THIS STATEMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. Bursa Malaysia Securities Berhad ( Bursa Securities ) has not perused this Share Buy-Back Statement prior to the issuance as it is an exempt statement. Bursa Securities takes no responsibility for the contents of this Share Buy-Back Statement, 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 Share Buy-Back Statement. MPHB CAPITAL BERHAD (1010253-W) (Incorporated in Malaysia) STATEMENT IN RELATION TO THE PROPOSED RENEWAL OF AUTHORITY FOR SHARE BUY-BACK ( SHARE BUY-BACK STATEMENT ) The ordinary resolution in respect of the above proposal will be tabled at the Fifth Annual General Meeting ( AGM ) of MPHB Capital Berhad ( MPHB Capital or the Company ) to be held at Grand Ballroom, First Floor, Flamingo hotel by the lake, No. 5, Taman Tasik Ampang, Jalan Hulu Kelang, 68000 Ampang, Selangor Darul Ehsan on Monday, 29 May 2017 at 9.30 a.m. The Notice of the Fifth AGM and the Form of Proxy are set out in the Company s 2016 Annual Report. Shareholders are advised to refer to the Notice of Fifth AGM and the Form of Proxy. This Statement is dated 28 April 2017 1
STATEMENT IN RELATION TO THE PROPOSED RENEWAL OF AUTHORITY FOR THE SHARE BUY-BACK 1. INTRODUCTION The shareholders of MPHB Capital Berhad ( the Company or MPHB Capital ) had, at the Fourth Annual General Meeting ( AGM ) of the Company held on 3 June 2016, granted authority for the Company to purchase its own shares of up to ten per centum (10%) of the total number of issued shares of the Company through Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Share Buy-Back ). The shareholders mandate for the Share Buy-Back will expire at the conclusion of the forthcoming AGM of the Company unless the authority is renewed by the shareholders. On 31 March 2017, the Company announced to Bursa Securities of its intention to seek shareholders approval for the renewal of the authority for the Company to purchase its own shares of up to ten per centum of the total number of issued shares of the Company ( Proposed Share Buy-Back or Proposed Renewal of Share Buy-Back ) at the forthcoming Fifth AGM of the Company. The purpose of this Statement is to provide you with information on the Proposed Share Buy- Back together with your Directors recommendation thereon, and to seek your approval on the Ordinary Resolution for the Proposed Share Buy-Back to be tabled as Special Business at the Fifth AGM of the Company. The Notice of the Fifth AGM and the Form of Proxy are set out in the MPHB Capital s 2016 Annual Report. 2. DETAILS OF THE PROPOSED SHARE BUY-BACK The Company proposes to seek the approval of the shareholders of the Company for the Proposed Renewal of Share Buy-Back at the forthcoming Fifth AGM of the Company. The Proposed Share Buy-Back will be effected on Bursa Securities through the Company s appointed stockbroker and it is subject to compliance with Section 127 of the Companies Act, 2016 and any other prevailing laws, rules, regulations, orders, guidelines and requirements issued by the relevant authorities at the time of any share buy-back and including compliance with the twenty five percent (25%) public shareholding spread as provided under Main Market of the Listing Requirements of Bursa Securities ( MMLR ). Pursuant to paragraph 12.17 of the MMLR, the Company may only purchase its own shares on Bursa Securities at a price which is not more than 15% above the weighted average market price of the Company s shares for the 5 market days immediately before the date of purchase(s). The purchased shares will be dealt with, at the discretion of the Board, in the following manner as permitted under Section 127 of the Companies Act, 2016: (a) (c) cancel the purchased shares to reduce the issued share capital of the Company and this will in turn enhance the earnings per share ( EPS ) and dividend rate of the Company in the long term;; or retain the purchased shares as treasury shares where there is good potential for the share price to increase for future resale to realise capital gain or distribute these treasury shares as share dividends to reward the shareholders of the Company;; or retain part of the purchased shares as treasury shares and cancel the remaining purchased shares. 2
2. DETAILS OF THE PROPOSED SHARE BUY-BACK (cont d) While the purchased shares are held as treasury shares, the rights attached to them in relation to voting, dividends and participation in any other distributions or otherwise will be suspended. The treasury shares shall not be taken into account in calculating the number or percentage of shares or of a class of shares in the Company for any purposes including substantial shareholding, takeovers, notices, the requisitioning of meetings, the quorum for a meeting and the result of a vote on a resolution at meeting. In the case of a resale of treasury shares, paragraph 12.18 of the MMLR provides that the Company may only resell the treasury shares on Bursa Securities at: (a) a price which is not less than the weighted average market price of the Company s shares for the 5 market days immediately before the resale;; or a discounted price of not more than 5% to the weighted average market price of the Company s shares for the 5 market days immediately before the resale provided that:- (i) the resale takes place not earlier than 30 days from the date of purchase;; and (ii) the resale price is not less than the cost of purchase of the shares being resold. The Proposed Renewal of Share Buy-Back, if approved, will be effective immediately upon the passing of the ordinary resolution for the Proposed Renewal of Share Buy-Back at the Fifth AGM of the Company to be held on 29 May 2017 and shall remain in force until: (a) (c) the conclusion of the next AGM of the Company at which time the Proposed Renewal of Share Buy-Back will lapse unless by an ordinary resolution passed at a general meeting of the Company, the authority is renewed, either unconditionally or subject to conditions;; the expiration of the period within which the next AGM of the Company is required by law to be held;; or revoked or varied by ordinary resolution of shareholders of the Company in a general meeting;; whichever is earlier. 3. RATIONALE FOR THE PROPOSED SHARE BUY-BACK The Proposed Share Buy-Back, if implemented, is expected to potentially benefit the Company and its shareholders as follows:- (i) (ii) the Company will be able to utilise its surplus financial resources to purchase its own shares which may have a positive impact on the market prices of the Company s shares;; the shareholders may enjoy increase in the value of their investments in the Company due to the strengthening of the EPS of the Group as a result of a reduced share capital base in the event that the purchased shares are cancelled;; (iii) the treasury shares may be distributed to shareholders as share dividends to serve as a reward to shareholders;; (iv) the Company may resell the treasury shares on the open market at higher prices, thereby giving the Company an opportunity to realise capital gains. 3
4. SOURCE OF FUNDS The Proposed Share Buy-Back will be funded from internally generated funds and/or external borrowings, the proportion of which will depend on the quantum of purchase consideration as well as the availability of internally generated funds and borrowings and repayment capabilities of the Company at the time of purchase(s). In the event the Proposed Share Buy-Back is financed by external borrowings, the Company s cash flow may be affected to the extent of the interest costs associated with such borrowings. However, the Board will ensure that the Company has the capability to repay such borrowings and that such repayment will not have a material effect on the cashflow of the MPHB Capital group ( Group ). The maximum amount of funds to be allocated for the Proposed Share Buy-Back shall not exceed the retained profits of the Company. The retained profits of the Company based on the latest audited financial statements for the year ended 31 December 2016 were approximately RM209,520,000. 5. ADVANTAGES AND DISADVANTAGES The Proposed Share Buy-Back will enable the Company to take pre-emptive measures, if necessary, to stabilize the supply and demand of the Company s shares in the open market, thereby allowing the price of the Company s shares to better reflect its fundamental value. The maintenance of the share price is important in order to maintain investors confidence in the Company. The other advantages of the Proposed Share Buy-Back are outlined in item 3 of this Circular. The disadvantages of the Proposed Share Buy-Back are: (i) (ii) (iii) the Proposed Share Buy-Back will reduce the financial resources of the Company and result in the Company having to forego better future investment opportunities;; or deprive the Company of any income that may be derived from the deposit of such funds in interest bearing instruments;; the Proposed Share Buy-Back will reduce the amount of resources available for the distribution of cash dividend to shareholders;; and the Proposed Share Buy-Back will reduce the Company s cashflow, which may otherwise be used as working capital to generate future income. In any event, the Board will be mindful of the interests of the Company and its shareholders when implementing the Proposed Share Buy-Back. 6. FINANCIAL EFFECTS OF THE PROPOSED SHARE BUY-BACK 6.1 Share Capital In the event the full amount of the purchased shares are cancelled, the proforma effects of the Proposed Share Buy-Back on the issued share capital of the Company are set out below:- No. of MPHB Capital Shares Amount RM Issued share capital as at 3 April 2017 715,000,000 715,000,000 Cancellation of the purchased shares (71,500,000) (71,500,000 Issued share capital after the Proposed Share Buy-Back 643,500,000 643,500,000 4
6. FINANCIAL EFFECTS OF THE PROPOSED SHARE BUY-BACK (cont d) 6.1 Share Capital (cont d) However, the Proposed Share Buy-Back will not have any effect on the issued share capital of the Company, if all the purchased shares are retained as treasury shares and are not cancelled. 6.2 Net Assets ( NA ) and Working Capital The effect of the Proposed Share Buy-Back on the NA per share of the Group is dependent on the purchase price(s) of the Company s shares, the number of the Company s shares purchased, treatment of the Company s shares purchased and funding cost, if any. If the purchased shares are either held as treasury shares or are cancelled, the NA per share of the Group would reduce if the purchase price exceeds the consolidated NA per share at the relevant point in time. Conversely, the NA per share of the Group would increase if the purchase price is less than the consolidated NA per share at the relevant point in time. If the treasury shares are resold on Bursa Securities, the NA per share of the Group will increase if the Company realises a gain from the resale, and vice versa. If the treasury shares are distributed as share dividends, the NA per share of the Group will decrease by the cost of the treasury shares. The Proposed Share Buy-Back, if implemented, will reduce the working capital of the Group, the quantum of which is dependent on the purchase price(s) of the Company s shares and the actual number of the Company s shares bought back. In the event of a resale of treasury shares, the working capital of the Group will increase to the extent of the amount of funds obtained from the resale of the treasury shares. 6.3 Earnings The effect of the Proposed Share Buy-Back on the earnings of the Group will depend on the purchase price(s) of the Company s shares, the number of shares purchased and effective funding cost to the Group to finance the purchase of the Company s shares or any loss in interest income to the Company. 6.4 Dividends The Proposed Share Buy-Back, if implemented, may have an impact on the Company s dividend policy as it may reduce the distributable reserves available for dividends. Nonetheless, if the purchased shares are retained as treasury shares, the dividend rate will be increased in that the rights attaching to the treasury shares as to dividend entitlements will be suspended. Moreover, the treasury shares may be distributed as dividends to shareholders of the Company, if the Company so decides. 5
The proforma effects of the Proposed Share Buy-Back on the shareholdings of the Directors and Substantial Shareholders of MPHB Capital as at 3 April 2017 are as follows: 7. SHAREHOLDINGS OF THE DIRECTORS AND SUBSTANTIAL SHARHOLDERS (i) Shareholdings of Directors As at 3 April 2017 After the Proposed Share Buy-Back Directors (Implemented in full) Direct Indirect/Deemed Direct Indirect/Deemed No. of shares % No. of shares % No. of shares % No. of shares % Tan Sri Dato Dr Yahya bin Awang 101,100 0.01 -- -- 101,100 0.02 -- -- Tan Sri Dato Surin Upatkoon -- -- #261,921,093 36.63 -- -- #261,921,093 40.70 Ms Ivevei Upatkoon 156,200 0.02 -- -- 156,200 0.02 -- -- Dato Lim Tiong Chin 1,000,000 0.14 ^8,940,000 1.25 1,000,000 0.16 ^8,940,000 1.39 Mr Kuah Hun Liang # Deemed interest by virtue of Section 8(4) of the Companies Act, 2016 ( Act ) held through his shareholdings of more than 20% in Cypress Holdings Limited 330,200 0.04 -- -- 330,200 0.05 -- -- Notes: and Pinjaya Sdn Bhd;; and indirect interest held through his daughters, Ms Ivevei Upatkoon and Ms Maythini Upatkoon. ^ Deemed interest by virtue of Section 8(4) of the Act held through his shareholdings of more than 20% in Keetinsons Sendirian Berhad, T.C. Holdings Sendirian Berhad and Trade Key Investments Limited. (ii) Shareholdings of Substantial Shareholders (a) 230,883,993 35.88 230,883,993 35.88 230,883,993 35.88 (d) Deemed interest by virtue of Section 8(4) of the Act held through his shareholdings of more than 20% in Cypress and Pinjaya Sdn Bhd;; and indirect As at 3 April 2017 After the Proposed Share Buy-Back Substantial Shareholders (Implemented in full) Direct Indirect/Deemed Direct Indirect/Deemed No. of shares % No. of shares % No. of shares % No. of shares % Casi Management Sdn Bhd ( CMSB ) 230,883,993 32.29 230,883,993 35.88 (a) Hanton Capital Limited ( HCL ) -- -- 230,883,993 32.29 -- -- Cedar Holdings Limited ( CHL ) -- -- 230,883,993 32.29 -- -- Kularb Kaew Company Limited -- -- 230,883,993 32.29 -- -- ( KKCL ) Cypress Holdings Limited ( Cypress ) -- -- (c) 230,883,993 32.29 -- -- (c) 230,883,993 35.88 Tan Sri Dato Surin Upatkoon -- -- (d) 261,921,093 36.63 -- -- (d) 261,921,093 40.70 Notes: (a) Deemed interest by virtue of Section 8(4) of the Act held through its shareholding of more than 20% in CMSB. Deemed interest by virtue of Section 8(4) of the Act held through its shareholding of more than 20% in HCL. (c) Deemed interest by virtue of Section 8(4) of the Act held through its shareholding of more than 20% in CHL and KKCL. interest held through his daughters, Ms Ivevei Upatkoon and Ms Maythini Upatkoon. 6
8. PUBLIC SHAREHOLDING SPREAD Based on the Record of Depositors maintained by the Bursa Malaysia Depository Sdn Bhd and the substantial shareholders notifications to the Company, the public shareholding spread of the Company as at 3 April 2017 is 61.56%. Assuming that the Company implements in full the Proposed Share Buy-Back and that the shares are purchased entirely from public shareholders and that all the purchased shares are cancelled, the proforma public shareholding spread of the Company would be reduced to 57.29%. The Board will endeavour to ensure that the Company complies with the twenty-five percent (25%) public shareholding spread requirements as required under the MMLR and shall not purchase its own shares if the share buy-back would result in the public shareholding spread requirements not being complied. 9. IMPLICATIONS OF THE PROPOSED SHARE BUY-BACK IN RELATION TO THE RULES ON TAKE-OVERS, MERGERS AND COMPULSORY ACQUISITIONS 2016 ( RULES ) Pursuant to the Rules, a person and any person acting in concert will be obliged to make a mandatory offer for the remaining ordinary shares of the company not already owned by him/them if his/their stake(s) in the company is increased beyond 33% or if his/their shareholding(s) is between 33% and 50% and exceeds by more than 2% in any 6-month period as a result of the company s share buy-back. However, an exemption from a mandatory offer obligation may be granted by the Securities Commission ( SC ) under Paragraph 4.15 of the Rules. Based on the tables as set out in item 7 of this Statement, the implementation of the Proposed Share Buy-Back may result in the direct shareholdings of CMSB and the indirect shareholdings of HCL, CHL, KKCL and Cypress in the Company to exceed 33%, and the indirect shareholdings of Tan Sri Dato Surin Upatkoon in the Company to increase by more than 2% in any 6-month period. Should such circumstances arise, CMSB, HCL, CHL, KKCL, Cypress, Tan Sri Dato Surin Upatkoon and persons acting in concert with them are expected to make the necessary application to the SC for an exemption from having to undertake a mandatory general offer. The Board is mindful on the requirements of the Rules and will continue to be mindful of the requirements when making any purchase of the Company s shares pursuant to Proposed Share Buy-Back. 10. PURCHASE, RESALE AND CANCELLATION OF SHARES MADE IN THE PREVIOUS 12 MONTHS The Company has not undertaken any share buy-back and there were no resale or cancellation of treasury shares in the previous twelve (12) months preceding the date of this Statement. There was no treasury shares held by the Company as at 3 April 2017. 7
11. DIRECTORS AND SUBSTANTIAL SHAREHOLDERS INTERESTS Save for the inadvertent increase in percentage of shareholding and/or voting rights of the shareholders of the Company as a result of the Proposed Share Buy-Back, none of the directors and/or substantial shareholders of MPHB Capital and/or persons connected with the directors and/or substantial shareholders of MPHB Capital have any interest, direct or indirect, in the Proposed Share Buy-Back or resale of the treasury shares. 12. DIRECTORS RECOMMENDATION The Board of Directors of the Company ( Board ), having considered all aspects of the Proposed Share Buy-Back, is of the opinion that the Proposed Share Buy-Back is in the best interest of the Company and its shareholders. Accordingly, the Board recommends that you vote in favour of the ordinary resolution for the Proposed Share Buy-Back to be tabled at the forthcoming Fifth AGM of the Company. This Share Buy-Back Statement is dated 28 April 2017. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 8