News

Contents :

Introduction

We wish to announce that Tan Chong Motor Holdings Berhad ("TCMH") intends to subscribe for 50% of the share capital in a limited liability company to be established in Thailand with the name TC Capital (Thailand) Co. Ltd. ("TCCT") to undertake automotive hire-purchase business. Nissan Diesel (Thailand) Co Ltd ("NDT"), a wholly-owned subsidiary of Tan Chong International Limited ("TCIL") will subscribe for the remaining 50% of the share capital in the said company.

TCIL is a public company whose shares are listed and quoted on The Hong Kong Stock Exchange. TCIL and its group of companies ("TCIL Group") are involved in activities including the distribution of motor vehicles, heavy commercial vehicles, hire purchase financing.

Tan Chong Consolidated Sdn Bhd ("TCC") is a direct major shareholder of TCMH and TCIL. Dato’ Tan Heng Chew, the Executive Deputy Chairman and a director of TCMH, by virtue of his shareholding in TCC, is deemed a major shareholder of TCMH and TCIL. Dato’ Tan Heng Chew is also a director of TCC. Mr Tan Eng Soon, the Managing Director of TCMH, by virtue of his shareholding in TCC is also deemed a major shareholder of TCMH and TCIL. Mr Tan Eng Soon is also a director of both TCC and TCIL. TCIL and NDT are persons connected with TCC, Dato’ Tan Heng Chew and Mr Tan Eng Soon for the purposes of the Listing Requirements of Kuala Lumpur Stock Exchange ("KLSE LR"). This investment is therefore deemed to be a related party transaction under Chapter 10 of the KLSE LR.

Background and rationale for the project

TCMH and its group of companies ("TCMH Group") have been involved in the automotive business as well as automotive financing activities for over two decades. As at the end of 2002, the TCMH Group had built up a sizable hire-purchase loan portfolio of RM266 million. The non-performing loans from the hire purchase business have been consistently kept below 1%. As at the end of 2002 the TCMH Group also had a cash balance of RM120 million and investment in money market funds of RM49 million which could be readily turned into cash.

The TCMH Group is constantly looking for opportunities to expand its business in areas of its core competence. Such an opportunity arose recently when its business partner, the TCIL Group decided to set up a new company to undertake the automotive financing business in Thailand following the TCIL Group’s acquisition of the distribution business of Nissan Diesel trucks in Thailand late last year. Subsequently the TCIL group invited TCMH to invest in TCCT.

This investment will allow the TCMH Group to diversify its revenue base in the rapidly expanding economy of Thailand.

Information on TCCT

TCCT, upon incorporation, will have an initial registered share capital of Bt 50,000,000 (about RM4.50 million assuming an exchange rate of RM0.90 to Bt 10) comprising 5,000,000 shares of Bt10 each, all of which will rank pari passu.

Its share capital will be increased progressively as business expands. TCCT is also expected to raise additional funds through borrowings in Thailand to fund its lending activities.

The relationship between TCCT’s shareholders will be governed by the provisions in the Memorandum and Articles of Association of TCCT.

Financial effect of the investment

The total financial commitment of TCMH in the form of subscription for 50% of the share capital in TCCT for the foreseeable period up to the end of 2004 is estimated at Bt 125 million or RM11.25 million including the initial subscription for 2,500,000 shares in TCCT of Bt10 per share of the aggregate sum Bt 25 million (equivalent to approximately RM2.25 million). The total financial commitment of TCMH will be funded by TCMH partly from its internal resources. The investment is not expected to contribute significantly to the Group’s revenue and profit in the immediate term during the initial start up but is expected to produce reasonable rates of return over the medium term.

Approval and consent

TCMH had on 8 September 2003 obtained the approval of the Controller of Foreign Exchange to remit funds of up to RM11.25 million for investment in TCCT. This investment does not require the approval of the shareholders of TCMH as the applicable percentage ratio set out in Chapter 10 of the KLSE LR in relation to the investment is less than 5%.

As and when appropriate, TCMH will seek its shareholders’ approval (if required) and make such announcement in accordance with the KLSE LR in respect of any related party transactions undertaken by the TCMH Group involving TCCT in the future.

TCCT will be applying to the Board of Investment of Thailand for its approval for TCCT to operate a hire purchase lending business as a wholly foreign-owned company.

Disclosure of interest of directors and major shareholders and persons connected with directors or major shareholders

Except for the disclosures made in relation to TCC, Dato’ Tan Heng Chew, Mr. Tan Eng Soon, TCIL, NDT, none of the other directors and major shareholders of TCMH and the persons connected with such directors or major shareholders has any interest direct or indirect in the above arrangement.

Directors recommendation

The Board of Directors of TCMH is of the opinion that the investment in TCCT to be undertaken is in the best interest of TCMH.