Circular to Shareholders in Relation to the Proposed

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. If you have sold or transferred all your shares in Boustead Heavy Industries Corporation Berhad, you should at once hand this Circular together with the accompanying Proxy Form to the purchaser, transferee or the agent through whom you affected the sale or transfer for onward transmission to the purchaser or transferee.

Bursa Malaysia Securities Berhad (“Bursa Malaysia”) has not perused the contents of this Circular prior to its issuance as it is an Exempt Circular pursuant to Paragraph 2.1 of Practice Note 18 of the Bursa Malaysia’s Main Market Listing Requirements.

Bursa Malaysia 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.

Company No. 197101000758 (11106-V) (Incorporated in Malaysia)

CIRCULAR TO SHAREHOLDERS

IN RELATION TO THE

PROPOSED RENEWAL OF THE 2019 SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

The resolution pertaining to the above proposal will be tabled at the Company’s Forty-Eighth Annual General Meeting to be conducted entirely through live streaming from the broadcast venue at Mutiara 5, Ground Floor, Royale Chulan Damansara, 2 Jalan PJU 7/3, Mutiara Damansara, 47810 Petaling Jaya, Selangor on Tuesday, 21 July 2020 at 9.30 a.m. The Notice of the Company’s Forty-Eighth Annual General Meeting together with the Proxy Form are set out in the Annual Report of Boustead Heavy Industries Corporation Berhad for the financial year ended 31 December 2019 (“Annual Report 2019”), which are available to be downloaded from the Company’s website at www.bhic.com.my or Bursa Malaysia’s website at www.bursamalaysia.com.

In line with the Government’s initiative to curb the spread of the Coronavirus Disease 2019 (COVID-19) and the Guidance Note on the Conduct of General Meetings for Listed Issuers issued by the Securities Commission Malaysia on 18 April 2020, the Company’s Forty-Eighth Annual General Meeting will be conducted on a virtual basis through live streaming whilst the online remote voting will be via Remote Participation and Voting (“RPV”). Both facilities are available on Tricor Investor & Issuing House Services Sdn Bhd (“Tricor”)’s TIIH Online website at https://tiih.online. Please follow procedures provided in the Administrative Notes for the Company’s Forty- Eighth Annual General Meeting provided together with the Annual Report 2019 in order to register, participate and vote remotely via the RPV facilities.

You may appoint the Chairman of the Meeting as your proxy and indicate the voting instruction in the Proxy Form. Please complete and deposit the Proxy Form at the office of the Company’s Share Registrar, Tricor, located at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur or its Customer Service Centre at Unit G-3, Ground Floor, Vertical Podium, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, not later than 48 hours before the time of the meeting. You may also submit the Proxy Form electronically via TIIH Online website at https://tiih.online. The return of the completed Proxy Form 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 Proxy Form : 19 July 2020 at 9.30 a.m. Date and Time of the Forty-Eighth Annual General Meeting : 21 July 2020 at 9.30 a.m.

This Circular is dated 22 June 2020

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 2016.

“ADT” : BHIC Allied Defence Technology Sdn Bhd 199601012036 (384385-U).

“AGM” : Annual General Meeting.

“BDT” : BHIC Defence Techservices Sdn Bhd 199801000165 (456291-H).

“BEAT” : BHIC Electronics and Technologies Sdn Bhd 200301021110 (623530-W).

“BHB” : Boustead Holdings Berhad 196001000193 (3871-H).

“BHIC” or “the Company” : Boustead Heavy Industries Corporation Berhad 197101000758 (11106-V).

“BHICDT” : BHIC Defence Technologies Sdn Bhd 199601019744 (392096-U).

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

“BL Shipyard” : Boustead Langkawi Shipyard Sdn Bhd 200001021191 (523798-K).

“BMTA” : BHIC Marine Technology Academy Sdn Bhd 199901001479 (476379-X).

“BNS” : Boustead Naval Shipyard Sdn Bhd 199001007732 (199302-K).

“BNT” : BHIC Navaltech Sdn Bhd 199701009472 (424968-A).

“Board” : The Board of Directors of BHIC.

“BP Shipyard” : Boustead Penang Shipyard Sdn Bhd 197201000156 (11795-W).

“BRSB” : Boustead Realty Sdn Bhd 199301015908 (270648-A).

“BSES” : BHIC Submarine Engineering Services Sdn Bhd 200301029101 (631521-V).

“BTS” : Boustead Travel Services Sdn Bhd 197201000101 (11708-P).

“Bursa Malaysia” : Bursa Malaysia Securities Berhad.

“CMSA” : Capital Markets and Services Act 2007, including all amendments made from time to time and any re-enactment thereof.

“DDI” : Dominion Defence & Industries Sdn Bhd 199001001175 (192736-W).

DEFINITIONS (cont’d):

“Director” : Shall have the meaning given in Section 2(1) of CMSA and for the purpose of the Proposal includes any person who is or was within the preceding 6 months of the date on which the terms of the transactions 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).

“Listing Requirements” : Main Market Listing Requirements of Bursa Malaysia as amended from time to time and any re-enactment thereof.

“LOA" : Limits of Authority

“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 BHIC and the number or aggregate number of those shares, is:- a) 10% or more of the total number of voting shares in BHIC; or b) 5% or more of the total number of voting shares in BHIC where such person is the largest shareholder of the company. For the purpose of this definition, “interest” shall have the meaning of “interest in shares” given in Section 8 of the Act. It also 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 Major Shareholder (as defined above) of BHIC or any other company which is its subsidiary or holding company.

“Proposal” : Proposed Renewal of Shareholders’ Mandate.

“Proposed Renewal of : Proposed renewal of the 2019 Shareholders’ Mandate. Shareholders’ Mandate”

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

“Recurrent Related Party : A recurrent related party transaction of a revenue or trading nature Transaction” 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.

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

“2019 Mandate” : The shareholders’ mandate obtained on 23 April 2019 for the BHIC Group to enter into Recurrent Related Party Transactions.

“2020 Mandate” : The shareholders’ mandate to be obtained at the Company’s forthcoming AGM for BHIC Group to enter into Recurrent Related Party Transactions.

CONTENTS

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

Page

1. INTRODUCTION 1

2. PROPOSED SHAREHOLDERS’ MANDATE 2

3. STATEMENT BY THE AUDIT COMMITTEE 13

4. RATIONALE AND BENEFIT 13

5. CONDITION OF THE PROPOSAL 13

6. FINANCIAL EFFECT OF THE PROPOSAL 13

7. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTEREST 14

8. DIRECTORS’ RECOMMENDATION 14

9. AGM 14

10. FURTHER INFORMATION 15

APPENDIX I – FURTHER INFORMATION 16

iii

Company No. 197101000758 (11106-V) (Incorporated in Malaysia)

Registered Office: 17th Floor, Menara Boustead 69 Jalan Raja Chulan 50200 Kuala Lumpur

22 June 2020

Board of Directors: YBhg Admiral Tan Sri Dato’ Seri Ramlan Mohamed Ali (Retired) (Non-Executive Chairman) Admiral Tan Sri Dato’ Seri Panglima (Dr.) Ahmad Kamarulzaman Ahmad Badaruddin (Independent/Non-Executive Director) YBhg Tan Sri Dato’ Wira Aziah Ali (Independent/Non-Executive Director) YBhg Dato’ Maznah Abdul Jalil (Non-Independent/Non-Executive Director) YBhg Vice Admiral Dato’ Syed Zahiruddin Putra Syed Osman (Retired) (Independent/Non-Executive Director) (Dr.) Salihin Abang (Independent/Non-Executive Director) Hajah Saadatul Nafisah Bashir Ahmad (Independent/Non-Executive Director) Puan Rozi Baharudin (Independent/Non-Executive Director) Encik Izaddeen Daud (Non-Independent/Non-Executive Director)

To: The Shareholders of BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD

Dear Sir/Madam,

BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD

PROPOSED RENEWAL OF 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 2019 Shareholders’ Mandate to enter into Recurrent Related Party Transactions at the Company’s Annual General Meeting on 23 April 2019.

The 2019 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 10 June 2020 the Company announced to the Bursa Malaysia its intention to seek shareholders’ approval of the Proposal at the forthcoming AGM.

The purpose of this Circular is to provide you with the relevant information pertaining to the Proposal and to seek shareholders’ approval of the Ordinary Resolution related thereto to be tabled at the forthcoming AGM, which will be held on 21 July 2020 at 9.30 a.m. or any adjournment thereof. The Notice of the AGM is enclosed in the Annual Report 2019 of the Company. 1

2. PROPOSED SHAREHOLDERS’ MANDATE

2.1 Details of the Proposal

Provisions under the Listing Requirements

Pursuant to Part E, Chapter 10.09 of the Listing Requirements, a listed issuer with a share 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.

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 340(2) of the Act (but must not extend to such extension as may be allowed pursuant to section 340(4) of the Act); or

whichever is the earlier.

The Proposal, 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 Principal activities of the BHIC Group

BHIC is an investment holding company. The principal activities of BHIC Group are disclosed in Note 16 of BHIC’s audited financial statement for the financial year ended 31 December 2019. The audited financial statement is enclosed in the Annual Report 2019 of the Company.

The holding company of BHIC is Boustead Holdings Berhad, a conglomerate with diverse business operations and listed on the Bursa Malaysia’s Main Board. The principal activity of BHB is investment holdings. BHB owns 65% equity interest in the Company as at 27 May 2020.

The holding corporation of BHB is Lembaga Tabung Angkatan Tentera, a local statutory body established under the Tabung Angkatan Tentera Act 1973, which owns 59.42% of the issued share capital of BHB as at 27 May 2020. LTAT also owns 8.16% of the issued share capital of BHIC as at 27 May 2020.

The Proposal will apply to the following companies (the effective interest is as at 27 May 2020):-

BHIC’S SUBSIDIARIES

BHIC’s Effective Interest Company Principal Activities (%)

1. ADT Supply of electronics and systems 100 technology to defence related industry (through BHICDT)

2. BDT Providing maintenance and services for 100 arsenal, missiles and other defence related (through BHICDT) products

3. BEAT Providing maintenance and services for 100 defence weapons and related products (through BHICDT)

4. BHICDT Investment holdings 100 (through BP Shipyard)

5. BMTA Providing marine technology skills training 100 and specialised defence technology (through BP Shipyard) equipment and systems training

6. BNT Providing in-service support for vessels 100 including maintenance, services and supply (through BP Shipyard) of spare parts

7. BP Shipyard Heavy engineering, ship repair and 100 shipbuilding, fabrication of steel structures and platforms, marine engineering, oil and gas fabrication, hook up and commissioning

BHIC’S SUBSIDIARIES (cont’d)

BHIC’s Effective Interest Company Principal Activities (%)

8. BSES Provision of maintenance and services of 100 submarines (through BHICDT)

9. DDI Supply and services of marine and naval 100 defence related products (through BP Shipyard)

2.3 Classes of Related Party

FIRM/CORPORATION CONNECTED WITH A DIRECTOR AND/OR OFFICER AND/OR A MAJOR SHAREHOLDER

Connection with Related Party Principal Activities Director/Major Shareholder

1. BNS Construction, repair and maintenance of BNS is a subsidiary of naval ships, weapons and electronics, BHB design and engineering, fabrication of steel structures and commercial shipbuilding

2. BL Shipyard Repair and maintenance of boats and BL Shipyard is a yachts subsidiary of BHB (through BNS)

3. BRSB Property investment BRSB is a wholly-owned subsidiary of BHB

4. BTS Travel agent BTS is a wholly-owned subsidiary of BHB

2.4 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 2.3 above. The shareholdings of BHIC are set out in Section 2.2 and the shareholdings of other interested parties in the Related Party are set out in section 2.3 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 lump sum basis.

2.4.1 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: -

Interested 2020 2019 Mandate Directors Mandate Related Party Nature of (I-Dir) (A) (B) (B) Transactions /Persons Estimated Estimated Actual exceeding Connected value of value of value of (A) of (P-C) transaction transaction transaction more than /Interested pursuant to disclosed in conducted 10% Major 2020 2019 pursuant to Shareholders Mandate Mandate 2019 (IMS) Mandate [as at 27 May 2020] (RM’000) (RM’000) (RM’000) (%)

1. BNS a) Provision of ship I-Dir 200,000 200,000 108,379 N/A building, ship • RMA (Note 1) repair works and • MAJ (Note 2) related services • ID (Note 3) by BP Shipyard IMS b) Provision of ship • BHB#A 7,000 5,000 3,725 N/A repair works and • LTAT#B related services by BDT

c) Provision of ship 4,500 4,500 1,713 N/A repair works and related services by ADT

d) Sale of 500 7,000 55 N/A equipment and machinery for ship related activities by DDI

e) Provision of ship 30,000 30,000 2,892 N/A repair works and related services by BNT

f) Purchase of (1,000) (1,000) (34) N/A materials/ consumables in relation to ship repair works and related services by BDT

g) Purchase of (1,000) (1,000) - N/A materials/ consumables in relation to ship repair works and related services by BNT

#A BHB holds 68.85% direct interest in BNS. #B LTAT holds 10.38% direct and 68.85% indirect interest (other than via BHIC) in BNS. 5

Existing Recurrent Related Party Transactions (cont’d)

h) Provision of 1,000 3,800 147 N/A training services by BMTA

i) Provision of ship - 2,000 - N/A repair works and related services by BEAT

j) Rental of (1,500) (1,500) (1,445) N/A premises by BP Shipyard^A

k) Rental of (350) (350) (280) N/A premises by BDT^B

l) Rental of (200) (200) (126) N/A premises by BMTA^C

m) Rental of (100) (100) (79) N/A premises by ADT^D

2. BL a) Provision of I-Dir 200 200 - N/A Shipyard management • RMA (Note 1) services by BP • MAJ (Note 2) Shipyard • ID (Note 3)

b) Provision of ship IMS (1,000) (1,000) - N/A building, ship • BHB#C repair works and • LTAT#D related services to BP Shipyard

^A Property rented by BP Shipyard comprises of office space located at Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur. The rental is paid on monthly basis. ^B Property rented by BDT comprises of workshop and office space located at Pangkalan TLDM, 32100 Lumut, Perak. The rental is paid on monthly basis. ^C Property rented by BMTA comprises of working and office space located at Pangkalan TLDM, 32100 Lumut, Perak. The rental is paid on monthly basis ^D Property rented by ADT comprises of workshops and office space located at Pangkalan TLDM, 32100 Lumut, Perak. The rental is paid on monthly basis. #C BHB is deemed to have an interest in BL Shipyard, via its substantial shareholding in BNS. #D LTAT is deemed to have an interest in BL Shipyard via its direct and indirect shareholding in BNS. 6

Existing Recurrent Related Party Transactions (cont’d)

Interested 2020 2019 Mandate Directors Mandate Related Nature of (I-Dir) /Persons (A) (B) (B) Party Transactions Connected (P-C) Estimated Estimated Actual exceeding /Interested value of value of value of (A) of Major transaction transaction transaction more than Shareholders pursuant to disclosed in conducted 10% (IMS) 2020 2019 pursuant to Mandate Mandate 2019 Mandate [as at 27 May 2020] (RM’000) (RM’000) (RM’000) (%)

3. BHB Provision of I-Dir (750) (750) (613) N/A training, • RMA (Note 1) management and • MAJ (Note 2) related services • ID (Note 3) to BHIC IMS • BHB#E 4 BRSB a) Rental of • LTAT#F - (160) (96) N/A premises by BP Shipyard^E

b) Rental of (150) (150) (150) N/A premises by BSES^F

5 BTS a) Provision of (1,000) (1,000) (49) N/A transport and travel related services to BP Shipyard

b) Provision of (200) (200) (97) N/A transport and travel related services to BDT

c) Provision of (100) (100) (14) N/A transport and travel related services to BNT

#E BRSB and BTS are wholly-owned subsidiaries of BHB. #F LTAT is deemed interested in BRSB, BTS and BHB via its substantial shareholding in BHB. ^E Property rented by BP Shipyard comprises of office space located at Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Georgetown, Penang. The rental is paid on monthly basis. ^F Property rented by BSES comprises of office space located at Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur. The rental is paid on monthly basis.

Existing Recurrent Related Party Transactions (cont’d)

Interested 2020 Mandate 2019 Mandate Directors (A) (B) (B) Related Nature of (I-Dir) /Persons Estimated Estimated Actual value of exceeding Party Transactions Connected (P- value of value of transaction (A) of C) /Interested transaction transaction conducted more than Major pursuant to disclosed pursuant to 10% Shareholders 2020 Mandate in 2019 2019 Mandate (IMS) Mandate [as at 27 May 2020] (RM’000) (RM’000) (RM’000) (%)

d) Provision of (1,000) (1,000) (220) N/A transport and travel related services to BSES

TOTAL 234,850 243,990 113,708

N/A = Not applicable

Notes:

1. RMA : YBhg Admiral Tan Sri Dato’ Seri Ramlan Mohamed Ali (Retired). He is the Non- Executive Chairman of BHIC. He is also the Chairman of BNS. As at 27 May 2020, he owns 2,000 shares in BHIC. He is also holding 1 share of BNS in BL Shipyard, on Trust. 2. MAJ : YBhg Dato’ Maznah Abdul Jalil. She is a director of BHIC. She is also a director of LTAT. 3. ID : Encik Izaddeen Daud. He is a director of BHIC. He is also a director of BHB and an alternate director in BNS.

The abovementioned values of transactions are based on accounting records, and the estimated figures during the validity of the Proposal are based on management’s estimate (on the assumption that the current level of operations will continue and all external conditions remain constant) excluding Sales and Services Tax and are subject to changes, and that the next AGM is expected to be held in April 2021.

In view of the time-sensitive and frequent nature of such Recurrent Related Party Transactions, the Board is seeking the approval of the Proposal 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 on arm’s length basis 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 2.6 below.

2.5 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 2019 are as follows:-

Outstanding Amount (RM’000) Related Nature of Transactions Party 1 year More More More or less than 1 to than 3 to than 5 3 years 5 years years

BNS a) Provision of ship building, 120,068 73,678 - - ship repair works and provision of related services by BP Shipyard

b) Provision of ship repair 1,317 151 19 - works and related services by ADT

c) Sale of equipment and 20 - - - machinery for ship related activities by DDI

d) Provision of ship repair - 1,349 514 1,965 works and related services by BEAT

e) Provision of ship repair 2,020 4,067 - - works and related services by BDT

f) Provision of ship repair - - - 6,156 works and related services by BNT

g) Provision of training 141 45 - - services by BMTA

TOTAL 123,566 79,290 533 8,121

There were no late payment charges imposed by the Group on the above outstanding amounts as it is not the Group’s practice to charge interest on late payment if the transaction is trade in nature. The Management has and will continuously meet and discuss with the debtors for early settlement of the outstanding amounts.

However, MFRS 9: Financial Instruments requires entity to assess at the end of each reporting period whether there is any indication that an asset may be impaired. The Group has performed expected credit loss (“ECL”) assessment by assessing the loss given default and the probability of default assigned to the associate that gave rise to an ECL on the amount due from an associate of RM11,378,000 for the Group. Nevertheless, there have been collections from the Related Party during the financial year ended 31 December 2019 and to the period up to 27 May 2020. The total collection made from 1 January 2020 to 27 May 2020 was RM17,349,561.71.

Although there was an outstanding amount of more than one year which has not yet been paid by the Related Party as of 27 May 2020, the Board is confident that the amount is recoverable as the Related Party has on-going projects and constantly make the repayment to the Group.

2.6 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:-

i) (Dr.) Salihin Abang (Chairman) ii) YBhg Admiral Tan Sri Dato’ Seri Ramlan Mohamed Ali (Retired) iii) YBhg Tan Sri Dato’ Wira Aziah Ali iv) YBhg Dato’ Maznah Abdul Jalil v) Hajah Saadatul Nafisah Bashir Ahmad

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 Proposal.

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.

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 Equipment Manufacturers (OEMs). Otherwise, they are subject to the approval in accordance with the LOA, policies and procedures of the respective transacting entities. The management of BHIC shall retain proper documentations to support the basis in arriving at the relevant transaction prices. The management will follow the guides and provisions in the BHIC’s LOA and Policy when approving each transaction. 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 in accordance with the LOA of the respective companies. o All Recurrent Related Party Transactions which are not within the proposed mandate and have a value of not less than RM1,000,000.00 or 1% of the percentage ratio (as defined under the paragraph 10.02(g) of the Listing Requirements), whichever is the higher, the Head of the respective company is responsible to track transaction values for immediate announcement to Bursa Malaysia.

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 rendered;

 Terms and conditions agreed by both parties are fair and reasonable; and

 Whether past experiences 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:-

• 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.

2.7 Validity Period of the Proposal

If approved at the forthcoming AGM, the Proposal 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 340(2) of the Act (but must not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or

whichever is the earlier.

In view of the foregoing, at the next AGM following the AGM in which approval for the Proposal is 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 Proposal will be subject to other applicable provisions of the Listing Requirements, the Act and/or any applicable law.

2.8 Disclosure

Disclosure has been made in the Annual Report 2019 of the Company of the aggregate value of transactions conducted pursuant to the 2019 Shareholders’ Mandate during the financial year ended 31 December 2019. Similar disclosure will be made in the Annual Report for the subsequent financial year during which the Proposal is 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 2.6 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 Proposal

The Proposal is 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.

5. CONDITION OF THE PROPOSAL

The Proposal is conditional upon the approval being obtained from the shareholders of BHIC at the forthcoming AGM.

6. FINANCIAL EFFECT OF THE PROPOSAL

The Proposal is not expected to have any effect on the issued share 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 27 May 2020, 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 161,497,448 65.00 - - Lembaga Tabung Angkatan Tentera 20,266,800 8.16 161,497,448 65.00*1

Interested Directors YBhg Admiral Tan Sri Dato’ Seri Ramlan 2,000 # - - Mohamed Ali (Retired) *2 YBhg Dato’ Maznah Abdul Jalil*3 - - - - Encik Izaddeen Daud*4 - - - -

Notes:

*1 Deemed interested by virtue of its substantial shareholding in BHB. *2 Deemed interested by virtue of his position as Chairman of BHIC nominated by LTAT and Trustee of BNS in BL Shipyard. *3 Deemed interested by virtue of her position as director of BHIC nominated by LTAT. *4 Deemed interested by virtue of his position as a director of BHIC nominated by BHB. # Negligible

YBhg Admiral Tan Sri Dato’ Seri Ramlan Mohamed Ali (Retired), YBhg Dato’ Maznah Abdul Jalil and Encik Izaddeen Daud, (“the Interested Directors”), being the interested directors as mentioned in section 2.4 above have abstained and will continue to abstain from deliberations and voting at the board meetings with regards to the Proposal. The Interested Directors together with BHB and LTAT will also abstain from voting on the resolution pertaining to the Proposal 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 Proposal at the AGM to be convened.

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 Proposal.

8. DIRECTORS’ RECOMMENDATION

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

9. AGM

The Forty-Eighth AGM of the Company will be conducted entirely through live streaming from the broadcast venue at Mutiara 5, Ground Floor, Royale Chulan Damansara, 2 Jalan PJU 7/3, Mutiara Damansara, 47810 Petaling Jaya, Selangor on Tuesday, 21 July 2020 at 9.30 a.m. for the purpose of considering and if thought fit, passing the Ordinary Resolution as set out in the Notice of AGM to approve the Proposed Renewal of Shareholders’ Mandate.

If you are unable to attend and vote in person at the AGM, you are requested to complete, sign, and return the Proxy Form enclosed in the Annual Report 2019 as soon as possible and in any event so as to arrive at the Company’s Share Registrar or its Customer Service Centre not later than 48 hours before the time set for the AGM. The Proxy Form can also be electronically lodged with the Company’s Share Registrar via TIIH Online at https://tiih.online (applicable to individual shareholders only). The lodging of the Proxy Form does not preclude you from attending and voting in person at the meeting should you subsequently wish to do so. For further information on electronic lodgement of the Proxy Form, kindly refer to the Administrative Notes provided together with the Annual Report 2019.

10. FURTHER INFORMATION

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

Yours faithfully For and on behalf of the Board BOUSTEAD HEAVY INDUSTRIES CORPORATION BERHAD

(Dr.) SALIHIN BIN ABANG Independent Non-Executive Director

APPENDIX I

FURTHER INFORMATION

1. DIRECTORS’ RESPONSIBILITY STATEMENT

This Circular has been seen and approved by the Directors of BHIC and they individually and collectively accepted full responsibility for the accuracy of the information given and confirmed 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

Neither BHIC nor its subsidiary companies are engaged in any material litigation and claims either as plaintiff or defendant or otherwise, nor are the Directors of BHIC aware of any proceedings pending or threatened against the BHIC Group, or any facts likely to give rise to any proceeding which might materially or adversely affect the position or business of the BHIC Group.

3. ARBITRATION

Neither BHIC nor its subsidiary companies are engaged in any arbitration either as claimant or respondent.

4. MATERIAL CONTRACTS

There are no material contracts (not being contracts entered into in the ordinary course of business) entered into by the BHIC Group within the past two (2) years preceding the date of this Circular.

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 Constitution of BHIC; and

(b) The audited financial statements of BHIC for the last three (3) financial years ended 31 December 2019, 31 December 2018 and 31 December 2017.