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 ( Bursa Securities ) 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. Bursa Securities has not perused Part B of this Circular in relation to the Proposed Share Buy- Back (as defined herein) prior to its issuance as it is an exempt document pursuant to Practice Note 18 of the Main Market Listing Requirements of Bursa Securities. YOONG ONN CORPORATION BERHAD (Company No. 814138-K) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PART A PROPOSED RENEWAL OF SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE PART B PROPOSED RENEWAL OF AUTHORITY FOR THE PURCHASE BY YOONG ONN CORPORATION BERHAD OF UP TO TEN PERCENT (10%) OF ITS OWN ISSUED AND PAID-UP SHARE CAPITAL ( PROPOSED SHARE BUY-BACK ) IN CONJUNCTION WITH THE SPECIAL BUSINESS AT THE EIGHTH ANNUAL GENERAL MEETING The above proposals will be tabled as Special Businesses at our Eighth (8th) Annual General Meeting ( 8th AGM ) to be held at Spring 1 Room, Nilai Springs Golf & Country Club, PT 4770 Nilai Springs, 71800 Putra Nilai, Negeri Sembilan Darul Khusus on Thursday, 17 December 2015 at 10.00 a.m. The notice of the 8th AGM and the Form of Proxy are enclosed in our Company s 2015 Annual Report. As a shareholder, you can appoint a proxy or proxies to attend and vote on your behalf. You must complete and lodge the Form of Proxy at our registered office at Suite 13A.01(A), Level 13A, Wisma Goldhill, 67 Jalan Raja Chulan, 50200 Kuala Lumpur, not later than forty-eight (48) hours before the time set for holding the 8th AGM. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the 8th AGM should you subsequently wish to do so. Last date and time for lodging the Form of Proxy : Tuesday, 15 December 2015 at 10.00 a.m. Date and time of the 8th AGM : Thursday, 17 December 2015 at 10.00 a.m. This Circular is dated 18 November 2015
DEFINITIONS Except where the context otherwise requires, the following words and abbreviations shall apply throughout this Circular and have the following meanings: 2015 Annual Report : Annual Report of YOCB issued for the financial year ended 30 June 2015 Act : Companies Act, 1965, as amended from time to time and any re-enactment thereof AGM : Annual general meeting Articles : Articles of Association of YOCB Board : Board of Directors of YOCB Bursa Securities : Bursa Malaysia Securities Berhad (635998-W) CCSB : Casatex Cosmo Sdn Bhd (832846-X) Circular : This circular dated 18 November 2015 which sets out the details of the Proposed Renewal of Shareholders Mandate and Proposed Share Buy-Back CHF : Chew Hon Foong, the Managing Director cum Group Chief Executive Officer and a Major Shareholder of YOCB as well as the brother of CHK, CHYG and CHYN CHK : Chew Hon Keong, the Executive Director cum Group Chief Operating Officer and a Major Shareholder of YOCB as well as the brother of CHF, CHYG and CHYN CHYG : Chew Hon Yoong, a Major Shareholder of YOCB and the brother of CHF, CHK and CHYN CHYN : Chew Hon Yoon, a Major Shareholder of YOCB and the brother of CHF, CHK and CHYG CMSA : Capital Markets & Services Act 2007, as amended from time to time and any re-enactment thereof Code : Malaysian Code on Take-Overs and Mergers, 2010, as amended from time to time and any re-enactment thereof Director(s) : Directors of YOCB and shall have the meaning given in Section 2(1) of the CMSA and includes any person who is or was within the preceding six (6) months of the date on which the terms of the transaction were agreed upon, a director of YOCB or any other company which is a subsidiary or holding company or a chief executive officer of YOCB, its subsidiary or holding company EPS : Earnings per share ETHSB : Elegant Total Home Sdn Bhd (268537-K) Listing Requirements : The Main Market Listing Requirements of Bursa Securities, as amended from time to time i
DEFINITIONS (Cont d) LPD : 20 October 2015, being the latest practicable date prior to the printing of this Circular Major Shareholder(s) : Any person who has an interest or interests in one or more voting shares in our Company and the nominal amount of that share, or the aggregate of the nominal amounts of those shares, is: (a) (b) ten percent (10%) or more of the aggregate of the nominal amounts of all the voting shares in our Company; or five percent (5%) or more of the aggregate of the nominal amounts of all the voting shares in our Company where such person is the largest shareholder of our Company, or any other company which is a subsidiary or holding company of our Company. It also includes any person who is or was within the preceding six (6) months of the date on which the terms of the transaction were agreed upon classified as, a Major Shareholder of our Company (as defined) above) or any other company which is its subsidiary or holding company. For the purpose of this definition, interest in shares shall have the meaning given in Section 6A of the Act. MSB : Monsieur (M) Sdn Bhd (121889-W) NA : Net assets Person Connected : Any person in relation to a Director or Major Shareholder, means such person who falls under any one of the following categories: (a) (b) (c) (d) (e) a family member of the Director or Major Shareholder; a trustee of a trust (other than a trustee for an employee share scheme or pension scheme) under which the Director, Major Shareholder or a family member of the Director or Major Shareholder is the sole beneficiary; a partner of the Director, Major Shareholder or a partner of a Person Connected with that Director or Major Shareholder; a person who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the Director or Major Shareholder; a person in accordance with whose directions, instructions or wishes the Director or Major Shareholder is accustomed or is under an obligation, whether formal or informal, to act; ii
DEFINITIONS (Cont d) (f) (g) (h) (i) a body corporate or its directors which/who is/are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the Director or Major Shareholder; a body corporate or its directors whose directions, instructions or wishes the Director or Major Shareholder is accustomed or under an obligation, whether formal or informal, to act; a body corporate in which the Director, Major Shareholder or persons connected with him are entitled to exercise, or control the exercise of, not less than fifteen percent (15%) of the votes attached to voting shares in the body corporate; or a body corporate which is a related corporation. Proposed Renewal of Shareholders Mandate : The proposed renewal of shareholders mandate for the RRPT as set out in Part A of this Circular Proposed Share Buy-Back : The proposed authority for the purchase by YOCB of up to ten percent (10%) of its own issued and paid-up share capital as set out in Part B of this Circular Purchased Share(s) : YOCB Share(s) that has/have been purchased by our Company pursuant to the Proposed Share Buy-Back Related Party(ies) : A Director, Major Shareholder or Person Connected with such Director or Major Shareholder RM and sen : Ringgit Malaysia and sen, respectively RRPT : Recurrent related party transactions of a revenue or trading in nature which is necessary for the day-to-day operations of the YOCB Group SC : Securities Commission Malaysia SFSB : Sleep Focus Sdn Bhd (401252-V) SYOSB : Syarikat Yoong Onn Sdn Bhd (171966-W) TSCB : The Store Corporation Berhad (252670-P) YFRSB : Yoon Fah Realty Sdn Bhd (87138-M) YOCB or our Company : Yoong Onn Corporation Berhad (814138-K) YOCB Group or our Group : YOCB and its subsidiary companies, collectively YOCB Share(s) or Share(s) : Ordinary share(s) of RM0.50 each in YOCB iii
DEFINITIONS (Cont d) All references to our or our Company in this Circular are addressing YOCB. References to our Group and the Group are addressing our Company and our subsidiaries, collectively. All references to you in this Circular are addressing the shareholders of YOCB. Words denoting the singular shall, where applicable, include the plural and vice versa. Words denoting the masculine gender shall, where applicable, include the feminine and/or neuter genders, and vice versa. Any reference to persons shall include a corporation, unless otherwise specified. Any reference in this Circular to any legislation is a reference to that legislation as for the time being amended or re-enacted. Any reference to a time of a day in this Circular shall be a reference to Malaysian time, unless otherwise specified. Any discrepancy in the tables between the amounts listed and the totals in this Circular are due to rounding. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK iv
TABLE OF CONTENTS Page PART A: LETTER TO SHAREHOLDERS OF YOCB IN RELATION TO THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE CONTAINING: 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE 2 3. STATEMENT BY THE AUDIT COMMITTEE 6 4. RATIONALE FOR AND BENEFITS OF THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE 5. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM 6 7 6. APPROVALS REQUIRED 7 7. DIRECTORS RECOMMENDATION 8 8. AGM 8 9. FURTHER INFORMATION 8 PART B: LETTER TO SHAREHOLDERS OF YOCB IN RELATION TO THE PROPOSED SHARE BUY-BACK CONTAINING: 1. INTRODUCTION 10 2. DETAILS OF THE PROPOSED SHARE BUY-BACK 11 3. RATIONALE 14 4. FINANCIAL EFFECTS OF THE PROPOSED SHARE BUY-BACK 14 5. IMPLICATIONS OF THE PROPOSED SHARE BUY-BACK IN RELATION TO THE CODE 18 6. HISTORICAL SHARE PRICES 18 7. APPROVAL REQUIRED 18 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM 18 9. DIRECTORS RECOMMENDATION 19 10. AGM 19 11. FURTHER INFORMATION 19 APPENDIX I FURTHER INFORMATION 20 v
PART A LETTER TO SHAREHOLDERS IN RELATION TO THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE
YOONG ONN CORPORATION BERHAD (Company No. 814138-K) (Incorporated in Malaysia) Registered Office: Suite 13A.01(A), Level 13A Wisma Goldhill 67, Jalan Raja Chulan 50200 Kuala Lumpur 18 November 2015 Board of Directors: Datuk Kamaludin Bin Yusoff (Independent Non-Executive Chairman) Chew Hon Foong (Managing Director and Group Chief Executive Officer) Chew Hon Keong (Executive Director and Group Chief Operating Officer) Datuk Hairuddin Bin Mohamed (Independent Non-Executive Director) Yeoh Chong Keng (Independent Non-Executive Director) Lee Kim Seng (Independent Non-Executive Director) To: Our shareholders Dear Sir/Madam, PROPOSED RENEWAL OF SHAREHOLDERS MANDATE 1. INTRODUCTION At our Company s 7 th AGM held on 18 December 2014, our shareholders had approved the mandate to allow our Group to enter into RRPTs as set out in the circular to shareholders dated 25 November 2014. The said mandate shall in accordance with the Listing Requirements, expires at the conclusion of our forthcoming AGM to be held on 17 December 2015, unless its renewal is obtained from our shareholders at our forthcoming AGM. On 20 October 2015, your Board announced that our Company proposes to seek your approval for the Proposed Renewal of Shareholders Mandate at our forthcoming AGM pursuant to paragraph 10.09 of the Listing Requirements. The purpose of Part A of this Circular is to provide you with the relevant information on the Proposed Renewal of Shareholders Mandate and to seek your approval for the ordinary resolution pertaining to the Proposed Renewal of Shareholders Mandate to be tabled at our forthcoming AGM. The notice of our forthcoming AGM and the Form of Proxy are enclosed in the 2015 Annual Report. YOU ARE ADVISED TO READ AND CONSIDER THE CONTENTS OF PART A OF THIS CIRCULAR TOGETHER WITH THE APPENDIX CAREFULLY BEFORE VOTING ON THE ORDINARY RESOLUTION PERTAINING TO THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE TO BE TABLED AT OUR FORTHCOMING AGM. 1
2. DETAILS OF THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE 2.1 The Listing Requirements Pursuant to Paragraph 10.09(2) of the Listing Requirements, our Company may seek a shareholders mandate for RRPT, subject to the following: (i) (ii) the transactions are in the ordinary course of business and are on terms not more favourable to the related party than those generally available to the public; the shareholders mandate is subject to annual renewal and disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the shareholders mandate during the financial year where: (a) (b) the consideration, value of the assets, capital outlay or costs of the aggregated transactions is equal to or exceeds RM1.0 million; or any one of the percentage ratios of such aggregated transactions is equal to or exceeds one percent (1%), whichever is the higher; (iii) (iv) (v) the issuance of a circular to shareholders for the shareholders mandate includes the information as may be prescribed by Bursa Securities. The draft Circular must be submitted to Bursa Securities together with a checklist showing compliance with such information; in a meeting to obtain shareholders mandate, the interested Director, interested Major Shareholder or interested Person Connected with a Director or Major Shareholder, and where it involves the interest of an interested Person Connected with a Director or Major Shareholder, such Director or Major Shareholder, must not vote on the resolution approving the transactions. An interested Director or interested Major Shareholder must ensure that persons connected with them abstain from voting on the resolution approving the transactions; and an immediate announcement shall be made to Bursa Securities when the actual value of a RRPT exceeds the estimated value of the RRPT disclosed in this Circular by ten percent (10%) or more and must include the information as may be prescribed by Bursa Securities in its announcement. 2.2 Validity period of the Proposed Renewal of Shareholders Mandate The Proposed Renewal of Shareholders Mandate, if approved by our shareholders at our forthcoming AGM, will be subject to annual renewal and shall continue to be in force until: (i) (ii) (iii) the conclusion of our next AGM following our forthcoming AGM, at which time it will lapse, unless by a resolution passed at that meeting, the authority is renewed; the expiration of the period within which the next AGM is required to be held under Section 143(1) of the Act (but shall not extend to such extension as may be allowed under Section 143(2) of the Act); or revoked or varied by ordinary resolution passed by our shareholders in a general meeting, whichever is the earlier. 2
2.3 Disclosure in the annual report We will, where appropriate, disclose the following information in our next annual report and subsequent financial years during which the authority under the Proposed Renewal of Shareholders Mandate is in force; (i) (ii) (iii) (iv) breakdown of the aggregate value of the RRPT during the relevant financial periods; the type of RRPT entered into; the names of the Related Parties involved; and the nature of the relationship of the Related Parties with our Group. 2.4 Information on our Group Our Company is principally involved in investment holding and provision of management services. The principal activities of our subsidiary companies are as follows: Name of company Country of incorporation Effective equity interest (%) Principal activities SYOSB Malaysia 100 Distribution and trading of home linen and homeware SFSB Malaysia 100 Design and manufacturing of home linen and bedding accessories, and trading of home linen ETHSB Malaysia 100 Distribution and trading of home linen and homeware MSB Malaysia 100 Retailing of home linen and homeware In the ordinary course of business, our Group has entered and/or is anticipated to enter into RRPT with various Related Parties on terms not more favourable to the Related Parties than those generally available to the public and which are not detrimental to the interests of our minority shareholders. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 3
2.5 Details of the RRPT under the Proposed Renewal of Shareholders Mandate Details of the RRPT under the Proposed Renewal of Shareholders Mandate are set out below: No. Transacting party within the YOCB Group Transacting party Nature of relationship Nature of transaction 1. SYOSB YFRSB** CHF, CHK, CHYG and CHYN are Directors and Major Shareholders of YFRSB. 2. SYOSB TSCB # Yeoh Chong Keng is a director of YOCB and TSCB. Rental of property which is currently used as SYOSB s office cum warehouse (a) Proposed Renewal of Shareholders Mandate Estimated Actual Estimated aggregate aggregate value aggregate value value as incurred from to be incurred^ disclosed in 7 th AGM held on from the 8th or the circular to 18.12.2014 up forthcoming shareholder to the LPD AGM to the next dated AGM 25.11.2014 RM RM RM 369,600 310,482 369,600 Supply of home linen 5,000,000 4,072,602 4,500,000 products (b) 3. ETHSB TSCB # Yeoh Chong Keng is a director of YOCB and TSCB. Supply of home linen 250,000 169,563 250,000 products (c) Notes: ^ The amount is based on estimates and is subject to changes. ** The principal activities of YFRSB are investment holding and letting of properties. # The principal activities of TSCB are investment holding and provision of management services whilst the principal activities of its subsidiaries include operation of department stores and hypermarkets. (a) YFRSB and SYOSB had entered into a tenancy agreement whereby YFRSB had let out its office cum warehouse situated at No. 27-35, Jalan 11/118B, Desa Tun Razak, Cheras, 56000 Kuala Lumpur. The rental of office cum warehouse space by SYOSB at No. 27-35, Jalan 11/118B, Desa Tun Razak, Cheras, 56000 Kuala Lumpur is for a built-up area of approximately 33,000 square feet. The rental rate of RM30,800 per month is charged by YFRSB based on the current market rate of similar office cum warehouse space within the vicinity. SYOSB has been occupying approximately 33,000 square feet of the office space since 1990. The tenancy agreement was last renewed on 1 July 2015 for a period of one (1) year commencing from 1 July 2015 until 30 June 2016. (b) SYOSB has been supplying home linen products to TSCB Group since 1985. (c) ETHSB has been supplying home linen products to TSCB Group since 2006. 4
2.6 Outstanding RRPT receivable There is no amount due and/or owing to our Group by our Related Parties pursuant to the RRPT for the financial year ended 30 June 2015. 2.7 Review procedures for the RRPT Our Company has established the following procedures and guidelines to ensure that RRPT are undertaken on arm s length basis, on normal commercial terms that are consistent with our Group s usual business practices and policies, which are not on prices and terms that are more favourable to the Related Parties than those generally extended to the public and are not detrimental to our minority shareholders. The review procedures established by our Group for the RRPT are as follows: (i) (ii) (iii) (iv) (v) (vi) (vii) all RRPT which are not covered by the Proposed Renewal of Shareholders Mandate and have the value of equivalent to or more than RM1.0 million or one percent (1%) of the percentage ratios (as defined in Paragraph 10.02(g) of the Listing Requirements) whichever is higher, shall be reviewed by our Audit Committee before the transactions are entered into; for all other RRPT that are not covered by the above sub-paragraph (i), the transactions concerned shall be reviewed by our Audit Committee on a periodic basis. Our Audit Committee may, as it deems fit, request for additional information or advice pertaining to the transactions from any internal or external sources; RRPT which are entered into by our Group pursuant to the Proposed Renewal of Shareholders Mandate will be captured by our Company in a register/record to ensure that relevant approvals have been obtained and the review procedures in respect of such RRPT are complied with; our Audit Committee shall continuously review and monitor the effectiveness as well as the adequacy of our Group s internal control system; where a member of our Board and/or Audit Committee has an interest, direct or indirect, in any particular RRPT, he will have to declare his interest in the RRPT and abstain from deliberating and voting on any matter relating to any decision to be taken by our Board and/or Audit Committee in respect of such transaction; disclosure will be made in our annual report of the aggregate value of the transactions conducted pursuant to the Proposed Renewal of Shareholders Mandate; at least two (2) other contemporaneous transactions with unrelated third parties for similar products/services and/or quantities will be used as a comparison, wherever possible, to determine whether the price and terms offered to/by the Related Parties are fair and reasonable and comparable to those offered to/by other unrelated third parties for the same or substantially similar type of products/services and/or quantities. In the event that quotation or comparative pricing from unrelated third parties cannot be obtained, the transaction price will be determined by our Group based on those offered by/to other unrelated parties for the same or substantially similar type of transaction to ensure that the RRPT is not detrimental to our Group; and 5
(viii) the guidelines for the relevant approving authority practised by our Group in relation to the RRPT are as follows : (a) (b) transactions below RM1.0 million each in value, will be reviewed and approved by senior executives (not being a person connected to the Related Parties) designated by our Audit Committee from time to time for such purpose, and tabled for review by our Audit Committee on a quarterly basis; and transactions equal to or exceeding RM1.0 million each in value will be reviewed and approved by our Audit Committee (not being the Related Parties or Person Connected to the Related Parties). 3. STATEMENT BY THE AUDIT COMMITTEE Our Audit Committee, save for Yeoh Chong Keng being a Related Party, has seen and reviewed the procedures set out in Section 2.7 above and is of the view that the existing guidelines and procedures for the RRPT are sufficient and adequate to ensure that the RRPT are entered into on arm s length basis and on normal commercial terms that are consistent with our Group s usual business practices and policies, which are not on terms that are more favourable to the Related Parties than those generally extended to the public and are not detrimental to our minority shareholders. Our Group has in place adequate procedures and processes to monitor, track and identify RRPT in a timely and orderly manner. Our Audit Committee conducts the review of these procedures and processes on a half yearly basis. Any member of our Audit Committee who is interested in any RRPT shall not be involved in the review and deliberation of the relevant RRPT. 4. RATIONALE FOR AND BENEFITS OF THE PROPOSED RENEWAL OF SHAREHOLDERS MANDATE The RRPT entered or to be entered into by our Group with the Related Parties are all recurring transactions and in the ordinary course of business, which were undertaken at arm s length basis and on normal commercial terms which are not more favourable to the Related Parties than those generally extended to the public and are not detrimental to the interests of our minority shareholders. The RRPT are likely to continue to occur with some degree of frequency from time to time. By obtaining the shareholders mandate and renewing the same on an annual basis, our Company does not need to convene separate meetings from time to time to seek your approval as and when potential RRPT with the specific classes of Related Parties arise, thereby reducing substantial administrative time and expenses in convening such meetings. It would also enable our Group to realise the business opportunities as and when they shall become available to us in a more timely and effective manner. The RRPTs are intended to meet the business needs of our Group at the best possible terms. By transacting with the Related Parties, our Group would have an advantage of familiarity with the background, financial well-being and management of the Related Parties, thus enabling more informed commercial decisions to be made. In most dealings with the Related Parties, our Group and the Related Parties have a good understanding of each other s business needs and expectations thus providing a platform where all parties can benefit from conducting the RRPT. 6
5. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM Save as disclosed below, none of the Directors and/or Major Shareholders and/or Persons Connected to them has any interest, direct or indirect, in the Proposed Renewal of Shareholders Mandate as at the LPD: <--------- Direct ---------> <------- Indirect ---------> No. of YOCB %^ No. of YOCB %^ Interested Major Shareholders Shares Shares CCSB 84,000,231 52.52 - - CHF - - 84,000,231* 52.52 CHK - - 84,000,231* 52.52 CHYG - - 84,000,231* 52.52 CHYN - - 84,000,231* 52.52 Interested Directors <--------- Direct ---------> <------- Indirect ---------> No. of YOCB Shares % No. of YOCB Shares % Yeoh Chong Keng 144,000 0.09 - - CHF - - 84,000,231* 52.52 CHK - - 84,000,231* 52.52 Note: ^ Excluding 65,000 treasury shares held. * Deemed interested by virtue of his direct shareholdings in CCSB pursuant to Section 6A of the Act. All the interested Directors have and shall continue to abstain from all Board deliberations and voting pertaining to the Proposed Renewal of Shareholders Mandate. The interested Directors will also abstain from voting in respect of their direct and/or indirect shareholdings on the ordinary resolution pertaining to the Proposed Renewal of Shareholders Mandate at our forthcoming AGM. The interested Major Shareholders will abstain from voting in respect of their direct and/or indirect shareholdings in our Company on the ordinary resolution pertaining to the Proposed Renewal of Shareholders Mandate at our forthcoming AGM. Further, the interested Directors and interested Major Shareholders have undertaken that they will ensure that the Persons Connected to them, if any, will also abstain from voting in respect of their direct and/or indirect shareholdings in our Company on the ordinary resolution pertaining to the Proposed Renewal of Shareholders Mandate at our forthcoming AGM. 6. APPROVALS REQUIRED The Proposed Renewal of Shareholders Mandate is subject to the approval of our shareholders at our forthcoming AGM. 7
7. DIRECTORS RECOMMENDATION Your Board, save for the interested Directors, after having considered all aspects of the Proposed Renewal of Shareholders Mandate, is of the opinion that the Proposed Renewal of Shareholders Mandate is in the best interest of our Group. Accordingly, your Board, save for the interested Directors, recommends that you vote in favour of the ordinary resolution pertaining to the Proposed Renewal of Shareholders Mandate to be tabled at our forthcoming AGM. 8. AGM The 8th AGM, notice of which is enclosed in the 2015 Annual Report will be held at Spring 1 Room, Nilai Springs Golf & Country Club, PT 4770 Nilai Springs, 71800 Putra Nilai, Negeri Sembilan Darul Khusus on Thursday, 17 December 2015 at 10.00 a.m. for the purpose of considering, and if thought fit, passing, the ordinary resolution on the Proposed Renewal of Shareholders Mandate under the agenda of Special Business as set out in the 2015 Annual Report. If you are unable to attend and vote in person at our forthcoming AGM, you may complete, sign and return the Form of Proxy enclosed in the 2015 Annual Report in accordance with the instructions printed therein as soon as possible so as to arrive at our Registered Office at Suite 13A.01(A), Level 13A Wisma Goldhill, 67 Jalan Raja Chulan, 50200 Kuala Lumpur not less than forty-eight (48) hours before the time set for our 8th AGM. The lodging of the Form of Proxy will not preclude you from attending and voting in person at our 8th AGM should you subsequently wish to do so. 9. FURTHER INFORMATION You are advised to refer to the attached appendix for further information. Yours faithfully For and on behalf of your Board of Directors of YOONG ONN CORPORATION BERHAD DATUK KAMALUDIN BIN YUSOFF Independent Non-Executive Chairman 8
PART B LETTER TO SHAREHOLDERS IN RELATION TO THE PROPOSED SHARE BUY-BACK 9
YOONG ONN CORPORATION BERHAD (Company No. 814138-K) (Incorporated in Malaysia) Registered Office: Suite 13A.01(A), Level 13A Wisma Goldhill 67, Jalan Raja Chulan 50200 Kuala Lumpur 18 November 2015 Board of Directors: Datuk Kamaludin Bin Yusoff (Independent Non-Executive Chairman) Chew Hon Foong (Managing Director and Group Chief Executive Officer) Chew Hon Keong (Executive Director and Group Chief Operating Officer) Datuk Hairuddin Bin Mohamed (Independent Non-Executive Director) Yeoh Chong Keng (Independent Non-Executive Director) Lee Kim Seng (Independent Non-Executive Director) To: Our Shareholders Dear Sir/Madam, PROPOSED SHARE BUY-BACK 1. INTRODUCTION On 20 October 2015, your Company announced its intention to seek authority from our shareholders to purchase up to ten percent (10%) of our own issued and paid-up share capital at any point in time, pursuant to Section 67A of the Act, Listing Requirements and any prevailing laws, rules and regulations and guidelines issued by the relevant authorities at the time of purchase. The purpose of Part B of this Circular is to provide you with the relevant information on the Proposed Share Buy-Back and to seek your approval for the ordinary resolution pertaining to the Proposed Share Buy-Back to be tabled at our forthcoming AGM. The notice of our forthcoming AGM and the Form of Proxy are enclosed in the 2015 Annual Report. YOU ARE ADVISED TO READ AND CONSIDER THE CONTENTS OF PART B OF THIS CIRCULAR TOGETHER WITH THE APPENDIX CAREFULLY BEFORE VOTING ON THE ORDINARY RESOLUTION PERTAINING TO THE PROPOSED SHARE BUY-BACK TO BE TABLED AT OUR FORTHCOMING AGM. 10
2. DETAILS OF THE PROPOSED SHARE BUY-BACK 2.1 Quantum The maximum number of ordinary shares which may be purchased by our Company shall not exceed ten percent (10%) of the issued and paid-up share capital of our Company. Based on our Company s issued and paid-up share capital of RM80,000,000 comprising 160,000,000 YOCB Shares as at the LPD, the maximum number of YOCB Shares which may be purchased by our Company pursuant to the Proposed Share Buy-Back shall not exceed 16,000,000 YOCB Shares. However, the actual number of YOCB Shares to be purchased and the timing of any purchase pursuant to the Proposed Share Buy-Back will depend on the market conditions and sentiments of Bursa Securities, the availability of financial resources, retained profits and share premium of our Company. In addition, our Board will ensure that the purchase of YOCB Shares will not result in our Company s public shareholding spread falling below the minimum public shareholding spread of twenty-five percent (25%) of our issued and paid-up share capital. 2.2 Duration The Proposed Share Buy-Back, once approved by the shareholders of our Company, shall be effective from the date of the passing of the ordinary resolution pertaining to the Proposed Share Buy-Back at our forthcoming AGM and shall remain in force until: (i) (ii) (iii) the conclusion of the next AGM following the general meeting at which the ordinary resolution pertaining to the Proposed Share Buy-Back was passed, at which time it shall lapse unless by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or the expiration of the period within which the next AGM after that date is required by law to be held; or revoked or varied by ordinary resolution passed by the shareholders of our Company in a general meeting, whichever occurs first. 2.3 Source of funds The maximum funds to be allocated by our Company for the purchase of the existing YOCB Shares in the open market shall be financed by internally generated funds and/or external borrowings. Pursuant to paragraph 12.10(1) of the Listing Requirements, the Proposed Share Buy-Back must be made wholly from the retained profits and/or the share premium accounts of our Company. Our Company will ensure that the maximum funds to be utilised for the Proposed Share Buy-Back shall not exceed the total retained profits and/or share premium accounts of our Company. The Proposed Share Buy-Back, if funded through internally-generated funds, is not expected to have a material impact on the cash flow position of our Company. In the event the Proposed Share Buy-Back is to be financed by bank borrowings, our Board will ensure that our Company has the capability to repay such borrowings and that such repayment will not have a material effect on the cash flow of our Company. The actual amount of funds to be utilised for the Proposed Share Buy-Back will only be determined later depending on the actual number of YOCB Shares to be purchased, availability of funds at the time of purchase(s) and other relevant cost factors. 11
Based on the latest audited financial statements of our Company for the financial year ended 30 June 2015, the retained profits and share premium of our Company are as follows: As at 30 June 2015 (RM 000) Retained profits 4,312 Share premium - 2.4 Treatment of the Purchased Shares The Proposed Share Buy-Back to be undertaken will be subject to Section 67A of the Act, Chapter 12 of the Listing Requirements and any prevailing laws, orders, requirements, rules, regulations and guidelines issued by the relevant authorities at the time of purchase. The Purchased Shares can be dealt with in the following manner: (i) (ii) (iii) cancelled; or retained as treasury shares for distribution as dividends and/or resold on Bursa Securities and/or cancellation subsequently; or partly retained and partly cancelled. In the event the Purchased Shares are held as treasury shares, the rights attached to them as to voting, dividends and participation in other distribution and otherwise are suspended and the treasury shares shall not be taken into account in calculating the number or percentage of shares or of a class of shares in our Company for any purposes including, without limiting the generality of Section 67A of the Act, the provisions of any law or requirements of the Articles or the Listing Requirements on substantial shareholdings, takeover, notices, the requisitioning of meetings, the quorum for a meeting and the result of a vote on a resolution at a meeting. As at the date of this Circular, your Board has yet to make a decision with regard to the treatment of the Purchased Shares and will take into consideration the effect of such treatment to our Group in arriving at its decision. In addition, an immediate announcement will be made to Bursa Securities upon each purchase, cancellation and/or resell of YOCB Shares pursuant to the Proposed Share Buy-Back. 2.5 Pricing Pursuant to the Listing Requirements, our Company may only purchase YOCB Shares on Bursa Securities at a price which is not more than fifteen percent (15%) above the weighted average market price of YOCB Shares for the five (5) market days immediately before the date of any purchase(s) and our Company may only resell the Purchased Shares on Bursa Securities at: (a) (b) a price which is not less than the weighted average market price of YOCB Shares for the five (5) market days immediately before the resale; or a discounted price of not more than five percent (5%) to the weighted average market price of YOCB Shares for the five (5) market days immediately before the resale provided that: (i) (ii) the resale takes place not earlier than thirty (30) days from the date of purchase; and the resale price is not less than the cost of purchase of the Purchased Shares being resold. 12
2.6 Potential advantages and disadvantages The potential advantages of the Proposed Share Buy-Back, if implemented, to our Company and our shareholders are as follows: (i) (ii) (iii) (iv) the Proposed Share Buy-Back will enable our Company to take preventive measures against market speculation and reduce volatility of YOCB Shares by stabilising the demand and supply of YOCB Shares that will maintain investors confidence; the Proposed Share Buy-Back will provide our Company with opportunities for potential gains if the Purchased Shares which are retained as treasury shares are resold at a higher price; the Proposed Share Buy-Back will allow our Company the flexibility in attaining the desired capital structure, in terms of debt and equity composition and size of equity; and in the event the treasury shares are distributed as share dividends, it will serve to reward our shareholders. The potential disadvantages of the Proposed Share Buy-Back, if implemented, to our Company and our shareholders are as follows: (i) (ii) the Proposed Share Buy-Back will reduce the financial resources of our Group and may result in the forgoing of better investment opportunities that may emerge in the future; and as the Proposed Share Buy-Back can only be made out of the retained profits and/or share premium accounts of our Company, it may result in the reduction of financial resources available for distribution as dividends and/or bonus shares to our shareholders in the immediate future. Your Board will be mindful of the interests of our Company and our shareholders when undertaking the Proposed Share Buy-Back and in the subsequent resale of treasury shares on Bursa Securities, if any. 2.7 Public shareholding spread The Proposed Share Buy-Back will be carried out in accordance with the prevailing laws at the time of the purchase including compliance with the 25% public shareholding spread requirement pursuant to Paragraph 8.02(1) of the Listing Requirements. According to the Record of Depositors of our Company as at the LPD, the total percentage of the issued and paid-up share capital of YOCB which is held by the public (in accordance with the public shareholding spread requirements of Bursa Securities), was 47.16%, representing 1,667 public shareholders holding 75,419,006 YOCB Shares. Your Board will be mindful of the public shareholding spread requirement before making any purchase of YOCB Shares. 2.8 Purchase of YOCB Shares and resale of Purchased Shares in the previous twelve (12) months In the previous twelve (12) months, our Company had on 17 December 2014 made purchase of 65,000 YOCB shares from the open market at an average price of RM0.80 per share and the total consideration paid for the purchase was RM52,380 including transaction costs and all of which are retained as treasury shares. As at the LPD, the Company held 65,000 treasury shares and none of the treasury shares held were resold or cancelled in the preceding twelve (12) months. 13
3. RATIONALE The Proposed Share Buy-Back will allow our Company to utilise our surplus financial resources, which is not immediately required for other uses more efficiently to purchase our own Shares from the open market, to stabilise the supply and demand of YOCB Shares traded on Bursa Securities thereby supporting the fundamental value of YOCB Shares and reduce the volatility of our Company s share price. If the Purchased Shares are subsequently cancelled, the Proposed Share Buy-Back may strengthen the EPS of our Company. Consequently, long term investors are expected to enjoy a corresponding increase in the value of their investments in our Company. The Purchased Shares can also be held as treasury shares and resold on Bursa Securities at a higher price therefore realising a potential capital gain without affecting the total issued and paid-up share capital of our Company. In addition, the Purchased Shares held as treasury shares would also provide our Board an option to distribute the treasury shares as share dividends to reward our shareholders. The Proposed Share Buy-Back is not expected to have any potential material disadvantage to our Company and our shareholders, and it will be implemented only after taking into consideration, amongst others, the financial resources of our Group, and of the resulting impact on the shareholders of our Company. 4. FINANCIAL EFFECTS OF THE PROPOSED SHARE BUY-BACK 4.1 Share capital The effect of the Proposed Share Buy-Back on the issued and paid-up share capital of our Company will depend on whether the Purchased Shares are cancelled or retained as treasury shares. The Proposed Share Buy-Back will result in a reduction of the issued and paid-up share capital of our Company if the Purchased Shares are cancelled. Based on the issued and paid-up share capital of our Company as at the LPD, and assuming that the maximum number of YOCB Shares (of up to ten percent (10%) of the issued and paid-up share capital) authorised under the Proposed Share Buy-Back are purchased and cancelled, it will result in the issued and paid-up share capital of our Company being reduced as follows: Existing issued and paid-up share capital as at the LPD Par value No. of YOCB Shares RM 0.50 160,000,000* 80,000,000 Less: Maximum number of YOCB Shares which may be purchased and cancelled pursuant to the Proposed Share Buy-Back 0.50 (16,000,000) (8,000,000) Resultant issued and paid-up share capital after the Proposed Share Buy- Back 0.50 144,000,000 72,000,000 * Including 65,000 shares bought and retained as treasury shares. 14
If the YOCB Shares so purchased are retained as treasury shares, the issued and paid-up share capital of the Company will not be reduced but the rights attaching to the treasury shares as to voting, dividends and participation in other distributions or otherwise will be suspended. While these YOCB shares remain as treasury shares, the Act prohibits the taking into account of such shares in calculating the number of percentage of shares in the Company for a purpose whatsoever including substantial shareholdings, takeovers, notices, requisitioning of meetings, quorum for meetings and the results of votes on resolution. 4.2 NA and gearing The effect of the Proposed Share Buy-Back on the consolidated NA of our Group will depend on, inter-alia, the number of Purchased Shares, the purchase price of such Purchased Shares, the effective funding cost to our Group to finance the Purchased Shares or any loss in interest income to our Company and the proposed treatment of the Purchased Shares. If all the Purchased Shares are cancelled, the Proposed Share Buy-Back will cause the NA per share of our Group to reduce in the event the purchase price of the Purchased Shares exceeds the NA per Share of our Group at the time of purchase, and vice versa. The NA of our Group would decrease if the Purchased Shares are retained as treasury shares due to the requirement for treasury shares to be carried at cost and to be offset against equity, resulting in a decrease in the NA of our Group by the cost of the treasury shares. In the event the treasury shares are resold through Bursa Securities for a profit, the NA per share of our Group will increase accordingly. If the treasury shares are distributed as share dividends, the NA per share of our Group will decrease by the cost of the treasury shares. The effect of the Proposed Share Buy-Back on the gearing of our Company will depend on the proportion of borrowings utilised to fund any purchase of shares. Any borrowing utilised to purchase YOCB Shares may increase the gearing of our Company. 4.3 Working capital The Proposed Share Buy-Back, as and when implemented, will reduce the working capital and cash flow of our Group, the quantum of which will depend on, inter-alia, the purchase price(s) of YOCB Shares and the number of YOCB Shares so purchased. The Purchased Shares which are retained as treasury shares, upon resale, will increase the working capital and cash flow of our Group upon receipt of the proceeds of the resale. The quantum of the increase in the working capital and cash flow will depend on the actual selling price(s) of the treasury share and the quantum of the treasury shares resold. 4.4 Earnings and EPS The effect of the Proposed Share Buy-Back on the earnings and EPS of our Group will depend on, inter-alia, the number of Purchased Shares, the purchase price of such Purchased Shares, the effective funding cost to our Group to finance the Purchased Shares, any loss in interest income to our Group or the opportunity cost in relation to other investment opportunities and the proposed treatment of the Purchased Shares. 15
If the Purchased Shares are retained as treasury shares and subsequently resold, the extent of the effects on the earnings of our Group will depend on the actual selling price, the number of treasury shares resold and the effective gain or the interest savings arising from the share buy-back exercise. If the Purchased Shares are retained as treasury shares or cancelled subsequently, the number of shares applied in the computation of the EPS will be reduced, and accordingly all other things being equal, the Proposed Share Buy-Back will have a positive impact on the EPS of our Group, provided that the income forgone and the interest expense incurred on these Purchased Shares are less than the EPS prior to such purchase. 4.5 Dividend Barring unforeseen circumstances, the Proposed Share Buy-Back may have an impact on our Company s dividend payment, if any, as it may reduce the cash available which may otherwise be used for dividend payments. The decision to declare and pay dividends in the future would depend on the financial performance, cash flow position and financing requirements of our Group. However, as stated in Section 3 above, your Board may have the option to distribute future dividends in the form of the treasury shares pursuant to the Proposed Share Buy-Back. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 16
4.6 Shareholdings of Directors and substantial shareholders Based on the Record of Depositors as at the LPD and assuming that the Proposed Share Buy-Back is implemented in full (up to ten percent (10%) of the issued and paid-up share capital) and that the Purchased Shares are from our shareholders other than our Directors and substantial shareholders, the effects of the Proposed Share Buy-Back on the shareholdings of our Directors and substantial shareholders are set out below: Name Directors Existing as at the LPD^ After the Proposed Share Buy-Back# <------- Direct --------> <------- Indirect ------> <-------- Direct -------> <------- Indirect -------> No. of YOCB Shares % No. of YOCB Shares % No. of YOCB Shares % No. of YOCB Shares % Datuk Kamaludin Bin Yusoff 325,333 0.20 27,999 0.02 325,333 0.23 27,999 0.02 (1) CHF - - 84,000,231 52.52 - - 84,000,231 58.33 (2) CHK - - 84,000,231 52.52 - - 84,000,231 58.33 (2) Datuk Hairuddin Bin Mohamed - - - - - - - - Yeoh Chong Keng 144,000 0.09 - - 144,000 0.10 - - Lee Kim Seng 45,099 0.03 - - 45,099 0.03 - - Substantial shareholders CCSB 84,000,231 52.52 - - 84,000,231 58.33 - - CHF - - 84,000,231 52.52 - - 84,000,231 58.33 (2) CHK - - 84,000,231 52.52 - - 84,000,231 58.33 (2) CHYG - - 84,000,231 52.52 - - 84,000,231 58.33 (2) CHYN - - 84,000,231 52.52 - - 84,000,231 58.33 (2) Note: (1) Deemed interest via his wife and children s direct interests. (2) Deemed interest by virtue of their direct interests in CCSB pursuant to Section 6A of the Act. ^ - Excluding 65,000 treasury shares held. # - Assuming the 10% of the existing issued and paid-up share capital of YOCB are bought and retained as treasury shares. 17
5. IMPLICATIONS OF THE PROPOSED SHARE BUY-BACK IN RELATION TO THE CODE As at the LPD, the Proposed Share Buy-Back is not expected to result in any shareholder triggering an obligation to undertake a mandatory general offer under the Code. 6. HISTORICAL SHARE PRICES The monthly highest and lowest market prices of YOCB Shares transacted for the past twelve (12) months from November 2014 to October 2015 are as follows: High Low RM RM 2014 November 1.05 0.98 December 1.02 0.80 2015 January 0.87 0.83 February 1.08 0.85 March 0.97 0.87 April 0.90 0.83 May 0.92 0.84 June 1.10 0.95 July 1.12 0.91 August 1.13 0.84 September 0.98 0.82 October 0.97 0.93 The last transacted market price of YOCB Shares on 20 October 2015 (being the LPD prior to the printing of this Circular) RM0.93 (Source: Bloomberg) 7. APPROVAL REQUIRED The Proposed Share Buy-Back requires the approval of our shareholders at the forthcoming AGM. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM Save for the consequential increase in the percentage shareholdings and/or voting rights of the shareholders of our Company, none of our Directors, Major Shareholders and/or Persons Connected to them has any interest, direct or indirect, in the Proposed Share Buy-Back or resale of the treasury shares (if any in the future). 18
9. DIRECTORS RECOMMENDATION Your Board, after 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 our Company. Accordingly, your Board recommends that you vote in favour of the ordinary resolution pertaining to the Proposed Share Buy-Back to be tabled at our forthcoming AGM. 10. AGM The 8th AGM, notice of which is enclosed in the 2015 Annual Report will be held at Spring 1 Room, Nilai Springs Golf & Country Club, PT 4770 Nilai Springs, 71800 Putra Nilai, Negeri Sembilan Darul Khusus on Thursday, 17 December 2015 at 10.00 a.m. for the purpose of considering, and if thought fit, passing, the ordinary resolution on the Proposed Share Buy- Back under the agenda of Special Business as set out in the 2015 Annual Report. If you are unable to attend and vote in person at our forthcoming AGM, you may complete, sign and return the Form of Proxy enclosed in the 2015 Annual Report in accordance with the instructions printed therein as soon as possible so as to arrive at our Registered Office at Suite 13A.01(A), Level 13A Wisma Goldhill, 67 Jalan Raja Chulan, 50200 Kuala Lumpur not less than forty-eight (48) hours before the time set for our 8th AGM. The lodging of the Form of Proxy will not preclude you from attending and voting in person at our 8th AGM should you subsequently wish to do so. 11. FURTHER INFORMATION You are advised to refer to the attached appendix for further information. Yours faithfully For and on behalf of your Board of Directors of YOONG ONN CORPORATION BERHAD DATUK KAMALUDIN BIN YUSOFF Independent Non-Executive Chairman 19