THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action you should take, please 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. MAGNA PRIMA BERHAD (Company No.: 369519-P) (Incorporated in Malaysia) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED ACQUISITION BY CROSSBORDER TEAM (M) SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF MAGNA PRIMA BERHAD ( MPB ), FROM MUAFAKAT KEKAL SDN BHD, OF A PIECE OF LEASEHOLD LAND HELD UNDER TITLE NO. PM 2780, LOT 2466, TOWN OF SELAYANG, DISTRICT OF GOMBAK, SELANGOR DARUL EHSAN, MEASURING APPROXIMATELY 2.43 HECTARES, FOR A PURCHASE CONSIDERATION OF RM16,500,000 TO BE SATISFIED BY THE ISSUANCE OF 33,000,000 NEW ORDINARY SHARES OF RM0.25 EACH IN MPB AT AN ISSUE PRICE OF RM0.50 PER SHARE AND NOTICE OF EXTRAORDINARY GENERAL MEETING Adviser The Notice of the Extraordinary General Meeting ( EGM ) to be held at Dewan Perdana, 1 st Floor Sport Complex, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Friday, 6 August 2010 at 10.00 a.m. or at any adjournment thereof, together with the Form of Proxy, are enclosed with this Circular. Shareholders are advised to refer to the Notice of EGM and the Form of Proxy which are enclosed. The Form of Proxy should be lodged at the Registered Office of the Company at Lot No. C-G11 & C-G12, Block C, Jalan Persiaran Surian, Palm Spring @ Damansara, 47810 Kota Damansara, Petaling Jaya, Selangor Darul Ehsan, no later than forty-eight (48) hours before the time set for holding the EGM or at any adjournment thereof. 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 : Wednesday, 4 August 2010 at 10.00 a.m. Date and time for the EGM : Friday, 6 August 2010 at 10.00 a.m. This Circular is dated 23 July 2010
DEFINITIONS Unless where the context otherwise requires, the following definitions shall apply throughout this Circular and the accompanying appendices:- Act : Companies Act, 1965 as amended from time to time and re-enactment thereof Board : Board of directors of MPB Bursa Securities : Bursa Malaysia Securities Berhad (635998-W) Bursa Securities LR : Main Market Listing Requirements of Bursa Securities Circular : This circular to shareholders of MPB dated 23 July 2010 Consideration Shares : 8,250,000 new ordinary shares of RM1.00 each in MPB originally to be issued pursuant to the Proposed Selayang Land Acquisition (which has been subsequently adjusted to 33,000,000 new MPB Shares resulting from the Share Split) Crossborder : Crossborder Team (M) Sdn Bhd (821484-P), a wholly-owned subsidiary of MPB EGM : Extraordinary general meeting LPD : 30 June 2010, being the latest practicable date prior to the date of printing of this Circular M&A Securities : M&A Securities Sdn Bhd (15017-H) MKSB : Muafakat Kekal Sdn Bhd (335240-D) MPB or the Company : Magna Prima Berhad (369519-P) MPB Group or the Group : MPB and its subsidiaries, collectively MPB Shares or Shares : Ordinary shares of RM0.25 each in MPB NA : Net assets Proposed Selayang Land Acquisition : Proposed acquisition by Crossborder from MKSB of the Selayang Land for a purchase consideration of RM16,500,000 to be satisfied by the issuance of 33,000,000 new MPB Shares at an issue price of RM0.50 per MPB Share Selayang Land : A piece of vacant leasehold residential development land (with an unexpired lease period of 88 years expiring on 9 August 2098) held under Title No. PM 2780, Lot 2466, Town of Selayang, District of Gombak, Selangor Darul Ehsan measuring approximately 2.43 hectares Selayang SPA : Sale and purchase agreement dated 14 October 2009 entered into between Crossborder and MKSB in relation to the Proposed Selayang Land Acquisition Selayang Valuation Report : The valuation report by the Valuer dated 12 October 2009 on the Selayang Land Updated Selayang Valuation Report : The updated valuation report by the Valuer dated 12 February 2010 on the Selayang Land i
DEFINITIONS (Cont d) Revised Selayang Valuation Report : The revised valuation report by the Valuer dated 22 April 2010 on the Selayang Land Share Split : Share split exercise involving the subdivision of every one (1) ordinary share of RM1.00 each in MPB into four (4) new MPB Shares, which was completed on 20 January 2010 RM and sen : Ringgit Malaysia and sen, respectively Valuer : Raine & Horne International Zaki + Partners Sdn Bhd (99440-T), an independent firm registered with the Board of Valuers, Appraisers & Estate Agents Malaysia Warrants : The 2006/2011 warrants issued by MPB which are exercisable into MPB Shares For the purpose of this Circular, reference to a time of day shall be a reference to Malaysian time. In this Circular, words referring to the singular shall, where applicable, include the plural and vice versa, and words referring to the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall include a company or a corporation. The remainder of this page has been intentionally left blank ii
TABLE OF CONTENTS LETTER TO THE SHAREHOLDERS OF MPB Page 1. INTRODUCTION 1 2. THE PROPOSED SELAYANG LAND ACQUISITION 2 3. RATIONALE FOR THE PROPOSED SELAYANG LAND ACQUISITION 8 4. FINANCIAL EFFECTS OF THE PROPOSED SELAYANG LAND ACQUISITION 8 5. APPROVALS REQUIRED FOR THE PROPOSED SELAYANG LAND ACQUISITION 10 6. OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION 11 7. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM 12 8. DIRECTORS RECOMMENDATION 12 9. OTHER MATTERS 12 10. EGM 13 11. FURTHER INFORMATION 13 APPENDICES I VALUER S CERTIFICATE ON THE SELAYANG LAND 14 II FURTHER INFORMATION 26 NOTICE OF EGM FORM OF PROXY ENCLOSED ENCLOSED iii
MAGNA PRIMA BERHAD (Company No: 369519-P) (Incorporated in Malaysia) Registered Office: Registered Office: Lot No. C-G11 & C-G12, Block C Jalan Persiaran Surian Palm Spring @ Damansara 47810 Kota Damansara Petaling Jaya Selangor Darul Ehsan 23 July 2010 Board of Directors Tan Sri Datuk Adzmi bin Abdul Wahab (Independent Non-Executive Director, Chairman) Tan Sri Datin Paduka Seri Hajah Zaleha binti Ismail (Deputy Executive Chairman) Yoong Nim Chee (Executive Director, Chief Executive Officer) Loo Kent Choong (Executive Director, Chief Operating Officer) Dato Mohamad Rizal bin Abdullah (Executive Director) Dato Dr. Manjit Singh a/l Harban Singh (Non-Independent Non-Executive Director) Dato Rahadian Mahmud bin Mohammad Khalil (Independent Non-Executive Director) Ong Ah Leng (Independent Non-Executive Director) Sazali bin Saad (Independent Non-Executive Director) Oh Aik Teong Michael (Independent Non-Executive Director) Ong Chiow Hock (Independent Non-Executive Director) To: The Shareholders of MPB Dear Sir / Madam, PROPOSED ACQUISITION BY CROSSBORDER, A WHOLLY-OWNED SUBSIDIARY OF MPB, FROM MKSB, OF A PIECE OF VACANT LEASEHOLD RESIDENTIAL DEVELOPMENT LAND HELD UNDER TITLE NO. PM 2780, LOT 2466, TOWN OF SELAYANG, DISTRICT OF GOMBAK, SELANGOR DARUL EHSAN, MEASURING APPROXIMATELY 2.43 HECTARES, FOR A PURCHASE CONSIDERATION OF RM16,500,000 TO BE SATISFIED BY THE ISSUANCE OF THE CONSIDERATION SHARES AT AN ISSUE PRICE OF RM0.50 PER MPB SHARE 1. INTRODUCTION On 14 October 2009, M&A Securities, on behalf of the Board, announced that Crossborder, a wholly-owned subsidiary of MPB, had on even date entered into a sale and purchase agreement with MKSB in relation to the Proposed Selayang Land Acquisition. On 1 December 2009, M&A Securities, on behalf of the Board, announced that the listing application in relation to the Proposed Selayang Land Acquisition had been submitted to Bursa Securities. On 20 January 2010, the Company had completed the Share Split. Resulting thereto, and in accordance with the terms of the Selayang SPA, the Vendor and the Purchaser have on 20 January 2010 mutually agreed in writing that the number of shares to be issued pursuant to the Proposed Selayang Land Acquisition was adjusted from 8,250,000 ordinary shares of RM1.00 each in MPB at an issue price of RM2.00 per share to 33,000,000 new MPB Shares at an issue price of RM0.50 per share. 1
The Gombak District Land Office vide its letter dated 2 April 2010 had approved the transfer of the Selayang Land from MKSB in favour of Crossborder pursuant to the Proposed Selayang Land Acquisition. Bursa Securities had vide its letter dated 16 July 2010 approved the listing of and quotation for the Consideration Shares to be issued pursuant to the Proposed Selayang Land Acquisition on the Main Market of Bursa Securities subject to the following conditions:- (i) (ii) (iii) (iv) (v) MPB and its adviser must fully comply with the relevant provisions under the Bursa Securities LR pertaining to the implementation of the Proposed Selayang Land Acquisition; MPB and its adviser are to inform Bursa Securities upon the completion of the Proposed Selayang Land Acquisition; To incorporate Bursa Securities comments in respect of the Circular; MPB is to furnish Bursa Securities with a written confirmation of its compliance with the terms and conditions of Bursa Securities approval once the Proposed Selayang Land Acquisition is completed; and To furnish to Bursa Securities a certified true copy of the resolution passed by the shareholders in a general meeting approving the Proposed Selayang Land Acquisition. The purpose of this Circular is to provide you with the relevant information on the Proposed Selayang Land Acquisition and to accordingly seek your approval for the resolution pertaining to the same to be tabled at the Company s forthcoming EGM. The notice of EGM together with the Form of Proxy are enclosed in this Circular. SHAREHOLDERS OF MPB ARE ADVISED TO READ AND CONSIDER CAREFULLY THE ENTIRE CONTENTS OF THIS CIRCULAR BEFORE VOTING ON THE RESOLUTION TO GIVE EFFECT TO THE PROPOSED SELAYANG LAND ACQUISITION AT THE FORTHCOMING EGM. 2. THE PROPOSED SELAYANG LAND ACQUISITION 2.1 Details of the Proposed Selayang Land Acquisition The Proposed Selayang Land Acquisition entails the acquisition of the Selayang Land by Crossborder from MKSB for a purchase consideration of RM16,500,000 to be satisfied originally by the issuance of 8,250,000 new ordinary shares of RM1.00 each in MPB at an issue price of RM2.00 per share. Under the terms of the Selayang SPA, in the event at any time before the Completion Date (as defined in Section 2.1.4(b) hereunder) where MPB undertakes any exercise to alter the par value of the MPB shares by reason of consolidation or sub-division or undertakes a bonus issue or rights issue of new MPB shares, the number of Consideration Shares shall be adjusted to an amount equivalent to the Purchase Consideration (as defined in Section 2.1.4(a) hereunder). On 20 January 2010, the Company completed the Share Split which effectively subdivided every one (1) ordinary share of RM1.00 each in MPB into four (4) new MPB Shares. In such an event and under the terms of the Selayang SPA, the number of shares to be issued pursuant to the Proposed Selayang Land Acquisition was adjusted from 8,250,000 new ordinary shares of RM1.00 each to 33,000,000 new MPB Shares. Pursuant to the Selayang SPA, MKSB shall sell and Crossborder shall purchase the Selayang Land free from all encumbrances, debenture, liens, caveats, equities and pledges and with vacant possession upon completion of the Selayang SPA. The purchase consideration of RM16,500,000 was arrived at on a willing buyer-willing seller basis after taking into account the market value of the Selayang Land of RM17,000,000 with the benefit of the proposed development being approved by the relevant authorities as assessed by the Valuer using the comparison method as the main method of valuation and supported by the residual method of valuation vide its Selayang Valuation Report. The planning approval for the proposed development was obtained on 11 January 2010. 2
Resulting thereto, the Valuer had on 12 February 2010 issued the Updated Selayang Valuation Report which retains the ascribed market value of the Selayang Land to be RM17,000,000. The said valuation was submitted to Bursa Securities on 18 February 2010. Bursa Securities had vide its letter dated 17 March 2010, noted that certain requirements under the Asset Valuation Guidelines issued by the Securities Commission were not complied. In compliance with Bursa Securities letter dated 17 March 2010, the Valuer had on 22 April 2010 issued the Revised Selayang Valuation Report ascribing the market value of the Selayang Land to be RM14,900,000. The said purchase consideration now represents a premium of approximately 10.7% to the market value of the Selayang Land assessed by the Valuer. Kindly refer to Appendix I for the Valuer s certificate on the Selayang Land. The Board is of the view that the Purchase Consideration (as defined in Section 2.1.4(a) hereunder) is fair, despite the abovesaid premium. The justifications for the Board s opinion on the Purchase Consideration are as follows: The returns on investment and profitability margins for the proposed development are within industry norm and expectations; The Selayang Land is small in size and as such, the proposed development does not carry obligation for massive social amenities e.g. provision of school, police station, etc. and social housing; There is no requirement for open space for the proposed development due to its strategic location and as such, the land area of 2.43 hectares is entirely for the proposed development of high-end residential units; No further charges are required for the conversion of the Selayang Land as the land is already designated as residential land; The proposed development is in the Klang Valley landed terrace house segment, which has seen strong prospects in the past two (2) years; and The proposed development is in line with the Group s corporate strategy to develop strategically located land in high-density areas. The original issue price of the new ordinary shares of RM1.00 each under the Proposed Selayang Land Acquisition before the Share Split was arrived at after taking into account inter-alia, the one (1) month weighted average market price of MPB Shares up to 13 October 2009 (being the market day preceding the date of the announcement of the Proposed Selayang Land Acquisition) of RM2.12 per share. The issue price represents a discount of approximately 5.7% from the one (1) month weighted average market price of MPB Shares up to 13 October 2009. The Board is of the view that the issue price for the Consideration Shares was determined using market-based principles. The settlement of the Purchase Consideration (as defined in Section 2.1.4(a) hereunder) by the issuance of Consideration Shares (as defined in Section 2.1.4(b) hereunder) will allow MPB Group to conserve its cash reserves and strengthen its capital base. The new MPB Shares to be issued pursuant to the Proposed Selayang Land Acquisition shall, upon allotment and issue, rank pari passu in all respects with the existing MPB Shares, save and except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the said shares. 2.1.1 Details of the Selayang Land The Selayang Land is located approximately ten (10) kilometres to the north-west of the Kuala Lumpur city centre. It is located off the western side of Jalan Ipoh, a highway linking Kuala Lumpur via Selayang-Kepong By-Pass and thence onto Jalan Prima Selayang 7. Properties within the immediate vicinity of the Selayang Land are predominantly residential and commercial in character including flatted developments, five (5) storey shop/apartments, single and double storey terrace houses and apartment/condominium developments as well as plots of vacant development land. Adjoining the Selayang Land due south east is the ongoing UITM Medical Campus. The Tenaga Nasional Berhad staff quarters, the Prima Selayang two (2) and three (3) storey shophouses and the Ideal Convention Centre are located opposite the Selayang Land, i.e., across Jalan Prima Selayang 7, Off Jalan Lebuhraya Selayang-Kepong. (Source: Revised Selayang Valuation Report) 3
The audited net book value of the Selayang Land as at 31 December 2007 is approximately RM7.6 million. The Selayang Land was acquired by MKSB on 22 December 2003 for approximately RM7.3 million. The Selayang Land is currently unencumbered. The MPB Group currently intends to develop for sale, the Selayang Land into a residential gated and guarded community comprising ninety (90) units of high-end residential terrace houses to be named at a later date. The layout plan for the ninety (90) units of high-end residential terrace houses was approved on 11 January 2010 subject to, inter-alia, compliance with the comments from the technical departments. The gross development cost is approximately RM49 million and the expected gross profit margin is approximately 25%. The expected commencement of the proposed development is tentatively targeted for the 2 nd half of 2010 and it is expected to be completed within two (2) years from the commencement date. The Directors of MPB are confident that the Proposed Selayang Land Acquisition will contribute positively to the long term future earnings of the MPB Group. Crossborder expects to fund the development of the Selayang Land through a combination of internal cashflow and/or borrowings of the MPB Group. Save as mentioned above, there are no additional financial commitments required by the MPB Group for the Proposed Selayang Land Acquisition. MPB will not assume any additional liabilities (including contingent liabilities and guarantees (if any)) under the Proposed Selayang Land Acquisition. 2.1.2 Information on the Vendor MKSB was incorporated in Malaysia as a private limited company under the Act on 1 March 1995. MKSB has an authorised share capital of RM8,000,000 comprising 8,000,000 ordinary shares of RM1.00 each, all of which have been issued and credited as fully paid-up. The directors and substantial shareholder of MKSB (together with their respective shareholdings in MKSB) are as follows:- As at the LPD Direct Indirect Directors No. of No. of shares % shares % Tengku Sulaiman Shah Ibni Sultan Abd Aziz 70,001 0.87 - - Azran bin Haji Abdul Rahman - - - - Dato Haji Abdul Hanif bin Abdullah 7,895,999 98.70 - - Substantial Shareholder Dato Haji Abdul Hanif bin Abdullah 7,895,999 98.70 - - MKSB s principal activities are property development and property investment. 2.1.3 Information on the Purchaser Crossborder was incorporated in Malaysia as a private limited company under the Act on 13 June 2008. Crossborder has an authorised share capital of RM5,000,000 comprising 5,000,000 ordinary shares of RM1.00 each, of which 2,600,000 ordinary shares of RM1.00 each have been issued and fully paid-up. Crossborder is a wholly-owned subsidiary of MPB. The directors of Crossborder are Yoong Nim Chee, Dato Mohamad Rizal bin Abdullah and Loo Kent Choong. Crossborder is currently a dormant company and intends to embark in property development. 4
2.1.4 Salient Terms of the Selayang SPA The salient terms and conditions of the Selayang SPA include the following:- (a) (b) Under the terms of the Selayang SPA, Crossborder agrees to purchase the Selayang Land from MKSB free from all encumbrances, debenture, liens, caveats, equities and pledges and with vacant possession at the consideration of RM16,500,000 ( Purchase Consideration ). The Purchase Consideration shall be satisfied by the issuance and allotment of the Consideration Shares at an issue price of RM2.00 per MPB share to MKSB and/or its nominee(s) on the date of the actual issuance of new MPB shares to MKSB and/or its nominee(s) within the Conditional Period (as defined in Section 2.1.4(c) hereunder) ( Completion Date ). For avoidance of doubt, in the event at any time before the Completion Date where MPB undertakes any exercise to alter the par value of the MPB Shares by reason of consolidation or sub-division or undertakes a bonus issue or rights issue of new MPB shares, the number of Consideration Shares shall be adjusted to an amount equivalent to the Purchase Consideration. Note : On 20 January 2010, the Company completed the Share Split which effectively subdivided every one (1) ordinary share of RM1.00 each into four (4) new MPB Shares. In such an event and under the terms of the Selayang SPA, the number of shares to be issued pursuant to the Proposed Selayang Land Acquisition was adjusted from 8,250,000 new ordinary shares of RM1.00 each to 33,000,000 new MPB Shares. (c) The Selayang SPA shall be conditional upon the following being obtained, procured and/or fulfilled within six (6) months from the date of the Selayang SPA or such extended period as the parties hereto may mutually agree in writing (the Conditional Period )*:- (i) (ii) (iii) (iv) the approval of Bursa Securities for the listing of and quotation for the Consideration Shares, which was obtained on 16 July 2010; the approval from the shareholders of Crossborder and MPB in a general meeting for the Proposed Selayang Land Acquisition and the issuance of the Consideration Shares respectively; the consent of the State Authority for the transfer of the Selayang Land from MKSB in favour of Crossborder, which was obtained on 2 April 2010; and such other waivers, consents or approvals as may be required (or deemed necessary by the parties hereto) from any third party or governmental, regulatory body or competent authority having jurisdiction over any part of the Proposed Selayang Land Acquisition. Note: * The parties had on 15 April 2010 mutually agreed to extend the Conditional Period up to 14 August 2010. In the event that the above conditions precedent are not fulfilled within the Conditional Period or an extended period mutually agreed between the parties (unless mutually waived), the Selayang SPA shall thereafter cease to have any effect and all rights, obligations and liabilities of the parties shall cease to have effect and deemed mutually terminated and none of the parties shall have any claim against the other save for antecedent breaches. (d) The parties agree that MKSB shall execute a Power of Attorney favouring Crossborder permitting Crossborder to deal with the Selayang Land, which among other things as stated in the Power of Attorney, to include making any applications to the relevant authorities and for preliminary works and any related matters therein in respect of the Selayang Land, provided that MKSB is notified in writing of any such dealings within fourteen (14) days before such applications and submissions have been made. 5
(e) In the event the registration of the memorandum of transfer ( MOT ) for the transfer of the Selayang Land to Crossborder pursuant to the Selayang SPA cannot be registered free from encumbrances and restrictions for whatsoever reason (other than due to any act or default of Crossborder or MKSB), MKSB shall indemnify Crossborder for the full payment of the Purchase Consideration wherein Crossborder shall terminate the Selayang SPA and MKSB shall repay in cash the equivalent of the Purchase Consideration. 2.1.5 Risk Factors The MPB Group s core business is in the property sector. As such, the Proposed Selayang Land Acquisition will not materially change the risks of the Company s business as the MPB Group would still be exposed to the same business, operational, financial and investment risks inherent in the property sector. These risks are inherently due to timely commencement or completion of projects, obtaining required approvals, satisfactory performance of contractors and adverse economic events or recession. In addition, any material escalation of cost of cement and other building materials as well as increase in petrol prices may contribute to a higher overall development cost, thereby impacting the profit margins of the MPB Group s projects. The MPB Group seeks to limit these risks through, inter-alia, careful planning and identification of the type of developments, innovative pricing strategies to pass through cost escalations to customers, prudent financial policy, close supervision on projects and effective management. In addition, the Proposed Selayang Land Acquisition is subject to the risk of the MOT for the transfer of the Selayang Land to Crossborder pursuant to the Selayang SPA not being able to be registered free from encumbrances and restrictions for whatsoever reason (other than due to any act or default by Crossborder or MKSB). In such an event, under the terms of the Selayang SPA, MKSB shall indemnify Crossborder for the full payment of the Purchase Consideration wherein Crossborder shall terminate the Selayang SPA and MKSB shall repay in cash the equivalent of the Purchase Consideration. 2.1.6 Outlook and Prospects Malaysian Economy The Malaysian economy registered a strong growth of 10.1% in the first quarter of 2010, led by continued expansion in domestic demand and stronger external demand. The expansion in domestic demand was supported by higher private consumption and sustained public sector spending. The robust external demand provided further impetus to domestic growth through its spillover effects on production, employment and overall sentiments. On the supply side, all economic sectors recorded positive growth during the quarter, led by strong growth in the manufacturing and services sectors. During the quarter, domestic demand expanded by 5.4% (4Q 09: 2.8%), due mainly to higher private consumption and sustained public sector spending. Private consumption spending grew by 5.1% (4Q 09: 1.6%), supported by continued improvement in labour market conditions amidst an environment of low inflation and improved consumer sentiment. The public sector continued to provide additional impetus to growth, with public consumption registering an expansion of 6.3% during the quarter, due mainly to higher expenditure on emoluments as well as supplies and services. Gross fixed capital formation continued its positive growth momentum, growing by 5.4% (4Q 09: 8.2%), supported by sustained public sector capital spending and a modest recovery in private sector business spending activity. Private investment activity benefited from the significant increase in production and external demand, which led to improvements in both capacity utilisation and business sentiments. Public sector capital spending continued to provide support to the domestic economy with the bulk of the development expenditure channelled into education, transportation, and agriculture and rural development. On the supply side, all economic sectors registered positive growth during the first quarter, with strong performance in the manufacturing and services sectors. The recovery momentum in the manufacturing sector strengthened further, with the sector registering a strong growth of 16.9% (4Q 09: 5.0%). Similarly, the services sector recorded a higher growth of 8.5% (4Q 09: 5.2%), with strong performance across all sub-sectors. The agriculture sector expanded further, supported mainly by strong rubber production amid higher prices. The construction sector continued to expand at a strong pace of 8.7% during the quarter (4Q 09: 9.3%), supported by the implementation of 6
construction-related projects under the second fiscal stimulus package and the Ninth Malaysia Plan. The mining sector turned around to register a positive growth of 2.1% (4Q 09: -2.8%), largely reflecting the strong pick up in natural gas production. The headline inflation rate, as measured by the change in the Consumer Price Index (CPI), increased to 1.3% on an annual basis in the first quarter (4Q 09: -0.2%). The recovery of the global economy continued to gather pace in the first quarter, with stronger growth performance across most regions, particularly the Asian economies. Economic activity was sustained in the advanced economies amid continued policy support, stabilisation of financial systems and improved business and consumer confidence. Meanwhile, the regional economies continued their robust expansion in the first quarter, supported by sustained domestic demand and strong export growth. Going forward, considerable uncertainties remain due to the ongoing sovereign debt problems in Europe and the diminishing support from policy stimulus. Despite these developments and the potential destabilising effects on financial markets, the assessment is that it would generally have limited effects on emerging market economies. The strong and broad-based expansion of the domestic economy in the first quarter affirms that the recovery of the Malaysian economy is firmly established. Going forward, growth is expected to be sustained, supported by the continued expansion in domestic and external demand. Expansion in domestic demand is expected to be supported by the favourable employment conditions, improving consumer and business confidence and an accommodative policy environment, while external demand will be supported by stronger regional trade and the global upturn in the electrical and electronics industry cycle. (Source: Economic and Financial Developments in Malaysia in the First Quarter of 2010, Bank Negara Malaysia) Property Market In Q1 2010, developers offered 5,760 new housing units to the market. A total of 1,378 units were taken up, achieving sales performance of 23.9%. The new housing units launched decreased substantially by 28.6% from 8,068 units recorded in the previous quarter. However, the sales performance increased from 17.0%. The past four quarters saw a total of 42,850 houses launched into the market and the total take up rate for the year was 16.7% (7,164 units). The highest number of units launched was in Q2 2009 at 16,657 units whilst the lowest was in the review quarter at 5,760 units. In terms of sales performance, Q1 2010 recorded the highest at 23.9% whilst the lowest was in Q1 2009 at 6.6%. As at end of Q1 2010, the total number of new residential units launched in the country for the past nine months was 26,193 units. These total comprised 5,760 units launched in Q1 2010, 8,068 units in Q4 2009 and 12,365 in Q3 2009. In Q1 2010, the number of units launched decreased by 28.6% from 8,068 units recorded in Q4 2009 and 53.4% from 12,365 units in Q3 2009 respectively. By property type, terraced houses continued to dominate the new housing market. This property type represented 62.6% (16,396 units) of the national total. Single storey terraced units made up of 30.4% (7,954 units) whilst 2-3 storey terrace formed another 32.2% (8,442 units). The condominium/apartments constituted another 9.6% (2,523 units) of the total. The 2-3 storey semidetached and single storey semi-detached formed 7.6% (1,987 units) and 6.3% (1,639 units) respectively. Terraced houses were highly sought after. This type of property represented 63.5% (7,021 units) of the total sold units. Single storey terraced units contributed 32.0% (3,534 units) whilst 2-3 storey terrace formed another 31.5% (3,487 units). The condominium/apartments constituted another 11.1% (1,230 units) of the total whilst the single storey semi-detached formed 7.4% (1,987 units) and 6.3% (1,639 units) respectively. In the overhang category, quarter on quarter analysis (Q1 2009 : Q1 2010) showed the overhang units decreased marginally from 28,747 whilst in terms of value, an increase of 2.4% from RM5.518 billion was recorded. Residential and shop sub-sectors recorded improved performance by registering a lower number of overhang. The residential overhang units decreased marginally from 23,256 whilst its value increased by 3.8% from RM3.733 billion respectively. Shops overhang and value recorded reductions of 1.3% from 4,827 units and 3.3% from RM1.434 billion respectively. 7
However, the industrial sub-sector recorded otherwise. The number and value of industrial overhang increased by 14.5% from 664 units and 10.3% from RM0.352 billion respectively. In the category of all types of unsold under construction units, quarter-on-quarter analysis (Q1 2009 : Q1 2010) showed all sub-sectors recorded better performance by registering lower number of unsold units. Residential, industrial and shops sub-sectors recorded decreases of 8.8% from 49,904 units, 18.3% from 679 units and 31.5% from 5,917 units respectively. (Source : Property Market Status Report Q1 2010, Valuation and Property Services Department, Ministry of Finance Malaysia) Based on the proposed development plan for the Selayang Land as described in Section 2.1.1 above, the Board is of the view that the prospects of the Selayang Land appears to be favourable as the Selayang Land is strategically located in the fast growing Selayang area, along with all the surrounding housing estates and well populated catchment area in the Klang Valley. Premised on the above, the Selayang neighbourhood will continue to be a popular choice for new development schemes. In addition, based on the strength of market demand for landed properties in the past year, the prospect of the proposed development is expected to be favourable. 3. RATIONALE FOR THE PROPOSED SELAYANG LAND ACQUISITION During 2009, MPB had announced several land or land related acquisitions. The Proposed Selayang Land Acquisition is in line with the corporate strategy of the Group to develop strategicallylocated land in high-density areas, with easy accessibility and significant gross development value, for the development of lifestyle-themed projects within a short turnaround time. The settlement of the Purchase Consideration by the issuance of Consideration Shares will allow MPB Group to conserve its cash reserves and strengthen its capital base. 4. FINANCIAL EFFECTS OF THE PROPOSED SELAYANG LAND ACQUISITION 4.1 Share Capital and Substantial Shareholdings The proforma effects of the Proposed Selayang Land Acquisition on the issued and paid-up share capital of the Company are set out below. No. of MPB Share Shares Par Value Capital 000 RM RM 000 Existing issued and paid-up share capital as at the LPD 214,012 0.25 53,503 To be issued pursuant to the Proposed Selayang Land Acquisition 33,000 0.25 8,250 247,012 0.25 61,753 Assuming the exercise of all outstanding Warrants^ 86,071 0.25 21,518 Enlarged issued and paid-up share capital 333,083 0.25 83,271 Note: ^ 86,071,256 Warrants as at the LPD. 8
4.2 NA and Gearing Based on the consolidated audited financial statements of the MPB Group for the financial year ended 31 December 2009, the proforma effects of the Proposed Selayang Land Acquisition on the NA and gearing of the MPB Group are set below: I II III After I and the After II and As at 31 December 2009 After the Share Split Proposed Selayang Land Acquisition assuming full exercise of Warrants^ RM 000 RM 000 RM 000 RM 000 Share capital 53,459 53,459 61,709 83,271 Share Premium 10,521 10,521 *18,671 35,488 Warrants Reserve 6,468 6,468 6,468 - Capital Reserve 30 30 30 30 Retained profits 47,753 47,753 46,153 46,153 Shareholders funds/ NA 118,231 118,231 133,031 164,942 No. of MPB Shares ( 000) 53,459 213,837 246,837 333,083 NA per share (RM) 2.21 0.55 0.54 0.50 Borrowings (RM 000) 38,280 38,280 38,280 38,280 Gearing (times) 0.32 0.32 0.29 0.23 Notes:- * After taking into account the estimated expenses for the Proposed Selayang Land Acquisition of RM100,000. ^ Assuming full exercise of 86,245,956 Warrants at an exercise price of RM0.37 per Warrant as at the financial year ended 31 December 2009. 4.3 Earnings and Earnings per Share The Proposed Selayang Land Acquisition is expected to contribute positively to the earnings of the MPB Group for the future financial years. However, immediately upon the completion of the Proposed Selayang Land Acquisition, the purchase consideration premium of RM1.6 million to the Selayang Land s ascribed market value of RM14.9 million will be written off against retained profits in recognition of the ascribed market value of the Selayang Land. The earnings per share for the financial year ended 31 December 2009 is 2.05 sen, taking into consideration the enlarged share capital of MPB after the Proposed Selayang Land Acquisition of approximately 247 million shares and the net profit of MPB of approximately RM6.6 million, netting off the abovementioned write off of RM1.6 million. 4.4 Dividends The Proposed Selayang Land Acquisition is not expected to affect the dividend policy of the Company as future dividend payable by the Company would be dependent on inter-alia, the future profitability and cash flow position of the MPB Group. 9
4.5 Substantial shareholders' shareholdings The effects of the Proposed Selayang Land Acquisition on the substantial shareholders shareholdings of MPB based on the Register of Substantial Shareholders of MPB as at the LPD are shown below. I After the Proposed Selayang Land As at the LPD Acquisition Direct Indirect Direct Indirect No. of MPB No. of MPB Shares Shares 000 % 000 % No. of MPB Shares 000 % No. of MPB Shares 000 % Fantastic Realty Sdn Bhd 32,975 15.41 - - 32,975 13.35 - - MKSB - - - - 33,000 13.36 - - II After I and assuming full exercise of Warrants^ No. of MPB Shares No. of MPB Shares 000 000 % % Fantastic Realty Sdn Bhd 83,632 # 25.11 - - MKSB 33,000 9.91 - - Notes:- ^ Assuming full exercise of 86,071,256 Warrants at an exercise price of RM0.37 per Warrant. # Fantastic Realty Sdn Bhd holds 50,656,624 Warrants as at LPD. 5. APPROVALS REQUIRED FOR THE PROPOSED SELAYANG LAND ACQUISITION The Proposed Selayang Land Acquisition is subject to the approvals being obtained from the following authorities/parties: (i) (ii) (iii) (iv) the State Authority for the transfer of the Selayang Land, for which approval was obtained on 2 April 2010; shareholders approvals at the forthcoming EGM for the issuance of the Consideration Shares*; Bursa Securities for the listing of and quotation for the Consideration Shares to be issued; and any other relevant authorities/parties (if required). * The highest percentage ratio applicable for the Proposed Selayang Land Acquisition pursuant to Paragraph 10.02(g) of the Bursa Securities LR is 15.4% for non related party transactions and as such, shareholders approval for the Proposed Selayang Land Acquisition pursuant to Paragraph 10.07 of the Bursa Securities LR is not required. The Proposed Selayang Land Acquisition is not conditional upon any other corporate exercises being undertaken by MPB. 10
6. OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION Save for the Proposed Selayang Land Acquisition and the following proposals, as at the LPD, the Company does not have any other corporate exercises which have been announced but pending implementation:- (a) (b) (c) (d) (e) (f) On 10 December 2009, OSK Investment Bank Berhad ( OSK ), had on behalf of the Board, announced that Twinicon (M) Sdn Bhd, a wholly-owned subsidiary of MPB, had entered into a sale and purchase agreement with Santari Sdn Bhd for the acquisition of a parcel of freehold land held under Geran 55267, Lot 38474, Mukim of Petaling, District of Kuala Lumpur, Negeri Wilayah Persekutuan, measuring approximately 22,280 square metres for a cash consideration of RM10,700,000. On 4 September 2009, TA Securities Holdings Berhad, had on behalf of the Board, announced that 33 Sentral Park Sdn Bhd, had entered into a sale and purchase agreement with Petaling Garden Sdn Bhd for the acquisition of the all the piece of land held under H.S. (D) 16678 PT 320, Mukim Kuala Lumpur, Daerah Petaling, Negeri Selangor measuring approximately 16,790.363 square metres and all the piece of land held under H.S. (D) 16679 PT 321, Mukim Kuala Lumpur, Daerah Petaling, Negeri Selangor measuring approximately 11,358.000 square metres in area together with a row of fifteen (15) single storey lock-up shops erected thereon and each of the shop(s) bearing postal address(es) of No.1 to No.15 respectively at Jalan 5/44, Petaling Garden 46000, Petaling Jaya, Selangor Darul Ehsan, for a total cash consideration of RM48,479,360. On 15 July 2009, AmInvestment Bank Berhad (a member of AmInvestment Bank Group) ( AmInvestment ), had on behalf of the Board, announced that Monetary Icon (M) Sdn Bhd, a wholly-owned subsidiary of MPB, had entered into a conditional sale and purchase agreement with Seri Dinar Project Development Sdn Bhd for the acquisition of one (1) parcel of freehold land measuring approximately 5.56 acres held under Lot No. 3587, Geran Mukim 899, Mukim Batu, Daerah Gombak, Selangor Darul Ehsan and all those parcels of leasehold lands measuring in aggregate approximately 16.78 acres comprising of Lot Nos. 1964, 1965, 1966, 3592, 3593, 3594, 3595 and 3601, located next to the former Bukit Lagong Forest reserve, within Selayang, Daerah Gombak, Selangor Darul Ehsan for a total cash consideration of RM40,532,641. On 23 March 2009, OSK, had on behalf of the Board, announced that Twinicon (M) Sdn Bhd, a wholly-owned subsidiary of MPB, had entered into a conditional sale and purchase agreement with Lai Meng Girls School Association for the acquisition of all pieces of land measuring an aggregate area of approximately 10,587.50 square metres held under Geran 4628, 4629, 4630, 4631 and 4632, Lot Nos. 124, 125, 126, 127 and 128, all in Section 44, Town and District of Kuala Lumpur, Negeri Wilayah Persekutuan together with the building(s) erected thereon for a total cash consideration of RM148,151,380. On 2 March 2009, AmInvestment, had on behalf of the Board, announced that Permata Juang (M) Sdn Bhd ( PJSB ), a wholly-owned subsidiary of MPB, had entered into a conditional sale and purchase agreement with Bukit Jalil Development Sdn Bhd ( BJD ) wherein BJD shall sell and PJSB shall purchase all the parcel of freehold land held under Lot 38476 in the Mukim of Petaling, Kuala Lumpur and State of Wilayah Persekutuan ( BJD Land ) for a cash consideration of RM19,408,370.57. On 2 November 2007, the Company announced that Magna City Development Sdn Bhd, a wholly-owned subsidiary of MPB, had entered into a sale and purchase agreement with Muafakat Baru Sdn Bhd for the acquisition of two (2) parcels of freehold land held under Geran Mukim No. Hakmilik 1343 and 1344 with Lot Nos. 1075 and 1073 respectively, all in the Mukim of Batu and Tempat Bangkong and District of Kuala Lumpur, State of Wilayah Persekutuan of total area measuring approximately 10.23 acres for a total cash consideration of RM57,930,444. The Proposed Selayang Land Acquisition is not conditional upon any of the abovementioned proposals. 11
7. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors or the major shareholder of MPB and/or persons connected to them, has any interest, direct or indirect, in the Proposed Selayang Land Acquisition. 8. DIRECTORS RECOMMENDATION The Board, after having considered all aspects of the Proposed Selayang Land Acquisition and after careful deliberation, is of the opinion that the Proposed Selayang Land Acquisition is in the best interest of the Company. Accordingly, the Board recommends that you vote in favour of the relevant resolutions in relation to the Proposed Selayang Land Acquisition to be tabled at the forthcoming EGM. 9. OTHER MATTERS 9.1 Estimated Timeframe For Completion The indicative timing of events leading up to the completion of the Proposed Selayang Land Acquisition is as follows: Tentative timing Events 6 August 2010 1. Convening of EGM 2. Proposed Selayang Land Acquisition becomes unconditional End August 2010 Completion of the Proposed Selayang Land Acquisition 9.2 Historical Share Prices The monthly highest and lowest prices of MPB Shares as traded on Bursa Securities for the past twelve (12) months are as follows:- Highest (RM) Lowest (RM) 2009 July 2.42 1.75 August 2.37 1.95 September 2.28 1.95 October 2.39 2.07 November 3.85 2.30 December 3.12 2.72 2010 January (adjusted for Share 1.03 0.76 Split) February 1.05 0.87 March 1.05 0.88 April 1.03 0.91 May 0.95 0.85 June 0.90 0.81 The last transacted price of MPB shares on 13 October 2009, being the date immediately before the announcement of the Proposed Selayang Land Acquisition was RM2.26* per share. Note : * Before taking into consideration of the Share Split exercise. The last transacted price of MPB Shares on the LPD was RM0.81 per Share. (Source: Bloomberg) 12
10. EGM An EGM, the notice of which is enclosed together with this Circular, will be held at Dewan Perdana, 1st Floor Sport Complex, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Friday, 6 August 2010,at 10.00 a.m. or at any adjournment thereof for the purpose of considering and, if thought fit, passing the ordinary resolution so as to give effect to the Proposed Selayang Land Acquisition. If you are unable to attend and vote in person at the EGM, you may complete and return the relevant Form of Proxy in accordance with the instructions printed thereon as soon as possible and in any event so as to arrive at the Registered Office of the Company at Lot No. C-G11 & C-G12, Block C, Jalan Persiaran Surian, Palm Spring @ Damansara, 47810 Kota Damansara, Petaling Jaya, Selangor Darul Ehsan not later than forty-eight (48) hours before the date and time fixed for the EGM or at any adjournment thereof. The lodging of the Form of Proxy will not, however, preclude you from attending the EGM and voting in person should you subsequently wish to do so. 11. FURTHER INFORMATION The shareholders of MPB are requested to refer to the attached appendices for further information. Yours faithfully, For and on behalf of, MAGNA PRIMA BERHAD TAN SRI DATUK ADZMI BIN ABDUL WAHAB Independent Non-Executive Director, Chairman 13
APPENDIX I VALUER S CERTIFICATE ON THE SELAYANG LAND (Prepared for inclusion in this Circular) 14
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APPENDIX II FURTHER INFORMATION 1. DIRECTORS' RESPONSIBILITY STATEMENT This Circular has been seen and approved by the Board who individually and collectively accept full responsibility for the accuracy of the information given in this Circular and confirms that, after making all enquiries as were reasonable in the circumstances and to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement contained herein false and misleading. 2. CONSENTS AND CONFLICT OF INTEREST Consents M&A Securities has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and all references thereon in the form and context in which they appear. Raine & Horne International Zaki + Partners Sdn Bhd has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name, its certificate on the Selayang Land referred to in Appendix I and all references thereon in the form and context in which they appear. Conflict of Interest M&A Securities is not aware of any existing conflict of interest nor of any circumstances which would or is likely to give rise to a possible conflict of interest by virtue of its appointment as the Adviser to MPB for the Proposed Selayang Land Acquisition. Raine & Horne International Zaki + Partners Sdn Bhd is not aware of any existing conflict of interest nor of any circumstances which would or is likely to give rise to a possible conflict of interest by virtue of its appointment as the Valuer to MPB for the Selayang Land. 3. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES Material Commitments Save as disclosed below, as at the LPD, the Directors of the Company are not aware of any other material commitments of the Group:- RM 000 Approved and contracted for: Contractual obligation for development project 202,003 Contingent Liabilities Save as disclosed below, as at the LPD, the Directors of the Company are not aware of any other contingent liabilities:- Utilised portion of guarantees given to financial institutions for facilities granted to subsidiaries Utilised portion of guarantees given to trade creditors of subsidiaries for credit facilities granted to subsidiaries Group Company RM 000 RM 000-47,058-3,790-50,848 26
4. MATERIAL LITIGATION As at the LPD, the Directors of MKSB are not aware of any proceedings, pending or threatened against the Selayang Land. Save as disclosed below, neither MPB nor its subsidiaries are engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and the Board is not aware of any proceedings, pending or threatened against the MPB Group or of any facts likely to give rise to any proceedings which may materially and adversely affect the financial position or business of the MPB Group:- (i) Kuala Lumpur High Court Civil Suit No. D3-22-2039-2000 MPB & 2 Others (Plaintiffs) v. Top Green Entity Sdn Bhd & 14 Others (Defendants) The Plaintiffs claim arose from the alleged illegal and wrongful withdrawal of a sum amounting to RM22,100,000.00 ( Sum ) from the accounts of Magna Prima Construction Sdn Bhd (2 nd Plaintiff) and Dunia Epik Sdn Bhd (3 rd Plaintiff). The Plaintiffs alleged, among others, fraud and conspiracy to defraud the Plaintiffs on the part of the Defendants. The Plaintiffs are claiming from: (i) Bumiputra-Commerce Bank Berhad (11 th Defendant) for losses arising from among others, negligence in failing to prevent the withdrawal of the Sum, knowingly or dishonestly assisting the other Defendants in the performance of their wrongdoings; and being vicariously liable for the acts of Tan Chow Poo (12 th Defendant) who was the assistant manager of the 11 th Defendant. (ii) the 12 th Defendant, among others, for breach of his duty of care owed to the Plaintiffs and assisting the 3 rd Defendant in breach of his fiduciary duties as director of the Plaintiffs and in breach of trust as trustee of the Plaintiffs assets. On 5 February 2010, the Plaintiffs withdrew the Suit against the 11 th Defendant. On 5 February 2010, the Suit was adjourned on the ground that counsel for the 5 th Defendant had informed the Court that they did not receive the Bundle of Documents, which was served on 26 June 2009 to Messrs Jagjit Singh & Co, the 5 th Defendant s solicitors at that material time, and duly acknowledged receipt by them. (Note: the 5 th Defendant had changed solicitors from Messrs Jagjit Singh & Co to Messrs Akberdin & Co.) On 24 March 2010, the counsel for the 5 th Defendant informed the Plaintiffs that they have filed an application to strike out the Plaintiffs writ and statement of claim ( Striking Out Application ). The parties proceeded to appear before the Deputy Registrar where counsel for the 5 th Defendant informed the Deputy Registrar that:- (i) (ii) the Striking Out Application should be fixed for hearing first; and the 5 th Defendant intends to file an application to amend the 5 th Defendant s defence ( Amendment Application ). On 30 April 2010, the Amendment Application was granted order with costs to be paid by the 5 th Defendant to the Plaintiffs and the Court had on 5 July 2010, dismissed the 5 th Defendant s Striking Out Application with cost. The Court has yet to fix the trial dates for the Suit. 27