Type / : / Announcement
Subject / : / DAYA MATERIALS BERHAD (“DMB” or “the Company”)
PROPOSED JOINT VENTURE BETWEEN DAYA SHEFFIELD SDN. BHD., A JOINT VENTURE COMPANY OF DAYA OCI SDN BHD AND CONNECT ENERGY SERVICES PTE.LTD. (“PROPOSED JOINT VENTURE”)

Contents:

1.INTRODUCTION

The Board of Directors (“Board”) of DMB is pleased to announce thatDaya Sheffield Sdn. Bhd. (“DSFSB”),a joint venture company of Daya OCI Sdn. Bhd. (“DOCI”), which in turn is a subsidiary of DMB, had on 11 September 2013entered intoa Joint Venture agreement (“JVA”) withConnect Energy Services Pte. Ltd.(“Connect Energy”)to undertake the provision of manpower services to Songa Offshore Malaysia Sdn. Bhd..

2.DETAILS OF THE PROPOSED JOINT VENTURE

2.1 Proposed Joint Venture

a)DSFSB and Connect Energy (hereinafter shall be referred to singularly as “Party” or collectively as “Parties”) have agreed to participate in an unincorporated joint venture (“JV”) to undertake the provision of manpower services (the “Works”) to Songa Offshore Malaysia Sdn. Bhd. (the “Client”).

b)The Parties have mutually agreed to enter into the JVA for the purpose of proposing to commit capital moneys and regulate their mutual rights and liabilities as participating parties, as well as the management and business activity of the joint venture project, upon and subject to the provisions of the JVA.

2.2 Salient terms of the JVA

The salient terms of the Proposed Joint Venture, as extracted from the JVA include, inter-alia, the following:-

a)The purpose of the JVA is to set out and regulate the relationship between the Parties to work together in providing manpower services to the Client.

b)The Parties agree that the Parties shall secure contracts with the Client ("Contracts") for the Works through DOCIas contract holder, as DOCI has various licenses issued by Petroliam Nasional Berhad which are required in order to carry out the Works.

c)Connect Energy shall provide the manpower for the Works contemplated with the Client.

d)The participation, share and interest of the Parties in relation to the assets, liabilities, obligations, costs, expenses, profits and losses arising out of the execution and completion of the Works shall, at all times, be in the following proportions:

Party / Percentage (%)
DSFSB / 50%
Connect Energy / 50%

The Parties shall provide the funds equally in accordance with their proportionsrequired by the JV for the provision of the Works to the Client, as required to meet the JV’s objectives under the Contracts, and the repayment of such funds shall only be from the profits and the cash flow of the JV.

e) The JVA does not create and must not be construed to create any express of implied relationship between the Parties of:

(i)employment;

(ii)principal and agency; or

(iii)partnership.

f) The Parties will appoint a Management Committee, which shall derive its powers from the authority delegated to it by the Parties from time to time. The Management Committee shall be responsible for the business and affairs of the JV.

3.INFORMATION ON DSFSB AND CONNECT ENERGY

3.1DSFSB

DSFSB was incorporated on 26 October 2010 as a limited company with an authorised share capital of RM500,000 divided into 500,000 ordinary shares of RM1.00 each and paid-up share capital of RM250,000 divided into 250,000 ordinary shares of RM1.00 each. DSFSB’s paid-up share capital is 51% owned by DOCI and 49% owned by Sheffield Offshore Services Pte. Ltd.

The principal activities of DSFSB are in supplying of services and equipment to exploration and extraction companies in the oil and gas industry.

3.2Connect Energy

Connect Energy was incorporated on 22 Dec 2006 under the Singapore Accounting and Corporate Regulatory Authority as a private limited company with an authorised share capital of SGD150,000 divided into 150,000 ordinary shares of SGD 1.00 each, of which 150,000 ordinary shares of SGD 150,000 each have been issued and fully paid-up. Connect Energy commenced business operations on 2 Jan 2007. Connect Energy’s principal activities are employment agency and management of human resources.

4.RATIONALE FOR THE PROPOSED JOINT VENTURE

The Proposed Joint Venture is to participate in an unincorporated JV to undertake the provision of manpower services to Songa Offshore Malaysia Sdn. Bhd. which shall provide reasonable returns to DSFSB and Connect Energy. The Proposed Joint Venture is expected to contribute positively to the future profitability and cash flow of DMB as well as the stability of its future income stream.

  1. RISK FACTORS

5.1 Business Risk

Like all business entities, risk factors affecting the Proposed Joint Venture include but not limited to execution risks such as business expansion, prudent financial management, changes in price materials, changes in political, economic and regulatory conditions. In addition, there is also no assurance that the anticipated benefits from the Proposed Joint Venture will be realised, and that the DMB group of companies (“DMB Group”) will be able to generate sufficient revenue from the Proposed Joint Venture to offset the associated cost.

Nevertheless, the Board of DMB has and will continue to exercise due care in considering the risks and benefits associated with the Proposed Joint Venture and will take appropriate measures in planning the successful integration of the Proposed Joint Venture with its current business operations. Further, the DMB Group is committed towards the close monitoring of the development of the Proposed Joint Venture in order to minimise any implementation issues or delays.

5.2 Political, economic and regulatory considerations

Like all business entities, changes in political, economic and regulatory conditions in Malaysia could materially and adversely affect the financial and business prospects for the DMB Group. Amongst the political, economic and regulatory uncertainties are the changes in nullification of existing sales orders and contracts, changes in interest rates and method of taxation and currency exchange rules and contracts.

The DMB Group may continue to take effective measures to mitigate such risks. However, there is no assurance that adverse economic, political and regulatory conditions will not materially affect the business activities of the DMB Group.

  1. SOURCE OF FUNDS
    DSFSBwill fund the Proposed Joint Venture from its internally generated funds if necessary.
  1. INVESTMENT

The estimated capital contribution by DSFSB for the project is approximately RM325,000.

  1. FINANCIAL EFFECTS

The Proposed Joint Venture is not expected to have material impact to the share capital, gearing, consolidated earnings, net assets and substantial shareholders’ shareholding of DMB for the financial year ending 31 December 2013.

  1. ESTIMATED TIME FRAME FOR THE PROPOSED JOINT VENTURE

This Proposed Joint Venture takes effect upon date of the JVAand shall continue in force and effect for two (2) years or until it is terminated in accordance with the provisions of the JVA.

  1. HIGHEST PERCENTAGE RATIO APPLICABLE

The percentage ratio in relation to the Proposed Joint Venture is 0.081%.

  1. APPROVALS REQUIRED

The Proposed Joint Venture is not subject to the approval of the shareholders of DMB or any relevant governmental authorities.

  1. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS

None of the directors and/or major shareholders and/or person connected to the directors or major shareholders of DMB have any interest, direct or indirect, in the Proposed Joint Venture.

  1. DIRECTORS' STATEMENT

The Board, after due consideration of all aspects of the proposal, is of the opinion that the Proposed Joint Venture is in the best interest of DMB Group.

  1. DOCUMENTS AVAILABLE FOR INSPECTION

The JVA will be made available to shareholders for inspection at the registered office of DMB at Level 8, Symphony House, Pusat Dagangan Dana 1, Jalan PJU1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan during normal working hours from Mondays to Fridays (except public holidays) for a period of one (1) month from the date of this announcement.

This announcement is dated 11 September 2013.

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