THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. If you have sold or transferred all your ordinary shares in Kwantas Corporation Berhad ( Kwantas or Company ), you should at once hand this Circular together with the accompanying Form of Proxy to the agent through whom the sale or transfer was contracted for immediate transmission to the purchaser or transferee. The Kuala Lumpur Stock Exchange takes no responsibility for the content 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. KWANTAS CORPORATION BERHAD (356602-W) (Incorporated in Malaysia) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED RENEWAL OF THE EXISTING SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE PROPOSED NEW SHAREHOLDERS MANDATE FOR ADDITIONAL RECURRENT RELATED PARTY TRANSACTION OF A REVENUE OR TRADING NATURE The Ordinary Resolutions in respect of the Proposed Renewal of the Existing Shareholders Mandate and Proposed New Shareholders Mandate will be tabled at the Eighth Annual General Meeting (AGM) of the Company to be held at 4 th Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah on 10 December 2003 at 10.00 a.m. Notice of the Eighth AGM dated 18 November 2003 together with the Proxy Form are set out in the Annual Report of the Company for the financial year ended 30 June 2003 despatched with this Circular. The Proxy Form must be lodged at the Registered Office of the Company at 1 st Floor, Fordeco Building, Jalan Singamata, Lahad Datu, 91100 Sabah not less than 48 hours before the time set for holding the meeting. The lodging of the Form of Proxy 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 Form of Proxy : 08 December 2003 at 10.00 a.m. Date and time of Annual General Meeting : 10 December 2003 at 10.00 a.m. This Circular is dated 18 November 2003
DEFINITIONS Except where the context otherwise requires, the following shall apply throughout this Circular: - Act : Companies Act, 1965, as amended from time to time and any re-enactment thereof AGM : Annual General Meeting Board : The Board of Directors of Kwantas EGM : Extraordinary General Meeting FCSB : Fordeco Construction Sdn Bhd, a company in which Kwan Ngen Chung and Kwan Ngen Wah, Directors of Kwantas, have the interest FSB : Fordeco Sdn Bhd, a company in which Kwan Ngen Chung and Kwan Ngen Wah, Directors of Kwantas, have the interests KAH : Kwan Ah Hee Holdings Sdn Bhd, the holding company of FSB and LDTSB KLSE : Kuala Lumpur Stock Exchange Kwantas or Company : Kwantas Corporation Berhad Kwantas Group or Group : Kwantas, its subsidiaries and associated companies, collectively LDTSB : Lahad Datu Tyres Sdn Bhd, a company in which the brother and sister of Kwan Ngen Chung, Kwan Ngen Wah, Kwan Jin Nget and Kwan Min Nyet, Directors of Kwantas, have the interests Listing Requirements : Listing Requirements of KLSE NTA : Net tangible assets Proposals : Proposed renewal of the existing shareholders mandate for recurrent related party transactions of a revenue or trading nature and proposed new shareholders mandate for additional recurrent related party transaction of a revenue or trading nature Proposed Renewal of Shareholders Mandate Proposed New Shareholders Mandate : Proposed renewal of existing shareholders mandate for Kwantas Group to enter into recurrent related party transactions of a revenue or trading nature with related party(ies) in the ordinary course of business which are necessary for Kwantas Group s day to day operations Proposed new shareholders mandate for Kwantas Group to enter into addition recurrent related party transaction of a revenue or trading nature with related party in the ordinary course of business which is necessary for Kwantas Group s day to day operations Recurrent Transactions : Transactions of a revenue or trading nature which are necessary for the day to day operations entered into by Kwantas Group in the ordinary course of business which involves the interest, direct or indirect of a related party Related Party(ies) : Directors, Major Shareholders or Persons connected with such Director or Major Shareholder RM and sen : Ringgit Malaysia and sen respectively USGI : Universal Shipping Group Inc, a company incorporated in the Republic of Panama, is the registered owner of a product tanker, a company in which Kwan Ngen Chung and Kwan Ngen Wah, directors of Kwantas, have the interests WKSB Warisan Kiara Sdn Bhd, the holding company of USGI i
TABLE OF CONTENTS LETTER TO THE SHAREHOLDERS OF KWANTAS CONTAINING: Page 1. INTRODUCTION...1 2. DETAILS OF THE PROPOSALS...2 3. RATIONALE...6 4. FINANCIAL EFFECTS...7 5. CONDITIONS...7 6. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST...7 7. DIRECTORS RECOMMENDATION...8 8. ANNUAL GENERAL MEETING...8 9. FURTHER INFORMATION...9 APPENDIX APPENDIX I FURTHER INFORMATION...10 ii
Board of Directors KWANTAS CORPORATION BERHAD (356602-W) (Incorporated in Malaysia) Dato Mohd Sarit bin Haji Yusoh DIMP, AMP (Chairman) Kwan Ngen Chung (Executive Director) Kwan Ngen Wah (Executive Director) Kwan Min Nyet (Executive Director) Kwan Jin Nget (Executive Director) Chong Kan Hiung (Executive Director) Datuk Jaswant Singh Kler (Independent Non-Executive Director) Ooi Jit Huat (Independent Non-Executive Director) Registered Office 1 st Floor, Fordeco Building Jalan Singamata 91100 Lahad Datu Sabah 18 November 2003 To: The Shareholders of Kwantas Corporation Berhad Dear Sir/Madam PROPOSED RENEWAL OF THE EXISTING SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE PROPOSED NEW SHAREHOLDERS MANDATE FOR ADDITIONAL RECURRENT RELATED PARTY TRANSACTION OF A REVENUE OR TRADING NATURE 1. INTRODUCTION At the EGM held on 19 December 2002, the Company obtained a mandate from its shareholders to renew the Recurrent Transactions of a revenue or trading nature with Related Parties in the ordinary course of business which are necessary for the Group s day to day operations. The aforesaid authorization for the shareholders mandate for recurrent related party transactions shall, in accordance with the Listing Requirements of the KLSE, lapse at the conclusion of the forthcoming AGM unless new authorization for the shareholders mandate for recurrent related party transactions is obtained from the shareholders of Kwantas at the AGM. Accordingly, on 07 October 2003, the Board of Kwantas announced to the KLSE that the Company proposed to seek its shareholders approval for the Proposed Renewal of the Existing Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature which are necessary for the Group s day to day operation in accordance with Paragraph 10.09 of the Listing Requirements. In addition to the above, on 20 October 2003, an announcement was made to the KLSE on the Proposed New Shareholders Mandate For Additional Recurrent Related Party Transaction of a Revenue or Trading Nature. The purpose of this Circular is to set out the details of the Proposals, to set out your Board s recommendation and to obtain your approval for the resolutions pertaining to the Proposals to be tabled at the forthcoming AGM. 1
2. DETAILS OF THE PROPOSALS 2.1 DETAILS OF THE PROPOSED RENEWAL OF THE EXISTING SHAREHOLDERS MANDATE & PROPOSED NEW SHAREHOLDERS MANDATE 2.1.1 Introduction Proposed Renewal of the Existing Shareholders Mandate For Recurrent Related Party Transactions Pursuant to Paragraph 10.09 (Part E) of Chapter 10 of the Listing Requirements, a listed issuer may seek shareholders mandate in respect of related party transactions involving recurrent transactions of a revenue or trading nature which are necessary for its day-to-day operations subject to, inter alia, the following: (ii) (iii) the transactions are in the ordinary course of business and are on terms not more favourable to the related party than those generally available to the public; the shareholders mandate is subject to annual renewal and disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the shareholders mandate during the financial year; and interested director, interested major shareholder or interested person connected with a director or major shareholder; and where it involves the interest of an interested person connected with a director or major shareholder, such director or major shareholder, must not vote on the resolution approving the transactions. An interested director or interested major shareholder must ensure that persons connected with him abstain from voting on the resolution approving the transactions. The principal activity of the Company is investment holding. Its subsidiaries are involved in the operation of oil palm plantations, palm oil mill, palm oil refinery, kernel crushing plant and wholesaling and supply of diesel and lubricants, rental of leasehold land, operation of a stone and gravel quarry and operation of a biomass power plant. It is envisaged that Kwantas and its subsidiaries will enter into transactions of a revenue or trading nature with the Related Parties set out under Section 2.1.2 (a) below in the ordinary course of business. It is likely that such transactions will occur annually. Kwantas shareholders had, during the EGM of the Company held on 19 December 2002, approved a mandate for recurrent related party transactions. The said mandate will expire at the conclusion of the forthcoming AGM of the Company to be held on 10 December 2003 and the Proposed Renewal of Shareholders Mandate is set out in Section 2.1.3 (a) herein. Proposed New Shareholders Mandate For Additional Recurrent Related Party Transaction In addition to the existing recurrent related party transactions entered into by the Company as provided under Section 2.1.2 (a), the Company will be entering into another Recurrent Transaction of a revenue or trading nature with Related Party in the ordinary course of business which is necessary for the Group s day to day operations as provided under Section 2.1.2 (b). A new shareholder mandate will have to be obtained for such additional transaction at the forthcoming AGM of the Company to be held on 10 December 2003. Hence, in compliance with Paragraph 10.09 of the Listing Requirements, the Company now proposes to seek shareholders approval for both Proposed Shareholders Mandate as set out under Section 2.1.3 (a) and Section 2.1.3 (b). These Proposals, if approved at the forthcoming AGM, will continue to be in force until : the conclusion of the next AGM of Kwantas following the general meeting at which mandate is passed, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed; 2 -
(ii) (iii) the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extensions may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by resolution passed by the shareholders in general meeting, whichever is earlier. Disclosure will be made in accordance with Section 4.1.5 of KLSE Practice Note No. 12/2001, which requires a breakdown of the aggregate value of the recurrent related party transactions entered into during the financial year, including amongst others, the following information: (ii) the type of recurrent related party transactions; and the names of the Related Parties involved in each type of Recurrent Transactions entered into and their relationship with the Company, pursuant to the shareholders mandate during the current financial year in the Company s annual report, and in the annual reports for subsequent financial years that the Proposed Renewal of Shareholders Mandate and Proposed New Shareholders Mandate continue to be in force. 2.1.2 (a) Classes of Recurrent Related Party Transactions Contemplated Under The Proposed Renewal of the Existing Shareholders Mandate The shareholders mandate will apply to transactions with the following related parties: Related party Principal activities Relationship with Kwantas and/or its subsidiaries FCSB FSB Road construction, civil works and trading of stones, sandbricks and culverts Hiring of scows and other equipment, sales of sand and trading of logs Kwan Ngen Wah and Kwan Ngen Chung are directors and major shareholders of both Kwantas and FCSB Kwan Ngen Wah and Kwan Ngen Chung are directors of both Kwantas and FSB. Kwang Mong Yeow and Kwan Chiew Giok who are family members of Kwan Ngen Chung and Kwan Ngen Wah are directors of FSB. Kwan Ngen Wah and Kwan Ngen Chung are major shareholders of Kwantas and are deemed major shareholders of FSB by virtue of their major shareholdings in KAH. Kwang Mong Yeow and Kwan Chiew Giok are deemed major shareholders of FSB by virtue of their major shareholdings in KAH. LDTSB Operation of a tyre retreading factory and the wholesale and retail of tyres, batteries, lubricant and general servicing Kwang Mong Yeow and Kwan Bee Giok are family members of Kwan Ngen Chung and Kwan Ngen Wah, the directors and major shareholders of Kwantas. They are directors of LDTSB and deemed major shareholders of LDTSB by virtue of their major shareholdings in KAH. (b) Classes of Recurrent Related Party Transactions Contemplated Under The Proposed New Shareholders Mandate The new shareholders mandate will apply to transaction with the following related party: Related party Principal activity Relationship with Kwantas and/or its subsidiaries USGI Operation of a product tanker Kwan Ngen Wah and Kwan Ngen Chung are directors of both Kwantas and USGI. Kwang Mong Yeow and Kwan Chiew Giok who are family members of Kwan Ngen Wah and Kwan Ngen Chung are directors of WKSB. 3 -
Kwan Ngen Wah and Kwan Ngen Chung are major shareholders of Kwantas and are deemed major shareholders of USGI by virtue of their major shareholdings in WKSB. 2.1.3 (a) Nature of Recurrent Related Party Transactions Contemplated Under The Proposed Renewal of the Existing Shareholders Mandate Existing recurrent related party transactions for which approval is now being sought for the Proposed Renewal of Shareholders Mandate at the forthcoming AGM: Details of Transaction 1. The supply of diesel by Kwantas Oil Sdn Bhd, a wholly-owned subsidiary of Kwantas to FCSB and FSB 2. The supply of tyres by LDTSB to Kwantas Group Value of transaction for the financial year ended 30 June 2003 Estimated annual value of transactions during the validity of Proposed Renewal RM 000 RM 000 1,527 4,500 825 1,500 Total 2,352 6,000 (b) Nature of Recurrent Related Party Transaction Contemplated Under The Proposed New Shareholders Mandate Detail of Transaction 1. The provision of product tanker chartering services by USGI to Kwantas Oil Sdn Bhd, a wholly owned subsidiary of Kwantas During the validity of the Proposed New Shareholders Mandate Estimated annual value of transaction RM 000 RM 000-25,000 2.1.4 Methods or Procedures for Determining Transaction Price The procedures for determining the price of diesel, tyres and freight charges are as follows: (ii) (iii) Kwantas will obtain quotation from various sources in relation to diesel, tyres and freight charges on a regular basis; and The Purchasing Department of Kwantas will decide to purchase the raw materials from suppliers based on factors such as price, quality, reliability and timing of delivery. The purchase prices of these raw materials are negotiated between Kwantas and the supplier based on the prevailing market prices at the time of negotiation. The Marketing and Trading Department of Kwantas will negotiate the chartering rates with USGI in accordance with the prevailing market prices based on factors such as timing of delivery, destination port, quantity and type of products carried, and prices are fixed on a voyage by voyage basis based on the prevailing market prices at the time of negotiation. 4 -
2.1.5 Review Procedures for Recurrent Related Party Transactions To ensure that the recurrent related party transactions are conducted at arms length on normal commercial terms which is consistent with Kwantas Group s usual business practices, the management of Kwantas will ensure that these recurrent related party transactions will only be entered into after taking into consideration, inter alia, the pricing, quality of product, timing of delivery, quantity and other related factors on terms not more favourable to the Related Parties than those generally available to the public and not to the detriment of the minority shareholders of Kwantas. The following procedures have been established by Kwantas to ensure that such Recurrent Transactions are conducted at arm s length and on normal commercial terms and on terms not more favourable to the Related Parties than those generally available to the public and not to the detriment of the minority shareholders: (ii) (iii) (iv) (v) Any tender, quotation or contract received from or proposed to be entered into with a Related Party will not be approved unless the terms offered to Kwantas and its subsidiaries are comparable with those offered by other unrelated parties for the same or substantially similar type of transactions; Records will be maintained by the Company to capture all recurrent related party transactions entered into pursuant to the Proposals; The annual internal audit plan shall incorporate a review of all recurrent related party transactions entered into pursuant to the Proposals to ensure that relevant approvals have been obtained and review procedures in respect of such transactions are adhered to; The Board and the Audit Committee shall review the internal audit reports and/or any other reports required from time to time to ascertain that the guidelines and procedures established to monitor all transactions with Related Parties to ensure compliance with the guidelines and procedures and the review shall be done at least once a year; and The Board and the Audit Committee have reviewed the procedures and shall continue to review the procedures as and when required, with the authority to sub-delegate to individuals or committees within the Company as they deem appropriate. If a member of the Board and the Audit Committee has an interest in the transaction to be reviewed by the Board and the Audit Committee as the case may be, he will abstain from any decision making by the Board and the Audit Committee in respect of that transaction. Further, where any director or any person connected with him has an interest (direct or indirect) in any related party transaction, such director shall abstain from deliberating and voting on the matter in Board meetings. Where any member of the Audit Committee is interested in any transaction, that member shall abstain from voting on any matter relating to any decision to be taken by the Audit Committee in respect of such transactions. Pursuant to Paragraph 10.09 of the Listing Requirements, the management of Kwantas will ensure that the interested director, major shareholder or person connected with a director or major shareholder and where it involves the interest of an interested person connected with a director or major shareholder, such director or major shareholder, shall not vote on the ordinary resolution approving the transactions. Interested directors or interested major shareholders must ensure that persons connected with them abstain from voting on the ordinary resolution approving the transactions. Disclosure will be made in the annual report of the Company of the aggregate value of transactions conducted pursuant to the Proposed Renewal of Shareholders Mandate and Proposed New Shareholders Mandate during the financial year. Disclosure will also be made in the annual reports of the Company for subsequent financial years during which the shareholders mandate remain in force. 5 -
2.1.6 Audit Committee Statement The Audit Committee will review the relevant recurrent related party transactions and also review the established guidelines and procedures to ascertain that they have been complied with. The Audit Committee is of the view that the said procedures are sufficient to ensure that the recurrent related party transactions will be conducted at arm s length in accordance with the Company s normal commercial terms and are not more favourable to the Related Parties than those generally available to the public and are not to the detriment of minority shareholders of the Company. Currently, the Audit Committee comprises the following directors: Name Designation in Audit Committee Designation on the Board Datuk Jaswant Singh Kler Chairman Independent Non-Executive Director Kwan Ngen Chung Member Managing Director Ooi Jit Huat Member Independent Non-Executive Director If, during its periodic reviews, the Audit Committee should be of the view that such guidelines and procedures are no longer appropriate or adequate to ensure that recurrent related party transactions will be carried out at arm s length and on normal commercial terms or will be prejudicial to the interests of shareholders, the Company will seek a new mandate from shareholders based on new guidelines and procedures. 3. RATIONALE 3.1 Proposed Renewal of Shareholders Mandate The recurrent related party transactions envisaged in the Proposed Renewal of Shareholders Mandate are in the ordinary course of business of the Kwantas Group. These are recurring transactions of a revenue or trading nature which are likely to occur with some degree of frequency. These transactions may be constrained by the time-sensitive nature of such transactions and it may be impractical to seek shareholders approval on a case-by-case basis before entering into such transactions. By obtaining the Proposed Renewal of Shareholders Mandate and the renewal of the same on an annual basis, the necessity to convene separate general meetings from time to time to seek shareholders approval as and when such recurrent related party transactions occur can be dispensed with. This would reduce substantial administrative time, inconvenience and expenses associated with the convening of such meeting, without compromising the corporate objectives of the Group or adversely affecting the business opportunities available to the Kwantas Group. Most importantly, the goods and services supplied by the Related Parties are priced competitively and the close and long-term business relationship between the Group and these companies have enhanced the Group s operating capabilities in overall. All these transactions are carried out on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public and are not to the detriment of the minority shareholders. 3.2 Proposed New Shareholders Mandate The recurrent related party transaction envisaged in the Proposed New Shareholders Mandate is in the ordinary course of business of the Kwantas Group. This is recurring transaction of a revenue or trading nature which is likely to occur with some degree of frequency. This transaction may be constrained by the time-sensitive nature of such transaction and it may be impractical to seek shareholders approval on a case-by-case basis before entering into such transaction. By obtaining the Proposed New Shareholders Mandate and the renewal of the same on an annual basis, the necessity to convene separate general meetings from time to time to seek shareholders approval as and when such recurrent related party transaction occurs can be dispensed with. This would reduce substantial administrative time, inconvenience and expenses associated with the convening of such meeting, without compromising the corporate objectives of the Group or adversely affecting the business opportunities available to the Kwantas Group. 6 -
Furthermore, the chartering services provided by the Related Party are priced competitively in accordance with the prevailing market prices determining by factors such as timing of delivery, destination port, quantity and type of products carried. Such prices are fixed on a voyage by voyage basis. This transaction is carried out on normal commercial terms which is not more favourable to the related party than those generally available to the public and is not to the detriment of the minority shareholders. 4. FINANCIAL EFFECTS 4.1 Share Capital The Proposals will not have any effect on the share capital of the Company. 4.2 Earnings 4.3 NTA The Proposals are not expected to have any significant effect on the earnings of the Group for the financial year ending 30 June 2004. The Proposals are not expected to have any material effect on the NTA of the Group. 4.4 Major Shareholding Structure The Proposed Renewal of Shareholders Mandate and Proposed New Shareholders Mandate will not have any effect on the major shareholding structure of the Company. 5. CONDITIONS The Proposed Renewal of Shareholders Mandate for the Recurrent Related Party Transactions of a Revenue or Trading Nature and Proposed New Shareholders Mandate for Additional Recurrent Related Party Transaction of a Revenue or Trading Nature require the approval of the shareholders of the Company at the forthcoming AGM. The said Proposals when procured from shareholders of the Company at the forthcoming AGM are subject to annual renewal. 6. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS Proposed Renewal of Shareholders Mandate Proposed New Shareholders Mandate Save as disclosed below, none of the other major shareholders and/or directors and persons connected with the major shareholders and/or directors of Kwantas has any interest, direct or indirect, in the Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions and Proposed New Shareholders Mandate for Additional Recurrent Related Party Transaction of a Revenue or Trading Nature. (ii) (iii) Kwan Ngen Chung and Kwan Ngen Wah are directors and major shareholders of Kwantas. Both of them are also directors and major shareholders of FCSB; Kwan Ngen Chung and Kwan Ngen Wah are directors and major shareholders of Kwantas. Both of them are also directors of FSB and deemed major shareholders of FSB by virtue of their major shareholdings in KAH. In addition, Kwang Mong Yeow and Kwan Chiew Giok who are directors of FSB and deemed major shareholders of FSB by virtue of their major shareholdings in KAH are also family members of Kwan Ngen Chung and Kwan Ngen Wah; Kwang Mong Yeow and Kwan Bee Giok who are directors of LDTSB and deemed major shareholders of LDTSB by virtue of their major shareholdings in KAH are family members of Kwan Ngen Chung and Kwan Ngen Wah; 7 -
(iv) (v) Kwan Ngen Chung and Kwan Ngen Wah are directors and major shareholders of Kwantas. Both are also directors and deemed major shareholders of USGI. Kwan Min Nyet and Kwan Jin Nget who are directors of Kwantas and are also family members of Kwan Ngen Chung, Kwan Ngen Wah, Kwang Mong Yeow, Kwan Bee Giok and Kwan Chiew Giok. The details of shareholdings in Kwantas held by interested Directors as at 20 October 2003 are as follows : Name Direct % Indirect % Kwan Ngen Chung 40,250,000 28.53 - - Kwan Ngen Wah 40,250,000 28.53 - - Kwan Min Nyet 100,000 0.07 - - Kwan Jin Nget 100,000 0.07 - - Kwan Ngen Chung, Kwan Ngen Wah, Kwan Min Nyet and Kwan Jin Nget are therefore deemed interested in the Proposed Renewal of the Existing Shareholders Mandate and Proposed New Shareholders Mandate and accordingly, have abstained and shall abstain from deliberation at Board Meetings of the Company on the Proposals. They will also abstain from voting on the resolution in respect of their direct and indirect shareholdings in relation to the Proposals at the forthcoming AGM and also undertake to ensure that persons connected with them will be abstained from voting on the same resolution. 7. DIRECTORS RECOMMENDATION Having considered the rationale and all relevant aspects of the Proposals, your Directors (except for Kwan Ngen Chung, Kwan Ngen Wah, Kwan Min Nyet and Kwan Jin Nget) are of the opinion that the Proposals are fair and reasonable and are in the best interest of Kwantas and its shareholders. Your Board, with the exception of Kwan Ngen Chung, Kwan Ngen Wah, Kwan Min Nyet and Kwan Jin Nget who are interested in the Proposals and have refrained from making any recommendation on the Proposals, recommends that you vote in favour of the ordinary resolutions pertaining to the Proposals to be tabled at the forthcoming AGM of the Company. 8. ANNUAL GENERAL MEETING For the purpose of approving the Proposals, an AGM, the notice of which is enclosed with this Circular, will be held at 4 th Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah on 10 December 2003 at 10.00 a.m. You will find with this Circular, a Form of Proxy which (if you are unable to attend) you are requested to complete, sign and return in accordance with the instructions printed thereon as soon as possible to be deposited at Registered Office of the Company at 1 st Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, not less than forty-eight (48) hours before the time of convening the AGM. The completion and lodgement of the Form of Proxy will not, however, preclude you as shareholder from attending and voting in person at the AGM should you find that you are subsequently able to do so. 8 -
9. FURTHER INFORMATION Shareholders are requested to refer to the attached appendix for further information. Yours faithfully, for and on behalf of KWANTAS CORPORATION BERHAD DATO MOHD SARIT BIN HAJI YUSOH Chairman 9 -
APPENDIX I FURTHER INFORMATION 1. Directors Responsibility This Circular has been seen and approved by the Board of Kwantas who 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 facts the omission of which would make any statement in this Circular misleading. 2. Material Contracts Kwantas and its subsidiaries have not entered into any material contract (not being contracts entered into in the ordinary course of business) within two(2) years preceding the date of this Circular. 3. Material Litigation Save as disclosed below, Kwantas and its subsidiaries are not engaged in any material litigation, claims or arbitration, either as plaintiff or defendant and the Board of Kwantas are not aware of any proceedings pending or threatened against Kwantas and its subsidiaries or any facts likely to give rise to any proceedings which might materially affect the position and business of Kwantas and its subsidiaries: On 28 June 1989, a suit was brought against Kwantas Plantations Sdn Bhd ( Defendant ) by Goh Brothers (M) Sdn Bhd ( Plaintiff ) for a sum of RM4,221,031.10. At the trial and in the submission of the Plaintiff s counsel, the Plaintiff s claim was revised to RM1,140,934.80 being damages for breach of contract. The Plaintiff has abandoned the claim for loss of profit and additional costs incurred by the Plaintiff as a result of the Defendant s termination of the contract. The Plaintiff s claim was dismissed on 25 September 1996 with costs. The trial judge had found that the Defendant s termination of the contract was lawful. The Plaintiff had filed an appeal to the Court of Appeal on 18 October 1996 whilst the Defendant had filed a Cross Appeal on 02 December 1996. Hearing was fixed by the Court of Appeal on 03 July 2003 and the Plaintiff s appeal was once again dismissed by the Court of Appeal with costs after conclusion of the hearing on 03 July 2003. (ii) On 18 March 1998, a suit was brought against Kwantas Oil Sdn Bhd ( 1 st Defendant ) and the Company ( 2 nd Defendant ) by RHB Bank Bhd ( Plaintiff ) under the Suit No. KL High Court D2-22-670-98. The Plaintiff claimed against Kwantas Oil Sdn Bhd and the Company for the sum of RM7,907,838.54 for losses incurred under two foreign exchange contracts together with interest and cost. In respect of the 1 st foreign exchange contract, judgement for the sum of RM2,679,950.00 together with interest had been obtained by the Plaintiff on 02 December 1998 and the Company had subsequently made payment of the sum of RM3,237,846.46 to the Plaintiffs on 24 March 1999. Both the Plaintiffs and Defendants have appealed. The Plantiffs appealed for the whole of the sum claimed was dismissed on 24 July 2002. The Defendants appealed against the quantum of the said judgement is fixed for mention on 01 December 2003 pending the application to admit fresh evidence by the Defendants which also fixed on 01 December 2003. In respect of the 2 nd foreign exchange contract, the Plaintiff is claiming RM5,144,066.32 together with interest. The Plaintiffs application for summary judgement and the Defendants application for extension of time to provide Bankers Guarantee was heard and the Court has yet to fix a date for their decision. The Company s lawyers are of the opinion that the Company has a good prospect of succeeding in this litigation. 10 -
APPENDIX I 4. Documents Available for Inspection Copies of the following documents will be available for inspection at the Registered Office of Kwantas at 1 st Floor, Fordeco Building, Jalan Singamata, Lahad Datu, 91100 Sabah during normal office hours on Mondays to Fridays (except public holidays) from the date of this Circular up to and including the date of AGM referred to in this Circular: Memorandum and Articles of Association of Kwantas; (ii) Audited accounts of the Kwantas Group for the past two (2) years ended 30 June 2002 and 2003 ; and (iii) Writs of summons mentioned in paragraph 3 above. 11 -