TATT GIAP GROUP BERHAD (Company No W) (Incorporated in Malaysia under the Companies Act, 1965)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action 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. TATT GIAP GROUP BERHAD (Company No W) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED DISPOSAL BY TATT GIAP STEEL CENTRE SDN. BHD, A WHOLLY- OWNED SUBSIDIARY OF TATT GIAP GROUP BERHAD, OF 9,022,500 ORDINARY SHARES OF 1.00 EACH, REPRESENTING 40.1% OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF NIPPON EGALV STEEL SDN BHD TO NIPPON STEEL CORPORATION FOR A CASH CONSIDERATION OF 19,172, ( PROPOSED DISPOSAL ) AND NOTICE OF EXTRAORDINARY GENERAL MEETING The notice of Extraordinary General Meeting ( EGM ) of the Company to be held at Sri Cengal 1, Level 1, Sunway Hotel Seberang Jaya on 28 June 2011 at a.m. or immediately after the conclusion or adjournment of the Company s Fifth Annual General Meeting, together with the Form of Proxy are set out in this Circular. A member entitled to attend and vote at the EGM is entitled to appoint a proxy or proxies to attend and to vote on his/her behalf. Shareholders are advised to refer to the Notice of EGM and the Form of Proxy that are enclosed. The Form of Proxy must be lodged at the Registered Office of the Company at Suite 2-1, 2nd Floor, Menara Penang Garden, 42-A, Jalan Sultan Ahmad Shah, Penang on or before the date and time indicated below should you be unable to attend the meeting. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the meeting should you subsequently wish to do so. Last date and time for lodging the Form of Proxy : 26 June 2011 at 11:45 a.m. Date and time of the EGM : 28 June 2011 at 11:45 a.m. This Circular is dated 13 June 2011

2 DEFINITIONS Except where the context otherwise requires, the following definitions shall apply throughout this Circular:- Act : Companies Act, 1965, or any statutory modification, amendment or reenactment thereof for the time being in force Agreement : The Sale and Purchase Agreement dated 9 May 2011 entered into between Nippon Steel Corporation ( NSC ) with Tatt Giap Steel Centre Sdn Bhd ( TGSC ) for the disposal of 9,022,500 ordinary shares of 1.00 each representing 40.1% of the entire issued and paid up share capital of Nippon EGalv ( Sale Shares ) to NSC for an aggregate selling price of 19,172, Amended and Reinstated Shareholders Agreement : The amended and reinstated shareholders agreement to be entered into by NSC, HANWA and the Company (as shareholders of Nippon EGalv) and Nippon EGalv on Completion and which thereupon shall supersede the Shareholders Agreement Board : Board of Directors of TGG Bursa Securities : Bursa Malaysia Securities Berhad ( W) Circular : Circular to Shareholders of TGG on Proposed Disposal dated 13 June 2011 Completion Date : The date falling fourteen (14) Business Days (or such longer time as TGSC and NSC may agree in writing) after the Fulfillment Date (or, if that day is not a Business Day, on the next Business Day Cut-off Date : Means two (2) months from the date of Agreement ( Initial Cut-off Date ) or such longer period if mutually extended by TGSC and NSC by notice in writing to TGSC on or before the Initial Cut-off Date; CYC : Chai Yin Chong (NRIC NO /A (B)) EG : Electro galvanised EGM : Extraordinary General Meeting EPS/(LPS) : Earnings/(Loss) per share FPE : Financial period ended FYE : Financial year ended/ending HANWA : Hanwa Co. Ltd. (Co. Registration No ) Listing Requirements : The Main Market Listing Requirements of Bursa Securities LPD : 9 June 2011, being the latest practicable date prior to the printing of this Circular NA : Net assets Nippon EGalv : Nippon EGalv Steel Sdn. Bhd. (Co. No W) NSC : Nippon Steel Corporation (Co. Registration No ) NTA : Net tangible assets PAT : Profit after taxation -ii-

3 DEFINITIONS PBT : Profit before taxation Proposed Disposal : Proposed disposal by TGSC of 9,022,500 ordinary shares of 1.00 each representing 40.1% of the entire issued and paid up share capital of Nippon EGalv to NSC for an aggregate selling price of 19,172, Proposed HANWA Acquisition : A sale and purchase agreement entered into or will be entered into by HANWA and Mr Chai Yin Chong to which HANWA will purchase and CYC will sell all of the shares in Nippon EGalv held by CYC comprising 1,750,000 ordinary shares of 1.00 each Proposed Subscription : The proposed subscription for ten million (10,000,000) ordinary shares by TGGB, NSC and HANWA within two (2) months after the completion in accordance with the Amended and Reinstated Shareholders Agreement; Proposed TGGB Acquisition : TGSC will transfer all of its remaining 6,102,500 ordinary shares of 1.00 each in Nippon EGalv to TGG on or before the completion and sen : Ringgit Malaysia and sen, respectively Sale Shares : 9,022,500 ordinary shares of 1.00 each representing 40.1% of the entire issued and paid up share capital of Nippon EGalv Sale Consideration : Cash consideration of 19,172, in relation to the Proposed Disposal Shareholders' Agreement : The existing shareholders agreement dated 9 December 2009 entered into by TGSC, CYC, NSC and HANWA (as shareholders of Nippon EGalv), Nippon EGalv and TGG (as the guarantor for TGSC and Nippon EGalv in respect of their respective obligations under the Shareholders Agreement) Substantial shareholder : Means a person who has an interest or interest in one or more voting shares in the company and the nominal amount of that shares, or the aggregate of the nominal amount of those shares, is not less than five per centum (5%) of the aggregate of the nominal amount of all the voting shares in the company TGG or Company : Tatt Giap Group Berhad ( W) TGG Group or Group : TGG and its subsidiary companies, collectively TGSC : Tatt Giap Steel Centre Sdn Bhd ( X) In this Circular, words incorporating the singular shall, where applicable include the plural and vice versa and words incorporating the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Reference to persons shall include a corporation, unless otherwise specified. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. For the purpose of this Circular, any reference to time of day shall be a reference to Malaysian time, unless otherwise stated. -iii-

4 CONTENTS LETTER TO THE SHAREHOLDERS OF TGG CONTAINING: PROPOSED DISPOSAL PAGE 1 INTRODUCTION 1 2. DETAILS OF THE PROPOSED DISPOSAL 2 3. UTILISATION OF PROCEEDS FROM THE PROPOSED DISPOSAL 5 4. INFOATION ON NIPPON EGALV 5 5. INFOATION ON NSC 5 6. RATIONALE FOR THE PROPOSED DISPOSAL 6 7. EFFECTS OF THE PROPOSED DISPOSAL 7 8. RISK IN RELATION TO THE PROPOSED DISPOSAL 8 9. APPROVALS REQUIRED DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS OTHER CORPORATE EXERCISES ANNOUNCED BUT NOT YET 8 COMPLETED 12. CESSATION AS SUBSIDIARY OF TGG ESTIMATED TIME FRAME FOR COMPLETION DIRECTORS RECOMMENDATION EGM FURTHER INFOATION 9 -iv-

5 CONTENTS (Cont d) APPENDICES I INFOATION ON NIPPON EGALV 10 II LATEST AUDITED FINANCIAL STATEMENTS OF NIPPON EGALV FOR THE FYE 31 DECEMBER III FURTHER INFOATION 64 NOTICE OF EGM ENCLOSED FO OF PROXY ENCLOSED -v-

6 TATT GIAP GROUP BERHAD (Company No W) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office: Suite 2-1, 2 nd Floor Menara Penang Garden 42A, Jalan Sultan Ahmad Shah Penang 13 June 2011 Board of Directors: Dato Siah Kok Poay Siah Lee Beng Tan Lu Eng Zainal Abidin bin Ab. Rahman Dato Hj Mohd Zaim bin Abu Hasan Loh Eng Wee Yap Gim Seng - Chairman/President - Executive Director - Executive Director - Executive Director - Non-Independent Non-Executive Director - Independent Non-Executive Director - Independent Non-Executive Director To: The Shareholders of TGG Dear Sir/Madam, PROPOSED DISPOSAL OF SHARES IN NIPPON EGALV STEEL SDN BHD ( PROPOSED DISPOSAL ) 1. INTRODUCTION On 7 April 2010, the Company announced to Bursa Securities that TGSC had executed a Letter of Intent ( Letter ) with Nippon Steel Corporation ( NSC ) to confirm the potential sale by its wholly-owned subsubsidiary, Tatt Giap Steel Centre Sdn Bhd ( TGSC ) and acquisition by NSC of 9,022,500 ordinary shares of 1.00 each representing 40.1% of the entire issued and paid up share capital of Nippon EGalv ( Sale Shares ) for an aggregate sale price of 19,172, ( Selling Price ). The Company has on 11 and 12 April 2011 provided additional information as requested by Bursa Securities with regards to the Proposed Disposal. On 10 May 2011, the Company further announced that on 9 May 2011, TGG had entered into a SPA with NSC and TGSC for the Proposed Disposal and had also on 12 May 2011 provided additional information as requested by Bursa Securities. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH INFOATION ON THE PROPOSED DISPOSAL AND SEEK YOUR APPROVAL ON THE RESOLUTION IN RELATION TO THE PROPOSED DISPOSAL TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY TO BE CONVENED. THE NOTICE OF THE FORTHCOMING EGM TOGETHER WITH THE FO OF PROXY IS SET OUT IN THIS CIRCULAR. SHAREHOLDERS OF TGG ARE ADVISED TO READ CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES CONTAINED HEREIN BEFORE VOTING ON THE RESOLUTION IN RELATION TO THE PROPOSED DISPOSAL TO BE TABLED AT THE FORTHCOMING EGM

7 2. DETAILS OF THE PROPOSED DISPOSAL TGSC shall sell and NSC shall purchase the Sale Shares free from encumbrances and together with all rights attaching thereto including all dividends and distributions declared, made or paid on and from the Completion Date. 2.1 Salient Terms of the Agreement The salient terms of the Proposed Disposal, as set out in the Agreement include, inter-alia, the following:- 1) the Selling Price of 19,172, of the Proposed Disposal under the Agreement shall be paid by NSC to TGSC on the date falling fourteen (14) Business Days (or such longer time as TGSC and NSC may agree in writing) after the Fulfillment Date (or, if that day is not a Business Day, on the next Business Day) (the Completion Date ) and shall be completed in the manner as provided therein Clause 5 of the Agreement (the Completion ). 2) Upon the terms and conditions as stated in the Agreement, TGSC would transfer all of its remaining 6,102,500 ordinary shares of 1.00 each in Nippon EGalv to TGG on or before the Completion (the Proposed TGGB Acquisition ). 3) On or before the execution of the Agreement, HANWA and CYC entered into or will enter into a sale and purchase agreement pursuant to which HANWA will purchase and CYC will sell, all of the shares in Nippon EGalv held by CYC comprising 1,750,000 ordinary shares of 1.00 each, subject to the terms of the said sale and purchase agreement (the Proposed HANWA Acquisition ). 4) Accordingly upon the Completion of the Proposed Disposal, TGG will enter into an Amended and Reinstated Shareholders Agreement with NSC, HANWA and Nippon EGalv to supersede the Shareholders Agreement dated 9 December 2009 entered into between TGG, TGSC, CYC, NSC, HANWA and Tatt Giap Hardware Sdn Bhd (Company No X) to regulate their relationship, inter se, as shareholders in Nippon EGalv and the conduct of the business and affairs of Nippon EGalv. 5) As further stated in the Agreement, after the completion of the Proposed Disposal, the Company, NSC and HANWA will undertake to subscribe for ten million (10,000,000) ordinary shares in Nippon EGalv in accordance with the Amended and Reinstated Shareholders Agreement to be entered into (the Proposed Subscription ) whereby the Proposed Subscription and payment of the consideration is contemplated to complete by end of August 2011 unless otherwise agreed among the shareholders. 6) The Proposed Disposal shall be conditional amongst others, the following being satisfied or fulfilled ( the Conditions Precedent ) not later than two (2) months from the date of the Agreement (the Initial Cut-off Date ) or such longer period if mutually extended by the TGSC and NSC by notice in writing to Nippon EGalv on or before the Initial Cut-off Date (the Cut-off Date ):-: (i) all necessary authorisations, licences, consents and approvals required to be obtained from banks, third parties and relevant governmental and/or regulatory authorities in Malaysia or any other foreign jurisdictions in respect of the transactions contemplated under the Agreement and the Amended and Reinstated Shareholders Agreement including but not limited to: (a) the written consents from Malayan Banking Berhad and Kuwait Finance House (Malaysia) Berhad for the Proposed Disposal, for the appointment of directors nominated by NSC, for the Proposed Subscription, for the alteration of the Articles, for the Proposed HANWA Acquisition, for the Proposed TGGB Acquisition and for the transactions as contemplated in the Agreement and the Amended and Reinstated Shareholders Agreement; and - 2 -

8 (b) the Ministry of International Trade and Industry having been notified of the Proposed Disposal, the Proposed HANWA Acquisition, the Proposed TGGB Acquisition, the Proposed Subscription and transactions contemplated under the Agreement; (ii) the passing at an extraordinary general meeting of TGG of a resolution to approve the transactions contemplated under the Agreement in accordance with the terms of the Agreement and the Proposed Subscription (if necessary); (iii) NSC being satisfied that there is no material adverse change in the business, financial or trading position, or assets, liabilities or profitability or prospects of Nippon EGalv, or any event reasonably likely to result in such a material adverse change; (iv) there is no introduction, imposition or implementation of any trade measure (including without limitation antidumping measures and safeguard measures) or change in applicable laws or regulations, which would adversely affect the rights and interests of NSC under the Amended and Reinstated Shareholders Agreement and no such introduction, imposition or implementation of trade measure or change in applicable laws or regulations would be reasonably anticipated on or before the Completion Date; and 7) NSC shall issue a letter to TGSC within fourteen (14) Business Days from the satisfaction of the last of the Conditions Precedent confirming the same (the Fulfillment Date ). 8) TGSC shall sell and NSC shall, in reliance upon the warranties, representations, undertakings, agreements and indemnities made and given by TGSC, purchase the Sale Shares free from all encumbrances but with all rights attaching thereto from the Completion Date and upon the terms and subject to the conditions hereinafter contained. Notwithstanding anything herein contained, NSC shall not be obliged to proceed to complete this Agreement unless the purchase of the Sale Shares is completed simultaneously with the completion of the Proposed HANWA Acquisition and the Proposed TGGB Acquisition in accordance with the terms more particularly stated under the Agreement. 9) If any of the documents required to be delivered by TGSC to NSC on Completion is not delivered for any reason or if in any other respect the conditions in the Agreement are not fully complied with by any party, the party not in default shall be entitled (in addition to and without prejudice to all other rights or remedies available to it including the right to claim damages):- (i) to elect to terminate the Agreement; (ii) to effect Completion so far as practicable having regard to the defaults which have occurred; or (iii) to fix a new date for Completion (not being more than twenty eight (28) days after the Completion Date) in which case the conditions in the Agreement shall apply to Completion as so deferred, provided that the party not in default has given notice to the party in default in writing and the party in default has not remedied the default within fourteen (14) days from the date of which the party in default receives such notice. 10) In the event NSC fails to complete the Agreement when obliged to do so, and TGSC is willing and demonstrates its ability to complete the Agreement and has not failed to comply with any of the terms of the Agreement or breached any of the terms of the Agreement, NSC shall pay to TGSC a sum equivalent to ten per cent (10%) of the Selling Price, as agreed liquidated and ascertained damages and compensation for breach of this Agreement, and thereafter the Agreement shall be terminated and be of no further effect and consequently the parties shall have no claim against the other parties

9 In the event TGSC fails to complete this Agreement when obliged to do so, and NSC is willing and demonstrate its ability to complete the Agreement and has not failed to comply with any of the terms of this Agreement or breached any of the terms of the Agreement, TGSC shall pay to NSC a sum equivalent to ten per cent (10%) of the Selling Price as agreed liquidated and ascertained damages and compensation for breach of the Agreement, and thereafter the Agreement shall be terminated and be of no further effect and consequently the parties shall have no claim against the other parties. 11) TGSC hereby undertakes to indemnify Nippon EGalv and NSC, and holds Nippon EGalv and NSC harmless from and against all losses arising from or in connection with Nippon EGalv s not having paid the full purchase price for the electro-galvanizing line (i) to Gana Jaan Machinery Co Ltd. (ii) the proceedings instituted against Gana Jaan Machinery Co Ltd. by Nippon EGalv, whether in Malaysia or elsewhere and (iii) any counterclaims or proceedings which may be instituted by Gana Jaan Machinery Co Ltd against Nippon EGalv, whether in Malaysia or elsewhere, (iv) or any matter in connection with the contract for the purchase of the electro-galvanizing line dated 16 February 2006 with Gana Jaan Machinery Co Ltd. 2.2 Sale Consideration The Sale Consideration for the 40.1% equity stake in Nippon EGalv amounting to 19,172, shall be fully satisfied by cash in a single lump sum payment. The Sales Consideration at per share is decided based on negotiated terms between NSC and TGG on a willing buyer willing seller" basis taking into consideration the cost of investment of TGG, which is 1.01 per share and various synergistic effects on the future operation of Nippon EGlav, as further detailed below:- Based on discounted cash flow method Value* 66,000,000 Less accumulated losses 14,142,388 Net Value 51,857,612 NTA of Nippon EGalv (Book value) based on the Audited Financial Statements for year ended 31 December 2010 is 42,855,834 #Final value agreed after negotiation = 47,812,500 Notes : * The terminal value is based on discounted cashflow at the rate of 7% on a projection of 10 years. The rate of 7% is used in consideration of inflation rate, interest rate of bank borrowing, interest rate of fixed deposits. Terminal value of 66.0 million is fixed based on mutual understanding of all parties during the finalization discussion. The above basis, assumptions and computations have not been reviewed by TGG s external auditors. # The value of 47,812,500 is agreed after taking into consideration of the following: i) Terminal value of 66.0 million ii) Accumulated loss of Nippon EGalv iii) Existing production facilities iv) Potential and future growth of EG business v) Transfer knowhow, technologies and research and development from NSC 2.3 Liabilities to be assumed by NSC There are no liabilities to be assumed by NSC arising from the Proposed Disposal

10 2.4 Original Cost of Investment The original cost and date of investment of TGSC in Nippon EGalv are as follows:- Date of investment Cost of investment () , ,500, ,300, , ,000, (5,692,500)** Notes :- ** Disposal of 2,250,000 ordinary shares and 3,375,000 ordinary shares of Nippon EGalv to NSC and Hanwa, respectively for a total cash consideration of 16,500, UTILISATION OF PROCEEDS FROM THE PROPOSED DISPOSAL Intended application Amount Timeframe ( 000) 1. Working capital *** 13,409, Within 12 months 2. Further investment ## 5,763, Within 6 months TOTAL 19,172, *** To cater for the increase in production volume and inventory level of stainless steel industrial pipes and service centre. ## To further invest in Nippon EGlav (27.12% out of the proposed additional 10.0 million ordinary shares at per share) as stated in the Amended and Reinstated Shareholders agreement to be entered into upon completion of this Proposed Disposal. If the further investment in Nippon EGlav is not materialized, the proceeds will be used as working capital and/or future investment. 4. INFOATION ON NIPPON EGALV Nippon EGalv was incorporated in Malaysia on 20 January 2006 under the name of Ta Zheng Steel Industry Sdn Bhd. It changed its name to E-Galv Steel Industry Sdn Bhd on 21 February 2007 and subsequently assumed its present name on 14 December Nippon EGalv is principally involved in the production of EG steel coils and began commissioning its electro galvanizing line in April Commercial production of EG steel coils commenced operations in the first quarter of Nippon EGalv s existing authorized share capital is 25,000, divided into 25,000,000 ordinary shares of 1.00 each and its issued and paid up share capital is 22,500, divided into 22,500,000 ordinary shares of 1.00 each. Further information on Nippon EGalv is set out in Appendix I in this Circular. 5. INFOATION ON NSC NSC, a corporation incorporated under the laws of Japan was established on 31 March 1970 with its registered office at 6-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo , Japan

11 NSC operates the mainstay steelmaking and steel fabrication business and five other closely related businesses. NSC is currently a shareholder in Nippon EGalv, holding 2,250,000 ordinary shares of 1.00 each representing 10% of the total shareholdings in Nippon EGalv. The board of directors of NSC as of July 2010 (as extracted from its latest Annual Report) together with their shareholdings in NSC are as follows:- Name of director/designation No. of shareholdings in NSC Akio Mimura 242 thousand shares Representative director and Chairman Shoji Muneoka 151 thousand shares Representative director and President Kozo Uchida 71 thousand shares Representative director and Executive Vice President Shinichi Taniguchi 124 thousand shares Representative director and Executive Vice President Keisuke Kuroki 158 thousand shares Representative director and Executive Vice President Kosei Shindo 64 thousand shares Representative director and Executive Vice President Masakazu Iwaki 108 thousand shares Representative director and Executive Vice President Junji Uchida 37 thousand shares Managing Director, Member of the Board Shigeru Oshita 16 thousand shares Managing Director, Member of the Board Toru Obata 56 thousand shares Managing Director, Member of the Board (The total number of existing shares in NSC : 6,806,980 thousand) The substantial shareholder of NSC as extracted from its latest Annual Report dated 31 March 2010 is Japan Trustee Services Bank, Ltd holding 10.1% of its total shares issued. 6. RATIONALE FOR THE PROPOSED DISPOSAL The synergy of this arrangement is that Nippon EGalv will be able to perform better via NSC experience in anti-finger electro-galvanized steel products. In addition, NSC will transfer knowhow, technologies and R&D and will license Nippon EGlav to manufacture the anti-finger electro-galvanized steel products under the name of NSC. This will allow Nippon EGlav to penetrate the Japanese electrical & electronics manufacturers operating in Malaysia. The Proposed Disposal would result in a capital gain of 3.14 million for group level and million for company level for the financial year ending 31 December 2011 and the sales proceed would be applied for the Group s working capital and future investment. As stated in the earlier Section 2.1, upon the Completion of the Proposed Disposal, TGG will enter into an Amended and Reinstated Shareholders Agreement with NSC, HANWA and Nippon EGalv where the Company, NSC and HANWA will undertake to subscribe for ten million (10,000,000) ordinary shares in proportion in Nippon EGalv ( Proposed Subscription ). The rationale of this Proposed Subscription is to pay off the existing loans that were extended from TGG and Hanwa as working capital. As at LPD, TGG had advanced up to 16.4 million to Nippon EGalv as working capital since Nippon EGalv commenced its operation in Nippon EGalv would utilize the cash to be injected by TGG, NSC and Hanwa under the Proposed Subscription to repay the loan advanced by TGG and HANWA. Ultimately, TGG will have net cash inflow of 10.7 million upon the completion of the Proposed Subscription

12 7. EFFECTS OF THE PROPOSED DISPOSAL 7.1 Share Capital and substantial shareholders shareholdings The Proposed Disposal will not have any effect on the issued and paid-up share capital of TGG as well as the shareholdings of its substantial shareholders. 7.2 Earnings The Proposed Disposal is expected to result in a capital gain of 3.14 million for group level and million for company level for the financial year ending 31 December If the Proposed Disposal took place in the beginning of FYE , TGG will only share 2.5 million loss of Nippon EGalv s total loss 9.2 million in FYE 2010 based on 27.12% new share holding and with this, plus the gain on disposal, TGG is making a profit of 5.1 million instead of loss of 4.6 million. Hence, the earnings per share will be 5.08 sen instead of the loss per share of 1.72 sen. As at Loss for the year - Audited (4,632) Reversal of loss incurred by subsidiary company Nippon EGalv 9,150 4,518 Share of loss of an associate Nippon EGalv (27.12%) (2,481) Gain on disposal of Nippon EGalv 3,140 Profit for the year attributable to shareholders 5,177 No. of ordinary shares issued ( 000) 102,000 Earnings per share (sen) 5.08 Based on the Audited Financial Statements of TGG for the year ended 31 December 2010, Nippon EGalv contributed a total net loss of 9.2 million to TGG s net loss. 7.3 Net Assets ( NA ) and Gearing The proforma effect of the Proposed Disposal on the net assets, net assets per share and gearing of TGG based on the audited financial statements for the financial year ended 31 December 2010 is set out in below. PROFOA EFFECT ON THE CONSOLIDATED NET ASSETS OF TGG Audited as at ( 000) After Proposed Disposal ( 000) Retained earnings 71,424 74,662^ Shareholders Funds/NA 122, ,662 No. of shares 102, ,000 Consolidated NA per share Borrowings 174, ,815 Gearing (times) Retained earnings 71,424 74,662 Notes:- ^ This is arrived at after adjusting for the Group s capital gain of 3.14 million on the Proposed Disposal - 7 -

13 8. RISK IN RELATION TO THE PROPOSED DISPOSAL 8.1 Completion Risk The completion of the Proposed Disposal may be subject to relevant authorities and/or parties as disclosed under Section 2.1 and Section 9 of this Circular and hence the benefit accruing to the Proposed Disposal for our Company may not be realised. Barring any unforeseen circumstances, we will endeavour to enable the completion of the Proposed Disposal. However, there is no assurance that the Proposed Disposal would be completed as contemplated by us. 9. APPROVALS REQUIRED The Proposed Disposal is conditional upon approvals being obtained from the following: (a) The shareholders of TGG at an Extraordinary General Meeting ( EGM ) to be convened for the Proposed Disposal; (b) TGSC has notified the Ministry of International Trade and Industry of Malaysia 19 April 2011; and (c) The Proposed HANWA Acquisition is not conditional nor inter-conditional upon the completion of the Agreement. The Proposed Disposal is not conditional upon the Proposed Subscription. 10. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors, major shareholders and/or persons connected to them has any interest, direct and/or indirect in the Proposed Disposal. 11. OTHER CORPORATE EXERCISES ANNOUNCED BUT NOT YET COMPLETED Save for the Proposed Disposal, there are no other outstanding proposals announced by the Company but pending implementation. The Proposed Disposal is not conditional or interconditional upon any other corporate exercise or scheme. 12. CESSATION AS SUBSIDIARY OF TGG Upon completion of the Proposed Disposal, Nippon EGalv shall cease to be a subsidiary of TGSC and accordingly, TGG. Before the Completion, TGSC would transfer all of its remaining 6,102,500 ordinary shares of 1.00 each in Nippon EGalv to TGG on or before the Completion (the Proposed TGGB Acquisition ). No. of shares in Nippon EGalv TGSC s shareholdings as at LPD 15,125,000 Proposed Disposal (9,022,500) 6,102,500 Proposed TGGB Acquisition (6,102,500) TGG s shareholdings after completion of Proposed TGGB Acquisition 6,102,500 Proposed Subscription 2,712,000^^ TGG s shareholdings after Proposed Subscription 8,814,500 Notes:- ^^ Subscribe in proportion to its shareholdings of 27.12% of the total shareholdings in Nippon EGalv after the Proposed Disposal - 8 -

14 13. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Disposal is expected to be completed by the third quarter of year The indicative timetable for the implementation of the Proposed Disposal is set out below:- Tentative Date Early June End June End August Events Despatch of Circular to shareholders of TGG Convening of EGM Completion of the Proposed Disposal The timetable above is indicative and is subject to changes which may be necessary to facilitate implementation procedures. Any delay in an event will result in the delay of subsequent events. 14. DIRECTORS RECOMMENDATION Our Board of Directors, after careful deliberation and having considered all aspects of the Proposed Disposal including the rationale for the Proposed Disposal as set out in Section 6 of this Circular, is of the opinion that the Proposed Disposal is in the best interest of our Group. Accordingly, our Board recommends that taking into consideration of the rationale for the Proposed Disposal, you vote in favour of the resolution pertaining to the Proposed Disposal, which will be tabled at our forthcoming EGM. 15. EGM An EGM, the notice of which is enclosed with this Circular, will be held at at the Sri Cengal 1, Level 1, Sunway Hotel Seberang Jaya on 28 June 2011 at a.m. or immediately after the conclusion or adjournment of the Company s Fifth Annual General Meeting, for the purpose of considering and, if thought fit, passing the resolution pertaining to the Proposed Disposal. If you are unable to attend and vote at the EGM, you are requested to complete, sign and return the enclosed Form of Proxy in accordance with the instructions contained therein so as to arrive at the Registered Office of the Company as soon as possible and in any event not later than fortyeight (48) hours before the time fixed for the EGM. The lodging of the Form of Proxy will not however, preclude you from attending and voting in person at the EGM should you subsequently wish to do so. 16. FURTHER INFOATION Shareholders are requested to refer to the attached appendices of this Circular for further information. Yours faithfully, For and on behalf of the Board of TATT GIAP GROUP BERHAD Dato Siah Kok Poay Chairman/President - 9 -

15 APPENDIX I INFOATION ON NIPPON EGALV 1, HISTORY AND BUSINESS Nippon EGalv was incorporated in Malaysia on 20 January 2006 under the name of Ta Zheng Steel Industry Sdn Bhd. It changed its name to E-Galv Steel Industry Sdn Bhd on 21 February 2007 and subsequently assumed its present name on 14 December Nippon EGalv is principally involved in the production of EG steel coils and began commissioning its electro galvanizing line in April Commercial production of EG steel coils commenced operations in the first quarter of Principal activity of Nippon EGlav is manufacturing and supply of electro-galvanized (EG) steel coils to local and regional manufactures of various industries at a percentage ratio of 99:1. Nippon EGalv s principal place of business is located at No. 1617, Lorong Perusahaan Maju 6, Prai Industrial Estate IV,13600 Prai, Penang. Nippon EGalv is currently renting its place of business with a total land area and built-up area of approximately 42,376 sq meter and 27,268 sq meter respectively from TGSC. The annual production capacity and production output of Nippon EGalv for the past three (3) financial years ended 31 December 2008 to 2010 are as follows:- Financial Years Ended 31 December Production capacity (metric tonne) 120, , ,000 Production output (metric tonne) ,800 30,200 The net book values of the fixed assets owned by the Nippon EGalv based on the audited consolidated financial statements of Nippon EGalv as at 31 December 2010 are as follows:- Particulars Net Book value as at () Plant and machinery 103,672,348 Furniture, fittings and office equipments 2,655,221 Motor vehicles 428,910 Renovation 534,307 Total 107,290,

16 APPENDIX I INFOATION ON NIPPON EGALV (Cont d) The details of the properties owned by Nippon EGalv are as set out below:- Location Not applicable Description/ Existing Use Approximate Age of Building/ Tenure/ Date of Expiry of Lease Approximate Built-up Area (Square Metres) Audited Net Book Value as at ( 000) 2. SHARE CAPITAL AND MOVEMENT IN SHARE CAPITAL As at LPD, Nippon EGalv s authorized share capital and issued paid-up share capital are as follow:- Type (Ordinary Shares) No. of ordinary shares Par Value () Total () Authorised 25,000, ,000,000 Issued and fully paid-up 22,500, ,500,000 Details of the changes in the issued and paid-up capital of Nippon EGalv since the date of incorporation are as follows:- Date of Allotment No. of Shares Allotted Par Value () Consideration Cumulative Issued and Paid- Up Share Capital () Cash , Cash 1,000, ,500, Cash 3,500, ,300, Cash 15,800, ,000, Cash 16,800, ,000, Cash 17,800, ,700, Cash 22,500, BOARD OF DIRECTORS Based on the Register of Directors and Register of Directors Shareholdings, the particulars of the Directors and their respective shareholdings in Nippon EGalv as at LPD are as follows:- Directors Designation Nationality < No. of ordinary shares > Direct % Indirect % Dato Siah Kok Poay Director Malaysia ,125, Siah Lee Beng Director Malaysia ,125, Tan Lu Eng Director Malaysia ,125, Chai Yin Chong Director Malaysia 1,750, Hiroshi Ebihara Director Japanese Kazuhiro Egawa Director Japanese

17 APPENDIX I INFOATION ON NIPPON EGALV (Cont d) 4. SUBSTANTIAL SHAREHOLDERS The substantial shareholders of Nippon EGalv (holding 5% or more equity interest in Nippon EGalv) as at LPD are as follows:- Substantial Shareholders Nationality/ No. of ordinary shares Place of Incorporation Direct % TGSC Malaysia 15,125, CYC Malaysian 1,750, NSC Japan 2,250, HANWA Japan 3,375, SUBSIDIARIES AND ASSOCIATED COMPANIES Nippon EGalv does not have subsidiaries nor associated company. 6. Summary of Financial Data The financial highlights of Nippon EGalv based on its audited consolidated financial statements for the past three (3) financial years ended 31 December 2008 to 2010 and the unaudited quarterly results for the period ended 31 March 2011 are as follows:- FYEs Audited Unaudited ( 000) ( 000) ( 000) ( 000) Revenue - 37,416,114 89,028,630 31,356,662 PBT/(LBT) (2,509,399) (2,396,902) (9,506,054) (1,553,207) Taxation ,531 - PAT/(LAT) (2,509,399) (2,396,902) (9,150,523) (1,553,207) Gross EPS () Net EPS () Paid-up capital 17,800,000 22,500,000 22,500,000 22,500,000 Shareholders 15,205,036 52,005,906 42,855,384 41,302,176 fund/na NA per share Current ratio (times) Total borrowings 23,309,299 39,865,539 34,753,287 35,602,235 Gearing ratio (times) Notes:- (a) (b) There is no extraordinary item and exceptional item for the financial years under review. There were no audit qualifications reported in the audited consolidated financial statements of Nippon EGalv throughout the years under review

18 APPENDIX I INFOATION ON NIPPON EGALV (Cont d) Commentaries on Past Performances (a) (b) As Nippon EGalv started its operation in the 1 st quarter of 2009, comparison between FYE 2008 and FYE 2009 is not available. Revenue of the Nippon EGalv for FYE 2010 increased by 138% or 51.6 million while loss before tax increase significantly from 2.4 in FYE 2009 to 9.5 million in FYE The higher revenue is in line with the stages increase in production plan / volume after commenced operation in 1 st quarter And increase in loss before tax is mainly due to the general decline in the steel price coupled with the stiff competition from a direct competitor in the market of Electro Galvanized (EG) steel. 7. Estimated Gain on Disposal arising from the Proposed Disposal Name 000 Sales proceeds 19,173 Less : Cost of investment by TGG in the Sale Shares 9,131 Less : TGG s share of Nippon EGalv s post-acquisition profit up to 31 6,802 December 2010 Less : Estimated cost incidental to the Proposed Disposal 100 3,140 The actual quantum of gain or loss on disposal to be made by TGG Group arising from this Proposed Disposal will depend on the reserves and accumulated profits of Nippon EGalv on Completion Date. 8. Materials commitments and contingent liabilities As at LPD, there are no material commitments or contingent liabilities incurred or known to be incurred, which upon becoming enforceable may have a material impact on the results of the financial position of Nippon EGalv. Nippon EGalv had filed a civil suit (Suit No ) on 17 August 2009, against Gana Jaan Machinery Co Ltd ( Defendant ) claiming for the Defendant s breach of implied conditions of a contract to supply and provide plant, machineries and equipment, to provide certain services to procure the establishment and setup of Nippon EGalv s commercial manufacturing electro galvanising line, of short supply of several parts of equipment and the subsequent refusal by the Defendant to reimburse Nippon EGalv for costs and expenses incurred. The claim is for an amount of 4.22 million, further damages to be assessed and interest thereon. The solicitors acting on behalf of Nippon Egalv informed that they are in the process of effecting service of the Writ out of jurisdiction through judicial assistance. On 8 October 2010, the solicitors informed in their letter that" the Draft Order has been approved and they are in the midst of filing for the sealed copy of the said Order with the Court and they are still awaiting for outcome of the service of the writ summons from the Ministry of Foreign Affairs." Based on the confirmation letter from the lawyer on 7 Jan 2011, Judgment in Default has been entered on 1 December The Directors are of the opinion that the case has a fair chance of success

19 LATEST AUDITED FINANCIAL STATEMENTS OF NIPPON EGALV FOR THE FYE 31 DECEMBER 2010 Nippon EGalv Steel Sdn. Bhd. () (Incorporated in Malaysia) Financial statements for the year ended 31 December

20 Nippon EGalv Steel Sdn. Bhd. () (Incorporated in Malaysia) Directors report for the year ended 31 December 2010 The Directors have pleasure in submitting their report and the audited financial statements of the Company for the year ended 31 December Principal activity The principal activity of the Company is the manufacture of electro-galvanised steel. There has been no significant change in the nature of this activity during the financial year. Results Loss for the year 9,150,523 Reserves and provisions There were no material transfers to or from reserves and provisions during the financial year. Dividend No dividend was paid since the end of the previous financial year and the Directors do not recommend any dividend to be paid for the financial year under review. Directors of the Company Directors who served since the date of the last report are : Dato Siah Kok Poay Siah Lee Beng Tan Lu Eng Chai Yin Chong Hiroshi Ebihara Kazuhiro Egawa (Approinted w.e.f ) 15

21 Directors interests The interests and deemed interests in the shares of the Company and of its related companies (other than wholly-owned subsidiaries) of those who were Directors at year end (including the interests of the spouses and/or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors Shareholdings are as follows : Number of ordinary shares of 1 each At At Name of Director Allotment (Sold) Ultimate holding company Giapxin Sdn. Bhd. Direct interest Dato Siah Kok Poay - own Siah Lee Beng - own Tan Lu Eng - own Penultimate holding company Tatt Giap Group Berhad Direct interests Dato Siah Kok Poay - own - 1,423,496-1,423,496 - others * - 262,000 (10,000) 252,000 Siah Lee Beng - others * - 230, ,000 Indirect interest Dato Siah Kok Poay - own - 52,016,253-52,016,253 Siah Lee Beng - own - 51,203,001-51,203,001 Tan Lu Eng - own - 51,203,001-51,203,001 The Company Direct interests Chai Yin Chong - own 1,750, ,750,000 Deemed interests Dato Siah Kok Poay - own 20,750,000-5,625,000 15,125,000 Siah Lee Beng - own 20,750,000-5,625,000 15,125,000 Tan Lu Eng - own 20,750,000-5,625,000 15,125,000 16

22 Directors interests (continued) Penultimate holding company : Tatt Giap Group Berhad Indirect interest Balance at Balance at Allotment (Sold) Number of 1 nominal value of 2% Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) Dato Siah Kok Poay - own - 19,582,640-19,582,640 Siah Lee Beng - own - 19,582,640-19,582,640 Tan Lu Eng - own - 19,582,640-19,582,640 * Being shares held in the name of the spouse or children and are treated as the interest of the Director in accordance with Section 134(12)(c) of the Companies Act, None of the other Directors holding office at 31 December 2010 had any interest in the ordinary shares and ICULS of the Company and of its related companies during the financial year. Directors benefits Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements of the Company and certain related companies) by reason of a contract made by the Company with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than the rental paid by certain related companies to a Director and those transactions as disclosed in Note 18 to the financial statements and the allotment of shares and ICULS to the Directors pursuant to the reorganisation and listing of the penultimate holding company on the Main Market of Bursa Malaysia Securities Berhad as disclosed in the Directors report of penultimate holding company. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate other than those relating to the ICULS issued by the penultimate holding company. Issue of shares and debentures There were no changes in the issued and paid-up capital of the Company and no debentures were in issue during the financial year. 17

23 Options granted over unissued shares No options were granted to any person to take up unissued shares of the Company during the financial year. Other statutory information Before the statement of comprehensive income and statement of financial position of the Company were made out, the Directors took reasonable steps to ascertain that: i) there are no bad debts to be written off and no provision need to be made for doubtful debts, and ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors of the Company are not aware of any circumstances : i) that would render it necessary to write off any bad debts, or provide for any doubtful debts, or ii) that would render the value attributed to the current assets in the financial statements of the Company misleading, or iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate, or iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Company misleading. At the date of this report, there does not exist : i) any charge on the assets of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or ii) any contingent liability in respect of the Company that has arisen since the end of the financial year. No contingent liability or other liability of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Company to meet its obligations as and when they fall due. In the opinion of the Directors, the financial performance of the Company for the financial year ended 31 December 2010 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. 18

24 Significant event during the year The details of the significant event are as disclosed in Note 20 to the financial statements. Subsequent event The details of such event are disclosed in Note 21 to the financial statements. Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors :.. Dato Siah Kok Poay.. Chai Yin Chong Penang, Date : 28 April

25 Nippon EGalv Steel Sdn. Bhd. () (Incorporated in Malaysia) Statement of financial position as at 31 December 2010 Assets Note Plant and equipment 3 107,290, ,973,584 Total non-current asset 107,290, ,973,584 Inventories 4 9,042,257 19,831,119 Trade and other receivables 5 18,524,029 5,582,951 Cash and cash equivalents 6 1,271,129 1,093,535 Total current assets 28,837,415 26,507,605 Total assets 136,128, ,481,189 Equity Share capital 7 22,500,000 22,500,000 Reserves 8 20,355,383 29,505,906 Total equity 42,855,383 52,005,906 Liabilities Loans and borrowings 9 15,340,763 15,340,123 Deferred tax liabilities 10 10,310,393 10,665,924 Total non-current liabilities 25,651,156 26,006,047 Trade and other payables 11 48,209,138 28,943,820 Loans and borrowings 9 19,412,524 24,525,416 Total current liabilities 67,621,662 53,469,236 Total liabilities 93,272,818 79,475,283 Total equity and liabilities 136,128, ,481,189 The notes on pages 25 to 59 are an integral part of these financial statements. 20

26 Nippon EGalv Steel Sdn. Bhd. () (Incorporated in Malaysia) Statement of comprehensive income for the year ended 31 December 2010 Note Revenue 12 89,028,630 37,416,114 Cost of goods sold (92,471,027) (35,893,270) Gross (loss)/profit (3,442,397) 1,522,844 Administrative expenses (1,378,117) (767,020) Distribution expenses (1,157,454) (320,454) Other operating expenses (1,493,861) (1,132,557) Other operating income 669, ,452 Operating loss 13 (6,802,173) (409,735) Finance costs 15 (2,703,881) (1,987,167) Loss before tax (9,506,054) (2,396,902) Income tax expense ,531 - Loss for the year (9,150,523) (2,396,902) Other comprehensive income, net of tax Surplus on revaluation of plant and equipment - 31,997,772 Total other comprehensive income for the year, net of tax - 31,997,772 Total comprehensive (expense)/income for the year (9,150,523) 29,600,870 The notes on pages 25 to 59 are an integral part of these financial statements. 21

27 Nippon EGalv Steel Sdn. Bhd. () (Incorporated in Malaysia) Statement of changes in equity for the year ended 31 December 2010 Non-distributable Share capital Share premium Revaluation reserve Accumulated losses Total equity At 1 January ,800, (2,594,964) 15,205,036 Issue during the year 4,700,000 2,500, ,200,000 Total comprehensive income/(expense) for the year ,997,772 (2,396,902) 29,600,870 At 31 December ,500,000 2,500,000 31,997,772 (4,991,866) 52,005,906 Total comprehensive expense for the year (9,150,523) (9,150,523) At 31 December ,500,000 2,500,000 31,997,772 (14,142,389) 42,855,383 Note 7 Note 8 Note 8 Note 8 The notes on pages 25 to 59 are an integral part of these financial statements. 22