S P SETIA BERHAD (19698-X) ("S P SETIA" or "THE COMPANY") PROPOSED ACQUISITION BY BUKIT INDAH (SELANGOR) SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF S P SETIA, OF A PIECE OF FREEHOLD LAND HELD UNDER GERAN 45874 FOR LOT 39 MUKIM BERANANG, DAERAH ULU LANGAT, NEGERI SELANGOR MEASURING 1,010.5 ACRES (“SAID LAND”) FROM BAN GUAN HIN REALTY SDN BHD FOR A TOTAL PURCHASE CONSIDERATION OF RM330,130,350. 1. INTRODUCTION The Board of Directors of S P Setia (“Board”) wishes to announce that on 12 August 2011, Bukit Indah (Selangor) Sdn Bhd (“Bukit Indah” or “Purchaser”), a wholly-owned subsidiary of S P Setia, entered into a sale and purchase agreement (“SPA”) with Ban Guan Hin Realty Sdn Bhd (“Ban Guan Hin Realty” or “Vendor”) for the proposed purchase of a piece of freehold land held under Geran 45874 for Lot 39 Mukim Beranang, Daerah Ulu Langat, Negeri Selangor measuring 1,010.5 acres for a purchase consideration of RM330,130,350 (“Purchase Consideration”) or RM7.50 per square foot. (“Proposed Acquisition”) 2. INFORMATION ON BUKIT INDAH Bukit Indah is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 23 July 1998. The present authorized share capital is RM100,000 comprising 100,000 ordinary shares of RM1.00 each of which 2 shares are issued and fully paid up. Bukit Indah is presently dormant. 3. INFORMATION ON BAN GUAN HIN REALTY Ban Guan Hin Realty is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 26 September 1953. The present authorized share capital is RM20,000,000 comprising 20,000,000 ordinary shares of RM1.00 each of which 1,070,000 shares are issued and fully paid up. Ban Guan Hin Realty’s principal activities involve the working of an estate, producing and selling of rubber and oil palm fresh fruit bunch. 4. INFORMATION ON THE SAID LAND The Said Land is held under Geran 45874 for Lot 39 Mukim Beranang, District of Ulu Langat, Negeri Selangor measuring 1,010.5 acres in total. The terrain of the Said Land is generally undulating and is zoned for mixed housing development. The Said Land is situated midway between the towns of Semenyih, Bangi Old Town and Beranang. It is approximately 5 kilometres south of Semenyih; 7 kilometres east of Bangi Old Town; and 2 kilometres north-west of Beranang. The Said Land is also located approximately 12 kilometres south of Kajang town and 25 kilometres south of Kuala Lumpur City Centre. The travel time to Kuala Lumpur City Centre from the Said Land via Jalan Semenyih, which connects onto the Kajang SILK Highway and further onto the North-South Highway and Kuala Lumpur-Seremban Highway is approximately 40 minutes. The Said Land is approximately 15 minutes from the proposed Bandar Kajang MRT Station on the Sungai Buloh-Kajang Line. Please refer to the attached map for location details of the Said Land. 5. DETAILS OF THE PROPOSED ACQUISITION 5.1. Salient Terms of the Proposed Acquisition 5.1.1. Basis of Consideration The Purchase Consideration of RM330,130,350 was calculated at the rate of RM7.50 per square foot, free from Encumbrances, as defined in the SPA, with vacant possession. The Purchase Consideration was arrived at on a willing-buyer willing-seller basis after taking into consideration the development potential of the Said Land. Given the Group’s knowledge of the market value of properties around the area, no valuation was carried out on the Said Land. S P Setia is unable to disclose the net book value of the Said Land as it is not privy to such information. 5.1.2. Conditions Precedent and Estimated Time Frame for Completion The Proposed Acquisition is conditional upon the fulfillment of, inter alia, the approval of the Estate Land Board being obtained by the parties for the sale and transfer of the Said Land to the Purchaser within four (4) months from the date of the SPA or such further period as may be mutually agreed in writing between the parties. The SPA shall become unconditional on the date on which the last of the conditions precedent has been fulfilled (“Unconditional Date”). 5.1.3. Payment of Purchase Consideration and Time Frame for Completion The Purchase Consideration will be satisfied wholly in cash by the Purchaser from internal funds and/or external borrowings in the following manner:- (i) deposit amounting to RM33,013,035 representing 10% of the Purchase Consideration upon the execution of the SPA; and (ii) the balance of the Purchase Consideration of RM297,117,315 representing 90% of the Purchase Consideration is payable within three (3) months from the Unconditional Date. 5.2. Liabilities to be Assumed There are no liabilities including contingent liabilities and guarantees to be assumed by S P Setia arising from the Proposed Acquisition. 5.3. Completion of the Proposed Acquisition Barring unforeseen circumstances the Proposed Acquisition is expected to be completed during the first half of financial year ending 31 October 2012. 6. ECONOMIC OUTLOOK AND PROSPECTS The Malaysian economy registered a growth of 4.6% in the first quarter of 2011. The expansion in domestic demand was supported by higher private sector spending while external demand also recorded a stronger growth during the quarter, mainly as a result of regional demand for commodities and non electrical and electronic products. On the supply side, all major economic sectors, with the exception of the primary commodity sector, continued to expand during the quarter, albeit at a more moderate pace. The sustained expansion in the first quarter underscores the steady pace of growth of the Malaysian economy, underpinned by the continued expansion of domestic demand amid improving external demand arising from higher commodity exports and stronger regional demand. Going forward, growth is expected to be sustained. Growth in private consumption will continue to be firm, given the favourable employment conditions and income growth, while private investment is expected to strengthen further amid an improving outlook for the domestic economy and the further expansion of new growth industries. Being a highly open economy however, the domestic economy may be affected by developments in the global environment. Nevertheless, Malaysia’s strong economic fundamentals and policy flexibility have increased its resilience and improved its ability to manage these challenges. (Source: Economic and Financial Developments in the Malaysian Economy in the First Quarter of 2011 dated 18 May 2011, Bank Negara Malaysia) In light of these factors, the management of S P Setia is of the view that the prospects for property development activities in Malaysia remain positive and is not aware of any risks factors arising from the Proposed Acquisition other than the normal market and global economic risks. 7. RATIONALE FOR THE PROPOSED ACQUISITION S P Setia has long established a solid reputation for delivering quality homes within its projects. Its flagship Setia Alam township project in the Shah Alam-Klang corridor has seen the starting price for a standard 20’x70’ double-storey terrace house more than triple from RM218,000 to RM668,000 in just over 7 years. The significant price increase achieved in Setia Alam has been underpinned by the substantial investments and enhancements to the infrastructure, connectivity, amenities and overall livability of the township. The masterfully crafted transformation of what was a former oil-palm plantation in a secondary location into an outstanding township has allowed Setia Alam to offer a unique proposition of sustained value creation to its customers. This has enabled Setia Alam, which truly embodies the Group’s LiveLearnWorkPlay development ethos, to attract owner-occupiers that previously resided in more central locations like Subang Jaya and Petaling Jaya. S P Setia intends to develop a mixed residential township development project on the Said Land with an estimated Gross Development Value of RM3.5 billion. The Proposed Acquisition offers S P Setia a good opportunity to tap into strong demand for attractively priced homes by first time owners and other home buyers in the Semenyih-Kajang corridor. The Proposed Acquisition also allows the Group to further reinforce and expand its core business by replicating its proven township development model in an emerging growth corridor that is not presently served by the Group’s more matured projects in the Klang Valley. Whilst it is currently too preliminary to ascertain the exact product mix, total development cost, expected completion date or expected profits to be derived, Management is confident that the proposed development of the Said Land will be well received and is expected to contribute positively to the future earnings and cash flow of S P Setia. 8. EFFECTS OF THE PROPOSED ACQUISITION 8.1. Share Capital and Major Shareholders The Proposed Acquisition which will be satisfied entirely in cash will not have any effect on the share capital and major shareholders of S P Setia. 8.2. Earnings and Net Assets ("NA") The Proposed Acquisition is not expected to have any material effect on the S P Setia Group's earnings and NA for the financial year ending 31 October 2011. However, the Proposed Acquisition is expected to contribute positively to the future earnings and NA of S P Setia. 8.3. Gearing The Proposed Acquisition will not have a material effect on the gearing of S P Setia for the financial year ending 31 October 2011. 9. PERCENTAGE RATIOS The highest percentage ratio applicable for the Proposed Acquisition, pursuant to Chapter 10 of the Main Market Listing Requirements of Bursa Securities is 11.10%. 10. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTEREST None of the Directors or Substantial Shareholders of S P Setia or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition.