise be paid by way of dividend will be preserved to fund the general working capital purposes of the Sunway Group. 4.2 Enhancing shareholders value The Proposed DRS provides the Shareholders with an opportunity to enhance and maximise the value of their shareholdings in Sunway by investing in New Shares at a discount as detailed in Section 2.3 of this Circular. The Proposed DRS also provides flexibility to the Shareholders in meeting their investment objectives as the Shareholders will have the option of receiving Dividends in cash and/or reinvesting in Sunway Shares without having to incur brokerage fees and related transaction costs, except for minimal subscription expenses, unless otherwise provided by any statute, law or regulation. 4.3 Alternative mode of Dividend payment The implementation of the Proposed DRS will provide an avenue to the Shareholders to exercise the Electable Portion under the Reinvestment Option into New Shares in lieu of receiving cash. Shareholders will not be worse off as a result of the implementation of the Proposed DRS as Shareholders are still entitled to elect to receive their Dividends in cash. [The rest of this page has been intentionally left blank] 8

15 5. EFFECTS OF THE PROPOSED DRS The effects of the Proposed DRS are dependent on several factors, which include, amongst others: (a) (b) (c) (d) (e) the quantum of the Dividend; the Board s decision on the proportion/size of the Electable Portion; the Issue Price in respect of the New Shares; the number of Shareholders who elect to exercise the Reinvestment Option and the extent of their election; and any necessary downward adjustment by the Board to the final number of New Shares to be allotted and issued to any of the Shareholders as referred to in Section 3.2 of this Circular. As at the LPD, the issued and paid-up share capital of the Company is RM1,723,678,356 comprising 1,723,678,356 Sunway Shares. For information purposes, the Company holds no treasury Shares as at the LPD. As at the LPD, the Company has 289,599,049 outstanding warrants issued on 18 May 2011 and expiring on 17 May There are a total of 125,715,300 outstanding options over the Sunway Shares under the Employee Share Option Scheme of the Company as at the LPD, out of which a total of 28,881,900 had been vested and not exercised. Set out below is an illustration of the number of New Shares that the Company could potentially allot and issue, after taking into consideration the following assumptions: (a) (b) (c) a total dividend of 10% or 10 sen per Share; the Board determines that the Electable Portion applies to the entire Illustrative Dividend amount; and all Shareholders elect to exercise their Reinvestment Option and reinvest the whole of the Electable Portion in New Shares. The illustration of the number of New Shares that the Company could potentially allot and issue is based on the following scenarios: Minimum Scenario : Assuming that none of the Outstanding Warrants 2011/2016 and Outstanding ESOS Options are exercised prior to the implementation of the Proposed DRS. Maximum Scenario : Assuming full exercise of the Outstanding Warrants 2011/2016 are converted into Sunway Shares at the conversion price of RM2.50 and Outstanding ESOS Options are converted into Sunway Shares at the exercise price of RM2.76 prior to the implementation of the Proposed DRS (collectively known as the Proforma Adjustments ). 9

16 Based on the above scenarios, the number of New Shares that Sunway could potentially allot and issue under the Proposed DRS would be as follows: Minimum Scenario Maximum Scenario Issued and paid-up share capital as at the LPD Illustrative Dividend (RM per Sunway Share) 1,723,678,356 2,042,159,305 (A) (B) Illustrative Dividend payout 172,367, ,215,931 (C) = (A) x (B) Illustrative Issue Price of New Shares (RM)* (D) Number of New Shares to be issued # 65,789,250 77,945,012 (E) = (C) / (D) Notes: * Calculated based on the five (5)-Market Day VWAP of Sunway Shares as at the LPD of RM3.01 after deducting the Illustrative Dividend and thereafter applying the maximum allowable discount of ten percent (10%). # The 65,789,250 and 77,945,012 New Shares to be issued represent approximately 3.82% of the Company s enlarged issued and paid-up share capital under the Minimum and Maximum Scenarios respectively. 5.1 Share Capital Under the Proposed DRS, the Company s issued and paid-up share capital will increase due to the issuance of New Shares pursuant to any election by Shareholders of the Reinvestment Option whenever the Reinvestment Option is offered by the Board. For illustration purposes only, based on the assumptions as stated in Section 5 of this Circular, the proforma effects of the Proposed DRS on the Company s issued and paid-up share capital are as follows: <-Minimum Scenario-> Number of Shares ( 000) (RM 000) <-Maximum Scenario-> Number of Shares ( 000) (RM 000) Issued and paid-up share capital as at the LPD To be issued pursuant to the exercise of the Outstanding Warrants 2011/2016 To be issued pursuant to the exercise of the Outstanding ESOS Options Proforma enlarged issued and paid-up share capital 1,723,678 1,723,678 1,723,678 1,723, , , ,882 28,882 1,723,678 1,723,678 2,042,159 2,042,159 To be issued pursuant to the Proposed DRS 65,789 65,789 77,945 77,945 Issued and paid-up share capital after the Proposed DRS 1,789,468 1,789,468 2,120,104 2,120,104 10

17 5.2 Substantial Shareholders Shareholdings The shareholdings of the Substantial Shareholders in Sunway will not be affected should all Shareholders fully exercise their respective Electable Portion. However, the shareholding percentage of the Substantial Shareholders who elect to reinvest their Electable Portion will increase, in the event some or all of the other Shareholders do not elect to reinvest their Electable Portion or elect to reinvest only part of their Electable Portion. Vice versa, the shareholding percentage of the substantial Shareholders will decrease, in the event they elect to not reinvest their Electable Portion while other Shareholders elect to reinvest their Electable Portion. For illustrative purposes only, based on the assumptions as stated in Section 5 of this Circular, the proforma effects of the Proposed DRS on all Substantial Shareholders shareholdings in the Company (based on the Register of Substantial Shareholders as at the LPD) assuming all Shareholders elect to participate and reinvest the whole of the respective Electable Portions, are as follows: Minimum Scenario (I) (II) As at the LPD After (I) and the Proposed DRS Direct Indirect Direct Indirect Number of Shares (%) Number of Shares (%) Number of Shares (%) Number of Shares (%) Substantial Shareholders of Sunway Tan Sri Dato Seri Dr Jeffrey Cheah Fook Ling, AO 76,988, (1) 877,610, ,927, (1) 911,107, Puan Sri Datin Seri (Dr) Susan Cheah Seok Cheng - - (2) 954,599, (2) 991,034, Sarena Cheah Yean Tih 577, (3) 953,889, , (3) 990,297, Evan Cheah Yean Shin 134, (4) 953,888, , (4) 990,296, Sungei Way Corporation Sdn Bhd 830,199, ,887, Active Equity Sdn Bhd - - (5) 830,199, (5) 861,887, GIC Private Limited for Government of Singapore 150,666, ,417, Notes: (1) (2) (3) (4) (5) Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Active Builder Sdn Bhd, Jef-San Enterprise Sdn Bhd, Sungei Way Corporation Sdn Bhd and children. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Jef-San Enterprise Sdn Bhd, spouse and children. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Active Builder Sdn Bhd, Sungei Way Corporation Sdn Bhd, spouse and parents. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Sungei Way Corporation Sdn Bhd and parents. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Sungei Way Corporation Sdn Bhd. 11

18 Maximum Scenario (I) (II) (III) As at the LPD After (I) and the Proforma Adjustments After (II) and the Proposed DRS Direct Indirect Direct Indirect Direct Indirect Substantial Shareholders of Number of Number of Number of Number of Number of Number of Sunway Shares (%) Shares (%) Shares (%) Shares (%) Shares (%) Shares (%) Tan Sri Dato Seri Dr Jeffrey 76,988, (1) 877,610, (2) (3) (3) 92,431, ,024,698, ,959, ,063,808, Cheah Fook Ling, AO Puan Sri Datin Seri (Dr) Susan - - (4) (5) (4) (4) 954,599, , ,117,004, , ,159,638, Cheah Seok Cheng Sarena Cheah Yean Tih 577, (6) 953,889, (7) (8) (8) 1,074, ,115,499, ,115, ,158,075, Evan Cheah Yean Shin 134, (9) 953,888, (10) (11) (11) 556, ,115,498, , ,158,074, ,199, (12) 969,520, ,006,525, Sungei Way Corporation Sdn Bhd Active Equity Sdn Bhd - - (13) 830,199, (14) (13) (13) 1,560, ,520, ,619, ,006,525, GIC Private Limited for 150,666, (15) 186,087, ,189, Government of Singapore Notes: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Active Builder Sdn Bhd, Jef-San Enterprise Sdn Bhd, Sungei Way Corporation Sdn Bhd and children. Assuming full exercise of 11,142,367 outstanding Warrants 2011/2016 and 4,300,000 outstanding ESOS Options held by Tan Sri Dato Seri Jeffrey Cheah Fook Ling, AO. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Active Equity Sdn Bhd, Active Builder Sdn Bhd, Jef-San Enterprise Sdn Bhd, Sungei Way Corporation Sdn Bhd, spouse and children. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Jef-San Enterprise Sdn Bhd, spouse and children. Assuming full exercise of 125,000 outstanding ESOS Options held by Puan Sri Datin Seri (Dr) Susan Cheah Seok Cheng. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Active Builder Sdn Bhd, Sungei Way Corporation Sdn Bhd, spouse and parents. Assuming full exercise of 97,058 outstanding Warrants 2011/2016 and 400,000 outstanding ESOS Options held by Sarena Cheah Yean Tih. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Active Equity Sdn Bhd, Active Builder Sdn Bhd, Sungei Way Corporation Sdn Bhd, spouse and parents. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Sungei Way Corporation Sdn Bhd and parents. Assuming full exercise of 22,589 outstanding Warrants 2011/2016 and 400,000 outstanding ESOS Options held by Evan Cheah Yean Shin. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Active Equity Sdn Bhd, Sungei Way Corporation Sdn Bhd and parents. Assuming full exercise of 139,320,922 outstanding Warrants 2011/2016 held by Sungei Way Corporation Sdn Bhd. Deemed interest by virtue of Section 6A of the Companies Act, 1965 held through Sungei Way Corporation Sdn Bhd. Assuming full exercise of 1,560,318 outstanding Warrants 2011/2016 held by Active Equity Sdn Bhd. Assuming full exercise of 35,420,438 outstanding Warrants 2011/2016 held by GIC Private Limited for Government of Singapore. 12

19 5.3 NA and Gearing The implementation of the Proposed DRS will increase the Company s NA and in turn, improve the Group s gearing ratio (without taking into account the expenses related to the payment of the Dividends entirely in cash and the Proposed DRS, respectively) as a result of the reinvestment of the Electable Portion in New Shares by the Shareholders. The quantum of the increase in NA and improvement in gearing ratio are dependent on the extent the Shareholders elect to reinvest the Electable Portion in New Shares. For illustration purposes, the effects of the Proposed DRS on the NA and gearing of the Sunway Group, based on the audited consolidated financial statements of Sunway as at 31 December 2013 as well as the assumptions set out in Section 5 of this Circular, are as follows: Audited as at 31 December 2013 (RM'000) Minimum Scenario Maximum Scenario (I) (IIa) (IIb) (IIIb) After exercise of ESOS options and warrants from 1 January 2014 to the LPD (RM'000) After (I) and Proposed DRS (RM'000) After (I) and Proforma Adjustments (RM'000) After (IIb) and Proposed DRS (RM'000) Group level Share capital 1,723,524 Share premium 2,628,404 (a)(b) 1,723,678 2,628,749 (d) 1,789,468 2,735,328 (e)(f) 2,042,159 3,130,567 (d) 2,120,104 3,256,838 Equity contribution 51,654 51,654 51,654 51,654 51,654 Merger reserve (1,192,040) (1,192,040) (1,192,040) (1,192,040) (1,192,040) Reserves 2,094,269 2,094,191 1,921,643 2,077,604 1,873,208 Reserve of disposal group classified as held for sale 22,488 22,488 22,488 22,488 22,488 Shareholders funds/ NA 5,328,299 5,328,721 5,328,541 6,132,432 6,132,252 No. of Shares 1,723,524 1,723,678 1,789,468 2,042,159 2,120,104 NA per Share (RM) Net Borrowings (g) 1,346,644 (a)(b) 1,346,222 (c) 1,346,402 (e)(f) 542,511 (c) 542,691 Net Gearing ratio Notes: (a) Adjusted for 135,900 Shares which were issued from the exercise of ESOS options from 1 January 2014 to the LPD as follows: No. of Shares Options granted and exercised: Exercise Price (RM) Share Premium (RM) 135, , , ,184 Following the exercise of the ESOS options, RM78,278 will be transferred from the share option reserve to the share premium account. 13

20 (b) Adjusted for 18,697 Shares which were issued from the exercise of warrants from 1 January 2014 to the LPD as follows: No. of Shares Warrants exercised: Exercise Price (RM) Share Premium (RM) 18, ,046 18,697 28,046 (c) (d) (e) After netting estimated expenses of RM180,000 pursuant to the Proposed DRS Adjusted for dividend payout amounting to RM172,367,836 and RM204,215,931 under the Minimum Scenario and Maximum Scenario respectively Assuming all the Outstanding ESOS Options are exercised prior to the books closure date as follows: No. of Shares Exercise Price (RM) Share Premium (RM) Options granted and exercised: 28,881, ,832,144 28,881,900 50,832,144 Following the exercise of the Outstanding ESOS Options, RM16,635,974 will be transferred from the share option reserve to the share premium account. (f) Assuming all the warrants are exercised into new Sunway Shares prior to the books closure date as follows: No. of Shares Exercise Price (RM) Share Premium (RM) Warrants exercised: 289,599, ,398, ,599, ,398,574 (g) Total borrowings of the Sunway Group less cash and bank balances 5.4 EPS The consolidated EPS of the Sunway Group will be diluted depending on the extent the Shareholders elect to reinvest the Electable Portion in New Shares. However, such reinvested amount will be retained to fund the working capital and/or other requirements of the Sunway Group and is expected to contribute positively to the future earnings of the Sunway Group. 5.5 Convertible Securities Save for the Outstanding ESOS Options and Outstanding Warrants 2011/2016 as at the LPD, the Company does not have any other convertible securities. The terms of the bylaws constituting the Outstanding ESOS Options and the terms of the deed poll constituting the Outstanding Warrants 2011/2016 dated 28 June 2011 provide that the Proposed DRS will not give rise to any adjustment to the exercise price and number of the Outstanding ESOS Options and the Outstanding Warrants 2011/2016 as long as the issue of new Shares in any one financial year do not exceed 10% of the Company s outstanding issued share capital. 14

21 6. SHARE PRICES The following table sets out the monthly highest and lowest market prices of Sunway s Shares traded on Bursa Securities for the past twelve (12) months ended May 2014: Highest (RM) Lowest (RM) Year 2013: June July August September October November December Year 2014: January February March April May (Source: Bloomberg) The last transacted market price of Sunway Shares on 22 May 2014 (being the last transacted price prior to the announcement of the Proposed DRS) was RM3.19 per Share. The last transacted market price of Sunway Shares on 15 May 2014 (being the LPD prior to the printing of this Circular) was RM3.07 per Share. 7. APPROVALS REQUIRED The Proposed DRS is subject to the following approvals being obtained: (i) (ii) (iii) the approval of the Shareholders for the Proposed DRS and the issuance of the New Shares arising from the Proposed DRS, at the forthcoming EGM; the approval of the Bursa Securities for the listing of and quotation for the New Shares to be issued pursuant to the Proposed DRS, on the Main Market of Bursa Securities; and such other approvals of relevant authorities/parties, if required.. The Proposed DRS is not conditional or inter-conditional upon any other corporate exercise undertaken or to be undertaken by the Company. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major Shareholders of Sunway and/or any persons connected with them have any interest, direct or indirect, in the Proposed DRS, save for their respective entitlements as Shareholders under the Proposed DRS as well as their right to participate in the Proposed DRS to which all other Shareholders are similarly entitled. 15

22 9. DIRECTORS RECOMMENDATION After having considered all aspects of the Proposed DRS (including but not limited to the rationale and effects of the Proposed DRS), the Board is of the opinion that the Proposed DRS is in the best interests of the Company. Accordingly, the Board recommends that you vote in favour of the ordinary resolution pertaining to the Proposed DRS to be tabled at the forthcoming EGM to be convened. 10. CORPORATE PROPOSALS ANNOUNCED BUT PENDING COMPLETION The Board confirms that there are no other outstanding corporate proposals which have been announced but not yet completed by the Company prior to the printing of this Circular. 11. ESTIMATED TIMEFRAME FOR THE IMPLEMENTATION OF THE PROPOSED DRS Subject to the receipt of the relevant approvals stated in Section 7 of this Circular and barring any unforeseen circumstances, the Proposed DRS is expected to be ready for implementation by the second half of An illustrative timeline for the implementation of the Proposed DRS in respect of any Dividend declared where the Reinvestment Option is made available by the Board is set out below: Events Declaration of final Dividend to which the Proposed DRS applies (a)(b) Issuance of annual report (a) or Declaration of interim Dividend to which the Proposed DRS applies (b) AGM (a) Submission of additional listing application ( ALA ) to Bursa Securities for its approval. Assuming Bursa Securities takes up to approximately fourteen (14) calendar days to approve the ALA Announcement of Issue Price and Books Closure Date (c) Books Closure Date (c) Despatch Notice of Election to Shareholders Expiry Date Allotment and issuance of the New Shares as well as payment of cash dividend to Shareholders Listing of New Shares Illustrative Timeline (d) T 40 calendar days T 37 calendar days T 16 calendar days T 14 calendar days T T + 14 calendar days T + 16 calendar days T + 30 calendar days T + 39 calendar days T + 40 calendar days Notes: (a) (b) (c) (d) Relates to the declaration of final Dividend where Shareholders' approval for the final Dividend is required. As Shareholders' approval in respect of the interim Dividend is not required, the indicative timeline for the Board to declare such interim Dividend (to which the Proposed DRS applies) may fall on T - 16 calendar days. Common processes which apply to declaration of both interim and final Dividend to which the Proposed DRS applies. The above illustrative timeline sets out the indicative timing of the aforementioned events and is subject to change. 16

23 12. EGM The ordinary resolution in respect of the Proposed DRS will be tabled at the EGM of Sunway to be held at Grand Bahamas, Level 12, Sunway Resort Hotel & Spa, Persiaran Lagoon, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan on Thursday, 26 June 2014 at 4.00 p.m. or immediately following the conclusion or adjournment (as the case may be) of the 4 th Annual General Meeting of Sunway which will be held at 3.30 p.m. on the same day and at the same venue, whichever is later, or any adjournment thereof. The Notice of the EGM together with the Form of Proxy are enclosed herein with this Circular. If you are unable to attend and vote in person at the EGM, you are requested to complete, sign and return the enclosed Form of Proxy and in any event, so as to arrive at the Registered Office of Sunway at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, Subang Jaya, Selangor Darul Ehsan, not less than forty-eight (48) hours before the time set for the EGM. The completion and return 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. 13. FURTHER INFORMATION Shareholders are requested to refer to the attached appendices for further information. Yours faithfully For and on behalf of the Board of Directors SUNWAY BERHAD Tan Sri Dato Seri Dr Jeffrey Cheah Fook Ling, AO Executive Chairman, Non-Independent Executive Director 17