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| CONVERSION OF LONG TERM RECEIVABLE FROM SUBSIDIARY INTO INVESTMENT |
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| CONVERSION OF LONG TERM RECEIVABLE FROM SUBSIDIARY INTO INVESTMENT 1. INTRODUCTION The Board of Directors of Hock Seng Lee Berhad (HSLB or the Company) is pleased to announce the conversion of its long term receivable of RM60 million from its wholly owned subsidiary, Hock Seng Lee Construction Sdn Bhd (HSLC or the Issuer) into investment in the subsidiary. 2. THE CONVERSION 2.1 Details of the conversion HSLB has converted its long term receivable of RM60 million from HSLC into investment in the subsidiary by the subscription of 600,000 new redeemable preference shares of RM1.00 each at RM100 per share for a total consideration of RM60 million in HSLC, all as fully paid up (‘the Conversion”). 2.2 Background Information on HSLC HSLC was incorporated in Malaysia on 27 December 1994 under the Companies Act, 1965 ("Act") as a private limited company. At present, the authorised share capital of HSLC is RM5,000,000 comprising 4,000,000 ordinary shares of RM1.00 each and 1,000,000 redeemable preference shares of RM1.00 each of which 1,000,000 ordinary shares and 600,000 redeemable preference shares have been issued and fully paid. HSLC is a wholly owned subsidiary of HSLB and is the property development arm of the Group. Property development is expected to continue generating positive earning for the Group. The list of directors of HSLC are set out in Table 1(a) whilst a summary of the financial results of HSLC for the past five (5) financial years ended 31 December 2008 are set out in Table 1(b). 2.3 Rights and privileges of the new shares The new preference shares confer upon the holders thereof the following rights and privileges and are subject to the following conditions:- i The preference shares are redeemable in whole or in part at the option of the Issuer by giving one (1) month’s notice to the holders of the shares. Such shares so redeemed shall be redeemed at RM100 per share ie the full premium at which they were issued. ii Dividends on preference shares shall be decided at the sole discretion of the directors of the Issuer and are non-cumulative. iii The preference shares shall rank ahead both as regards to payment of dividends and repayment of capital in priority to all classes of shares of the Issuer. iv The holders of the preference shares are entitled to receive notices of General Meetings, Reports, and Balance Sheets and to attend General Meetings but shall only have the rights to vote in the following circumstances and not otherwise: a. On a proposal to reduce the Issuer’s share capital or share premium account. b. On a proposal that affects the rights attached to the preference shares. c. On a proposal to wind up the Issuer d. On a proposal for the disposal of the whole or a substantial part of the Issuer’s property, business and undertaking. e. On a proposal to alter the Memorandum and Association and Articles of the Association of the Issuer. 2.4 Basis Of Arriving At The Consideration The Conversion is on terms mutually agreed and is in the best interest of both parties. 2.5 Implications under the Malaysian Code on Take-Overs and Mergers, 1998 ("Code") HSLC is a wholly owned subsidiary of HSLB. As such the new issue of shares by HSLC to HSLB has no implication under the Code. 2.6 The date on which the terms of the Conversion was agreed upon The terms of the Conversion were agreed upon on 22 December 2009. 2.7 Risk Factors The Conversion does not change the risk profile and has no effect on the cash flow of the Company, HSLC or the Group. 2.8 Approval The Conversion does not require the approval of shareholders of the Company or any relevant Government authorities. 2.9 Applicable percentage ratio The highest percentage ratio applicable to the Conversion pursuant to paragraph 10.02(g) of the Listing Requirements of Bursa Malaysia Securities Berhad is 24.7%. 3. RATIONALE FOR THE CONVERSION HSLC is a wholly owned subsidiary of HSLB and is the property development arm of the Group. The major funding of HSLC’s business activities came from HSLB’s internally generated funds. The long term payable by HSLC was interest free and payable at the discretion of HSLC. This is synonymous with an equity instrument under the definition of FRS 139: Financial instruments: recognition and measurement. The Conversion is to formalize the long term debt into equity. 4. EFFECTS OF THE CONVERSION The Conversion does not have any effects on the share capital, earnings per share, net assets per share, gearing, substantial shareholders’ shareholding and dividend payments of HSLB. 5. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTERESTS None of the directors and/or major shareholders of HSLB and/or persons connected to the directors and/or major shareholders of HSLB has any interest, direct or indirect, in the Conversion. 6. DIRECTORS' STATEMENT The Board, having taken into consideration all aspects of the Conversion, is of the opinion that the Conversion is in the best interest of the Company and the Group. 7. DOCUMENT AVAILABLE FOR INSPECTION The Letter of Acceptance for the Provisional Allotment of shares in respect of the Conversion may be inspected at the registered office of HSLB at Lot 1004, Jalan Kwong Lee Bank, 93450 Kuching Sarawak during business days from 9.00 am to 5.00 pm for a period of 14 days from the date of this announcement. This announcement is dated 22 December 2009 |
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Table 1 - Information on HSLC.pdf