Farlim Group () Bhd Proposed Disposal Page 1 of 12

FARLIM GROUP (MALAYSIA) BHD (“FARLIM” OR “COMPANY” OR “VENDOR”)

- PROPOSED DISPOSAL OF LANDS FOR A TOTAL CASH CONSIDERATION OF APPROXIMATELY RM112.50 MILLION

1. INTRODUCTION

On behalf of the Board of Directors of Farlim (“Board”), AmInvestment Bank Berhad wishes to announce that the Company had on 23 September 2013 entered into a conditional sale and purchase agreement (“SPA”) to dispose of the following:-

(a) ¼ undivided share of freehold land of Lot 1561, Section 3, Town of held under No. Hakmilik GRN 43187 (“Lot 1561”);

(b) ¼ undivided share of freehold land of Lot 1584, Mukim 13 held under No. Hakmilik GRN 53264 (“Lot 1584”); and

(c) 11/100 undivided share of freehold land of Lot 1457, Mukim 13 held under No. Hakmilik GRN 4661 (“Lot 1457”),

all within the district of Timur Laut, , measuring an aggregate gross area reflecting the undivided share of the Company in and to the above lands of approximately 1,022,742.96 square feet (collectively known as the “Disposal Lands”), to 1MDB RE (Ayer Itam) Sdn Bhd (formerly known as Aluminium Development Company Sdn Bhd) (“1MDB RE (Ayer Itam)” or the “Purchaser”) for a total cash consideration of RM112,501,725.60 (“Disposal Consideration”) (“Proposed Disposal”), or RM110 per square foot. For the purpose of this announcement, all of the three (3) Lots 1561, 1584 and 1457 in their entirety shall collectively be referred to as the “Lands”.

2. DETAILS OF THE PROPOSED DISPOSAL

The Disposal Lands were previously transferred to the Company by Farlim Properties Sdn Bhd as full settlement of an amount due from Farlim Holding Sdn Bhd (“FHSB”) to the Company and set-off with all the professional fees and related expenses pertaining to the said settlement borne by FHSB (“Settlement”). The Settlement was completed on 31 December 2012. Kindly refer to the relevant announcements on the website of Bursa Malaysia Securities Berhad (“Bursa Securities”) and circular to shareholders dated 13 December 2011 for further information.

2.1 Information on the Lands

The Lands encompass a total land area measuring approximately 116.89 acres (about 473,050 square metres).

The Lands are freehold development lands and are presently occupied by squatters’ buildings and structures comprising residential units (semi-concrete, concrete, wooden and zinc houses), foundries, temples, a recycle centre, factories, workshops and shops.

The Lands are strategically situated within an established township known as Bandar Air Itam (formerly known as Ayer Itam) and is sited at the north-eastern part of . This township is located along Jalan Air Itam and Jalan , the main thoroughfares leading to the Kek Lok Si Buddhist Temple as well as the (Bukit Bendera) funicular railway station.

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The city centre of Georgetown is located about 8.5 kilometres (“km”) due northeast of the Lands. Major developments in Georgetown include KOMTAR (an integrated development comprising an office block, retail outlets and exhibition and convention facilities), KOMTAR shopping complex, GAMA Supermarket & Departmental Store and 1st Avenue retail centre.

The central financial district along Lebuh Pantai where most of the major banks and financial institutions are located is situated about 10km due northeast of the Lands.

The Penang Ferry Terminal and Port Swettenham are located approximately 10.5km due northeast of the Lands while the Penang International Airport in is situated about 15km due south of the Lands.

The Lands are approachable from KOMTAR via Jalan Magazine, Jalan Datuk Keramat and thence onto Jalan Air Itam and Jalan Paya Terubong.

Salient information in respect of the Lands as appraised by Henry Butcher Malaysia (Penang) Sdn Bhd (“Independent Valuer”) via its valuation report dated 13 September 2013 (“Valuation Report”), are as follows:-

Identification Details

Title No. - Lot 1561 : No. Hakmilik GRN 43187 - Lot 1584 : No. Hakmilik GRN 53264 - Lot 1457 : No. Hakmilik GRN 4661

Title land area (approximately) - Lot 1561 : 60.36 acres (244,276.6 square metres) - Lot 1584 : 15.50 acres (62,726.3 square metres) - Lot 1457 : 41.03 acres (166,047.3 square metres)

Approximate age of buildings : Not applicable(a)

Tenure : Freehold

Express conditions : (in respect of all titles)

(FIRST GRADE)

The land comprised in this title:-

(a) shall not be affected by any provision of the National Land Code 1965 (“Code”) limiting the compensation payable on the exercise by the State Authority of a right of access or use conferred by Chapter 3 of Part Three of the Code or on the creation of a Land Administrator’s right of way; and

(b) subject to the implied condition that land is liable to be re-entered if it is abandoned for more than three years, shall revert to the State only if the proprietor for the time being dies without heirs,

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and the title shall confer the absolute right to all forest produce and to all oil, mineral and other natural deposits on or below the surface of the land (including the right to work or extract any such produce or deposit and remove it beyond the boundaries of the land).

Restriction in interest : Nil (in respect of all titles)

Encumbrances(b) : (a) Lot 1457 and Lot 1584: nil

(b) Details on the private caveat lodged on Lot 1561 are as follows:-

 Private caveat presentation no: 0799B2010019143 by Tan Guat Gee @ Tan Guat Ee lodged on 20 December 2010  Private caveat presentation no: 0799B2011015604 by Ng Peng Wah lodged on 31 October 2011  Private caveat presentation no: 0799B2011016941 by Chong Sie Cheong lodged on 23 November 2011  Private caveat presentation no: 0799B2011018151 by Ooi Yeow Hoe @ Ooi Eow Hoe lodged on 15 December 2011  Private caveat presentation no: 0799B2012007352 by Zantalite Enterprise (M) Sdn Bhd lodged on 25 May 2012  Private caveat presentation no: 0799B2012012270 by Lam Ah Heng lodged on 28 August 2012  Private caveat presentation no: 0799B2012013935 by Tay Lit Yang lodged on 1 October 2012

(Collectively referred to as “Lodged Caveats”)

Notes:- (a) The said Lands are presently erected with 507 illegal squatters’ buildings and structures. (b) In relation to the Disposal Lands only.

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The Proposed Disposal entails the disposal of the following fraction of the undivided share of the Lands:-

Lands Lot 1561 Lot 1584 Lot 1457 Total

Title land area (approximately) - In acres 60.36 15.50 41.03 116.89 - In square metres 244,276.6 62,726.3 166,047.3 473,050.2

To be disposed of pursuant to the Proposed Disposal:- - Fraction ¼ ¼ 11/100 - - Land area (approximately) (for illustration purposes) - In acres 15.09 3.88 4.51 23.48 - In square metres 61,069.2 15,681.6 18,265.2 95,016

Pursuant to the Valuation Report, the market value of the Disposal Lands is RM100 million, taking into consideration the squatters’ buildings and structures.

2.2 Salient terms of the SPA

2.2.1 Sale and Purchase

The Vendor agrees to sell and the Purchaser agrees to purchase the Disposal Lands:-

(a) free from all encumbrances save for the Lodged Caveats and the caveators’ rights and interests as caveators;

(b) on an as-is-where-is basis;

(c) with the category of land use of each of the Disposal Lands being "Tiada";

(d) subject to the conditions (whether express or implied) and restrictions-in- interest as currently stated on the titles;

and upon the terms and conditions contained in the SPA.

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2.2.2 Conditions Precedent

The SPA is conditional upon and subject to the fulfilment of the following conditions (collectively the “Conditions Precedent”) on or before the expiry of the period of six (6) months from the date of the SPA or such extended period or periods as the parties may otherwise mutually agree in writing (“Conditional Period”):-

(a) the Vendor obtaining the approval from its shareholders at an extraordinary general meeting (“EGM”) for the disposal of the Disposal Lands to the Purchaser in accordance with the terms and conditions of the SPA;

(b) the Vendor being in a position to transfer the undivided share and interest in and to the Disposal Lands into the name of the Purchaser, including obtaining written consent from the caveators which have lodged the Lodged Caveats and have not withdrawn their private caveat for the transfer of the Vendor's share and interests in and to the Disposal Lands to the Purchaser free from encumbrances (save for the Lodged Caveats and the Purchaser's caveat); and

(c) any relevant approval required to enable the transactions contemplated in the SPA to be completed, having been obtained.

In the event that the Condition Precedent in Section 2.2.2(b) above cannot be fulfilled on or before a date falling within six (6) months from the date of the SPA, that there will be a further extension of three (3) months for the Vendor to fulfill the Condition Precedent in Section 2.2.2(b) above and where it still cannot be fulfilled by the expiry of that three (3) month period, Provided Always that the delay in the satisfaction or fulfillment of the said Condition Precedent shall not be attributable to the Vendor, the Vendor shall be entitled to request for a further extension of time and such consent shall not be unreasonably withheld by the Purchaser.

2.2.3 Vendor’s Default

(a) In the event of the Vendor’s Default (as stipulated in the SPA), the Purchaser to serve a written notice to the Vendor within fourteen (14) days of the default occurring or of the Purchaser becoming aware of the default (whichever is later):-

(i) setting out the default; and

(ii) requiring the Vendor to remedy such default within fourteen (14) business days from the date of the notice or such longer period as may be mutually agreed between the parties.

(b) In the event of Vendor’s Default and the default is not capable of being remedied and is not remedied in accordance with Section 2.2.3(a) above, the Purchaser shall be entitled but not obliged to, terminate the SPA by written notice to the Vendor. In such event of termination:-

(i) the Purchaser shall be entitled to an amount from the Vendor equivalent to ten per cent (10%) of the Disposal Consideration; and

(ii) all other monies paid to the Vendor pursuant to the SPA shall be refunded to the Purchaser free of interest,

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within fourteen (14) days of the termination (save that where the Retention Sum as defined below has been paid to the Inland Revenue Board (“IRB”), the Purchaser shall be entitled to take such actions so as to make a claim from the IRB for payment in respect of the Retention Sum), failing which interest shall be chargeable thereon at the rate of ten percent (10%) per annum on a daily basis based on a 365-day year from the date immediately following the expiry of the period or date prescribed for the refund to the date of actual payment thereof.

In return for the refund/payment of the monies, Purchaser shall concurrently deliver to the Vendor all the Transfer Documents (as stipulated in the SPA) with the Vendor’s interest over the Disposal Lands remaining intact, the Purchaser’s caveat withdrawal and the requisite registration fees relating to the Purchaser’s caveat withdrawal and redelivery the possession of the Disposal Lands to the Vendor in the same state as when possession was delivered to the Purchaser (if possession has been delivered to the Purchaser) and thereafter the SPA shall be null and void and no party shall have any claim against the other party arising from or in connection with the SPA.

Alternatively, the Purchaser shall be entitled to elect for the remedy of specific performance and the parties acknowledge and agree that monetary compensation or damages shall not be adequate or sufficient for the purposes of the SPA.

2.2.4 Purchaser’s Default

(a) In the event of the Purchaser’s Default (as stipulated in the SPA), the Vendor to serve a written notice to the Purchaser within fourteen (14) days of the breach occurring or of the Vendor becoming aware of the breach (whichever is later):-

(i) setting out the breach; and

(ii) requiring the Purchaser to remedy such breach within fourteen (14) days from the date of the notice or such longer period as may be mutually agreed between the parties.

(b) In the event of the Purchaser’s Default and the default is not capable of being remedied and is not remedied in accordance with Section 2.2.4(a) above, the Vendor shall be entitled to terminate the SPA by a notice in writing to the Purchaser. In such event of termination:-

(i) the Purchaser shall forfeit an amount equivalent to ten percent (10%) of the Disposal Consideration; and

(ii) all other monies paid to the Vendor pursuant to the SPA shall be refunded to the Purchaser free of interest within fourteen (14) days of the termination (save that where the Retention Sum as defined below has been paid to the IRB, the Purchaser shall be entitled to take such actions so as to make a claim from the IRB for payment in respect of the Retention Sum), failing which interest shall be chargeable thereon at the rate of ten percent (10%) per annum on a daily basis based on a 365-day year from the date immediately following the expiry of the period or date prescribed for the refund to the date of actual payment thereof.

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In return for the refund, the Purchaser shall concurrently deliver to the Vendor all the Transfer Documents (as stipulated in the SPA) with the Vendor’s interest over the Disposal Land remaining intact, the Purchaser’s caveat withdrawal and the requisite registration fees relating to the Purchaser’s caveat withdrawal and redelivery the possession of the Disposal Lands to the Vendor in the same state as when possession was delivered to the Purchaser (if possession has been delivered to the Purchaser) and thereafter the SPA shall be null and void and no party shall have any claim against the other party arising from or in connection with the SPA.

2.2.5 Non-Registration Of Transfer And Termination

If for any non-rectifiable reasons where there is no default, willful neglect or omission on the part of the parties and the Purchaser is unable to be registered as the registered proprietor of the Disposal Lands, the Purchaser shall be:-

(i) entitled to serve a written notice to the Vendor to forthwith terminate the SPA; and

(ii) refunded all sums paid to the Vendor free of interest within fourteen (14) days from the date of receipt of the notice of termination (save that where the Retention Sum has been paid to the IRB, the Purchaser shall be entitled to take such actions so as to make a claim from the IRB for payment in respect of the Retention Sum). Failing which interest shall be chargeable thereon at the rate of ten percent (10%) per annum on a daily basis based on a 365 days year from the date immediately following the expiry of the period prescribed for the refund to the date of actual repayment thereof.

In return for the refund, Purchaser shall concurrently deliver to the Vendor all the Transfer Documents (as stipulated in the SPA) with the Vendor’s interest over the Disposal Lands remaining intact, the Purchaser’s caveat withdrawal and the requisite registration fees relating to the Purchaser’s caveat withdrawal and redelivery the possession of the Disposal Lands to the Vendor (if possession has been delivered to the Purchaser) and thereafter the SPA shall be null and void and no party shall have any claim against the other party arising from or in connection with the SPA.

2.3 Payment of the Disposal Consideration

The Disposal Consideration shall be paid by the Purchaser to Farlim in the following manner:-

(a) Upon the execution of the SPA, the Purchaser shall pay:-

(i) into an escrow account, RM9,000,138.05 in cash as earnest deposit, which is equivalent to eight per cent (8%) of the Disposal Consideration to AmTrustee Berhad to hold as stakeholders and to act in accordance with the provisions of the escrow agreement; and

(ii) into an escrow account, a retention sum of RM2,250,034.51 in cash, which is equivalent to two percent (2%) of the Disposal Consideration to AmTrustee Berhad to hold as stakeholders and to act in accordance with the provisions of the escrow agreement (“Retention Sum”),

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(b) subject to the fulfilment of the Conditions Precedent as stipulated in Section 2.2.2, the Purchaser shall pay or procure the payment of RM101,251,553.04 in cash, an amount equivalent to ninety per cent (90%) of the Disposal Consideration (“Balance Purchase Price”) to Farlim within five (5) business days from the date on which the Memorandum of Transfers are presented to the Land Registry for registration or such other date as may be agreed between the parties in writing (“Completion Period”).

In the event that the Purchaser is unable to pay the Balance Purchase Price on or before the expiry of the Completion Period, Farlim shall automatically grant the Purchaser a thirty (30) days extension period and the Purchaser shall pay Farlim an interest of ten per cent (10%) per annum calculated on a daily basis based on a 365-day year commencing from the day immediately following the last day of the Completion Period up to and including the day of actual payment of the Balance Purchase Price.

The Purchaser shall only be obliged to pay the Balance Purchase Price on the ninetieth (90th) day from the date of the SPA, notwithstanding that the unconditional date occurs earlier.

2.4 Basis of arriving at the Disposal Consideration

The Disposal Consideration of RM112,501,725.60 was arrived at on a willing-buyer-willing- seller basis, after taking into consideration the valuation conducted by the Independent Valuer. The Disposal Consideration represents a premium of RM12,501,725.60 or approximately 12.50% to the market value of RM100 million as appraised by the Independent Valuer.

2.5 Original cost and date of investment

As stated above, the Disposal Lands were transferred to Farlim pursuant to the Settlement which was completed on 31 December 2012.

The original costs and dates of investment in the Disposal Lands are as follows:-

Original cost of Audited net book value as investment at 31 December 2012 Lands Date of investment (RM) (RM) Lot 1561 31 December 2012 37,035,599.44 37,035,599.44 Lot 1584 31 December 2012 9,507,435.96 9,507,435.96 Lot 1457 31 December 2012 11,074,442.99 11,074,442.99 57,617,478.39 57,617,478.39

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2.6 Estimated gain and utilisation of proceeds

(a) The estimated gain from the Proposed Disposal to the Farlim Group is approximately RM46.11 million and is derived as follows:-

RM’000 Disposal Consideration 112,501 Less: Carrying amount (57,617) Estimated expenses(a) (8,770) Estimated gain on disposal 46,114

Note:- (a) Includes the professional fees, fees to the authorities, printing cost, real property gain tax (“RPGT”) payable and other incidental expenses in connection with the Proposed Disposal.

(b) The Disposal Consideration is proposed to be utilised as follows:-

Estimated timeframe for utilisation Amount RM’000 Working capital Within 36 months from the date of 103,731 completion of the Proposed Disposal Estimated expenses(a) Within 12 months from the date of 8,770 completion of the Proposed Disposal 112,501 Note:- (a) Includes professional fees, fees to the authorities, printing cost, RPGT payable and other incidental expenses in connection with the Proposed Disposal.

2.7 Information on the Purchaser

1MDB RE (Ayer Itam) is a private limited company incorporated in Malaysia under the Companies Act 1965 on 3rd November 2010. 1MDB RE (Ayer Itam) is a wholly-owned subsidiary of My City Ventures Sdn Bhd, which in turn is a wholly-owned subsidiary of 1Malaysia Development Berhad. Its principal activities are real estate, property development and investment holding.

2.8 Liabilities to be assumed by the Purchaser

There are no liabilities to be assumed by the Purchaser pursuant to the SPA.

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3. RATIONALE

Farlim currently owns only a fraction of the undivided share of the Lands. The Proposed Disposal will enable the Company to unlock the value of the Disposal Lands and realise a gain on disposal of approximately RM46.11 million upon completion of the Proposed Disposal. The Proposed Disposal will also enable the Company to raise funds for future development projects to be undertaken by the Company.

4. FINANCIAL EFFECTS

4.1 Issued and paid-up capital

The Proposed Disposal will not have any effect on the issued and paid-up share capital of Farlim as it does not involve any issuance of shares in Farlim.

4.2 Substantial shareholders’ shareholdings

The Proposed Disposal will not have any effect on Farlim’s substantial shareholders’ shareholding in Farlim as it does not involve any issuance of shares in Farlim.

4.3 Net assets (“NA”), NA per share and gearing

Based on the audited financial statements for the financial year ended (“FYE”) 31 December 2012, the Proposed Disposal is expected to increase the NA of Farlim and its subsidiaries (“Farlim Group”) by approximately RM46.11 million (equivalent to approximately RM0.33 per share based on the issued and paid-up share capital of Farlim of 140,326,100 as at the date of this announcement). However, the Proposed Disposal will not have material impact on the gearing of Farlim for the FYE 31 December 2013.

4.4 Earnings and earnings per share ("EPS”)

The Proposed Disposal is expected to generate a one-off gain of approximately RM46.11 million for Farlim Group. Based on the issued and paid-up share capital of 140,326,100 as at the date of this announcement, the EPS of Farlim Group is expected to increase by approximately RM0.33.

5. CASH COMPANY OR PN17 COMPANY

The Proposed Disposal will not result in Farlim becoming a cash company or a PN17 company, as defined under the Main Market Listing Requirements (“Listing Requirements”) of Bursa Securities.

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6. APPROVALS REQUIRED

The Proposed Disposal is subject to the following approvals being obtained:-

(a) the shareholders of Farlim at an EGM to be convened;

(b) the governmental approval or consent, if required; and

(c) any other relevant authorities, if required.

The Proposed Disposal is not conditional upon any other proposal undertaken or to be undertaken by Farlim.

7. INTERESTS OF DIRECTORS AND/OR MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM

None of the directors and/or major shareholders of Farlim Group and/or persons connected with them have any interest, direct or indirect in the Proposed Disposal.

8. ADVISER

AmInvestment Bank has been appointed as the Adviser to the Company for the Proposed Disposal.

9. BOARD’S STATEMENT

Having considered the market value of the Disposal Lands, estimated gain on disposal, rationale and effects of the Proposed Disposal, the Board is of the opinion that the Proposed Disposal is in the best interests of the Company and its shareholders.

10. HIGHEST PERCENTAGE RATIO

The highest percentage ratio applicable to the Proposed Disposal pursuant to Paragraph 10.02(g) of the Listing Requirements is approximately 97.07%, being the Disposal Consideration compared with the NA of Farlim Group as at 31 December 2012.

11. ESTIMATED TIME FRAME FOR SUBMISSION TO RELEVANT AUTHORITIES

The circular to shareholders of Farlim for the Proposed Disposal is expected to be submitted to Bursa Securities within two (2) months from the date of this announcement.

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12. ESTIMATED TIME FRAME FOR COMPLETION

Barring unforeseen circumstances, the Proposed Disposal is expected to be completed by second quarter of 2014.

13. DOCUMENTS AVAILABLE FOR INSPECTION

The following documents will be made available for inspection at the registered office of Farlim during office hours from Monday to Friday (except public holidays) at No. 2-8, Bangunan Farlim, Jalan PJS 10/32, Bandar Sri Subang, 46000 Petaling Jaya, Darul Ehsan, for a period of three (3) months from the date of this announcement:-

(a) the SPA; and

(b) the Valuation Report

This announcement is dated 23 September 2013.