Details of Announcement

Contents :

1. INTRODUCTION
This announcement is dated 29 November 2002.

On behalf of the Board of Directors of Kia Lim, AmMerchant Bank Berhad (formerly known as Arab-Malaysian Merchant Bank Berhad) (" AmMerchant Bank ") wishes to announce the proposed renounceable two-call rights issue of up to 24,215,500 new Shares at an indicative issue price of RM1.00 per Share on the basis of one (1) new Share for every two (2) existing Shares (" Proposed Two-Call Rights Issue").
2. DETAILS OF THE PROPOSED TWO-CALL RIGHTS ISSUE

2.1 The Proposed Two-Call Rights Issue
The Proposed Two-Call Rights Issue of up to 24,215,500 new Shares ("Rights Shares") at an indicative issue price of RM1.00 per Rights Share is to be implemented on a renounceable basis of one (1) new Share for every two (2) existing Shares held on an entitlement date to be determined later by the Board of Directors of Kia Lim.

The proposed issue price of RM1.00 will be payable in two (2) calls i.e. the first call of RM0.50 per Rights Share payable in cash on application and the second call of RM0.50 per Rights Shares payable out of the Company's share premium account and asset revaluation reserve. The second call of RM0.50 per Rights Shares will be payable immediately after the issue of the Rights Shares and therefore, subscribing shareholders will not have to bear any further cash payment after the first call.

2.2 Reserves Available for Capitalisation

The Proposed Two-Call Rights Issue would entail the capitalisation of approximately RM12.11 million of the Company’s reserves of which the Company has proposed to capitalise from its Share Premium and Revaluation Reserve accounts. Based on Kia Lim’s audited accounts as at 31 December 2001, the Share Premium account balance available for the capitalisation stood at RM7,283,230.

To meet, inter alia, the required level of reserves for the Proposed Two-Call Rights Issue, the Company proposes to undertake a revaluation of its existing land and building. The surplus arising from the difference between the book value and the new valuation amount of the assets (after retention of 20% of the new valuation amount as required by SC’s policies and Guidelines on Issue / Offer of Securities) of approximately RM16.30 million is expected to be sufficient to pay up the remaining amount attributing from the second call of RM0.50.
2.3 Basis of Pricing

The indicative issue price of RM1.00 per Rights Share, with the first call of RM0.50 per Rights Share payable in cash on application and the second call of RM0.50 per Rights Shares payable out of the Company's share premium account and asset revaluation surplus, which specifically is subject to the SC's approval, was arrived at after taking into consideration the following:-

a) the last transacted price of Kia Lim Shares on 28 November 2002 and the weighted average market price of Kia Lim Shares for the last five (5) days on which they were traded up to 28 November 2002 (being the last market day on which Kia Lim Shares were traded prior to this announcement of the Proposed Two-Call Rights Issue) are RM0.79 and RM0.78 respectively. The theoretical ex-all prices based on the above is RM0.69 for both prices. The proposed amount of the first call of RM0.50 per Rights Share payable on application represents a discount of approximately 28% to the abovementioned theoretical ex-all prices; and
b) the audited NTA of the Kia Lim Group as at 31 December 2001 of RM32.32 million or RM0.73 per Share based on the then existing share capital of 44,550,000 Shares. The amount of RM0.50 per Rights Share payable on application represents a discount of RM0.23 or 32% over the aforementioned audited NTA per Share of the Kia Lim Group.

The final Rights Issue price will be determined at a later date after all relevant approvals have been obtained.
2.4 Rationale for the Proposed Two-Call Rights Issue
After due consideration of various methods of fund-raising, the Board of Directors of Kia Lim is of the opinion that raising funds by way of a rights issue of Shares is in the longer term interest of the Company due to the following reasons:-
a) To enable the Company's capital to reflect the extent of its activities and to fund the additional working capital required for the anticipated increase in the turnover of the Kia Lim Group;

b) To enable the Company to raise the funds required at an attractive and substantially lower cost as compared to bank financing. The Proposed Two-Call Rights Issue will help Kia Lim to reduce its gearing to a lower level as well as avoid the burden of interest cost. In addition, the Group will be in a better position to capitalise on viable business opportunities due to its lower gearing position and enlarged capital base;
c) The Proposed Two-Call Rights Issue will involve the issuance of new Shares without diluting existing shareholders' equity interest assuming the shareholders subscribe for their respective entitlements;and

d) To provide an opportunity for existing shareholders to further participate in the equity of the Company.
Upon completion of the Proposed Two-Call Rights Issue, the Company will meet the minimum capital requirement of RM60,000,000 set by the Securities Commission (" SC") for companies listed on the Main Board of the Kuala Lumpur Stock Exchange (" KLSE").
2.5 Irrevocable Undertaking from Substantial Shareholders and Underwriting Arrangements
Kia Lim proposes to procure irrevocable undertakings from its substantial shareholders namely, Kia Lim Realty Sdn Bhd, Kia Lim Timber Trading Sdn Bhd, Ng Hoo Tee Holdings Sdn Bhd and certain other shareholders to subscribe for their entitlements to the Rights Shares.

The Proposed Two-Call Rights Issue will be done on a minimum subscription basis so that the enlarged share capital of Kia Lim upon the completion of the Proposed Two-Call Rights Issue will be at least RM60 million.

Further, the Company proposes to procure irrevocable undertakings from the major shareholders of Kia Lim to subscribe for such number of shares from the Excess Rights Shares Application to ensure Kia Lim have an issued and paid-up share capital of RM60 million.

A waiver will be sought if the above arrangements result in an obligation to make a mandatory take-over offer as required by the Malaysian Code on Take-overs and Mergers, 1998.

At this juncture, no underwriting arrangements have been firmed up for the Proposed Two-Call Rights Issue.
2.6 Ranking of Rights Shares
The Rights Shares shall upon allotment and issue, rank pari passu in all respects with the existing Shares of the Company except that they shall not be entitled to participate in any rights, allotments, dividends and/or any other distributions that may be declared, made or paid before the allotment date of the Rights Shares.
2.7 Utilisation of Proceeds
Based on the amount of RM0.50 per Rights Share payable on application, the gross proceed from the Proposed Two-Call Rights Issue of approximately RM12.11 million is proposed to be utilised as repayment of term loan, purchase of plant and machinery and working capital to fund the anticipated increase in the turnover of the Group and estimated expenses of the Proposed Two-Call Rights Issue. The proposed utilisation is detailed in Table 1.


3. SUMMARY OF THE FINANCIAL EFFECTS

The effects of the Proposed Two-Call Rights Issue are set out below:-
3.1 Share Capital
Based on the share capital of Kia Lim as at the date of this announcement and assuming the full exercise of all outstanding Kia Lim Employee Share Option Scheme (“ESOS”) options, the share capital of Kia Lim will be enlarged from RM44,579,000 comprising 44,579,000 Shares to RM72,646,500 comprising 72,646,500 Shares as detailed in Table 2.
3.2 Earnings
As the Proposed Two Call Rights Issue is only expected to be completed by the end of third quarter of the calendar year 2003, it is not expected to have any material effect on the earnings of the Kia Lim Group for the current financial year ending 31 December 2002. The Proposed Two Call Rights Issue is expected to contribute positively to the earnings of the Group in the future.
3.3 Net Tangible Assets ("NTA")
Based on the audited consolidated balance sheet of the Kia Lim Group as at 31 December 2001, the effects of the Proposed Two-Call Rights Issue on the Group's NTA per Share are detailed in Table 3 below.
3.4 Substantial Shareholders Structure
The Proposed Two-Call Rights Issue will not have any effect on the substantial shareholders structure of the Company as the Rights Shares will be provisionally allotted on a pro-rata basis. Accordingly, the number of Shares held by each shareholder will increase proportionately assuming the existing shareholders subscribe to their entitlements.
3.5 Dividend
In view of the loss-making position of the Group, the Company will not be declaring any dividend in respect of the financial year ending 31 December 2002.

4. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTERESTS
None of the directors and substantial shareholders of Kia Lim and persons connected with them have any interest, direct or indirect, in the Two-Call Rights Issue, beyond their entitlements under the Proposed Two-Call Rights Issue.


5. DIRECTORS' RECOMMENDATION
Having considered the rationale for the Proposed Two-Call Rights Issue, the Board is of the opinion that the Proposed Two-Call Rights Issue is in the best interest of the Kia Lim Group and its shareholders.


6. CONDITIONS TO THE PROPOSED TWO-CALL RIGHTS ISSUE
The Proposed Two Call Rights Issue are subject to the following approvals:-

a) the SC for the Proposed Two-Call Rights Issue and the revaluation of the land and building;

b) the KLSE for the listing of and quotation for the new Shares to be issued pursuant to the Proposed Two-Call Rights Issue; and

c) the shareholders of Kia Lim at an EGM to be convened.


7. APPLICATION TO THE SC
An application to the SC for the Proposed Two-Call Rights Issue is expected to be submitted within three (3) months from the date of this announcement.

8. ADVISER
AmMerchant Bank has been appointed as the Adviser for the Proposed Two-Call Rights Issue.