Contents :

1.0 INTRODUCTION
 

The Board of Directors of Asiatic Development Berhad("Asiatic" or the "Company") is pleased to announce that two of its subsidiary companies listed in Section 2.1 (hereinafter collectively referred to as the "Purchasers") have entered into several conditional Sale and Purchase Agreements ("Conditional SPA") with several vendors listed in Section 2.1 (hereinafter collectively referred to as the "Vendors") on 22 May 2002 to acquire several pieces of agricultural land at various stages of oil palm cultivation measuring approximately 13,864 acres together with a 30 metric tonnes per hour palm oil mill, all of which located at Bukit Garam, District of Kinabatangan, Sandakan, Sabah (the said "Property") for a total cash consideration of RM134.0 million (the "Proposed Acquisition").

2.0 DETAILS OF THE PROPOSED ACQUISITION


2.1 Particulars of assets to be acquired

SDC – Sabah Development Company Sdn Bhd (Company No. 22672-V)
ASB – Asiaticom Sdn Bhd (Company No. 180770-V)
AMSB – Abadi Mewah Sdn Bhd (Company No. 147597-T)
TDSB – Transgrand Development Sdn Bhd (Company No. 154431-D)
PDSB – Panaroma Development Sdn Bhd (Company No. 84008-M)


2.2 Oil Palm Estates
 

The Oil Palm Estates are held under country leases expiring on dates as stated in Section 2.1 with unexpired lease period ranging from 81 years to 888 years and are situated about 95 km from Sandakan at a site which is west of Sandakan-Lahad Datu highway and northwest of Bukit Garam town.

The plantation profile of the Oil Palm Estates is as follows:

Description	Year of Planting	Area (acres)
Prime	Above 6 years	7,704.90
Matured	4 to 6 years	3,545.97
Immatured	1 to 3 years	655.22
Unplanted	-	1,958.39
Total		13,864.48

2.3 Palm Oil Mill

The Palm Oil Mill comprising the mill infrastructure and building, labour and staff quarters is situated on a 74-acre site next to the Oil Palm Estates. It was commissioned in December 1977 with a capacity of 30 metric tonnes per hour.
 

2.4 Other Estates' and Mill's Assets

Other Estates' and Mill's Assets include the plant and machineries, motor vehicles, furniture and fittings, office equipment and electrical appliances.


 

2.5 Purchase Consideration of the Proposed Acquisition

The purchase consideration of RM134.0 million was arrived at on a "willing buyer-willing-seller" basis after taking into account the plantation profile of the Oil Palm Estates and the prevailing market prices of agricultural land. The Company has not conducted any valuation exercise on the said Property.

The purchase consideration is to be satisfied wholly in cash and to be financed through internally generated funds.
 

2.6 Net Book Value / Original Cost of Investment of the Said Property
 

Based on the information provided by the Vendors, the net book value of the said Property as at 31 March 2002 is RM68.94 million and the original cost of investment of the said Property is RM77.05 million. In addition, the Oil Palm Estates were purchased over a period from August 1991 to February 1997.

3.0 SALIENT FEATURES OF THE CONDITIONAL SPA

3.1 Conditions Precedent

The Proposed Acquisition is interdependent and is subject to the following conditions being satisfied within 6 months from the date of the Conditional SPA:
(i) the approval of Foreign Investment Committee being obtained;
(ii) the approval of the Department of Environment being obtained;
(iii) the approval of Malaysian Palm Oil Board being obtained;
(iv) the completion of a due diligence to the satisfaction of the Purchasers; and
(v) any other approvals from the relevant authorities as may be required.

3.2 Payment Term
 

The purchase consideration is to be paid in the following manner:
(i) 10% of the purchase consideration in the sum of RM13.4 million was paid upon execution of the Conditional SPA; and
(ii) the balance of the purchase consideration in the sum of RM120.6 million is payable upon completion.

4.0 INFORMATION ON PURCHASERS

4.1 Information on SDC

SDC, a wholly owned subsidiary of Asiatic, was incorporated in Malaysia under the Companies Act, 1965 on 28 April 1962 with an authorised share capital of 60,000,000 shares of RM1.00 each and an issued and paid up share capital of RM54,000,0000 ordinary shares. It is principally involved in the production, processing and sale of palm products. It currently owns a total land bank of approximately 16,000 acres of oil palm estate located in Sabah. Its other major assets consist of 2 palm oil mills with a total capacity of 100 metric tonnes per hour.

4.2 Information on ASB
 

ASB, a 70% owned subsidiary of Asiatic, was incorporated in Malaysia under the Companies Act, 1965 on 10 April 1990 with a present authorised and issued and paid up share capital of RM525,000 and RM10.00 respectively. It is currently dormant.

5.0 INFORMATION ON VENDORS

5.1 Information on AMSB
 

AMSB was incorporated in Malaysia under the Companies Act, 1965 on 20 November 1985 and it is principally involved in the cultivation of oil palm. It has an authorised and issued and paid up capital of RM25,000,000 and RM18,000,000 respectively.

5.2 Information on TDSB
 

TDSB was incorporated in Malaysia under the Companies Act 1965 on 7 December 1982 with a present authorised and issued and paid up capital of RM25,000 and RM5,000 respectively. Its principal activity is investment in land.
 

5.3 Information on PDSB
 

PDSB was incorporated in Malaysia under the Companies Act 1965 on 9 July 1986 with a present authorised and issued and paid up capital of RM25,000 and RM13 respectively. Its principal activity is investment in land.

6.0 RATIONALE OF THE PROPOSED ACQUISITION

The Proposed Acquisition is in line with Asiatic's long term strategy in furthering its plantation interest given its continued faith in oil palm business and represents a positive step towards realising the Group's vision of establishing itself a major player in the industry. Accordingly, the Proposed Acquisition will expand Asiatic land bank by 13,864 acres to over 142,200 acres, an increase of 11%, hence enlarging the existing operation to benefit from economy of scale whilst widening Asiatic's earning base to improve profitability.
 

7.0 PROSPECT
 

The future prospects of the oil palm business are expected to be reasonably good mainly due to the following reasons:

· The expected continued growth in demand for edible oils in tandem with the increase in worldwide population, which will be partly fulfilled by palm oil;
· The increasing share of palm oil in the edible oils market in view of its superior nutritional strength and health attributes; and
· Its productivity and cost efficiency has ranked palm oil among the most competitively produced edible oils.

8.0 RISK FACTORS
 

The Group is operating in an ever-changing environment and is susceptible to certain business risks inherent in the oil palm industry. The risk factors associated with the Proposed Acquisition include, among others:

· Fluctuation in prices of crude palm oil and palm kernel;
· Unfavourable local and global weather patterns which affect the production of fresh fruit bunches;
· Constraints and rising costs of labour;
· Threats of substitute products;
· Diseases or crop pests;
· More stringent environment and conservation regulations; and
· Changes in political, economic and legislative conditions.

9.0 FINANCIAL EFFECT

9.1 Share Capital and Substantial Shareholders' Shareholding

The Proposed Acquisition will not have any effect on the share capital or the substantial shareholders' shareholding in the Company.
 

9.2 Net Tangible Asset and Earning Per Share
 

The Proposed Acquisition will not have any material impact on the net tangible assets of the Group based on its audited accounts for the financial year ended 31 December 2001 and is not expected to have any material effect on the earnings of the Group for the current financial year ending 31 December 2002. However, given the Company's continued faith in the long term viability of the oil palm business through greater awareness of the products' intrinsic properties and price competitiveness, the Proposed Acquisition is expected to contribute positively towards the earnings of the Group in the future.

10.0 DIRECTORS' AND/OR SUBSTANTIAL SHAREHOLDERS INTEREST

None of the directors or persons connected to the directors of the Company has any interest, direct or indirect, in the Proposed Acquisition. To the best of the knowledge of the directors, none of the substantial shareholders or persons connected to the substantial shareholders of the Company has any interest, direct or indirect, in the Proposed Acquisition.

11.0 DIRECTORS' RECOMMENDATION

The Directors, after careful deliberation, are of the opinion that the Proposed Acquisition is in the best interest of the Company.

12.0 ESTIMATED TIME FRAME FOR COMPLETION
 

The Proposed Acquisition is expected to be completed within 6 months upon execution of the Conditional SPA.

13.0 DOCUMENTS FOR INSPECTION
 

The Conditional SPA will be available for inspection at the registered office of the Company during normal office hours on any working day for a period of one month commencing on the date of this announcement.

TAN SRI MOHD AMIN BIN OSMAN
Chairman
Asiatic Development Berhad