this circular is important and requires … circular 13-03...boustead heavy industries corporation...

(Company No. 11106-V)

(Incorporated in Malaysia under the Companies Act, 1965)

CIRCULAR TO SHAREHOLDERS

IN RELATION TO THE

PART A

PROPOSED RENEWAL OF THE 2012 SHAREHOLDERS’ MANDATE AND PROPOSED ADDITIONAL SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

PART B

PROPOSED PROVISION OF FINANCIAL ASSISTANCE BY BOUSTEAD HEAVY

INDUSTRIES CORPORATION BERHAD GROUP TO PYROTECHNICAL ORDNANCE MALAYSIA SDN BHD, AN ASSOCIATE COMPANY THAT WILL BE

49% OWNED BY BHIC DEFENCE TECHNOLOGIES SDN BHD

The resolutions pertaining to the above proposals are set out in the Notice of the Company’s Forty-First Annual General Meeting which is attached in the enclosed Annual Report. The Forty-First Annual General Meeting is to be held at The Royale Ballroom, Level 2, The Royale Bintang Damansara, No. 2, Jalan PJU 7/3, Mutiara Damansara, 47810 Petaling Jaya, Selangor on Thursday, 4 April 2013 at 10.00 a.m. A Form of Proxy is set out in the Annual Report of Boustead Heavy Industries Corporation Berhad for the financial year ended 31 December 2012. You are urged to complete and deposit the Form of Proxy at the Company’s Registered Office at 17th Floor, Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur, not later than 48 hours before the time of the meeting. The return of the completed 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 : 2 April 2013 at 10.00 a.m. Date and Time of the Forty-First Annual General Meeting : 4 April 2013 at 10.00 a.m.

This Circular is dated 13 March 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to the course of action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular.




IN RELATION TO THE

PART A


PART B










IN RELATION TO THE

PART A


PART B










IN RELATION TO THE

PART A


PART B










IN RELATION TO THE

PART A


PART B







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DEFINITIONS:

Except where the context otherwise requires, the following definitions shall apply throughout this Circular:- (Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Reference to persons shall include corporations.)

“The Act” : Companies Act, 1965 as amended from time to time and any re-enactment thereof.

“AGM” : Annual General Meeting.

“BDT” : BHIC Defence Techservices Sdn Bhd (456291-H), a wholly-owned subsidiary of BHICDT, involved in maintenance and services for arsenal, missiles and other defence related products.

“BEAT” : BHIC Electronics and Technologies Sdn Bhd (623530-W), a wholly-owned subsidiary of BHICDT, involved in maintenance and services for defence weapons and related products.

“BHB” or “Boustead” : Boustead Holdings Berhad (3871-H).

“BHIC” or “the Company” : Boustead Heavy Industries Corporation Berhad (11106-V)

“BHICDT” : BHIC Defence Technologies Sdn Bhd (392096-U), a wholly-owned subsidiary of BP Shipyard, which is an investment holding company.

“BHIC Group” or “Group” : BHIC and its subsidiaries and associate companies.

“BHIC Navaltech” : BHIC Navaltech Sdn Bhd (424968-A), a wholly-owned subsidiary of BP Shipyard, involved in the in-service support of vessels including maintenance, services and supply of spare parts.

“Board” : The Board of Directors of BHIC.

“BP Shipyard”

:

Boustead Penang Shipyard Sdn Bhd (11795-W), a wholly-owned subsidiary of BHIC, involved in heavy engineering, ship repair and shipbuilding, fabrication of steel structures and platforms, marine engineering, oil and gas fabrication, hook up and commissioning.

“Bursa Securities” : Bursa Malaysia Securities Berhad.

“CCM” : Companies Commission of Malaysia.

“DDI” : Dominion Defence & Industries Sdn Bhd (192736-W), a wholly-owned subsidiary of BP Shipyard, involved in supply and services of marine and naval defence related products.

“Director” : Shall have the meaning given in Section 4 of the Act and for the purpose of the Proposals includes any person who is or was within the preceding 6 months of the date on which the terms of the transaction were agreed upon, a Director of BHIC (or any other company which is its subsidiary or holding company or a Chief Executive Officer of BHIC, its subsidiary, or holding company).

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DEFINITIONS (cont’d):

“Government” : The Government of Malaysia

“Joint Venture Company” : POM

“Joint Venture Agreement” : Joint Venture Agreement entered between BHICDT and PMSB on 30 May 2011.

“Listing Requirements” :

:

Listing Requirements of Bursa Securities as amended from time to time and any re-enactment thereof.

“LTAT” : Lembaga Tabung Angkatan Tentera, a statutory body established under the Tabung Angkatan Tentera Act, 1973.

“Major Shareholder” : A person who has an interest or interests in one or more voting shares in a company and the nominal amount of that share, or the aggregate of the nominal amounts of those shares, is :-

a) equal to or more than 10% of the aggregate of the nominal amounts of all the voting shares in the company; or equal to or more than 5% of the aggregate of the nominal amounts of all the voting shares in the company where such person is the largest shareholder of the company.

For the purpose of this definition, “interest in shares” shall have the meaning given in section 6A of the Companies Act 1965.

“MinDef” : The Ministry of Defence Malaysia.

“PMSB” : Pyrotechnical Managers Holdings Sdn Bhd (formerly known as Prokhas Managers Sdn Bhd) (848467-U)

“POM” : Pyrotechnical Ordnance Malaysia Sdn Bhd (946525-W), a company incorporated pursuant to the Joint Venture Agreement.

“Proposals” : Proposed Renewal of Shareholders’ Mandate and Proposed Additional Shareholders’ Mandate.

“Proposed Additional Shareholders’ Mandate”

: Proposed new shareholders’ mandate for the BHIC Group to enter into Recurrent Related Party Transactions.

“Proposed Provision of Financial Assistance”

: Proposed provision of financial assistance by the BHIC Group to POM

“Proposed Renewal of Shareholders’ Mandate”

: Proposed renewal of the 2012 Shareholders’ Mandate.

“Person Connected ” : Shall be as defined in Chapter 1 of the Listing Requirements.

“Recurrent Related Party Transaction”

: A recurrent related party transaction of a revenue or trading nature which is necessary for day to day operations and is entered into by the Company or its subsidiaries in the ordinary course of business which involves the interest, direct or indirect, of a Related Party.

“Related Party ” : A Director, Major Shareholder or a Person Connected with such Director or Major Shareholder.

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DEFINITIONS (cont’d):

“RM” and “sen” : Ringgit Malaysia and sen, respectively.

“STRIDE” : The Science and Technology Research Institute for Defence, Malaysia, a department under MinDef.

“2012 Shareholders’ Mandate” : The shareholders’ mandate obtained on 5 April 2012 for the BHIC Group to enter into Recurrent Related Party Transactions.

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CONTENTS PART A - PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE AND PROPOSED ADDITIONAL SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

Page 1. INTRODUCTION 22. PROPOSED SHAREHOLDERS’ MANDATE 23. STATEMENT BY AUDIT COMMITTEE 15 4. RATIONALE AND BENEFIT 15 5. CONDITION OF THE PROPOSALS 16 6. FINANCIAL EFFECT OF THE PROPOSALS 16 7. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTEREST 16 8. DIRECTORS’ RECOMMENDATION 17 9. FURTHER INFORMATION 17

PART B - PROPOSED PROVISION OF FINANCIAL ASSISTANCE BY THE BHIC GROUP TO POM, AN ASSOCIATE COMPANY THAT WILL BE 49% OWNED BY BHICDT

Page 1. INTRODUCTION 182. DETAILS OF THE PROPOSED PROVISION OF FINANCIAL ASSISTANCE 183. RATIONALE AND BENEFITS 234. MALAYSIA DEFENCE INDUSTRY 245. RISK FACTORS OF THE PROPOSED PROVISION OF FINANCIAL

ASSISTANCE 24

6. APPROVAL REQUIRED 257. FINANCIAL EFFECTS OF THE PROPOSED PROVISION OF FINANCIAL

ASSISTANCE 25

8. OUTSTANDING CORPORATE EXERCISES 259. DIRECTORS’ AND/OR MAJOR SHAREHOLDERS’ INTERESTS 2610. DIRECTORS’ RECOMMENDATION 2611. ESTIMATED TIME FRAME FOR COMPLETION 2612. FURTHER INFORMATION 26 APPENDIX I – INFORMATION ON POM AND PMSB APPENDIX II – FURTHER INFORMATION

28 31

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BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD

(Company No. 11106-V) (Incorporated in Malaysia)

Registered Office: 17th Floor, Menara Boustead

69 Jalan Raja Chulan 50200 Kuala Lumpur

13 March 2013 Board of Directors: Y. Bhg Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin (Chairman) Y. Bhg Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Haji Mohd Nor (B) (Executive Deputy Chairman/Managing Director) Mr. David William Berry (Non-Independent/Executive Director) Y. Bhg Datuk Azzat Bin Kamaludin (Non-Independent/Non-Executive Director) Y. Bhg Dato’ Ishak Bin Osman (Independent/Non-Executive Director) En. Abd Malik Bin A Rahman (Independent/Non-Executive Director) To: The Shareholders of BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD Dear Sir/Madam, BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD

1) PART A PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE AND PROPOSED

ADDITIONAL SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

2) PART B

PROPOSED PROVISION OF FINANCIAL ASSISTANCE BY THE BHIC GROUP TO POM, AN ASSOCIATE COMPANY THAT WILL BE 49% OWNED BY BHICDT

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PART A - PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE AND PROPOSED ADDITIONAL SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE 1. INTRODUCTION

In accordance with Part E, Chapter 10.09 of the Listing Requirements, the Company has obtained the 2012 Shareholders’ Mandate to enter into Recurrent Related Party Transactions at the Company’s Annual General Meeting on 5 April 2012.

The 2012 Shareholders’ Mandate shall, in accordance with the Listing Requirements, lapse at the conclusion of the forthcoming AGM unless authority for its renewal is obtained from the shareholders of the Company at the AGM. Accordingly, on 21 February 2013 the Company announced to the Bursa Securities its intention to seek shareholders’ approval of the Proposals at the forthcoming AGM. The purpose of this Circular is to provide you with the relevant information pertaining to the Proposals and to seek shareholders’ approval of the ordinary resolution related thereto to be tabled at the forthcoming AGM, which will be held on 4 April 2013 at 10.00 a.m. or any adjournment thereof. The notice of the AGM is enclosed in the 2012 Annual Report of the Company.

2. PROPOSED SHAREHOLDERS’ MANDATE

2.1 Details Of The Proposals

Provisions under the Listing Requirements Pursuant to Part E, Chapter 10.09 of the Listing Requirements, a listed issuer with an issued and paid-up capital of RM60 million and above must immediately announce a Recurrent Related Party Transaction as follows:- i) the consideration, value of assets, capital outlay or costs of the Recurrent Related

Party Transactions is RM1 million or more; or

ii) the percentage ratio of such Recurrent Related Party Transaction is 1% or more, whichever is the higher. Transactions entered between a listed issuer (or any of its wholly-owned subsidiaries) and its wholly-owned subsidiary is excluded from the requirements of Part E, Chapter 10.09 of the Listing Requirements. Paragraph 2.4 of Practice Note 12 states that where a listed issuer has obtained a shareholders’ mandate in respect of any Recurrent Related Party Transaction, the above disclosure obligation will not apply to the Recurrent Related Party Transactions which are comprised in the mandate.

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Accordingly, the Company proposes to seek approval of the Proposed Renewal of Shareholders’ Mandate from its shareholders for the BHIC Group to enter into transactions with the Related Parties which are of a revenue or trading nature and necessary for its day to day operations, on terms not more favourable to the Related Parties than those generally available to the public and are not detrimental to the minority shareholders. Paragraph 3.1.4 of Practice Note 12 states that a shareholders’ mandate is subject to annual renewal and any authority conferred by a shareholders’ mandate will continue to be in force until:- (a) the conclusion of the first AGM of the listed issuer following the general meeting at

which such shareholders’ mandate was passed, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed; or

(b) the expiration of the period within which the next AGM after that date is required to

be held pursuant to Section 143(1) of the Act (but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(c) revoked or varied by a resolution passed by the shareholders in a general meeting; whichever is the earlier. In addition to the Proposed Renewal of Shareholders’ Mandate of which the applicable Recurrent Related Party Transactions are specified in Section 2.3.1 herein, the Company will be entering into new Recurrent Related Party Transactions as set out in Section 2.3.2. Accordingly, the Company proposes to seek approval of the Proposed Additional Shareholders’ Mandate at the forthcoming AGM. The Proposals, if approved, shall take effect from the date of the passing of the Ordinary Resolution relating thereto at the AGM and will continue to be in force until the conclusion of the next AGM of the Company or until the expiration of the period within which the next AGM is required by law to be held unless revoked or varied by the Company in a general meeting, whichever is the earlier.

2.2 Classes of Related Party The principal activity of the Company is investment holding. The holding company of BHIC is Boustead Holdings Berhad, a conglomerate with diverse

business operations and listed on the Bursa Securities’ Main Board. BHB has interests in plantations including plantation management, financial services and investment, property development and construction, heavy industries, trading, manufacturing and services, pharmaceutical and education services. BHB owns 65% equity interest in the Company as at 20 February 2013.

The holding corporation of BHB is Lembaga Tabung Angkatan Tentera, a local statutory

body established by the Tabung Angkatan Tentera Act, 1973, which owns 61.47% of the issued and paid-up share capital of BHB as at 20 February 2013. LTAT also owns 8.15% of the issued and paid-up capital of BHIC as at 20 February 2013.

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4

The Proposals will apply to the following companies (the effective interest is as at 20 February 2013):- I. SUBSIDIARIES NOT WHOLLY OWNED BY BHIC Related Party

Principal Activities

BHIC’s Effective Interest (%)

1. Atlas Defence Technology

Sdn Bhd (“ADT”)

Supply of electronics and

systems technology to defence related industry

70

(a subsidiary of BHICDT)

2. BHIC Bofors Asia Sdn Bhd

(“BHIC Bofors”)

Providing, supplying and

servicing BOFORS weapons systems

51


3. BYO Marine Sdn Bhd

(“BYO Marine”)

Construction of vessels

51


4. Contraves Advanced

Devices Sdn Bhd (“CAD”)

Manufacturing of electronic

products

51


II. BHIC’S ASSOCIATES 1. Boustead Naval Shipyard

Sdn Bhd (“BN Shipyard”)

Construction, repair and

maintenance of naval ships, weapons and electronics, design and engineering,

fabrication of steel structures and commercial shipbuilding.

20.76

2. Boustead Langkawi

Shipyard Sdn Bhd (“BL Shipyard”)

Repair and maintenance of

boats and yachts

20.76

(99.99% owned by BN Shipyard)

2.3 Nature of Recurrent Related Party Transactions and Estimated Values It is anticipated that the Group would, in the normal course of business, enter into transactions

with the Related Party set out in section 2.2 above. The shareholdings of BHIC and other interested parties in the Related Party are also set out in section 2.2 above. It is likely that such transactions will occur with some degree of frequency and could arise at any time.

For transactions with a Related Party where office rental is paid or received, the transactions

are in compliance with Paragraph 3.2(c) of Practice Note 12 of the Listing Requirements, that is the lease period does not exceed three years and does not involve payments of rental on a

5

lump sum basis. 2.3.1 Existing Recurrent Related Party Transactions

Existing Recurrent Related Party Transactions for which approval is now being sought for the Proposed Renewal of Shareholders’ Mandate at the forthcoming AGM are as follows : -

2013 Mandate

2012 Mandate Related Party

Nature of Transactions

Interested Directors

(I-Dir) /Persons

Connected (P-C) /Interested

Major Shareholders

(IMS)

(A) Estimated value of

transaction pursuant to

2013 Mandate

(RM’000)

(B) Estimated value of

transaction disclosed in

2012 Mandate

(RM’000)

(C) Actual

value of transaction conducted

pursuant to 2012

Mandate [as at 20 February

2013] (RM’000)

Deviation between values in (B) and

(C)

(%)

BHIC’S ASSOCIATES - BHB has direct and indirect (via BHIC) interest - LTAT has direct and indirect (via BHB and BHIC) interest 1.

BN Shipyard

a) Provision of

ship building, ship repair works and provision of related services by BP Shipyard

b) Provision of ship repair works and related services by BDT

c) Provision of ship repair works and related services by ADT

d) Sale of equipment and machinery for ship related activities by DDI

I-Dir

LWK (Note 1) ARMN (Note 2) AK (Note 3) IMS BHB#A LTAT#B

300,000

5,000

5,000

5,000

300,000

5,000

5,000

5,000

104,135.98

992.61

1,255.48

1,506.88

-65.29

-80.15

-74.89

-69.86

#A BHB holds 68.85% direct shareholding in BN Shipyard. BHB is deemed to have an interest in BN

Shipyard via its substantial shareholding in BHIC. BHB is deemed to have an interest in all subsidiaries of BHIC by virtue of its substantial shareholding in BHIC.

#B LTAT holds 10.38% direct interest in BN Shipyard. LTAT is indirectly interested in BN Shipyard via its substantial shareholding in BHB and BHIC. LTAT is deemed to have an interest in all subsidiaries of BHIC via its direct shareholding in BHB and

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5

lump sum basis. 2.3.1 Existing Recurrent Related Party Transactions

Existing Recurrent Related Party Transactions for which approval is now being sought for the Proposed Renewal of Shareholders’ Mandate at the forthcoming AGM are as follows : -

2013 Mandate




(I-Dir) /Persons


Major Shareholders

(IMS)



2013 Mandate

(RM’000)



2012 Mandate

(RM’000)

(C) Actual


pursuant to 2012


2013] (RM’000)


(C)

(%)

BHIC’S ASSOCIATES - BHB has direct and indirect (via BHIC) interest - LTAT has direct and indirect (via BHB and BHIC) interest 1.

BN Shipyard

a) Provision of


b) Provision of ship repair works and related services by BDT

c) Provision of ship repair works and related services by ADT


I-Dir

LWK (Note 1) ARMN (Note 2) AK (Note 3) IMS BHB#A LTAT#B

300,000

5,000

5,000

5,000

300,000

5,000

5,000

5,000

104,135.98

992.61

1,255.48

1,506.88

-65.29

-80.15

-74.89

-69.86

#A BHB holds 68.85% direct shareholding in BN Shipyard. BHB is deemed to have an interest in BN

Shipyard via its substantial shareholding in BHIC. BHB is deemed to have an interest in all subsidiaries of BHIC by virtue of its substantial shareholding in BHIC.

#B LTAT holds 10.38% direct interest in BN Shipyard. LTAT is indirectly interested in BN Shipyard via its substantial shareholding in BHB and BHIC. LTAT is deemed to have an interest in all subsidiaries of BHIC via its direct shareholding in BHB and

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direct and indirect shareholding in BHIC. Existing Recurrent Related party Transactions (cont’d)

2013 Mandate




(I-Dir) /Persons


Major Shareholders

(IMS)



2013 Mandate

(RM’000)



2012 Mandate

(RM’000)

(C) Actual


pursuant to 2012


2013] (RM’000)


(C)

(%) e) Provision of

ship repair works and related services by BHIC Bofors

f) Provision of ship repair works and related services by BHIC Navaltech

g) Provision of ship repair works and related services by BEAT

h) Purchase of materials/ consumables in relation to ship repair works and related services by BDT

i) Purchase of materials/ consumables in relation to ship repair works and related services by BHIC Navaltech

j) Purchase of materials/ consumables in relation to ship repair works and related services by BEAT

2,000

60,000

10,000

(2,500)

(30,000)

(5,000)

4,000

50,000

15,000

(2,500)

(25,000)

(7,500)

1,423.94

27,778.83

5,286.24 - - -

-64.40

-44.44

-64.76

-100

-100

-100

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6

direct and indirect shareholding in BHIC. Existing Recurrent Related party Transactions (cont’d)

2013 Mandate




(I-Dir) /Persons


Major Shareholders

(IMS)



2013 Mandate

(RM’000)



2012 Mandate

(RM’000)

(C) Actual


pursuant to 2012


2013] (RM’000)


(C)

(%) e) Provision of

ship repair works and related services by BHIC Bofors

f) Provision of ship repair works and related services by BHIC Navaltech

g) Provision of ship repair works and related services by BEAT

h) Purchase of materials/ consumables in relation to ship repair works and related services by BDT

i) Purchase of materials/ consumables in relation to ship repair works and related services by BHIC Navaltech

j) Purchase of materials/ consumables in relation to ship repair works and related services by BEAT

2,000

60,000

10,000

(2,500)

(30,000)

(5,000)

4,000

50,000

15,000

(2,500)

(25,000)

(7,500)

1,423.94

27,778.83

5,286.24 - - -

-64.40

-44.44

-64.76

-100

-100

-100

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Existing Recurrent Related Party Transactions (cont’d)

2013

Mandate 2012 Mandate

Related Party



(I-Dir) /Persons


Major Shareholders

(IMS)



2013 Mandate

(RM’000)



2012 Mandate

(RM’000)

(C) Actual


pursuant to 2012


2013] (RM’000)


(C)

(%) k) Provision of

ship building, ship repair works and provision of related services to BP Shipyard

l) Provision of ship repair works and provision of related services from CAD

m) Provision of subcontracting work on engineering of SETIS combat management system and integration of combat system equipment by CAD

(6,500)

8,000

500,000

(6,500)

8,000

500,000

(955.05)

7,500

273,167.75

-85.31

-6.25

-45.37

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Existing Recurrent Related Party Transactions (cont’d)

2013 Mandate




(I-Dir) /Persons


Major Shareholders

(IMS)



2013 Mandate

(RM’000)



2012 Mandate

(RM’000)

(C) Actual


pursuant to 2012


2013] (RM’000)


(C)

(%) 2.

BL Shipyard

Provision of services for the construction of vessels to BYO Marine

I-Dir

LWK (Note 1) ARMN (Note 2) AK (Note 3) IMS BHB#C LTAT#D

(2,000)

(2,000) (1,047.82)

-47.61

TOTAL

849,000

848,500

421,044.84

-51.14

#C BHB is deemed to have an interest in BL Shipyard, a subsidiary of BN Shipyard via its substantial

shareholding in BN Shipyard and BHIC. BHB is deemed to have an interest in BYO Marine, via its substantial shareholding in BHIC.

#D LTAT is indirectly interested in BL Shipyard via its direct shareholding in BHB and direct and indirect shareholding in BN Shipyard and BHIC. LTAT is deemed to have an interest in BYO Marine via its direct shareholding in BHB and direct and indirect shareholding in BHIC.

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2.3.2 Additional Recurrent Related Party Transactions

Additional Recurrent Related Party Transactions for which approval is now being sought for the Proposed Additional Shareholders’ mandate at the forthcoming AGM are as follows:-

Related Party


Interested Directors (I-Dir) /Persons Connected (P-C) /Interested Major

Shareholders (IMS)

Estimated Income/ (Expenditure) during the validity of the Proposals

(RM’000) BHIC’S ASSOCIATES - BHB has direct and indirect (via BHIC) interest - LTAT has direct and indirect (via BHB and BHIC) interest BL Shipyard

Provision of ship building, ship repair works and provision of related services to BP Shipyard

I-Dir

LWK (Note 1) ARMN (Note 2) AK (Note 3) IMS BHB#E LTAT#F

(5,000)

TOTAL

(5,000)

#E BHB is deemed to have an interest in BL Shipyard, a subsidiary of BN Shipyard via its substantial

shareholding in BN Shipyard and BHIC. BHB is deemed to have an interest in BP Shipyard, via its substantial shareholding in BHIC.

#F LTAT is indirectly interested in BL Shipyard via its direct shareholding in BHB and direct and indirect shareholding in BN Shipyard and BHIC. LTAT is deemed to have an interest in BP Shipyard via its direct shareholding in BHB and direct and indirect shareholding in BHIC.

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Notes: 1. LWK - Y. Bhg Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin. He is the Chief Executive of

LTAT, Deputy Chairman and Group Managing Director of BHB. He is also the Chairman of BHIC and BN Shipyard. As at 20 February 2013, he owns 28,192,758 BHB shares and 2,000,000 BHIC shares.

2. ARMN - Y. Bhg Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Haji Mohd Nor (B). He is the Executive Deputy Chairman and Managing Director of BHIC. He is also a director of BN Shipyard and BL Shipyard. As at 20 February 2013, he does not hold any shares in these companies except for 2,002,100 shares in BHIC.

3. AK - Y. Bhg Datuk Azzat Bin Kamaludin. He is a director of BHIC, BP Shipyard, BN Shipyard, BL Shipyard and BHB. As at 20 February 2013, he owns 44,000 BHB shares and 400,000 BHIC shares.

The abovementioned values of transactions are based on accounting records, and the estimated figures during the validity of the Proposals are based on management’s estimate (on the assumption that the current level of operations will continue and all external conditions remain constant) and are subject to changes, and that the next AGM will be held in April 2013. In view of the time-sensitive and frequent nature of such Recurrent Related Party Transactions, the Board is seeking the approvals of the Proposals which would allow the Group, in their normal course of business, to enter into Recurrent Related Party Transactions with the classes of Related Party set out above, provided such transactions are made at arm’s length and on normal commercial terms and are on terms not more favourable to the Related Party than those generally available to the public and are not to the detriment of the minority shareholders. Such Recurrent Related Party Transactions will be subject to the review procedures set out in section 2.5 below.

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2.4 Outstanding Amount Due under the Recurrent Related Party Transactions

The breakdown of the principal sum (without interest) of the total outstanding amount due to the BHIC Group under the Recurrent Related Party Transactions which exceeded the credit term as at 31 December 2012 are as follows:-

Outstanding Amount (RM’000) Related Party

Nature of

Transactions

1 year or less More than 1 to 3 years

More than 3 to 5 years

More than 5 years

BN Shipyard

a) Provision of


b) Provision of ship repair works and related services by ADT

c) Provision of ship repair works and related services by BHIC Bofors


e) Provision of ship repair works and provision of related services from CAD

f) Provision of ship repair works and related services by BEAT

g) Provision of ship repair works and related services by BDT

h) Provision of ship repair works and related services by BHIC Navaltech

76,177

934

213

165 -

542

717

1,833

- -

48

8,950 -

10,618

1,665 -

- - - - - - - -

- - - - - - - -

TOTAL

80,581

21,281

-

-

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There were no late payment charges imposed by the Group on the above outstanding amounts as they were trade in nature. The Management has and will continuously meet and discuss with the debtor for early settlement of the outstanding amounts. The Board of Directors is of the opinion that there will be no recoverability issues as the debtor is a related party with a long-standing business relationship with the Group and has proven to be a creditworthy debtor with a good payment record. Furthermore, there have been collections from the Related Party during the financial year ended 31 December 2012 and to the period up to the date of this Circular.

2.5 Guidelines and Review Procedures for Recurrent Related Party Transactions To ensure that Recurrent Related Party Transactions are undertaken on the BHIC Group’s normal commercial terms, and to supplement the existing internal control procedures of the Group, the Audit Committee will be tasked with the review of the procedures of such transactions. The Audit Committee currently comprises:- - En. Abd Malik Bin A Rahman (Chairman) - Y. Bhg Datuk Azzat Bin Kamaludin - Y. Bhg Dato’ Ishak Bin Osman The following guidelines will apply to the review and approval of Recurrent Related Party Transactions to ensure that the terms of the Recurrent Related Party Transactions are fair, reasonable and on normal commercial terms; are not more favourable to the Related Party than those generally available to the public; are not detrimental to minority shareholders and are in the best interests of the Group:- o The Related Parties and interested Directors will be advised that they are subject to

the shareholders’ mandate and will also be advised of the review and disclosure procedures.

o Records will be maintained by the Company to capture all Recurrent Related Party

Transactions, which are entered into pursuant to the Proposals.

o The annual internal audit plan shall incorporate a review of the sufficiency of and compliance with the guidelines and review procedures established to monitor Recurrent Related Party Transactions.

o The Board and the Audit Committee shall review the internal audit reports to ascertain that the guidelines and procedures established to monitor Recurrent Related Party Transactions have been complied with.

o Any member of the Audit Committee may, as he deems fit, request for additional

information pertaining to any transaction from independent sources or advisers, including obtaining valuations from professional valuers.

o If a member of the Board or Audit Committee has an interest (direct or indirect) in

any Recurrent Related Party Transactions, he shall abstain from any decision making by the Board or Audit Committee in respect of such transactions and continue to abstain from voting on the resolutions approving the transactions.

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o Should the Audit Committee during its review form an opinion that the Recurrent

Related Party Transactions are not being conducted in accordance with established terms and procedures and/or are not being conducted on an arm’s length basis and on normal commercial terms, or are detrimental to the interests of shareholders, it will advise the Board to convene a General Meeting of shareholders to seek a fresh shareholders’ mandate for the Recurrent Related Party Transactions.

o The interested Director or interested Major Shareholder shall also ensure that the

persons connected with him abstain from voting on the resolutions approving the transactions.

o At least 2 other contemporaneous transactions with unrelated third parties for similar

products/services and/or quantities will be used as 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 types of products/services and/or quantities. In the event the quotation or comparative pricing from unrelated third parties cannot be obtained (for instance, if there are no unrelated third party vendors/customers of similar products or services, or if the product/service is a proprietary item), the transaction price will be determined based on quotations, tenders and prices guided by the Original Equipments Manufacturers (OEMs). Otherwise, they are subject to the approval of the Board of Directors of the transacting entities. The management of BHIC shall retain proper documentation to support the basis in arriving at the relevant transaction prices.

o There is no specific threshold for approval of the Recurrent Related Party

Transactions within the BHIC Group. All Recurrent Related Party Transactions are reviewed and approved by personnel of at least senior managerial level, provided always that such personnel has no interest in the transaction and the said transaction has been approved pursuant to a shareholders’ mandate obtained in the general meeting for the Recurrent Related Party Transactions.

o All Recurrent Related Party Transactions which are not within the proposed mandate

and have a value of not less than RM1,000,000 or 1% of the percentage ratio (as defined under the paragraph 10.02(g) of the Listing Requirements), whichever is the higher, shall be reviewed by the Audit Committee and approved by the Board before the transactions are entered into.

The following are the commercial considerations which the BHIC Group takes into account before entering into transactions for the sale/supply of goods and provision of services, in the ordinary course of business:- The ability and track record of the purchaser to pay for the goods supplied or services

provided; and Whether past experience and the working relationship with the purchaser has been

satisfactory.

The following are the commercial considerations which the BHIC Group takes into account before entering into transactions for the purchase of goods or services from a vendor/service provider, in the ordinary course of business:-

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The BHIC Group’s pricing for the goods to be provided or supplied and/or received

or purchased is negotiated between the BHIC Group and the Related Party based on the prevailing market prices as agreed with unrelated third parties;

The terms are no more favourable to the Related Party than those extended to

unrelated third parties and available to the public, and the Recurrent Related Party Transactions are not detrimental to minority shareholders;

The transactions are entered into and/or the services are provided after taking into

account factors such as pricing, quality, delivery schedules and, where applicable, preferential rates, rebates or discounts accorded for bulk purchases, the terms offered are fair and reasonable and in the BHIC Group’s commercial interest;

The competitiveness in pricing; The standard and quality of the goods/services and whether it meets the requirements

of the BHIC Group; The responsiveness and level of services provided by the goods or service providers

and whether past experience and the working relationship has been satisfactory; and The track record and competence of the goods or service provider and whether the

goods or service provider has sufficient resources to perform its obligations.

The BHIC Group would only enter into transactions with relevant parties based on the above criteria, regardless of whether or not the party is related.

2.6 Validity Period of the Proposals

If approved at the forthcoming AGM, the Proposals will take effect from the passing of the Ordinary Resolution relating thereto at the AGM and will continue to be in force until:-

(a) The conclusion of the next AGM of the Company following the general meeting at

which the authorisation is obtained, at which time it will lapse, unless by an Ordinary Resolution passed at the meeting, the authority is renewed either unconditionally or subject to conditions; or

(b) The expiration of the period within which the next AGM of the Company after this

date is required to be held pursuant to Section 143(1) of the Act (but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(c) Revoked or varied by resolution passed by the shareholders in a general meeting;

whichever is the earlier.

In view of the foregoing, at the next AGM following the AGM in which approval for the Proposals are obtained, and at each subsequent AGM the Board will seek shareholders’ approval for the renewal of the same, subject to satisfactory review by the Audit Committee of its continued application to the Recurrent Related Party Transactions. Transactions with any Related Parties which do not fall within the ambit of the Proposals will be subject to other applicable provisions of the Listing Requirements, the Act and/or any applicable law.

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2.7 Disclosure

Disclosure has been made in the 2012 Annual Report of the Company of the aggregate value of transactions conducted pursuant to the 2012 Shareholders’ Mandate during the financial year ended 31 December 2012. Similar disclosure will be made in the Annual Report for the subsequent financial year during which the Proposals are in force by providing amongst others, the following:-

(a) The type of Recurrent Related Party Transactions made; and (b) The names of the Related Parties involved in each type of Recurrent Related Party

Transactions made and their relationship with the Company. 3. STATEMENT BY THE AUDIT COMMITTEE

The Audit Committee of the Company has seen and reviewed the procedures mentioned in section 2.5 above and is of the view that: 1. The procedures above are sufficient to ensure the terms of the Recurrent Related

Party Transactions are not more favourable to the Related Party than those generally available to the public and the Recurrent Related Party Transactions are not detrimental to minority shareholders and are in the best interests of the Group.

2. The BHIC Group has in place adequate procedures to monitor, track and identify the Recurrent Related Party Transactions in a timely and orderly manner, and such procedures are reviewed on a yearly basis or whenever the need arises.

4. RATIONALE AND BENEFIT 4.1 The Proposals

The Proposals are intended to enhance the Group’s ability to pursue business opportunities, which are time-sensitive in nature, and will eliminate the need to announce, or to announce and convene separate general meetings on each occasion to seek shareholders’ prior approval for the entry by the relevant company in the Group into such transactions. This will substantially reduce the expenses associated with the convening of general meetings on an ad hoc basis, considerably improve administrative efficacy, and allow manpower resources and time to be channelled towards attaining other corporate objectives.

4.2 The Benefit to the BHIC Group from Transacting With the Related Parties

The Recurrent Related Party Transactions entered into by the BHIC Group are intended to meet business needs at the best possible terms. The BHIC Group should be able to have access to all available markets and products and services provided by all vendors including its Related Parties. Transacting with its Related Parties also enhances the ability to explore beneficial business opportunities within the BHIC Group, which will be of benefit to all the companies within the BHIC Group. In most instances, companies within the BHIC Group have a better understanding of each other’s business needs, thus providing a platform where all parties can benefit from timely provision of products/services.

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5. CONDITION OF THE PROPOSALS

The Proposals are conditional upon the approval being obtained from the shareholders of BHIC at the forthcoming AGM.

6. FINANCIAL EFFECT OF THE PROPOSALS

The Proposals are not expected to have any effect on the issued and paid-up capital, earnings and net tangible assets of the BHIC Group.

7. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTEREST

The direct and indirect shareholding of the interested Major Shareholders, interested Directors of the Company and Persons Connected to them as at 20 February 2013, being the last practicable date prior to the Circular are as follows:-

Direct Shareholding Indirect Shareholding Name No of Shares % No of Shares % Interested Major Shareholders Boustead Holdings Berhad Lembaga Tabung Angkatan Tentera

161,497,448 20,250,000

65 8.15

-

161,497,448

-

65*1

Interested Directors Y. Bhg Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin Y. Bhg Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Haji Mohd Nor (B) Y. Bhg Datuk Azzat Bin Kamaludin

2,000,000

2,002,100

400,000

0.8

0.8

0.16

-

25,200 -

-

0.01*2 -

Notes: *1 Deemed interest by virtue of its substantial shareholding in BHB *2 Deemed interest by virtue of his daughter, Rinnie Nor Ahmad Ramli who owns 11,200 shares in BHIC and

his son-in-law, Emil Renaldi Bin Sjaiful who owns 14,000 shares in BHIC Y. Bhg Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin, Y. Bhg Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Haji Mohd Nor (B) and Y. Bhg Datuk Azzat Bin Kamaludin (“the Interested Directors”), being the interested directors as mentioned in section 2.3 above have abstained and will continue to abstain from deliberations and voting at the board meetings with regards to the Proposals. The Interested Directors together with BHB and LTAT will also abstain from voting on the resolution pertaining to the Proposals in respect of their direct and indirect interests in BHIC at the AGM. The Interested Directors, BHB and LTAT have undertaken that they will ensure that the Persons Connected with them as disclosed above will abstain from voting on the resolution relating to the Proposals at the AGM to be convened.

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Save as disclosed above, none of the other Directors and/or Major Shareholders of BHIC and/or persons connected to them have any interest, direct or indirect in the Proposals.

8. DIRECTORS’ RECOMMENDATION

The Board of Directors (except the Interested Directors), after careful deliberations on the Proposals, is of the opinion that the Proposals are in the best interests of the Company and therefore recommends that you vote in favour of the resolution pertaining to the Proposals to be tabled at the forthcoming AGM.

9. FURTHER INFORMATION

Shareholders are advised to refer to Appendix II of this Circular for further information.

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PART B - PROPOSED PROVISION OF FINANCIAL ASSISTANCE BY THE BHIC GROUP TO POM, AN ASSOCIATE COMPANY THAT WILL BE 49% OWNED BY BHICDT 1. INTRODUCTION

On 21 February 2013, the Company announced to the Bursa Securities its intention to seek shareholders’ approval for the Proposed Provision of Financial Assistance at the forthcoming AGM. During the fortieth AGM held on 5 April 2012, approval of the shareholders of BHIC was obtained for the provision of financial assistance to POM by the BHIC Group for an amount up to RM60 million. The purpose of this Circular is to provide you with the relevant details on the Proposed Provision of Financial Assistance, to set out the recommendation of the Board and to seek your approval of the resolution pertaining to the Proposed Provision of Financial Assistance to be tabled at the forthcoming AGM, which will be held on 4 April 2013 at 10.00 a.m. or any adjournment thereof. The notice of the AGM, is enclosed in the 2012 Annual Report of the Company.

2. DETAILS OF THE PROPOSED PROVISION OF FINANCIAL ASSISTANCE

2.1 Implications of Paragraph 8.23 of the Listing Requirements Pursuant to Paragraph 8.23(1) of the Listing Requirements, the provision of advances by a listed issuer or its unlisted subsidiaries in favour of the subsidiaries or associated companies of the listed issuer, the listed issuer (in the case of the subsidiaries providing financial assistance) or its immediate holding company which is listed, is deemed to be a provision of financial assistance. Further to the above, pursuant to Paragraph 8.23(2)(c) of the Listing Requirements, where the provision of financial assistance is to an associated company, and the aggregate amount provided or to be provided at any time to each associated company compared to the net tangible assets (“NTA”) of the group is equal to or exceeds 5%, the listed issuer must issue a circular to its shareholders and seek its shareholders approval in general meeting of such provision of financial assistance. In this respect, the details of the financial assistance to be provided by the BHIC Group in favour of POM, a company incorporated on 27 May 2011, which will eventually be an associate company of BHICDT, are as follows:

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Financial Assistance Amount Amount Details

Provided by Provided to As at 31 Dec 2012

(RM’000)

%(1) Estimated Committed Cost Before Operation

(RM’000)

Total % of Financial Assistance Including Committed Cost

Proposed Provision of Financial Assistance Estimated aggregate amount of advances for POM’s operation in relation to the operations of the factory located in Bentong, Pahang Darul Makmur

BHIC Group, including BP Shipyard and BHICDT

POM

52,000(2)

Up to 18.8%

18,000

Up to 25.3%

Notes: (1) Percentage of financial assistance valued against latest audited consolidated NTA of BHIC as at 31

December 2012 of approximately RM276,568,000. (2) Included in the above are as follows:

(a) Land & Building – RM37,000,000.00 (b) Consultants Fee – RM6,000,000.00 (c) Fixed Assets – RM3,132,000.00. Included in the fixed assets are conveyor and hoisting work

(RM632,000.00), office equipment, furniture, fittings and vehicles (RM50,000.00), earth strip and installation (RM450,000.00), plant and machinery and equipment (RM100,000.00) and Bi-Modular Charge System (RM1,900,000.00).

(d) Other expenses – RM5,868,000.00. Included in others are forwarding and storage (RM1,010,000.00), insurance (RM300,000.00), tax agent (RM8,000.00), security services (RM500,000.00), staff cost (RM3,000,000.00), company secretary fees (RM50,000.00) and other operating expenses (RM1,000,000.00).

In light of the above and pursuant to paragraph 8.23(2)(c) of the Listing Requirements, as the value of the Proposed Provision of Financial Assistance will exceed 5% of the BHIC Group latest audited consolidated NTA as at 31 December 2012, the Proposed Provision of Financial Assistance is subject to the Company’s shareholders’ approval at an AGM to be convened. BHICDT is a wholly-owned subsidiary of BP Shipyard, which in turn a wholly-owned subsidiary of BHIC. PMSB is currently the investment arm of the Minister of Finance (Incorporated). Detailed information on PMSB is enclosed as Appendix 1 (Part ‘B’) of this Circular for reference. At the time of preparation of this document, the paid-up capital of POM is RM2.00 consisting of 2 units of ordinary shares of RM1.00 each, of which 1 share is currently held by each of BHICDT and PMSB respectively. Pursuant to the Joint Venture Agreement between BHICDT and PMSB signed on 30 May 2011, the paid-up capital of POM shall be increased eventually to RM35,294,120.00 with the shareholding structure being 49% BHICDT and 51% PMSB respectively. The increase in the paid up capital may only take effect once the conditions precedent as per the Joint Venture Agreement between both shareholders have been fulfilled, which is expected to be completed by the second quarter of this year.

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The salient terms including the conditions precedent of the Joint Venture Agreement are as follows: (a) The incorporation of the Joint Venture Company (which refers to POM) shall be on

or before the date falling six (6) months after the date of signing of the Joint Venture Agreement, or such later date as the Parties may agree;

(b) The Joint Venture Company shall upon incorporation have an initial authorised share

capital of RM50,000,000.00 divided into 49,999,999 ordinary shares of RM1.00 each and 1 preference share of RM1.00 each. At the completion of the Joint Venture Agreement, the Joint Venture Company shall have a paid-up capital of RM35,294,120.00;

(c) The equity structure of the Joint Venture Company shall be 49% BHICDT and 51%

PMSB respectively; (d) PMSB also holds 1 Golden Share (preference share) in the Joint Venture Company; (e) BHICDT’s subscription of the 49% equity in the Joint Venture Company is funded

wholly in cash from internally generated funds; (f) The Government (represented by STRIDE), the Joint Venture Company and

Konstrukta (the seller of the KLP-100 production plant) executing an agreement for the novation and transfer of all of STRIDE’s rights, benefits, duties and obligations under the Plant Purchase Contract and all rights and interest in the Plant to the Joint Venture Company;

(g) The Government and the Joint Venture Company entering into the following

agreements:-

(i) the Government through STRIDE undertaking to provide technical support and assistance to the Joint Venture Company in the management of the plant on terms acceptable to the Parties;

(ii) the Joint Venture Company undertaking to provide an annual research and

development incentive of 1% of the net annual sales proceeds of Propellant to the Government through STRIDE;

(iii) the Joint Venture Company undertaking to supply Propellant to the

Government through MinDef and the Government through MinDef undertaking to accept such supply:

a. For a term of not less than 5 years with an option for a further term of

3 years plus 2 years;

b. At a price for the Propellant calculated on a cost plus a profit margin acceptable to both Parties;

c. Subject to a minimum annual purchase of not less than 34,000 units of Propellant or such other quantity as may be acceptable to both Parties commencing on and subject to completion; and

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d. In the event that MinDef decided to proceed with domestic smart shell artillery production, MinDef must grant to the Joint Venture Company a first right of refusal to such production; and

(iv) The Government through the Ministry of Finance providing a loan to the

Joint Venture Company of not less than RM60,000,000.00, payable over a fixed repayment term of not less than 8 years at an interest rate of not more than 3.75% per annum on terms acceptable to both parties.

At the time of preparation of this document, all conditions precedent listed above have yet to be completed, with the exception for item (a) above. The Joint Venture Agreement was executed between BHICDT and PMSB with the objective of establishing a long term relationship through the creation of a Joint Venture Company to jointly carry on the following business:- (a) To manufacture, market and sell propellant and related products; and (b) Any other business which parties would agree by unanimous resolution and to enter

into contracts pertaining to such unanimous resolution.

The paid-up capital of POM shall be increased to RM35,294,120.00 after taking into consideration the level of commitment required from BHICDT and PMSB for POM to carry out its business activities. The advances made by the BHIC Group to POM have not been in accordance with the shareholdings structure of 49:51. As a shareholder of POM that represents a business entity, the BHIC Group had taken the initial initiatives to ensure the project could commence immediately in view of the fact that the other shareholder of POM is PMSB (which is jointly owned by the Minister of Finance (Incorporated) and Pesuruhjaya Tanah). Notwithstanding this, the BHIC Group would like to state that it is currently in discussion and negotiation with the Minister of Finance (Incorporated) for an advance payment to be made to POM to facilitate the repayment of advances made by the BHIC Group on behalf of POM (please refer to Note 11 in this circular). Both shareholders of POM are in the opinion that granting financial assistance or loan to POM is preferred compared to increasing the issued and paid-up capital of POM as the financing requirement for POM is expected to be for a normal business start-up. The provision of financial assistance requested under this Circular shall be in the form of payment made on behalf of POM to meet its working capital and capital expenditure requirements. This is after taking into consideration that POM has yet to commence its production, hence unable to generate cash inflow to meet the necessary requirements. The breakdown of the utilisation of the financial assistance from start until the end of 2013 is as follows: Details Estimated Amount(1)

(RM) Estimated Time Frame for

utilisation(2) Land & Building(3)

46,120,000(4)

Consultants Fee(5) 6,100,000 Fixed Assets(6) 9,422,000 Other Expenses(7)

8,358,000

12 months

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d. In the event that MinDef decided to proceed with domestic smart shell artillery production, MinDef must grant to the Joint Venture Company a first right of refusal to such production; and

(iv) The Government through the Ministry of Finance providing a loan to the

Joint Venture Company of not less than RM60,000,000.00, payable over a fixed repayment term of not less than 8 years at an interest rate of not more than 3.75% per annum on terms acceptable to both parties.

At the time of preparation of this document, all conditions precedent listed above have yet to be completed, with the exception for item (a) above. The Joint Venture Agreement was executed between BHICDT and PMSB with the objective of establishing a long term relationship through the creation of a Joint Venture Company to jointly carry on the following business:- (a) To manufacture, market and sell propellant and related products; and (b) Any other business which parties would agree by unanimous resolution and to enter

into contracts pertaining to such unanimous resolution.

The paid-up capital of POM shall be increased to RM35,294,120.00 after taking into consideration the level of commitment required from BHICDT and PMSB for POM to carry out its business activities. The advances made by the BHIC Group to POM have not been in accordance with the shareholdings structure of 49:51. As a shareholder of POM that represents a business entity, the BHIC Group had taken the initial initiatives to ensure the project could commence immediately in view of the fact that the other shareholder of POM is PMSB (which is jointly owned by the Minister of Finance (Incorporated) and Pesuruhjaya Tanah). Notwithstanding this, the BHIC Group would like to state that it is currently in discussion and negotiation with the Minister of Finance (Incorporated) for an advance payment to be made to POM to facilitate the repayment of advances made by the BHIC Group on behalf of POM (please refer to Note 11 in this circular). Both shareholders of POM are in the opinion that granting financial assistance or loan to POM is preferred compared to increasing the issued and paid-up capital of POM as the financing requirement for POM is expected to be for a normal business start-up. The provision of financial assistance requested under this Circular shall be in the form of payment made on behalf of POM to meet its working capital and capital expenditure requirements. This is after taking into consideration that POM has yet to commence its production, hence unable to generate cash inflow to meet the necessary requirements. The breakdown of the utilisation of the financial assistance from start until the end of 2013 is as follows: Details Estimated Amount(1)

(RM) Estimated Time Frame for

utilisation(2) Land & Building(3)

46,120,000(4)

Consultants Fee(5) 6,100,000 Fixed Assets(6) 9,422,000 Other Expenses(7)

8,358,000

12 months

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Total

70,000,000

Notes: (1) The estimated amounts are based on the Management’s estimate of the value of working capital and capital

expenditure to be incurred, and as such may be subject to change. (2) From the date of the shareholders’ approval for the Proposed Provision of Financial Assistance. (3) The land size is 21.21 acres which was already purchased in 2007 by BHIC on leasehold for 99 years. The

construction of the building has already started and is undertaken by BP Shipyard. The building (built up area of 36,494 sq ft) is expected to be completed and ready to commence operations in the second quarter of 2013.

(4) Based on the total purchase price of the land by BHIC and the construction cost incurred by BP Shipyard. At the time of preparing this document, no market valuation was undertaken with regard to both land & building.

(5) Included the fees for construction’s project management consultant, land surveyor, legal consultant, human resource consultant, plant authority submission and land valuer.

(6) Included conveyor and hoisting work (RM632,000.00), office equipment, furniture, fittings and vehicles (RM536,000.00), earth strip and installation (RM500,000.00), plant and machinery and equipment (RM1,324,000.00) and Bi-Modular Charge System (RM6,430,000.00).

(7) Included the expenses for forwarding and storage (RM1,010,000.00), insurance (RM500,000.00), tax agent (RM8,000.00), security services (RM700,000.00), staff cost (RM4,000,000.00), company secretary fees (RM100,000.00) and other operating expenses (RM2,040,000.00).

The total estimated amount of RM70 million is higher compared to last year’s mandate of RM60 million in view of additional investment required for fixed assets in order to meet the safety and security requirements of the factory. The financial assistance to be provided to POM is interest-free and without any specific repayment time frame or interest. Based on mutual understanding and co-operation, POM will repay any amount due to the BHIC Group once it has sufficient financial capability to do so in term of generating its own cash flow. In addition, repayment to the BHIC Group shall also materialise once the advances from the Minister of Finance (Incorporated) is made to POM through PMSB. As a ‘pioneer’ company in this area, POM is expected not to generate any profit in the first few years of operation but is currently on track to ensure its factory in Bentong, Pahang Darul Makmur becomes operational in 2013, and will eventually work towards generating its own cash flow for self-sustenance.

Based on the business plan, POM is expected to achieve breakeven point in the year 2020, with the expected profit to be recorded from 2021 onwards. In the business plan, POM is assumed to commence production in June 2013 with recognition of sales from October 2013 onwards. The expected annual production capacity for POM is as follows:

Product Year 2013 Year 2014 Year 2015 and onwards

(annually) Bi-Modular Charge System

1,000 units

4,000 units

5,500 units

Propellant(1)

300 casts

1,000 casts

3,000 casts

Rocket Propellant

Nil(2)

Nil(2)

500 units

Notes:

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Total

70,000,000

Notes: (1) The estimated amounts are based on the Management’s estimate of the value of working capital and capital

expenditure to be incurred, and as such may be subject to change. (2) From the date of the shareholders’ approval for the Proposed Provision of Financial Assistance. (3) The land size is 21.21 acres which was already purchased in 2007 by BHIC on leasehold for 99 years. The

construction of the building has already started and is undertaken by BP Shipyard. The building (built up area of 36,494 sq ft) is expected to be completed and ready to commence operations in the second quarter of 2013.

(4) Based on the total purchase price of the land by BHIC and the construction cost incurred by BP Shipyard. At the time of preparing this document, no market valuation was undertaken with regard to both land & building.

(5) Included the fees for construction’s project management consultant, land surveyor, legal consultant, human resource consultant, plant authority submission and land valuer.

(6) Included conveyor and hoisting work (RM632,000.00), office equipment, furniture, fittings and vehicles (RM536,000.00), earth strip and installation (RM500,000.00), plant and machinery and equipment (RM1,324,000.00) and Bi-Modular Charge System (RM6,430,000.00).

(7) Included the expenses for forwarding and storage (RM1,010,000.00), insurance (RM500,000.00), tax agent (RM8,000.00), security services (RM700,000.00), staff cost (RM4,000,000.00), company secretary fees (RM100,000.00) and other operating expenses (RM2,040,000.00).

The total estimated amount of RM70 million is higher compared to last year’s mandate of RM60 million in view of additional investment required for fixed assets in order to meet the safety and security requirements of the factory. The financial assistance to be provided to POM is interest-free and without any specific repayment time frame or interest. Based on mutual understanding and co-operation, POM will repay any amount due to the BHIC Group once it has sufficient financial capability to do so in term of generating its own cash flow. In addition, repayment to the BHIC Group shall also materialise once the advances from the Minister of Finance (Incorporated) is made to POM through PMSB. As a ‘pioneer’ company in this area, POM is expected not to generate any profit in the first few years of operation but is currently on track to ensure its factory in Bentong, Pahang Darul Makmur becomes operational in 2013, and will eventually work towards generating its own cash flow for self-sustenance.

Based on the business plan, POM is expected to achieve breakeven point in the year 2020, with the expected profit to be recorded from 2021 onwards. In the business plan, POM is assumed to commence production in June 2013 with recognition of sales from October 2013 onwards. The expected annual production capacity for POM is as follows:

Product Year 2013 Year 2014 Year 2015 and onwards

(annually) Bi-Modular Charge System

1,000 units

4,000 units

5,500 units

Propellant(1)

300 casts

1,000 casts

3,000 casts

Rocket Propellant

Nil(2)

Nil(2)

500 units

Notes:

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(1) Sold in casts weighing 25 kilogram each. (2) No production in year 2013 and 2014. Production for Rocket Propellant only commence on 2015. The Proposed Provision of Financial Assistance will be funded via the BHIC Group’s internally generated funds and will not exceed RM70 million at any point of time during the period of the Proposed Provision of Financial Assistance. Any further financial assistance to be provided exceeding RM70 million or subsequent to the next AGM following the AGM in which approval for this proposal is obtained, will require a separate shareholders’ approval.

2.2 Validity Period of the Proposed Provision of Financial Assistance

From the total amount of Proposed Provision of Financial Assistance approved in the last AGM (totaling RM60 million), the total utilised portion as at 31 December 2012 is RM52 million. As we are expecting an additional of RM18 million to be incurred before POM can be fully operationalised this year, it is essential for a new mandate be obtained from the shareholders of BHIC to formalize this arrangement. In view of the above, the Board is seeking the shareholders’ approval for the Proposed Provision of Financial Assistance by the BHIC Group (totaling RM70 million) in favour of POM in respect of the period from the forthcoming AGM to the next AGM.

2.3 Information on POM

Please refer to Appendix I (Part ‘A’) of this Circular for the background information on POM.

3. RATIONALE AND BENEFITS POM was incorporated on 27 May 2011 as a joint venture company between PMSB (a company, which is currently 50% owned by the Minister of Finance (Incorporated) and BHICDT. Its manufacturing plant is located at Kawasan Perindustrian Bentong Fasa 2B, Bentong, Pahang. POM will produce and sell double based propellants for locally-used artillery shells and rockets in the defence sector, with MinDef as the main customer. Propellant is a generic name for explosives (with its own oxygen for combustion) that burns controllably and is used for propelling projectiles for artillery, rockets, missiles and other firearms. This distinguishes propellants from the more violent explosives used in shells and mines to produce a blasting effect. There are various types of propellants that are commonly identified as Single Base, Double Base and Triple Base propellants.

The manufacturing process of propellants is carried out in a facility called a KLP-100 production plant (“KLP-100 plant”). A KLP-100 plant has a maximum output capacity of 100kg/hour. The raw material to be processed in the production plant takes the form of a wet paste that consists of nitro-glycerin and nitro-cellulose. The wet paste is then processed into semi-finished products of various sizes and shapes. The final product to be produced and supplied by POM is known as Bi-Modular Charge System (“BMCS”). The output from the KLP-100 plant will go through a loading, assembling and packing process using the BMCS assembly equipment. At the moment, the BMCS will be used with the G5 155mm 45 Calibre Gun-Howitzer which is currently being used by the Malaysian Armed Forces. Technically, the BMCS fully combusts inside the gun barrel and creates a sufficient amount of pressure to push the ammunition from the gun to the desired

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(1) Sold in casts weighing 25 kilogram each. (2) No production in year 2013 and 2014. Production for Rocket Propellant only commence on 2015. The Proposed Provision of Financial Assistance will be funded via the BHIC Group’s internally generated funds and will not exceed RM70 million at any point of time during the period of the Proposed Provision of Financial Assistance. Any further financial assistance to be provided exceeding RM70 million or subsequent to the next AGM following the AGM in which approval for this proposal is obtained, will require a separate shareholders’ approval.

2.2 Validity Period of the Proposed Provision of Financial Assistance

From the total amount of Proposed Provision of Financial Assistance approved in the last AGM (totaling RM60 million), the total utilised portion as at 31 December 2012 is RM52 million. As we are expecting an additional of RM18 million to be incurred before POM can be fully operationalised this year, it is essential for a new mandate be obtained from the shareholders of BHIC to formalize this arrangement. In view of the above, the Board is seeking the shareholders’ approval for the Proposed Provision of Financial Assistance by the BHIC Group (totaling RM70 million) in favour of POM in respect of the period from the forthcoming AGM to the next AGM.

2.3 Information on POM

Please refer to Appendix I (Part ‘A’) of this Circular for the background information on POM.

3. RATIONALE AND BENEFITS POM was incorporated on 27 May 2011 as a joint venture company between PMSB (a company, which is currently 50% owned by the Minister of Finance (Incorporated) and BHICDT. Its manufacturing plant is located at Kawasan Perindustrian Bentong Fasa 2B, Bentong, Pahang. POM will produce and sell double based propellants for locally-used artillery shells and rockets in the defence sector, with MinDef as the main customer. Propellant is a generic name for explosives (with its own oxygen for combustion) that burns controllably and is used for propelling projectiles for artillery, rockets, missiles and other firearms. This distinguishes propellants from the more violent explosives used in shells and mines to produce a blasting effect. There are various types of propellants that are commonly identified as Single Base, Double Base and Triple Base propellants.

The manufacturing process of propellants is carried out in a facility called a KLP-100 production plant (“KLP-100 plant”). A KLP-100 plant has a maximum output capacity of 100kg/hour. The raw material to be processed in the production plant takes the form of a wet paste that consists of nitro-glycerin and nitro-cellulose. The wet paste is then processed into semi-finished products of various sizes and shapes. The final product to be produced and supplied by POM is known as Bi-Modular Charge System (“BMCS”). The output from the KLP-100 plant will go through a loading, assembling and packing process using the BMCS assembly equipment. At the moment, the BMCS will be used with the G5 155mm 45 Calibre Gun-Howitzer which is currently being used by the Malaysian Armed Forces. Technically, the BMCS fully combusts inside the gun barrel and creates a sufficient amount of pressure to push the ammunition from the gun to the desired

24

target. The Double Base propellants will be the main components of the BMCS. In view of the fact that POM will be involved in an industry that is considered ‘pioneer’ in the country, local financial institutions are hesitant to grant financing facilities to POM. For a newly established company like POM, the availability of financial assistance is crucial from the pre-operationalisation stage until revenues are generated. The Proposed Provision of Financial Assistance will allow POM to meet its necessary expenses, including capital expenditures and overheads. The financial assistance will be fully utilised to ensure that POM can commence its operations without any difficulties.

At the date of this Circular, POM has yet to start its operations.

4. MALAYSIA DEFENCE INDUSTRY Based on the Defence Industry Blueprint published by Defence Industry Division, MinDef, the Malaysia defence industry is a strategic component of the national economy that forms an integral part in the development of the country’s defence capability. A well developed defence industry will contribute significantly to the formation of a local supply chain by promoting indigenous state of the art technology development for platform and payload systems and other military solutions, to the through life support services. Such a supply chain would have a direct bearing on the availability and readiness of the inventory of equipment and supplies for the armed forces. The role of the defence industry in maintaining, repairing and overhauling as well as respecifying, upgrading and modernising military equipment has become increasingly critical. A capable local defence industry will enhance the country’s self reliance in defence, which is one of the major pillars of the National Defence Policy. The contribution of the local defence industry to the socio-economic development of the nation will be reflected in terms of employment opportunities, savings of foreign exchange, foreign direct investments (FDIs) and other local economic activities. The local defence industry should also generate spin-offs to other sectors of the economy with the research, development and commercialisation of technology, thus accelerating the development of other supporting and ancillary industries. The local defence industry in Malaysia has evolved quite significantly with capabilities in manufacturing of military assault rifles, small caliber ammunition, aerial reconnaissance vehicles (AVR), patrol vessels, information and communication technology-based solutions and military gears and apparel. The industry has also developed capabilities in maintenance, repair and overhaul (MRO), upgrades and modernisation for land, sea and aerospace equipment. In addition, the industry has established the ability to manufacture parts and components for military equipment for domestic and export markets. The demand for propellants to be produced by POM is expected to increase in line with the evolution of the local defence industry. Apart from the existing targeted usage, the propellants to be produced by POM will serve as an important component for any new related products developed in the industry for MinDef.

5. RISK FACTORS OF THE PROPOSED PROVISION OF FINANCIAL ASSISTANCE Apart from the normal business risks, the Board does not envisage any specific risks

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target. The Double Base propellants will be the main components of the BMCS. In view of the fact that POM will be involved in an industry that is considered ‘pioneer’ in the country, local financial institutions are hesitant to grant financing facilities to POM. For a newly established company like POM, the availability of financial assistance is crucial from the pre-operationalisation stage until revenues are generated. The Proposed Provision of Financial Assistance will allow POM to meet its necessary expenses, including capital expenditures and overheads. The financial assistance will be fully utilised to ensure that POM can commence its operations without any difficulties.

At the date of this Circular, POM has yet to start its operations.

4. MALAYSIA DEFENCE INDUSTRY Based on the Defence Industry Blueprint published by Defence Industry Division, MinDef, the Malaysia defence industry is a strategic component of the national economy that forms an integral part in the development of the country’s defence capability. A well developed defence industry will contribute significantly to the formation of a local supply chain by promoting indigenous state of the art technology development for platform and payload systems and other military solutions, to the through life support services. Such a supply chain would have a direct bearing on the availability and readiness of the inventory of equipment and supplies for the armed forces. The role of the defence industry in maintaining, repairing and overhauling as well as respecifying, upgrading and modernising military equipment has become increasingly critical. A capable local defence industry will enhance the country’s self reliance in defence, which is one of the major pillars of the National Defence Policy. The contribution of the local defence industry to the socio-economic development of the nation will be reflected in terms of employment opportunities, savings of foreign exchange, foreign direct investments (FDIs) and other local economic activities. The local defence industry should also generate spin-offs to other sectors of the economy with the research, development and commercialisation of technology, thus accelerating the development of other supporting and ancillary industries. The local defence industry in Malaysia has evolved quite significantly with capabilities in manufacturing of military assault rifles, small caliber ammunition, aerial reconnaissance vehicles (AVR), patrol vessels, information and communication technology-based solutions and military gears and apparel. The industry has also developed capabilities in maintenance, repair and overhaul (MRO), upgrades and modernisation for land, sea and aerospace equipment. In addition, the industry has established the ability to manufacture parts and components for military equipment for domestic and export markets. The demand for propellants to be produced by POM is expected to increase in line with the evolution of the local defence industry. Apart from the existing targeted usage, the propellants to be produced by POM will serve as an important component for any new related products developed in the industry for MinDef.

5. RISK FACTORS OF THE PROPOSED PROVISION OF FINANCIAL ASSISTANCE Apart from the normal business risks, the Board does not envisage any specific risks

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associated with the Proposed Provision of Financial Assistance as MinDef will require the supply of propellants for the nation’s defence. At present, the supply of propellants to MinDef is sourced from overseas through a local party. As the Minister of Finance (Incorporated) owns 50% shareholding in PMSB, the Government is said to have an interest in POM. Taking this into consideration, the risks in relation to the effects on the BHIC Group’s cash flow arising from the provision of financial assistance and the collectability of the advances from POM is considered to be low.

6. APPROVAL REQUIRED The Proposed Provision of Financial Assistance is subject to the approval of the shareholders of BHIC at the forthcoming AGM.

7. FINANCIAL EFFECTS OF THE PROPOSED PROVISION OF FINANCIAL ASSISTANCE 7.1 Share Capital

The Proposed Provision of Financial Assistance will not have any effect on the issued and paid-up share capital of BHIC.

7.2 Substantial Shareholders’ Shareholdings

The Proposed Provision of Financial Assistance will not have any effect on the shareholdings of the substantial shareholders of BHIC.

7.3 Net Assets and Net Assets Per Share

The Proposed Provision of Financial Assistance will not have any material effect on the consolidated net assets and net assets per share of BHIC for the financial year ending 31 December 2013.

7.4 Earnings Per Share (EPS)

The Proposed Provision of Financial assistance will not and is not expected to have a material effect on the earnings and earnings per share of BHIC for the financial year ending 31 December 2013.

7.5 BHIC Group Cash Flow

The Proposed Provision of Financial Assistance will not result in major cash outflow from the BHIC Group to POM, as most of the expenses incurred to date have already been paid and undertaken by the BHIC Group in its books. As at 31 December 2012, the BHIC Group has made payments on behalf of POM totaling RM52 million (please refer to para 2.1 above for the details). Following the approval of the shareholders of BHIC on this Proposed Provision of Financial Assistance and the increase in paid-up capital of POM to RM35,294,120.00, the expenses incurred by the BHIC Group will be transferred to POM, where it will be classified by the BHIC Group as an amount owing by an associate company.

8. OUTSTANDING CORPORATE EXERCISES

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associated with the Proposed Provision of Financial Assistance as MinDef will require the supply of propellants for the nation’s defence. At present, the supply of propellants to MinDef is sourced from overseas through a local party. As the Minister of Finance (Incorporated) owns 50% shareholding in PMSB, the Government is said to have an interest in POM. Taking this into consideration, the risks in relation to the effects on the BHIC Group’s cash flow arising from the provision of financial assistance and the collectability of the advances from POM is considered to be low.

6. APPROVAL REQUIRED The Proposed Provision of Financial Assistance is subject to the approval of the shareholders of BHIC at the forthcoming AGM.

7. FINANCIAL EFFECTS OF THE PROPOSED PROVISION OF FINANCIAL ASSISTANCE 7.1 Share Capital

The Proposed Provision of Financial Assistance will not have any effect on the issued and paid-up share capital of BHIC.

7.2 Substantial Shareholders’ Shareholdings

The Proposed Provision of Financial Assistance will not have any effect on the shareholdings of the substantial shareholders of BHIC.

7.3 Net Assets and Net Assets Per Share

The Proposed Provision of Financial Assistance will not have any material effect on the consolidated net assets and net assets per share of BHIC for the financial year ending 31 December 2013.

7.4 Earnings Per Share (EPS)

The Proposed Provision of Financial assistance will not and is not expected to have a material effect on the earnings and earnings per share of BHIC for the financial year ending 31 December 2013.

7.5 BHIC Group Cash Flow

The Proposed Provision of Financial Assistance will not result in major cash outflow from the BHIC Group to POM, as most of the expenses incurred to date have already been paid and undertaken by the BHIC Group in its books. As at 31 December 2012, the BHIC Group has made payments on behalf of POM totaling RM52 million (please refer to para 2.1 above for the details). Following the approval of the shareholders of BHIC on this Proposed Provision of Financial Assistance and the increase in paid-up capital of POM to RM35,294,120.00, the expenses incurred by the BHIC Group will be transferred to POM, where it will be classified by the BHIC Group as an amount owing by an associate company.

8. OUTSTANDING CORPORATE EXERCISES

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Save for the Proposed Provision of Financial Assistance, the Board confirms that as at the date of this Circular, there is no other intended related corporate exercise which has been announced but is yet to be completed.

9. DIRECTORS’ AND/OR MAJOR SHAREHOLDERS’ INTERESTS

None of the Directors and/or Major Shareholders of the BHIC Group and/or persons connected with such Directors and/or major shareholders of the BHIC Group have any interest, direct or indirect, in the Proposed Provision of Financial Assistance. In view of the above, the Proposed Provision of Financial Assistance is not regarded as a related party transaction pursuant to Chapter 10 of the Listing Requirements.


The Board, having considered all aspects of the Proposed Provision of Financial Assistance, is of the opinion that the Proposed Provision of Financial Assistance is in the best interests of the Company. The Board has also considered the role of the Minister of Finance Incorporated through its shareholdings in PMSB, particularly its role in looking after the interests of the Government in coming up with opinion and recommendations. The Board is also of the opinion that the Proposed Provision of Financial Assistance is fair and reasonable to BHIC and is not expected to be detrimental to BHIC and its shareholders. Accordingly, the Board recommends that you vote in favour of the resolution in relation to the Proposed Provision of Financial Assistance to be tabled at the forthcoming AGM.

11. ESTIMATED TIME FRAME FOR COMPLETION At the date of this Circular, BHIC is negotiating and finalising the terms of the advances with the Ministry of Finance on the advance payment. Barring any unforeseen circumstances and subject to the receipt of the shareholders’ approval, the estimated time frame for completion of the Proposed Provision of Financial Assistance is by 31 December 2013. However, the Board wishes to highlight to shareholders that BHIC is currently negotiating and finalising with the Minister of Finance (Incorporated) on their advances to be made to POM via PMSB, which will be utilised to reimburse the BHIC Group on the expenses incurred and paid on behalf of POM. This will reduce the amount of financial assistance provided by the BHIC Group to POM. This advance to POM is expected to be released in the first or second quarter of 2013. Notwithstanding this information, the financial assistance of up to RM70 million requested under this Circular will be disbursed at the discretion of the management from time to time, as and when POM requires such funding, until POM has sufficient fund to support its own working capital.

12. FURTHER INFORMATION Shareholders are advised to refer to the attached appendices for further information.

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Save for the Proposed Provision of Financial Assistance, the Board confirms that as at the date of this Circular, there is no other intended related corporate exercise which has been announced but is yet to be completed.

9. DIRECTORS’ AND/OR MAJOR SHAREHOLDERS’ INTERESTS

None of the Directors and/or Major Shareholders of the BHIC Group and/or persons connected with such Directors and/or major shareholders of the BHIC Group have any interest, direct or indirect, in the Proposed Provision of Financial Assistance. In view of the above, the Proposed Provision of Financial Assistance is not regarded as a related party transaction pursuant to Chapter 10 of the Listing Requirements.


The Board, having considered all aspects of the Proposed Provision of Financial Assistance, is of the opinion that the Proposed Provision of Financial Assistance is in the best interests of the Company. The Board has also considered the role of the Minister of Finance (Incorporated) through its shareholdings in PMSB, particularly its role in looking after the interests of the Government in coming up with opinion and recommendations. The Board is also of the opinion that the Proposed Provision of Financial Assistance is fair and reasonable to BHIC and is not expected to be detrimental to BHIC and its shareholders. Accordingly, the Board recommends that you vote in favour of the resolution in relation to the Proposed Provision of Financial Assistance to be tabled at the forthcoming AGM.

11. ESTIMATED TIME FRAME FOR COMPLETION At the date of this Circular, BHIC is negotiating and finalising the terms of the advances with the Ministry of Finance on the advance payment. Barring any unforeseen circumstances and subject to the receipt of the shareholders’ approval, the estimated time frame for completion of the Proposed Provision of Financial Assistance is by 31 December 2013. However, the Board wishes to highlight to shareholders that BHIC is currently negotiating and finalising with the Minister of Finance (Incorporated) on their advances to be made to POM via PMSB, which will be utilised to reimburse the BHIC Group on the expenses incurred and paid on behalf of POM. This will reduce the amount of financial assistance provided by the BHIC Group to POM. This advance to POM is expected to be released in the first or second quarter of 2013. Notwithstanding this information, the financial assistance of up to RM70 million requested under this Circular will be disbursed at the discretion of the management from time to time, as and when POM requires such funding, until POM has sufficient fund to support its own working capital.

12. FURTHER INFORMATION Shareholders are advised to refer to the attached appendices for further information.

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Yours faithfully For and on behalf of the Board BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD ABD MALIK BIN A RAHMAN Independent Non-Executive Director

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APPENDIX I INFORMATION ON POM AND PMSB A. POM 1. HISTORY AND BUSINESS

POM is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 27 May 2011. The company’s registered office is at the 12th Floor, Bangunan Setia 1, 15 Lorong Dungun, Bukit Damansara, 50490 Kuala Lumpur. The principal activity of POM is to manufacture, market and sell Propellants and related products.

2. SHARE CAPITAL

The current authorised and paid-up capital of POM is RM2.00 comprising of 2 ordinary shares of RM1.00 each.

3. SHAREHOLDERS

The shareholders of POM and their respective shareholdings as at 20 February 2013 are as follows:

No. of Ordinary Shares Shareholders Nationality Direct Indirect BHICDT

Incorporated in Malaysia

1 (50%)

-

PMSB


1 (50%)

-

4. BOARD OF DIRECTORS

The Board of Directors of POM and their respective shareholdings as at 20 February 2012 are as follows:

No. of Ordinary Shares

Name

Designation

Nationality

Direct Indirect Y. Bhg Tan Sri Ahmad Kamil Jaafar

Director

Malaysian

-

-

Eshah Meor Suleiman

Director

Malaysian

-

-

Y. Bhg Datuk Abdul Aziz Hasan

Director

Malaysian

-

-

Anuar Murad

Director

Malaysian

-

-

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APPENDIX I

B. PMSB

1. HISTORY AND BUSINESS

PMSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 3 March 2009. The company’s registered office is at Tingkat 7, Bangunan Setia 1, 15 Lorong Dungun, Bukit Damansara, 50490 Kuala Lumpur. The main activities of the Company are as follows: (a) To carry on business as consultants and advisers to government, governmental or

statutory agencies or bodies, business, commerce and industry on any business, management, financial or investment matters including, but no limited to, the following:

(i) The provision of financial services and/or solutions, advice, information

technology related services and other facilities of every description to the public;

(ii) The development, establishment, organization, administration, management,

expansion, reorganization and restructuring of all types of businesses or industries and the training and utilization of personnel for all types of businesses or industries; and

(iii) The extension, development and improvement of all types of businesses or

industries and all systems or processes relating to businesses or industries (including, but not limited to, the production, storage, distribution, marketing and sale of goods or the rendering of services).

(b) To purchase or otherwise acquire, and to sell, exchange, surrender, lease, mortgage,

charge, convert, turn to account, dispose of, and deal with rights of all kinds, including but not limited to, mortgages, charges, pledges, liens and lien-holders caveats, debentures, produce, concessions, options, contracts, patents, annuities, licences, stocks, shares, bonds, notes, debt securities, policies, book debts, business concerns, and undertakings, and claims privileges, and immovable and movable property of all kinds.

(c) To provide financial services, advice and facilities of every description (including,

but not limited to, all those capable of being provided by bankers, stockbrokers, investment and pension fund managers and advisers, promoters and managers of unit trusts and other investment media, insurance brokers, underwriters, issuing houses and financiers).

2. SHARE CAPITAL The current authorised capital of PMSB is RM100,000.00 comprising of 100,000 ordinary shares of RM1.00 each. The current paid-up capital of PMSB is RM2.00 comprising of 2 ordinary shares of RM1.00 each.

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3. SHAREHOLDERS The shareholders of PMSB and their respective shareholdings as at 20 February 2013 are as follows:

No. of Ordinary Shares Shareholders Nationality Direct Indirect Minister of Finance (Incorporated)


1 (50%)

-

Pesuruhjaya Tanah


1 (50%)

-


The Board of Directors of PMSB and their respective shareholdings as at 20 February 2013 are as follows:


Name

Designation

Nationality

Direct Indirect Y. Bhg Dato’ Mat Noor bin Nawi

Director

Malaysian

-

-

Eshah Meor Suleiman

Director

Malaysian

-

-

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1 (50%)

-

Pesuruhjaya Tanah


1 (50%)

-




Name

Designation

Nationality


Director

Malaysian

-

-

Eshah Meor Suleiman

Director

Malaysian

-

-

30




1 (50%)

-

Pesuruhjaya Tanah


1 (50%)

-




Name

Designation

Nationality


Director

Malaysian

-

-

Eshah Meor Suleiman

Director

Malaysian

-

-

30




1 (50%)

-

Pesuruhjaya Tanah


1 (50%)

-




Name

Designation

Nationality


Director

Malaysian

-

-

Eshah Meor Suleiman

Director

Malaysian

-

-

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APPENDIX II

FURTHER INFORMATION 1. DIRECTORS’ RESPONSIBILITY STATEMENT

This Circular has been seen and approved by the Directors of BHIC and they individually and collectively accept full responsibility for the accuracy of the information given, and confirm that, after making all enquiries as are reasonable in the circumstances and that to the best of their knowledge and belief, there are no other facts and information the omission of which, would make any statement herein misleading.

2. MATERIAL LITIGATION

BHIC Neither BHIC nor its subsidiary companies are engaged in any material litigation, claims and arbitration either as plaintiff or defendant or otherwise, nor are the Directors of BHIC aware of any proceedings pending or threatened against, or of any facts likely to give rise to any proceeding which might materially or adversely affect the position or business of BHIC and/or its subsidiary companies. POM As at the date of the Circular, POM is not engaged in any material litigation, arbitration or claims either as plaintiff or defendant, and the Directors of POM does not have any knowledge of any proceedings pending or threatened against POM, or of any facts likely to give rise to any proceedings which might materially and adversely affect the financial position or business of POM.

3. MATERIAL CONTRACT

BHIC There is no material contracts (not being contracts entered into in the ordinary course of business) entered into by the BHIC Group within the past 2 years preceding the date of this Circular. POM POM has not entered into contracts which are or may be material (not being contracts entered into in the ordinary course business of POM) within the past 2 years immediately preceding to the date of this Circular.

4. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES

BHIC As at the date of this Circular, the status of the contingent liabilities disclosed in the 2012 Annual Report remains unchanged for the BHIC Group. No other contingent liability has arisen since the financial year end.

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The BHIC Group has the following commitments as at 31 December 2012:

Details

Approved but not contracted for

(RM’000)

Approved and contracted for

(RM’000)

Total

(RM’000) Property, plant and equipment

208,356

1,986

210,342

POM As at the date of this Circular, POM has no material commitments and contingent liabilities incurred or known to be incurred.

5. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the registered office of BHIC at 17th Floor, Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur, during normal business hours on any weekday (except public holidays) from the date of this Circular up to and including the date of the AGM:- (a) The Memorandum and Articles of Association of BHIC and POM; (b) The audited financial statements of BHIC for the last three (3) financial years ended

31 December 2012, 31 December 2011 and 31 December 2010; and (c) The Joint Venture Agreement.

6. AGM The Forty-First AGM of the Company will be held at The Royale Ballroom, Level 2, The Royale Bintang Damansara, No. 2, Jalan PJU 7/3, Mutiara Damansara, 47810 Petaling Jaya, Selangor on Thursday, 4 April 2013 at 10.00 a.m. for the purpose of considering and if thought fit, passing the Ordinary Resolutions as set out in the Notice of AGM to approve the Proposed Renewal of Shareholders’ Mandate, the Proposed Additional Shareholders’ Mandate and the Proposed Provision of Financial Assistance. If you are unable to attend and vote in person at the AGM, you are requested to complete, sign, and return the enclosed Form of Proxy in accordance with the instructions therein as soon as possible and in any event so as to arrive at the registered office of BHIC not later than 48 hours before the time set for the AGM. The lodging of the Form of Proxy does not preclude you from attending and voting in person at the meeting should you subsequently wish to do so.

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Details


(RM’000)


(RM’000)

Total


208,356

188

210,342






32


Details


(RM’000)


(RM’000)

Total


208,356

1,986

210,342






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Details


(RM’000)


(RM’000)

Total


208,356

1,986

210,342






32

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