THIS INFORMATION CIRCULAR IS FOR THE INFORMATION OF THE SHAREHOLDERS OF AEON CO. (M) BHD..

NO
ACTION IS REQUIRED TO BE TAKEN.
If you are in any doubt about the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or
other professional adviser immediately.
If you have sold or transferred all your shares in AEON CO. (M) BHD. (AEON or the Company), you should at once hand this
Information Circular to the agent/broker through whom the sale was contracted or effected for transmission to the purchaser or transferee.
Bursa Malaysia Securities Berhad (Company No. 635988-W) has not perused the contents of this Information Circular prior to its
issuance and takes no responsibility for the contents of this Information 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 Information Circular.

AEON CO. (M) BHD.

(Company No: 126926-H)
(Incorporated in Malaysia)

INFORMATION CIRCULAR TO SHAREHOLDERS

IN RELATION TO THE
SALE AND LEASEBACK OF KINTA CITY SHOPPING CENTRE
BY AEON CO. (M) BHD.

This Information Circular is dated 27 February 2006

DEFINITIONS
Except where the context requires, the following terms and abbreviations shall apply throughout this Information
Circular:Act

Companies Act, 1965, as amended from time to time.

AEON or the Company

or the Vendor or the
Lessee

AEON CO. (M) BHD.

AGM

Annual General Meeting

Board or Board of
Directors

Board of Directors of AEON

Bursa Securities

Bursa Malaysia Securities Berhad (635998-W)

ENSB or the Purchaser

or the Lessor

Equity Nirvana Sdn Bhd (709587-A)

FIC

Foreign Investment Committee

Kinta City Shopping

Centre or the Property

Kinta City Shopping Centre comprising all the freehold land held under Geran
72619 (formerly known as H.S.(D) 81942) for Lot PT 320549 in the Mukim of
Hulu Kinta, District of Kinta, Perak (the Land); a three (3) storey shopping mall
containing two (2) levels of retail floors, one (1) level of car park bays and
tenanted lots and an additional level of car park bays and a bowling alley on the
roof top and all improvements thereon (the Building) and all the items of the
plant, machinery, equipment and mechanical and electrical systems specified in
Exhibit 2-1 of the SLA (the Assets).

Lease

Means the registrable lease in Form 15A of the National Land Code over the
Property to be granted by the Purchaser to the Vendor for a period of nine (9)
years commencing on the completion of sale and purchase of the Property with
three (3) consecutive options to the Vendor to renew the lease for a period of five
(5) years each subject to and upon the terms and conditions contained in Exhibit 3
of the SLA.

Listing Requirements

The Listing Requirements of Bursa Securities including any amendments therein

that may be made from time to time.

SLA

: The Conditional Sale and Leaseback Agreement dated 28 December 2005 entered
into between ENSB and AEON.

RM and sen

Ringgit Malaysia and sen respectively.

ii

TABLE OF CONTENTS

PART A
LETTER TO THE SHAREHOLDERS OF AEON CONTAINING:-

PAGE
1.

INTRODUCTION

2.

DETAILS OF THE SALE AND LEASEBACK

3.

BASIS OF ARRIVING AT THE PURCHASE PRICE

4.

RATIONALE FOR THE SALE AND LEASEBACK

5.

UTILISATION OF PROCEEDS

6.

RISK CONSIDERATION

7.

FINANCIAL EFFECTS OF THE SALE AND LEASEBACK

8.

APPROVALS REQUIRED

9.

DIRECTORS AND/OR SUBSTANTIAL SHAREHOLDERS INTERESTS

10.

DIRECTORS RECOMMENDATION

11.

FURTHER INFORMATION

APPENDIX I

FURTHER INFORMATION

iii

AEON CO. (M) BHD.

(Company No: 126926-H)
(Incorporated in Malaysia)

Registered Office
3rd Floor, Jusco Taman Maluri
Shopping Centre, Jalan Jejaka
Taman Maluri, Cheras
55100 Kuala Lumpur
27 February 2006
Board of Directors
Dato Abdullah bin Mohd Yusof (Non-Independent Non-Executive Chairman)
Toshiji Tokiwa (Non-Independent Non-Executive Vice Chairman)
Nagahisa Oyama (Managing Director)
Masato Yokoyama (Non-Independent Executive Director)
Tatsuichi Yamaguchi (Non-Independent Non-Executive Director)
Datuk Ramli bin Ibrahim (Non-Independent Non-Executive Director)
Brig. Jen. (B) Dato Mohd Idris bin Saman (Independent Non-Executive Director)
Datuk Zawawi Bin Mahmuddin (Independent Non-Executive Director)
Dato Chew Kong Seng (Independent Non-Executive Director)
To :

The Shareholders of AEON CO. (M) BHD.

Dear Sir/Madam,
SALE AND LEASEBACK OF KINTA CITY SHOPPING CENTRE BY AEON

1.

INTRODUCTION
On 28 December 2005, the Company announced to Bursa Securities that the Company had on the same
date entered into a SLA with ENSB for the sale of Kinta City Shopping Centre for a total cash
consideration of RM121.0 million (Purchase Price) on the express understanding that the Purchaser
shall lease the Property to AEON on completion of the sale and purchase of the Property upon the terms
and subject to the terms contained in the SLA.
The purpose of this Information Circular is to set out the relevant details of the Sale and Leaseback
and is intended for your information only. NO ACTION IS REQUIRED TO BE TAKEN BY THE
SHAREHOLDERS OF AEON

2.

DETAILS OF THE SALE AND LEASEBACK

2.1

Information on Kinta City Shopping Centre

Kinta City Shopping Centre is a shopping centre erected on the the Land measuring in total area
approximately 60,230 square metres and located at the intersection of Jalan Sultan Azlan Shah
Utara and Jalan Teh Lean Swee, approximately five (5) kilometres due north east of the Ipoh
City center and approximately one (1) kilometre from North-South Highway Ipoh Selatans toll.
It has an approximate gross floor area (GFA) of 844,135 square feet and an approximate net
lettable area (NLA) of 470,998 square feet comprising two (2) levels of retail floors, one (1)
level of car park bays and tenanted lots and an additional level of car park bays and a bowling
alley on the roof top. Kinta City is currently enjoying an occupancy rate of about 99%. AEON
currently also operates a departmental store cum supermarket together with a food court in Kinta
City.
AEON completed the purchase of the Land in April 1996 at a total costs of RM20.8 million. The
construction of the shopping centre was at an initial total construction costs of approximately
RM79.5 million and the shopping centre was completed and opened for business on 30 July
1997. For the financial year ended 28 February 2005, the net book value of Property is RM87.7
million. The Sale and Leaseback is expected to give rise to a gain on disposal of approximately
RM31.9 million, after accounting for the net book value of the Property as at 28 February 2005
and incidental costs of disposal.

2.2

Sale and Leaseback

By the SLA, AEON has agreed to sell and the Purchaser has agreed to purchase the Property
free from all encumbrances, charges, liens, caveats and other restraints, whether equitable or
legal, but subject to all conditions express or implied in the document of title to the Land and
subsisting tenancies upon the terms and conditions therein contained.
Subject to the completion of the sale and purchase of the Property in accordance with the terms
and conditions of the SLA, the Purchaser has agreed to grant a lease over the Property and
AEON has agreed to take the lease for a period of nine (9) years commencing on the completion
of the sale and purchase of the Property with three (3) consecutive options to AEON to renew
the lease for a period of five (5) years each upon the terms and subject to the conditions
contained in the SLA and the Lease (as defined herein).
Upon execution of the SLA:(i)

the Purchaser has paid a deposit of sum of RM12.1 million to AEONs solicitors and
the Purchasers solicitors as joint stakeholders;

(ii)

AEON has delivered to the Purchaser a valid and registrable but unstamped
memorandum of transfer in the form prescribed under the National Land Code
(NLC) in respect of the Land; and

(iii)

the Purchaser has delivered to AEON a lease in favour of AEON duly executed by the
Purchaser in-escrow in Form 15A of the NLC over the Property together with the lease
annexure.

2.3

Salient terms of the SLA

The salient terms of the SLA are as follows:2.3.1

AEON agrees to sell and the Purchaser agrees to purchase the Property free from all
encumbrances, charges, liens, caveats and other restraints, whether equitable or legal,
but subject to all conditions express or implied in the document of title to the Property
and subject to the subsisting tenancies on the terms and conditions contained in the
SLA;

2.3.2

Subject to the completion of the sale and purchase of the Property, the Purchaser agrees
to grant a lease over the Property and AEON agrees to take the lease subject to the
terms and conditions contained in the SLA and in the Lease;

2.3.3

The completion of the sale and purchase of the Property is subject to the following
conditions precedent (Conditions Precedent) being fulfilled within five (5) months
from the date of the SLA (Cut-Off Date):-

2.3.4

(a)

the Purchaser obtaining the approval (FIC Transfer Approval) of the FIC for
the acquisition of the Property by the Purchaser in accordance with the terms
of the SLA;

(b)

AEON obtaining the approval (FIC Lease Approval) of the FIC for the lease
of the Property from the Purchaser in accordance with the terms of the SLA
and the Lease;

(c)

the Purchaser, as a foreign-owned company, obtaining the approval of the

State Authority for the acquisition of the Property by the Purchaser in
accordance with the terms of the SLA under Section 433B of the NLC (State
Authority 433B Transfer Approval);

(d)

AEON obtaining the approval of the State Authority for the transfer of the
Property by AEON in accordance with the terms of the SLA arising from the
restriction-in-interest contained in the document of title to the Land (State
Authority Restriction Transfer Approval);

(e)

if necessary, AEON obtaining approval from its shareholders in general

meeting for the disposal of the Property in accordance with the terms of the
SLA (Shareholders Approval);

(f)

AEON obtaining the approval of the State Authority for the lease of the
Property by AEON in accordance with the terms of the Lease under Section
433B of the NLC (State Authority 433B Lease Approval); and

(g)

the Purchaser obtaining the approval of the State Authority arising from the
restriction-in-interest contained in the document of title to the Land (State
Authority Restriction Lease Approval) allowing the Purchaser after becoming
the beneficial owner of the Property to grant the Lease in favour of AEON in
accordance with the terms of the Lease;

In the event any or all of the Conditions Precedent is/are not satisfied or are deemed not
to have been satisfied by the Cut-Off Date or such extended period pursuant to the
terms and conditions of the SLA, the SLA shall be deemed terminated forthwith;

2.4

2.3.5

The balance of the Purchase Price of RM108.9 million shall be paid by the Purchaser
within one (1) month after the date on which all the Conditions Precedent have been
fulfilled; and

2.3.6

Upon completion of the sale and purchase of the Property, the Lease shall commence
and the rights and obligations of AEON and the Purchaser thereunder shall
immediately become effective and enforceable and AEON shall commence with the
payment of the rentals thereunder.

Salient terms of the Lease

The salient terms of the Lease are as follows:-

2.5.

2.4.1

the Lessor leases to the Lessee the Property to hold the same unto the Lessee for the
initial period of nine (9) years (Initial Term) commencing from the completion of the
sale and purchase of the Property envisaged in the SLA;

2.4.2

Provided that the Lessee shall not be in breach of any of the covenants and conditions
contained in the Lease and on the part of the Lessee to be observed or performed at the
relevant time, the Lessee shall have:
(i)

the option to extend the duration of the Lease for a period of five (5) years
from the expiration of the Initial Term (First Extended Term) on the terms
and conditions contained in the Lease;

(ii)

the option to extend the duration of the Lease for a further period of five (5)
years from the expiration of the First Extended Term (Second Extended
Term) on the terms and conditions contained in the Lease; and

(iii)

the option to extend the duration of the Lease for a further period of five (5)
years from the expiration of the Second Extended Term (Third Extended
Term) on the terms and conditions contained in the Lease;

2.4.3.

The terms and conditions of the Lease shall remain unchanged during the First
Extended Term, the Second Extended Term and the Third Extended Term, save and
except for the rent payable during the First Extended Term, the Second Extended Term
and the Third Extended Term;

2.4.4

The Lessee shall be entitled to grant tenancies and sub-leases in respect of the Property
or any part thereof to such persons and upon such terms and for such rent as the Lessee
may deem fit; and

2.4.5

The Lessor agrees and undertakes that it will not sell, transfer or otherwise dispose of
the Property without first making an offer in writing to sell the same to the Lessee save
and except for sale of the Property to a fund or real estate investment trust managed by
the Lessor or by Pramerica Real Estate Investors (Asia) Pte. Ltd. (Pramerica) or a
Pramerica-related entity or an affiliate of Pramerica.

Estimated time frame for completion

Barring any unforeseen circumstances, and subject to the approvals as stated in Section 2.3.3
above, the Sale and Leaseback is expected to be completed within six (6) months from the date
of the SLA.

3.

BASIS OF ARRIVING AT THE PURCHASE PRICE

The Purchase Price of RM121.0 million was arrived at on a willing buyer-willing seller basis after taking
into consideration:-

4.

3.1

the market value of the Property, of RM124.6 million as opined by Messrs Henry Butcher &
Long, an independent professional valuer in their certificates of valuations dated 30 December
2004 and 13 December 2005;

3.2

the net lettable area of the Property;

3.3

the physical state, condition and age of the Building which was built in 1997;

3.4

the sale and leaseback nature of the transaction which take into consideration the lease in
entirety of the Property and the Purchasers investment criteria of an acceptable yield; and

3.5

The location of the Property in the suburb of Ipoh city where the retail market size is smaller
than in Klang Valley and other major cities in Malaysia.

RATIONALE FOR THE SALE AND LEASEBACK

The Sale and Leaseback is in line with AEONs corporate strategy of accelerating the expansion of its
retail business through opening of new outlets and shopping centres. The Sale and Leaseback will unlock
the value of AEONs existing fixed assets and provide funds for its expansion plans.
The long term Lease will ensure that AEON maintains its presence and continues to operate the retail and
shopping centre management business on the Property as before.

5.

UTILISATION ON PROCEEDS
The Sale and Leaseback will result in a cash inflow to AEON of RM121.0 million, which will be utilised
for development of its new outlets in line with its expansion strategy, refurbishment of its existing stores,
working capital purposes and incidental costs.
RMmil
Development of its new outlets
Refurbishment of its existing stores
Working Capital
Incidental expenses, taxes and duties

90.0
20.0
9.6
1.4
121.0

6.

RISKS CONSIDERATION
To the best knowledge and belief of our Board, there are no risk factors relating to the Sale and
Leaseback which could have a material adverse effect on the business or financial position of the
Company.

7.

FINANCIAL EFFECTS OF THE SALE AND LEASEBACK

7.1

Share Capital
The Sale and Leaseback will not have any effect on the issued and paid-up share capital of
AEON as the Sale and Leaseback do not involve issuance of shares.

7.2

Shareholding Structure
The Sale and Leaseback will not have any effect on the substantial shareholders shareholdings
as the Sales and Leaseback do not involve any issuance of shares.

7.3

Earnings
The Sale and Leaseback is not expected to have any impact on the earnings of AEON for the
financial year ending 28 February 2006 as the Sale and Leaseback is expected to be completed
after 28 February 2006. However, the impact of the Sale and Leaseback including the proposed
gain on disposal is expected to increase earnings per share by approximately 17.0 sen for the
financial year ending 28 February 2007.

7.4

Net Assets
On a proforma basis, the Sale and Leaseback is expected to increase the net assets per share of
AEON by approximately 17.0 sen based on the audited balance sheet as at 28 February 2005.

8.

APPROVALS REQURIED
The Sale and Leaseback are subject to the approvals specified under section 2.3.3 sub-sections (a) to (g).

9.

DIRECTORS AND/OR SUBSTANTIAL SHAREHOLDERS INTERESTS

To the best knowledge of the Board, none of the Directors and substantial shareholders of AEON or
persons connected with them has any interest, direct or indirect, in the Sale and Leaseback.

10.

DIRECTORS RECOMMENDATION
The Board of AEON, having taken into consideration all aspects of the Sale and Leaseback, is of the
opinion that the Sale and Leaseback is fair and reasonable, and is in the best interest of AEON and its
shareholders.

11.

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

Yours faithfully
For and on behalf of the Board of Directors of
AEON CO. (M) BHD.

Nagahisa Oyama
Managing Director

APPENDIX I

FURTHER INFORMATION

1.

DIRECTORS RESPONSIBILITY STATEMENT

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

2.

MATERIAL CONTRACTS
Save as disclosed below, AEON has not entered into any other contracts which are or may be material
(not being contracts entered into in the ordinary course of business), within the two (2) years immediately
preceding the date of this Information Circular:-

3.

(i)

On 3 March 2004, AEON entered into a conditional Sale and Purchase (SPA) with Plenitude
Holdings Bhd (Vendor) (Company No. 120951-T) of No. 1, Jalan Harmonium, Taman Desa
Tebrau, 81100 Johor Bahru, Johor for the acquisition of part of the land held under No. H.S. (D)
286621, PTD 84471, Mukim Tebrau, District of Johor Bahru, State of Johor Darul Takzim
measuring approximately 1,308,035 square feet at a purchase price of Ringgit Malaysia Thirty
Nine Million Two Hundred Forty One Thousand and Fifty (RM39,241,050.00) only upon the
terms and conditions therein contained. The acquisition of the said land is for the construction of
a shopping centre which has since been opened for business. The abovementioned purchase
price is paid by cash.

(ii)

On 31 May 2004, AEON entered into a conditional SPA with Mujur Harta Sdn. Bhd.
(Vendor) (Company No. 304105-P) for the acquisition of a piece of freehold land held under
GRN 28484, Lot No. 3144, Mukim Cheras, District of Ulu Langat, State of Selangor measuring
approximately 1.054 hectares (said land) at a purchase price of Ringgit Malaysia Ten Million
and Five Hundred Thousand (RM10,500,000.00) only subject to the terms and conditions therein
contained. The abovementioned purchase price is paid by cash. The said land shall be developed
to be part of the development of a shopping centre to be constructed on the part of the land held
under Mukim of Cheras, District of Hulu Langat.

MATERIAL LITIGATIONS
AEON is not involved in any material litigation, claims or arbitration, either as plaintiff or defendant as at
the date hereof, and the Board is not aware and does not have any knowledge of any proceedings,
pending or threatened, or of any facts likely to give rise to any proceedings which might materially or
adversely affect the financial position or business of the Company.

4.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the Registered Office of the Company
during normal business hours between Monday and Fridays (except public holidays) for a period of two
(2) weeks from the date of this Information Circular: (i)

the Memorandum and Articles of Association of the Company;

(ii)

the audited financial statements of AEON for the past two (2) financial years ended 29 February
2004 and 28 February 2005 and the unaudited financial results for the period ended 30
November 2005;

(iii)

the material contracts referred to in Section (2) above;

(iv)

the SLA; and

(v)

the certificates of valuation dated 30 December 2004 and 13 December 2005.