GADANG HOLDINGS BERHAD - National University of...

THIS ABRIDGED PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER IMMEDIATELY. If you have sold all your ordinary shares in Gadang Holdings Berhad (“Gadang”), you should at once hand this Abridged Prospectus together with the Rights Subscription Form and Notice of Provisional Allotment to the agent through whom you have effected the sale for onward transmission to the purchaser. All enquiries concerning this Rights Issue should be addressed to the Registrar of Gadang, Tenaga Koperat Sdn Bhd (118401-V), 20th Floor, Plaza Permata (formerly known as IGB Plaza), Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur.

A copy of this Abridged Prospectus, has been registered by the Securities Commission (“SC”) and together with the accompanying Rights Subscription Form and the Notice of Provisional Allotment have been lodged with the Chief Executive Officer of Companies Commission of Malaysia (formerly known as the Registrar of Companies, Malaysia) who takes no responsibility for the contents of these documents.

Approvals for the Rights Issue and the listing of and quotation for the Rights Shares on the Second Board of the Kuala Lumpur Stock Exchange (“KLSE”) have been obtained from the SC on 22 December 2000 and from the shareholders of Gadang at an Extraordinary General Meeting held on 8 May 2002. An application to the KLSE will be made within three (3) market days from the date of this Abridged Prospectus for the listing of and quotation for all the new securities on the Second Board of the KLSE to be issued pursuant to this Rights Issue, and such new securities will be admitted to the Official List of the KLSE and official quotation will commence after receipt of final approval for listing from the KLSE and confirmation from the Malaysian Central Depository Sdn Bhd that all the Central Depository System accounts of the successful applicants have been duly credited and notices of allotment have been despatched to the said successful applicants.

Neither the KLSE nor the SC takes any responsibility for the correctness or accuracy of any statements made or opinions expressed herein. Admission to the Official List and quotation of the said new ordinary shares are in no way reflective of the merits of this Rights Issue.

All the documentation relating to this Rights Issue have been seen and approved by the Directors of Gadang, and they collectively and individually accept full responsibility for the accuracy of the information given herein and confirm that, after having made all reasonable inquiries, and to the best of their knowledge and belief, there are no false or misleading statements or other facts, the omission of which would make any statement in these documents false or misleading.

The Abridged Prospectus together with the accompanying Rights Subscription Form and Notice of Provisional Allotment are not intended to be issued, circulated or distributed in countries or jurisdictions other than Malaysia and no action has been taken to ensure that the Rights Issue comply with laws of any countries or jurisdictions other than Malaysia. Entitled persons who are resident in countries other than Malaysia should therefore immediately consult their legal advisers as to whether the acceptance or sale/transfer of the provisional allotment of Rights Shares (as the case may be) would result in the contravention of any laws of such countries or jurisdictions. Gadang and Alliance Merchant Bank Berhad shall not accept any responsibility or liability in the event that any acceptance or sale/transfer of the provisional allotment of rights made by entitled persons and/or their transferee shall become illegal, unenforceable, voidable or void in such countries or jurisdictions.

The Adviser and Managing Underwriter acknowledges that, based on all available information and to the best of its knowledge and belief, this Abridged Prospectus constitutes a full and true disclosure of all material facts concerning this Rights Issue.

GADANG HOLDINGS BERHAD (278114–K) (Incorporated in Malaysia under Companies Act, 1965)

RENOUNCEABLE RIGHTS ISSUE OF 29,850,000 NEW ORDINARY SHARES OF RM1.00 EACH AT AN ISSUE PRICE OF RM1.00 PER SHARE PAYABLE IN FULL UPON ACCEPTANCE ON THE BASIS OF THREE (3) NEW ORDINARY SHARES FOR EVERY TWO (2) EXISTING ORDINARY SHARES HELD AT 5.00 P.M. ON 29 AUGUST 2002

Adviser and Managing Underwriter

IMPORTANT RELEVANT DATES

Entitlement or record date : Thursday, 29 August 2002 at 5.00 p.m.

Last day and time for sale of provisional allotment of rights : Wednesday, 18 September 2002 at 5.00 p.m.

Last day and time for transfer of provisional allotment of rights : Monday, 23 September 2002 at 12.30 p.m.

Last day and time for acceptance and payment : Tuesday, 1 October 2002 at 5.00 p.m.

Last date for excess shares application and payment : Tuesday, 1 October 2002 at 5.00 p.m.

This Abridged Prospectus is dated 5 September 2002

THE SECURITIES COMMISSION HAS APPROVED THIS RIGHTS ISSUE AND THAT THE

APPROVAL SHALL NOT BE TAKEN TO INDICATE THAT THE SECURITIES COMMISSION

RECOMMENDS THE RIGHTS ISSUE.

THE SECURITIES COMMISSION SHALL NOT BE LIABLE FOR ANY NON-DISCLOSURE ON

THE PART OF GADANG HOLDINGS BERHAD AND ASSUMES NO RESPONSIBILITY FOR THE

CORRECTNESS OF ANY STATEMENT MADE OR OPINION OR REPORTS EXPRESSED IN THIS

ABRIDGED PROSPECTUS. SHAREHOLDERS/INVESTORS SHOULD RELY ON THEIR OWN

EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT.

Company No.: 278114-K

Gadang Holdings Berhad

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DEFINITIONS Except where the context otherwise requires, the following definitions (in alphabetical order) shall apply throughout this Abridged Prospectus: “Achwell’s Vendors” : Raja Zainal Abidin bin Raja Hussin and Nik Alieza Melinee binti Nik

Mohamad “Alliance” or “Adviser” : Alliance Merchant Bank Berhad (21605-D) “Achwell” : Achwell Property Sdn Bhd (257256-D) “Board” : Board of Directors of Gadang “CCM” : Companies Commission of Malaysia (formerly known as the Registrar of

Companies) “CDS” : Central Depository System “EGM” : Extraordinary General Meeting “Entitled Shareholders” : Shareholders of Gadang on the Register of Members and/or Record of

Depositors as at 29 August 2002 “EPS” : Earnings per share “ESOS” : Employees’ share option scheme which was approved by the shareholders

of Gadang at the EGM on 8 May 2002 which is currently pending implementation

“Gadang” or “Company” : Gadang Holdings Berhad (278114-K) “Gadang Group” or “Group” : Gadang, its subsidiary and associated companies collectively “Gadang ICULS” : ICULS to be issued by Gadang for the settlements of debts “Gadang Shares(s)” or “Shares(s)”

: Ordinary share(s) of RM1.00 each in Gadang

“ICULS” : Irredeemable Convertible Unsecured Loan Stock(s) “ICULS Issue” : Issuance of RM14,502,000, 5-year, 3% ICULS at 100% of the nominal

value of the ICULS 2002/2007 for the settlement of the debts of Mandy’s Vendors and Trade Creditors as follows: (i) Mandy’s Vendors

• part of the outstanding debts of RM9,904,000 as at 30 April 2000 (cut-off date agreed upon for the settlement of outstanding debts) will be converted into RM9,904,000 Gadang ICULS at an issue price of 100% of its nominal value for the balance of the purchase consideration of Mandy;

(ii) Trade Creditors

• Total debts of RM4,598,000 as at 29 May 2002 will be converted into RM4,598,000 Gadang ICULS at an issue price of 100% of its nominal value.



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DEFINITIONS (Cont’d) “KLSE” : Kuala Lumpur Stock Exchange (30632-P) “Mandy” : Mandy Corporation Sdn Bhd (165604-K) “Mandy’s Vendors” : Ahmad Sufian bin Haji Abdul Majid and Lai Kuai Weng “MCD” : Malaysian Central Depository Sdn Bhd (165570-W) “NPA” : Notice of provisional allotment “NTA” : Net tangible assets “PAL” : Provisional Allotment Letter “PAT” : Profit after tax and after minority interests but before extraordinary items “PBT” : Profit before tax and extraordinary items but after minority interests “PE Multiple” : Price earnings multiple “Registrar” Tenaga Koperat Sdn Bhd (118401-V) “Rights Issue” : Renounceable rights issue of 29,850,000 new Gadang Shares on the basis

of three (3) new Gadang Shares for every two (2) existing Gadang Shares held at an issue price of RM1.00 per share, the subject of this Abridged Prospectus

“RSF” : Rights Subscription Form “RM” and “sen” : Ringgit Malaysia and sen, respectively “Rights Share(s)” : New Gadang Share(s) to be issued and allotted pursuant to the Rights

Issue “SC” : Securities Commission “Underwriters” : The underwriters for this Rights Issue, namely Alliance, OSK Securities

Berhad, TA Securities Berhad and MIDF Sisma Securities Sdn Bhd



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CONTENTS Page CORPORATE INFORMATION 1 LETTER TO SHAREHOLDERS CONTAINING: 1. INTRODUCTION 4 2. DETAILS OF THE RIGHTS ISSUE 6 3. PROCEDURES FOR APPLICATION AND ACCEPTANCE 7 4. PURPOSE OF THE RIGHTS ISSUE AND UTILISATION OF PROCEEDS 12 5. RISK FACTORS 13 6. EFFECTS OF THE PROPOSALS 15 7. INDUSTRY REVIEW AND FUTURE PROSPECTS 16 8. WORKING CAPITAL, BORROWINGS AND CONTINGENT LIABILITIES 19 9. MAJOR SHAREHOLDERS’ UNDERTAKING AND UNDERWRITING

ARRANGEMENTS 20 10. TERMS AND CONDITIONS 20 11. QUOTATION OF THE RIGHTS SHARES 20 12. FURTHER INFORMATION 20 APPENDICES I. CERTIFIED TRUE EXTRACT OF THE ORDINARY RESOLUTION IN

RESPECT OF THE RIGHTS ISSUE AS PASSED AT THE EGM OF GADANG CONVENED ON 8 MAY 2002 21

II. INFORMATION ON GADANG 22 III. PROFORMA CONSOLIDATED BALANCE SHEETS OF GADANG AS AT

31 MAY 2002 TOGETHER WITH THE UNDERLYING BASES AND ASSUMPTIONS AND THE REPORTING ACCOUNTANTS’ LETTER THEREON 29

IV. CONSOLIDATED FINANCIAL STATEMENTS OF GADANG FOR THE

FINANCIAL YEAR ENDED 31 MAY 2002 AND THE AUDITORS’ REPORT THEREON 34

V. DIRECTORS’ REPORT 75 VI. STATUTORY AND GENERAL INFORMATION 76



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GADANG HOLDINGS BERHAD (Company No.: 278114-K) (Incorporated in Malaysia)

CORPORATE INFORMATION BOARD OF DIRECTORS Name Address Nationality Age Occupation Dato’ Kamaruddin bin Abdul Ghani

D8-0-8, Ground Floor Prima Damansara 8, Jalan Chempenai Bukit Damansara 50490 Kuala Lumpur

Malaysian 57 Chairman

Dato’ Kok Onn No. 2A, Jalan Mambu

Bukit Bandaraya, Bangsar 59100 Kuala Lumpur

Malaysian 51 Managing Director cum Chief Executive Officer

Mr Koay Teng Keong No. 157, Jalan Cempaka Hutan

Sierramas 47000 Sungai Buloh Selangor Darul Ehsan

Malaysian 45 Executive Director

Datuk Wan Lokman bin Dato’ Wan Ibrahim

No. 14, Jalan SS 1/22A 47300 Petaling Jaya Selangor Darul Ehsan

Malaysian 56 Independent Non-Executive Director

Encik Adam bin Bachek No. 33, Lorong Rahim Kajai 4

Taman Tun Dr Ismail 60000 Kuala Lumpur

Malaysian 53 Independent Non-Executive Director

Mr Ling Hock Hing No. 45, Jalan U8/51

Seksyen U8 Bukit Jelutong 40150 Shah Alam Selangor Darul Ehsan


Mr Chan Ah Kam @ Chan Ah Thoong

No. 1, Jalan USJ 20/6J 47630 UEP-Subang Jaya Selangor Darul Ehsan




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AUDIT COMMITTEE Name Directorship Position Encik Adam bin Bachek Independent Non-Executive Director Chairman of Committee Dato’ Kamaruddin bin Abdul Ghani Independent Non-Executive Director Member of Committee Dato’ Wan Lokman bin Dato’ Wan Ibrahim

Independent Non-Executive Director Member of Committee

Mr Ling Hock Hing Executive Director Member of Committee COMPANY SECRETARY : Tan Seok Chung (MAICSA No. 0829689)

No. 40, Jalan Ara SD7/3E Bandar Sri Damansara 52200 Kuala Lumpur

REGISTERED OFFICE : Wisma Gadang,

No. 52, Jalan Tago 2 Off Jalan Persiaran Utama Sri Damansara 52200 Kuala Lumpur Tel. No: 03 – 62756888

HEAD/MANAGEMENT OFFICE

: Wisma Gadang, No. 52, Jalan Tago 2 Off Jalan Persiaran Utama Sri Damansara 52200 Kuala Lumpur Tel. No: 03 – 62756888

E-MAIL : [email protected] WEBSITE : Not Applicable PRINCIPAL BANKERS : AmBank Berhad

(formerly known as Arab-Malaysian Bank Berhad) Level 19, Menara Dion Jalan Sultan Ismail 50250 Kuala Lumpur HSBC Bank Malaysia Berhad No. 2, Leboh Ampang 50100 Kuala Lumpur RHB Bank Berhad 15 & 17, 1st & 2nd Floor Jalan Tun Mohd Fuad 3 Taman Tun Dr Ismail 60000 Kuala Lumpur



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REGISTRAR : Tenaga Koperat Sdn Bhd

20th Floor, Plaza Permata (formerly known as IGB Plaza) Jalan Kampar Off Jalan Tun Razak 50400 Kuala Lumpur

SOLICITOR FOR THIS RIGHTS ISSUE

: Messrs Cheang & Ariff 39 Court 39, Jalan Yap Kwan Seng 50450 Kuala Lumpur

AUDITORS AND REPORTING ACCOUNTANTS

: Ernst & Young Chartered Accountants 4th Floor, Kompleks Antarabangsa Jalan Sultan Ismail 50250 Kuala Lumpur

ADVISER AND MANAGING UNDERWRITER

: Alliance Merchant Bank Berhad Level 20, Menara Multi-Purpose, Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur

UNDERWRITERS : Alliance Merchant Bank Berhad

Level 20, Menara Multi-Purpose, Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur MIDF Sisma Securities Sdn Bhd 17th & 18th Floor, Empire Tower 182, Jalan Tun Razak 50400 Kuala Lumpur OSK Securities Berhad 20th Floor, Plaza OSK Jalan Ampang 50450 Kuala Lumpur TA Securities Berhad TA One Tower No. 22, Jalan P. Ramlee 50250 Kuala Lumpur

STOCK EXCHANGE LISTING : Second Board of the Kuala Lumpur Stock Exchange



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GADANG HOLDINGS BERHAD (278114 –K)

(Incorporated in Malaysia) Registered Office

Wisma Gadang No. 52, Jalan Tago 2 Off Jalan Persiaran Utama Sri Damansara 52200 Kuala Lumpur

5 September 2002

Board of Directors: Dato’ Kamaruddin bin Abdul Ghani (Chairman) Dato’ Kok Onn (Managing Director/Chief Executive Officer) Mr Koay Teng Keong (Executive Director) Datuk Wan Lokman bin Dato’ Wan Ibrahim (Independent Non-Executive Director) Encik Adam bin Bachek (Independent Non-Executive Director) Mr Ling Hock Hing (Executive Director) Mr Chan Ah Kam @ Chan Ah Thoong (Executive Director) To the Shareholders of Gadang Holdings Berhad

Dear Sir/Madam RENOUNCEABLE RIGHTS ISSUE OF 29,850,000 NEW ORDINARY SHARES OF RM1.00 EACH AT AN ISSUE PRICE OF RM1.00 PER SHARE PAYABLE IN FULL UPON ACCEPTANCE ON THE BASIS OF THREE (3) NEW ORDINARY SHARES FOR EVERY TWO (2) EXISTING ORDINARY SHARES HELD AT 5.00 P.M. ON 29 AUGUST 2002.

1. INTRODUCTION

Your Board is pleased to inform you that at the EGM convened on 8 May 2002, the shareholders of Gadang have approved, inter alia, a rights issue of 29,850,000 new Gadang Shares on the basis of three (3) new Gadang Shares for every two (2) existing Gadang Shares held, as set out in the Circular to Shareholders dated 22 April 2002. An extract of the ordinary resolution approving the Rights Issue at the EGM held on 8 May 2002 is reproduced in Appendix I of this Abridged Prospectus. Alliance, on behalf of your Board, announced on 5 June 2000 that the Company proposes to undertake the following: (i) Proposed issuance of up to RM28,652,000 nominal value of ICULS at 100% nominal value in

Gadang for the settlement of outstanding debts to the following;

• Achwell’s Vendors, for the settlement of RM8.23 million outstanding debts and all accrued interest from 1 May 2000 to 30 November 2000 of RM0.7 million by the proposed issue of approximately RM8.93 million Gadang ICULS at an issue price of 100% of its nominal value;



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• Mandy’s Vendors, for the settlement of RM15.01 million outstanding debts by the

proposed issue of RM15.01 million Gadang ICULS at an issue price of 100% of its nominal value;

• Trade creditors for the settlement of up to RM4.71 million outstanding debts by the

proposed issue of up to RM4.71 million Gadang ICULS at an issue price of 100% of its nominal value.

(ii) Proposed rights issue of 29,850,000 new ordinary shares of RM 1.00 each in Gadang on the

basis of three (3) Rights Shares for every two (2) Gadang Shares held at a price to be determined later; and

(iii) Proposed employees’ share option scheme. The settlements with the Mandy’s Vendors and Achwell’s Vendors were due to the outstanding amount owing for the proposed acquisition of Achwell and Mandy in accordance with the sale and purchase agreements dated 17 May 1997 and 7 October 1997, respectively. Alliance had, on 26 December 2000 announced that, the SC had, on 22 December 2000 approved the proposals as follows: (i) Proposed issuance of RM14,616,000 nominal value of ICULS as compared to RM28,652,000

nominal value of ICULS as follows :-

As proposed As approved RM’000

RM’000

Achwell’s Vendors 8,930 - Mandy’s Vendors 15,010 9,904 Trade Creditors 4,712 4,712

Total 28,652 14,616

(ii) Proposed rights issue of 29,850,000 new ordinary shares of RM1.00 each in Gadang on the

basis of three (3) Rights Shares for every two (2) existing Gadang Shares;

(iii) Proposed employees’ share option scheme to the eligible executive directors and employees of Gadang of up to 10% of the enlarged issued and paid-up share capital of Gadang; and

(iv) Listing and quotation of the ICULS and the new ordinary shares to be issued pursuant to the proposals on the KLSE and admission to the Official List for the ICULS.

Alliance had, on 29 May 2002, informed the SC that the nominal value of ICULS to be issued to the trade creditors has subsequently been firmed up with the trade creditors at RM4,598,000. Therefore the total nominal value of ICULS to be issued will amount to RM14,502,000. The proceeds from the Proposed Rights Issue are to be utilised for the core business activities of Gadang as follows:

RM’000

Repayments of bank borrowings 11,530 Proposed development of a project in Segambut, Kuala Lumpur 3,000 Working capital 14,020 Estimated expenses 1,300 --------- 29,850 =====



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The utilisation of proceeds is subject to the following conditions: (i) The approval of the SC must be obtained for any variation to the utilisation of proceeds for

non-core business activities of Gadang; (ii) The approval of the shareholders of Gadang must be obtained for any subsequent changes to

the utilisation of proceeds that deviates by 25% or more from the original utilisation of proceeds. Should the deviation be less than 25%, appropriate disclosure must be made to the shareholders of Gadang;

(iii) Any extension of time for the timeframe that has been determined for the utilisation of

proceeds must be approved by a clear resolution by the Board of Directors of Gadang and clearly communicated to the KLSE; and

(iv) Appropriate disclosure must be made on the status of the utilisation of proceeds in the

Quarterly Report and Annual Report of Gadang until the proceeds have been fully utilised. The approval of the proposals by the SC is subject to, amongst others, the following conditions: (i) If the issue price of the Rights Shares is set at a discount of more than 30% from the

theoretical ex-rights price based on the five (5)-days weighted average market price at the price-fixing date, the promoters and directors of Gadang must give an undertaking to the SC that they would not dispose of their shares from the ex-date of the Rights Shares until ten (10) market days after the listing of the Rights Shares;

(ii) Alliance as Adviser must make the arrangements for the underwriting as well as be an

underwriter in respect of the Rights Shares. The underwriting arrangements must be completed prior to the issuance of the Abridged Prospectus; and

(iii) Gadang must comply with all the conditions in respect of the utilisation of proceeds. Your Board had determined 16 May 2002 as the price-fixing date and accordingly, fixed the issue price of the Rights Shares at RM1.00 per share. An application to the KLSE will be made within three (3) market days from the date of this Abridged Prospectus for the listing of and quotation for the Rights Shares. The official quotation for the Rights Shares will commence after receipt of confirmation from MCD that the CDS accounts have been duly credited and notices of allotment have been despatched to Entitled Shareholders.

2. DETAILS OF THE RIGHTS ISSUE

2.1 Introduction

The Rights Issue involves the issuance of 29,850,000 new Gadang Shares at an issue price of RM1.00 per new Gadang Share to shareholders on the basis of three (3) new Gadang Shares for every two (2) existing Gadang Shares held.

2.2 Basis of arriving at the issue price

The issue price of RM1.00 per Rights Share represents a discount of 14.53% from the theoretical ex-rights price of RM1.17 based on the five (5) days weighted average market price of Gadang Shares up to 16 May 2002 (being the Price-Fixing Date) of RM1.44.



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2.3 Shareholders’ entitlements

In accordance with the terms of the Rights Issue as approved by the SC and the shareholders of Gadang, the Company has provisionally allotted 29,850,000 Rights Shares at an issue price of RM1.00 per share for subscription by shareholders whose names are registered on Gadang’s Register of Members and/or Record of Depositors at 5.00 p.m. on 29 August 2002 (“the Entitlement Date”) in the proportion of three (3) new Gadang Shares for every two (2) existing Gadang Shares held. The Rights Shares which are not taken up or allotted for any reason shall first be made available for excess shares applications and if undersubscribed, will be allotted to the Underwriters. In determining the shareholders’ entitlement to the Rights Issue, any fractional entitlements of new ordinary shares will be disregarded. The Rights Shares representing fractional entitlements, which are not otherwise taken up or allotted for any reason shall be disposed of in such manner as the Directors in their absolute discretion think expedient in the interest of the Company.

2.4 Ranking of the Rights Shares

The Rights Shares will, upon allotment and issue, rank pari passu in all respects with the then existing ordinary shares of the Company except that they are not entitled to any dividends, rights, allotments or other distributions which may be declared prior to or on the date of allotment of the Rights Shares.

2.5 Last day and time for acceptance and payment The last day and time for acceptance and payment for the Rights Issue is at 5.00 p.m. on 1 October 2002 or such later date and time as the Directors of Gadang may decide at their discretion, subject to the approval of the KLSE, and which will then subsequently be announced.

2.6 Details of any other intended corporate exercise which has been approved

Save for the ICULS Issue and ESOS, there is no intended corporate exercise by the Company which has been approved by the regulatory authorities.

3. PROCEDURES FOR APPLICATION AND ACCEPTANCE

As you are an Entitled Shareholder of the Company, your CDS account will be duly credited with the number of provisionally allotted Rights Shares which you are entitled to subscribe for under the terms of the Rights Issue. You will find enclosed together with this Abridged Prospectus, a NPA notifying you of the crediting of such provisionally allotted Rights Shares into your CDS account and a RSF to enable you to subscribe for such provisionally allotted Rights Shares. The RSF is also available on the KLSE website (http://www.klse.com.my).

3.1 PAL The PAL is a prescribed security pursuant to Section 14(5) of the Securities Industry (Central Depositories) Act, 1991 and therefore, all dealings in the PAL will be by book entry through CDS accounts and will be governed by the Securities Industry (Central Depositories) Act, 1991, the Securities Industry (Central Depositories) Amendment Act, 1998 and the Rules of MCD.

3.2 Procedure for Application and Acceptance Acceptance and payment for the Rights Shares provisionally allotted to the Entitled Shareholders must be made on the RSF and must be completed in accordance with the notes and instructions printed therein. Acceptances which do not strictly conform to the terms of this Abridged Prospectus or RSF and notes and instructions printed therein or which are illegible may not be accepted at the absolute discretion of the Company.



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FULL INSTRUCTIONS FOR THE ACCEPTANCE AND PAYMENT FOR THE RIGHTS SHARES PROVISIONALLY ALLOTTED TO THE ENTITLED SHAREHOLDERS AND THE PROCEDURES TO BE FOLLOWED SHOULD ENTITLED SHAREHOLDERS WISH TO SELL/TRANSFER ALL OR ANY PART OF THEIR ENTITLEMENTS ARE SET OUT IN THE RSF. ENTITLED SHAREHOLDERS ARE ADVISED TO READ THE RSF AND THE NOTES AND INSTRUCTIONS THEREIN CAREFULLY. Entitled Shareholders who wish to accept their entitlement are required to fill and complete Parts I and III of the RSF. Each completed RSF together with the relevant payment must be sent to the Registrar at the following address: Tenaga Koperat Sdn Bhd 20th Floor, Plaza Permata (formerly known as IGB Plaza) Jalan Kampar Off Jalan Tun Razak 50400 Kuala Lumpur so as to arrive not later than the last day and time for acceptance and payment, as set out in section 2.5 of this Abridged Prospectus. Entitled Shareholders who lose, misplace or for any other reasons require another copy of the RSF, may obtain additional copies from their stockbrokers, the KLSE website (http://www.klse.com.my) or the Registrar, as stated above. One (1) RSF can only be used for acceptance of provisionally allotted Rights Shares standing to the credit of one (1) CDS account. Rights Shares subscribed by the Entitled Shareholders will be credited into the respective CDS accounts. The minimum number of Gadang Shares that can be accepted is one (1) Rights Share. Fractions of a share arising from the Rights Issue will be dealt with by the Directors of the Company as they may deem fit. However, applicants should take note that a trading board lot comprises 1,000 Gadang Shares. A new purchaser/transferee who wishes to accept the provisionally allotted Rights Shares must obtain a copy of the RSF from his/her stockbroker, the KLSE website (http://www.klse.com.my) or the Registrar, as stated above, complete the RSF and submit the same together with the remittance in accordance with the notes and instructions printed therein. If acceptance and payment for the Rights Shares provisionally allotted to any Entitled Shareholder is not received by the Registrar by the last day and time for acceptance and payment as set out in section 2.5 of this Abridged Prospectus, the provisional entitlement of that Entitled Shareholder will be deemed to have been declined and will be cancelled and such Rights Shares not taken up will be allotted first to applicants applying for the excess Rights Shares and subsequently to the Underwriters of the Rights Issue, if the Rights Shares are not fully taken up by such applicants. The Directors of the Company shall reserve the right not to accept any application or to accept in part only any application without assigning any reason thereof. EACH COMPLETED RSF MUST BE ACCOMPANIED BY REMITTANCE IN RINGGIT MALAYSIA FOR THE FULL AMOUNT IN THE FORM OF BANKER'S DRAFT(S) OR CASHIER'S ORDER(S) OR MONEY ORDER(S) OR POSTAL ORDER(S) DRAWN ON A BANK OR POST OFFICE IN MALAYSIA AND MUST BE MADE OUT IN FAVOUR OF "GADANG RIGHTS ISSUE ACCOUNT" CROSSED "A/C PAYEE ONLY" AND ENDORSED ON THE REVERSE SIDE, THE NAME AND ADDRESS OF THE APPLICANT IN BLOCK LETTERS AND THE CDS ACCOUNT NUMBER.



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NO ACKNOWLEDGEMENT OF THE RECEIPT OF THE RSF OR APPLICATION MONIES WILL BE MADE BY THE COMPANY OR THE REGISTRAR IN RESPECT OF THE RIGHTS ISSUE. HOWEVER, SUCCESSFUL APPLICANTS WILL BE ALLOTED THEIR RIGHTS SHARES AND NOTICES OF ALLOTMENT WILL BE ISSUED AND FORWARDED BY ORDINARY POST TO ENTITLED SHAREHOLDERS OR THEIR RENOUNCEES TO THE ADDRESS STATED IN THE MCD RECORD WITHIN FIFTEEN (15) MARKET DAYS FROM THE LAST DAY AND TIME FOR ACCEPTANCE AND PAYMENT FOR THE RIGHTS SHARES. THE RSF AND REMITTANCES SO LODGED WITH THE REGISTRAR SHALL BE IRREVOCABLE AND CANNOT SUBSEQUENTLY BE WITHDRAWN. WHERE AN APPLICATION IS NOT ACCEPTED OR ACCEPTED IN PART ONLY, THE FULL AMOUNT OR THE BALANCE OF THE APPLICATION MONIES, AS THE CASE MAY BE, SHALL BE REFUNDED WITHOUT INTEREST AND SHALL BE DESPATCHED TO THE APPLICANT WITHIN FIFTEEN (15) MARKET DAYS FROM THE LAST DATE FOR ACCEPTANCE AND PAYMENT FOR THE RIGHTS SHARES BY ORDINARY POST TO THE ADDRESS STATED IN THE MCD RECORD AT THE APPLICANT’S OWN RISK. APPLICATIONS SHALL NOT BE DEEMED TO HAVE BEEN ACCEPTED BY REASON OF THE REMITTANCE BEING PRESENTED FOR PAYMENT. THE LAST DAY AND TIME FOR ACCEPTANCE AND PAYMENT FOR THE RIGHTS SHARES IS SET OUT IN SECTION 2.5 OF THIS ABRIDGED PROSPECTUS.

3.3 Procedure for Part Acceptance by the Entitled Shareholders Entitled Shareholders are entitled to accept part of their entitlement. Subject to the minimum of one (1) Rights Share that can be subscribed/applied for, there will be no minimum number of Rights Shares that can be accepted or minimum number of excess Rights Shares which can be applied for. Entitled Shareholders have to complete Part I of the RSF by specifying the number of Rights Shares which the Entitled Shareholder is accepting and Part III of the RSF and deliver the completed RSF together with the relevant payment to the Registrar, in the same manner as set out in section 3.2 of this Abridged Prospectus. THE ENTITLED SHAREHOLDERS ARE ADVISED TO READ AND ADHERE TO THE RSF AND THE NOTES AND INSTRUCTIONS CONTAINED THEREIN. The portion of the provisional allotment of Rights Shares that has not been accepted will be allotted to any other persons allowed under any law, regulations or rules to accept the transfer of the provisional allotment of Rights Shares and the balance, if any, will first be allotted to applicants applying for the excess Rights Shares and subsequently thereafter to the Underwriters of the Rights Issue.

3.4 Procedure for Sale/Transfer of Provisional Allotment of Rights Shares The provisionally allotted Rights Shares are renounceable and as such, Entitled Shareholders and/or their renouncee(s) (if applicable) may sell/transfer all or part of their entitlement to the Rights Shares. Entitled Shareholders and/or their renouncee(s) (if applicable) who wish to sell/transfer some and accept only part of their entitlement to the Rights Shares or sell/transfer all their entitlement to the Rights Shares may do so immediately through their stockbrokers without first having to request for a split of the PAL standing to the credit of their CDS accounts. To dispose of all or part of their entitlement of the Rights Shares, they may sell such entitlement on the open market or transfer such entitlement to such persons as may be allowed pursuant to the Rules of MCD. THE ENTITLED SHAREHOLDERS AND/OR THEIR RENOUNCEE(S) (IF APPLICABLE) ARE ADVISED TO READ AND ADHERE TO THE RSF AND THE NOTES AND INSTRUCTIONS CONTAINED THEREIN.



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IN SELLING ALL OR PART OF THEIR PROVISIONAL ALLOTMENT OF RIGHTS SHARES, ENTITLED SHAREHOLDERS AND/OR THEIR RENOUNCEE(S) (IF APPLICABLE) NEED NOT DELIVER ANY DOCUMENT TO THEIR STOCKBROKERS. THE ENTITLED SHAREHOLDERS AND/OR THEIR RENOUNCEE(S) (IF APPLICABLE) ARE HOWEVER ADVISED TO ENSURE THAT THEY HAVE SUFFICIENT PROVISIONAL ALLOTMENT OF RIGHTS SHARES STANDING IN THEIR CDS ACCOUNTS BEFORE TRADING.

3.5 Procedure for Acceptance by Renouncees A renouncee who wishes to accept the provisionally allotted Rights Shares must obtain a copy of the RSF from his/her stockbroker, the Registrar as stated above, the KLSE website (http://www.klse.com.my) or the registered office of the Company, complete the RSF and submit the same together with the remittance in accordance with the notes and instructions printed therein. The procedure and payment for the acceptance of the provisional allotment of Rights Shares by the renouncee is the same as that which is applicable to the Entitled Shareholders as described in section 3.2 of this Abridged Prospectus. Please refer to section 3.2 of the Abridged Prospectus for the procedure for acceptance and payment. THE RENOUNCEES ARE ADVISED TO READ AND ADHERE TO THE RSF AND THE NOTES AND INSTRUCTIONS CONTAINED THEREIN.

3.6 Procedure for Excess Rights Shares Application Entitled Shareholders and/or their renouncee(s) (if applicable) who accept the provisionally allotted Rights Shares may apply for excess Rights Shares by completing Part II of the RSF (in addition to Parts I and III) and forwarding it (together with a separate remittance for the full amount payable in respect of the excess Rights Shares applied for) to the Registrar. Payment for the excess Rights Shares applied for should be in the same manner described in section 3.2 of this Abridged Prospectus, with remittance in the form of a banker's draft(s) or cashier's order(s) or money order(s) or postal order(s) drawn on a bank or post office in Malaysia and crossed "A/C PAYEE ONLY" and made payable to "GADANG EXCESS SHARES APPLICATION ACCOUNT" and endorsed on the reverse side with the name and address of the applicant in block letters and the CDS Account number, to be received by the Registrar not later than the last day and time for acceptance and payment, as set out in section 2.5 of this Abridged Prospectus. The Directors of the Company reserve the right to allot any unsubscribed Rights Shares applied for under the RSF in such manner as they deem fit or expedient. It is the intention of the Directors of the Company to allot excess Rights Shares in such manner that the incidence of odd lots will be minimised. Where the Rights Shares are allotted to excess Rights Shares applicants, the rounding-up of odd lots would be the main criterion for the allotment of such Rights Shares and such Rights Shares would be allotted in a non-discriminatory manner. NO ACKNOWLEDGEMENT WILL BE ISSUED FOR SUCCESSFUL EXCESS RIGHTS SHARES APPLICATIONS BUT A NOTICE OF ALLOTMENT WILL BE DESPATCHED BY ORDINARY POST TO THE ADDRESS STATED IN THE MCD RECORD WITHIN 15 MARKET DAYS FROM THE LAST DAY AND TIME FOR ACCEPTANCE AND PAYMENT FOR THE EXCESS RIGHTS SHARES. IN RESPECT OF UNSUCCESSFUL OR PARTIALLY UNSUCCESSFUL EXCESS RIGHTS SHARES APPLICATIONS, THE FULL AMOUNT OR THE SURPLUS APPLICATION MONIES WILL BE REFUNDED WITHOUT INTEREST WITHIN FIFTEEN (15) MARKET DAYS FROM THE LAST DAY AND TIME FOR ACCEPTANCE AND PAYMENT FOR THE EXCESS RIGHTS SHARES BY ORDINARY POST TO THE ADDRESS STATED IN THE MCD RECORD AT THE APPLICANT'S OWN RISK.



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3.7 Form of Issuance

The KLSE has already prescribed the Gadang Shares listed on the Second Board of the KLSE to be deposited with MCD. Accordingly, the Rights Shares are prescribed securities and as such, the Securities Industry (Central Depositories) Act, 1991, Securities Industry (Central Depositories) Amendments Act, 1998 and the Rules of MCD shall apply in respect of the dealings in the said Rights Shares. No physical share certificates will be issued to you under the Rights Issue. The Rights Shares will be credited directly into your CDS account and a notice of allotment will be despatched to you at the address stated in the MCD record. The Rights Shares, if allotted to the Entitled Shareholder who applies for excess Rights Shares, will be credited directly as deposited securities into his/her CDS account. The excess Rights Shares, if allotted to the Entitled Shareholder who applies for excess Rights Shares, will be credited directly as deposited securities into his/her CDS account.

3.8 Laws of Foreign Jurisdictions This Abridged Prospectus, the NPA and the RSF have not been (and will not be) made to comply with the laws of any foreign jurisdictions, and have not been (and will not be) lodged, registered or approved pursuant to or under any legislation of (or with or by any regulatory authorities or other relevant bodies of) any foreign jurisdictions, and the Rights Issue will not be made or offered in any foreign jurisdictions. An Entitled Shareholder and/or the renouncee(s) (if applicable) may only accept or renounce (as the case may be) all or any part of their entitlement and exercise any other rights in respect of the Rights Issue to the extent that it would be lawful to do so, and Alliance, other experts and Gadang and its Directors and officers would not, in connection with the Rights Issue, be in breach of the laws of any jurisdictions to which that Entitled Shareholder and/or the renouncee(s) (if applicable) is or might be subject to. The Entitled Shareholder and/or the renouncee(s) (if applicable), shall be solely responsible to seek advice as to the laws of the jurisdictions to which he/she is or might be subject to. Alliance, other experts and Gadang and its Directors and officers shall not accept any responsibility or liability in the event that any acceptance or renunciation made by any Entitled Shareholder and/or the renouncee(s) (if applicable) is or shall become unlawful, unenforceable, voidable or void in any such jurisdictions. By signing the form accompanying this Abridged Prospectus, the RSF, the Entitled Shareholder and/or the renouncee(s) (if applicable) is deemed to have represented, acknowledged and declared in favour of (and which representations, acknowledgements and declarations will be relied upon by) Alliance, other experts and Gadang and its Directors and officers that: (i) The Company would not, by acting on the acceptance or renunciation in connection with the

Rights Issue, be in breach of the laws of any jurisdiction to which that Entitled Shareholder and/or the renouncee(s) (if applicable) is or might be subject to;

(ii) The Entitled Shareholder and/or the renouncee(s) (if applicable) has complied with the laws to

which the Entitled Shareholder and/or the renouncee(s) (if applicable) is or might be subject to in connection with the acceptance or renunciation of the Rights Issue;

(iii) The Entitled Shareholder and/or the renouncee(s) (if applicable) is not a nominee or agent of a

person in respect of whom the Company would, by acting on the acceptance or renunciation be in breach of the laws of any jurisdiction to which that person is or might be subject to;

(iv) The Entitled Shareholder and/or the renouncee(s) (if applicable) is aware that the Rights

Shares can only be transferred, sold or otherwise disposed of, or charged, hypothecated or pledged in accordance with all applicable laws in Malaysia; and



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(v) The Entitled Shareholder and/or the renouncee(s) (if applicable) has sufficient knowledge and

experience in financial and business matters to be capable of evaluating the merits and risks of subscribing or purchasing the Rights Shares, and is and will be able, and is prepared to bear the economic and financial risks of investing in and holding the Rights Shares.

4. PURPOSE OF THE RIGHTS ISSUE AND UTILISATION OF PROCEEDS 4.1 Details of the Rights Issue

The Rights Issue will provide the much-needed working capital for the existing businesses and raise the necessary funds to commensurate with the increase in business activities of the Group due to the current economic recovery. The Group is thus making a step ahead to strengthen its financial position by raising equity to take advantage of the economic recovery which the country is currently experiencing. The Rights Issue, which will be partly utilised for the repayment of the bank borrowings will result in interest savings as well as reduce the gearing level of the Group. The Rights Issue will further enable the Company to comply with the requirements of the SC for companies listed on the Second Board of the KLSE to have an issued and paid-up share capital of at least RM40,000,000.

4.2 Utilisation of proceeds from the Rights Issue The Rights Issue will raise total net proceeds of RM29.85 million. A summary of the utilisation of the said proceeds is set out below:

RM’000

Timeframe for utilisation of proceeds from the date of receipt

(i) Repayments of bank borrowings 11,530 Within two (2) years

(ii) Proposed development of a project in Segambut, Kuala Lumpur

3,000 Within two (2) years

(iii) Estimated expenses 1,300 Within six (6) months

(iv) Working capital 14,020 Within two (2) years ------------- 29,850 =======

4.2.1 Repayments of bank borrowings

Following the repayment of the principal amount of the bank borrowings and based on the current interest rates, the Company will benefit from an estimated net interest cost savings of approximately RM634,000 per annum. The total borrowings of the Group as at 23 August 2002 amounts to RM93.80 million.



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4.2.2 Proposed Development of a parcel of land in Segambut

The Group has earmarked an existing piece of 99 year leasehold land expiring on 13 November 2078 measuring 10.14 acres, Mukim Batu, District and State of Wilayah Persekutuan (“the Land”) for mixed commercial and residential development. The Land is located along Jalan Segambut which is approximately 15km North East of Kuala Lumpur City Centre and is presently vacant. The construction of the Land is expected to commence in the last quarter of 2002 and complete in 2007. Developments within the immediate vicinity comprise mixed development in nature. The Land has been granted layout approval for mixed commercial and residential developments by Dewan Bandaraya Kuala Lumpur (“DBKL”) on 4 July 1998. However, Mandy had submitted a proposal to DBKL to revise certain layout to the proposed development which was subsequently approved on 5 April 2001. The development of this project is divided into two phases. Phase 1 of the proposed development will comprise 288 units of medium cost apartments and 86 units of low cost flats which will be expected to launch by the last quarter of 2002 and subsequent to the completion of the acquisition of Mandy. The development value of Phase 1 is expected to be approximately RM45 million with an estimated total construction cost of RM40 million. The construction cost will be financed by borrowings and internally generated funds, the quantum of which cannot be determined at this stage. Phase 2 of the proposed development will comprise four (4) blocks of shop office of which the launching will be dependent on the market condition. Hence, at this point in time, the expected profit of Phase 2 cannot be determined.

4.2.3 Estimated expenses

The amount of RM1.30 million will be utilised to settle the estimated expenses of the proposals.

4.2.4 Working capital The balance of the sum of RM14.02 million raised shall be utilised for working capital of the Group.

Currently, the Group funds its working capital requirement through short term banking facilities and the raising of funds for working capital requirement will improve the cash flow position.

5. RISK FACTORS 5.1 Business Risks

The Gadang Group’s core activities are in civil engineering and building construction, property investment and development, manufacturing and trading of ready mixed concrete, protective and decorative paints and are therefore subject to the business risks inherent in these economic sectors. These risks include, inter-alia, competition, changes in the environment framework within which the industries operate, changes in inflation rates, interest rates, taxation and other political, economic or social developments. Although the Gadang Group seeks to limit these risks through, inter alia, increasing the efficiency of its operations and diversifying into other businesses, no assurance can be given that any change to the factors above will not have a material adverse effect on the Group’s business.

5.2 Market Risks The market price of the Rights Shares and the ICULS upon listing on the KLSE is dependent on, amongst others, the stock market sentiment, interest rates, future profitability of the Group and the economies in which the Group operates. There is , however, no assurance that the market price of the Rights Shares and ICULS upon or subsequent to its listing will remain at or above their issue prices. Further, there is no assurance that there will be a market for the ICULS.



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5.3 Increase in Capital Base

The Rights Issue is expected to have a positive impact on the future earnings of the Group. However, depending on the resultant earnings capacity, the economy of the country in the future and the eventual enlarged share capital following the conversion of the ICULS, there exists the potential of a significant dilution in future earnings per share of the Company. The ICULS issue would mitigate any immediate dilution in the basic EPS of the Company which could otherwise materialise from a pure equity issue. However, upon conversion of the ICULS, the capital base of the Company would increase accordingly. Depending on the earnings potential of the Gadang Group in relation to the economic situation and investment opportunities available at the time the ICULS are converted, there could be a potential future dilution in basic EPS of the Company due to the resultant larger capital base.

5.4 Dependence on Key Personnel

The success of the Rights Issue on Gadang Group is dependent upon the abilities and continuing efforts of its existing Directors and senior management. The loss of any of the key members of the Gadang Group’s Directors and senior management may adversely affect the Gadang Group’s continuing ability to compete in the civil engineering and building construction, property investment and development, manufacturing and trading of ready mixed concrete, decorative and protective paints. However, efforts are being made to retain the Group’s key personnel. The Gadang Group’s future success will also depend upon its ability to attract and retain skilled personnel. In this regard, the Group is making every effort to groom the junior and middle level executives to ensure continuity of the management team. The Board will also consider, from time to time, to enter into service agreement with the Group’s key personnel.

5.5 Financing of Development Projects The property development projects undertaken by the Group involve long gestation period of planning and construction. The Group anticipates that revenues from existing and future projects will depend to a significant degree on the proceeds of the Rights Issue and the Group’s ability to arrange for future financing for such projects at terms and interest rates which are acceptable to the Group. In mitigating the risks mentioned above, the Group has made prudent financial decisions by not placing heavy reliance on bank borrowings in financing its property development projects. In addition, a certain portion of the expenditure for the proposed development will be partly financed through the proceeds from the Rights Issue.

5.6 Competition

Gadang faces stiff competition in the local construction and property market. To remain competitive in the market, the Group practises stringent cost surveillance and control measures. Among the steps to be taken by the Group to mitigate the effect of intense competition are as follows: (i) diversification into the following:

• telecommunication activities involving the maintenance works and construction of base stations;

• manufacturing and trading of protective and decorative paints; (ii) improving its strength on specialised construction areas where it has established a niche, such

as construction of tunnels and bridges; and

(iii) expansion of its in house construction activities by focusing on the property development projects of the Group.



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6. EFFECTS OF THE PROPOSALS

6.1 Share Capital

The effects of the proposals on the issued and paid-up share capital of the Group as at 23 August 2002 are as follows:

RM’000 % As at 23 August 2002 19,900 28.75 To be issued pursuant to the:

- Rights Issue 29,850 43.12

- Full conversion of the ICULS* 14,502 20.95

- Full exercise of the ESOS# 4,975 7.18 ---------- ------- Enlarged share capital 69,227 100.00 ====== ==== Note: * Alliance had, on 29 May 2002, informed the SC that the nominal value of ICULS to be issued to the

trade creditors has subsequently been firmed up with the trade creditors at RM4,598,000. Therefore the total nominal value of ICULS to be issued will amount to RM14,502,000. The conversion price of the ICULS is at RM1.06 per new Share and assuming the ICULS holders tender RM1.00 nominal value of ICULS plus RM0.06 cash for one (1) new Share.

# The exercise price of the ESOS has been assumed at RM1.00 per new Share.

6.2 NTA Based on the consolidated audited financial statements of Gadang for the financial year ended 31 May 2002, the effects of the proposals on the proforma consolidated NTA of Gadang as at 31 May 2002 are as follows:

<--------------------------------------Proforma--------------------------------------> (I) (II) (III) After (II) and Audited full conversion/ as at After After (I) and exercise of the 31 May 2002 ICULS Issue Rights Issue ICULS/ESOS RM’000 RM’000 RM’000 RM’000 Share capital 19,900 19,900 49,750 69,227 Share premium 592 - - 870 Other reserves 5,686 5,686 5,686 5,686 Retained profits 11,780 11,253 10,545 10,545 Merger deficits (9,089) (9,089) (9,089) (9,089) ------------ -------------- -------------- -------------- Shareholders’ funds 28,869 27,750 56,892 77,239 Less: Goodwill - (4,741)* (4,741) (4,741) Reserve on consolidation (70) (70) (70) (70) ------------ -------------- -------------- -------------- NTA 28,799 22,939 52,081 72,428 ======= ======== ======== ======== NTA per share (RM) 1.45 1.15 1.05 1.05



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Notes: * The goodwill arising on consolidation is due to the incorporation of the net assets of Mandy into the

proforma consolidated balance sheets.

1 All outstanding options under the ESOS are assumed to be exercised at RM1.00 per new Share

2 After deducting estimated expenses of the proposals of RM1.3 million

3 The issue price for the Rights Shares is at RM1.00 per new Share

4 The conversion price of the ICULS is at RM1.06 per new Share and assuming the ICULS holders tender RM1.00 nominal value of ICULS plus RM0.06 cash for one (1) new Share.

6.3 Earnings

The Rights Issue is expected to be completed in the last quarter of 2002 and to contribute positively to the earnings of the Gadang Group for the financial year ending 31 May 2003.

6.4 Dividends The Company has not declared any dividend for the financial year ended 31 May 2002. The Directors of Gadang envisage that the completion of the Rights Issue would put Gadang on a better footing to pay dividends for the financial year ending 31 May 2003 and in the future.

6.5 Gearing The effects of the proposals on the gearing ratio of the Group based on the consolidated audited balance sheets of Gadang as at 31 May 2002 are as follows: <--------------------------------------Proforma--------------------------------------> (I) (II) (III) After (II) and Audited full conversion/ as at After After (I) and exercise of the 31 May 2002 ICULS Issue Rights Issue ICULS/ESOS RM’000 RM’000 RM’000 RM’000

Borrowings 93,286 110,585 110,585 96,083

Shareholders’ funds 28,869 27,750 56,892 77,239

Gearing ratio (times) 3.23 3.99 1.94 1.24

7. INDUSTRY REVIEW AND FUTURE PROSPECTS 7.1 Economic Outlook The performance of the Malaysian economy in 2001 has been adversely affected by the greater-than-

expected slowdown in the world economy, particularly in the United States (“US”) as well as the continuing weak performance of the Japanese market. The recent attack on the US has led to greater uncertainties with respect to the severity and duration of the recovery in the US. There are concerns on the risk of the US economy entering into recession and its contagion on other industrialised and developing economies.

(Source : Economic Report 2001/2002)



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The Malaysian economy is expected to strengthen in 2002 following a strengthening of external demand. Past trends show that there is a brief lag between the recovery in the major economies and recovery in Malaysian export. Current indications suggest that external demand will not pick up as strongly as in the 1999-2000 period, where recovery was mainly led by the internet-boom and the Y2K factor. The current economic upturn is taking place amidst global excess capacity, particularly in the technology sector. External demand is, therefore, expected to strengthen gradually. Against this background, the recovery in the Malaysian economy would modest, with real GDP expanding by 3.5% in 2002. (Source: Bank Negara Annual Report 2001)

7.2 Overview of the construction industry

Measures undertaken by the Government to support economic growth and increase disposable income led to a positive growth of the residential sub-sector in 2001. The low interest rate environment with financial institutions offering competitive housing loan packages with lower margin requirements and longer tenure provided additional impetus. Indicators of optimism of rising demand in the residential sub-sector included increase in new developers’ license issued with more units approved for construction in Peninsular Malaysia; new sales and advertising permits as well as renewals of such permits, and increase in loans for residential properties.

For 2002, the growth in the construction sector is expected to be sustained at 2.4%, with impetus coming from the civil engineering and residential sub-sectors. Low interest rates and various pre-emptive measures implemented by the Government to address the excess supply situation in the property market will continue to support demand for residential housing. However, activity in the non-residential sub-sector would continue to be constrained by excess capacity with activity focused mainly on ongoing projects.

(Source: Bank Negara Malaysia Annual Report 2001) 7.3 Overview of the property market

During the year 2001, 97,673 units of residential houses of various types were approved by the Ministry of Housing and Local Government to be built. Out of these, 37.3% constitute medium-cost houses, 16.4% low cost houses, while the remainder, high-end houses. The largest number of units launched was for terrace houses which accounted for 43.5% of the total. The prices of residential properties have generally been stable. The Malaysian House Price Index, which tracks the movement in prices of residential landed properties, apartments and condominiums, showed that the price of houses has stabilised, increasing by 0.9% (2000: 14.3%). The highest price increases were for residential properties in Seremban-Sepang and Ipoh-Kinta with price increases of 5.2% and 2.5%, respectively. The Government continued to place priority in the construction of low and medium-cost houses in line with the objective of providing affordable houses to all Malaysians. A total of 192,000 low-cost units are targeted to be built during the Eight Malaysia Plan, of which 175,000 units will be implemented through the Public Low-Cost Housing Program. To cater to the housing needs of squatter settlements within Kuala Lumpur and other major cities, 5,936 units are being constructed under the Integrated Housing Programme.

(Source: Economic Report 2001/2002)



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For 2002, the Malaysian economy is expected to show positive growth, despite being adversely affected by the protracted slowdown in the US economy which was exacerbated further by the September 11 incident in the US. There is a degree of consensus that the Malaysian economy is likely to rebound in the coming year with the positive turn of events in the aftermath of the September 11 incident and the measures taken by the government to spur the economy. Thus, barring no further adverse external developments in 2002, recovery in the property sector is encouraging in tandem with the positive growth in 2002. In 2001, the residential sector of the market continued to show growth in the number of transactions with the focus on the affordable housing segment of RM150,000 and below. This situation is likely to carry through to 2002. The outlook for the office sub-sector for 2002 is not encouraging, pressured by oversupply and economic conditions. The situation is unlikely to change for the better until the economy picks up with more expansion in the services sector and more employment. (Source: Property Market Report, 2001)

7.4 Industry prospects The outlook of the external sector in 2002 remains uncertain, particularly in the light of the aftermath of the attack on the US. Given the weaker performance of the US and Japan, world growth has subsequently been revised downwards to 2.6%, with GDP growth for the major industrialised countries decelerating to 1.3%. The Malaysian economy is forecast to grow by 4-5% in 2002, led by stronger performances in the manufacturing and services sectors.

(Source: Economic Report 2001/2002)

7.5 Prospects of the Group

The principal activity of Gadang is investment holding while its subsidiary companies’ core business are of civil engineering and building construction, property investment and development, manufacturing and trading of ready mixed concrete, decorative and protective paints. The Group will continue to strive and expand in tandem with the expected recovery of the national economy. The Group’s engineering and construction division will continue to be a major contributor to the Group’s turnover. Despite the difficult market condition, the Group has a balance of contracts in hand of approximately RM160 million during the financial year ended 31 May 2002.



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Apart from the external factors, Gadang with its proven track record in a diverse nature of works and committed experienced human resource will be able to seize the opportunities available to move along with the changing environment. The Group will continue to establish itself as a renowned developer and has launched its property development project in Puchong, Selangor which comprises low cost, low medium cost and medium cost apartments during the last quarter of 1999. The Puchong development value is approximately RM73 million of which Phase I of the Puchong development will be completed in the last quarter of 2002 and the entire development is expected to be completed in 2004. With the completion of the Rights Issue, the Group will own additional land bank held by Mandy which will be developed into mixed, residential and commercial development. Gadang expects to launch the residential development immediately upon completion of the Rights Issue exercise. As part of the Group diversification exercise, the Group has ventured into telecommunication activities involving maintenance works and construction of base transceiver stations during the year 2001. For the year 2002, the Group has ventured into the manufacturing and trading of protective and decorative paints as the Group envisaged the vast potential in this industry. Nevertheless, the Group will continue to explore into other fields to identify potential business opportunities.

8. WORKING CAPITAL, BORROWINGS AND CONTINGENT LIABILITIES 8.1 Working capital

The Directors are of the opinion that, after taking into account the amount to be raised from the Rights Issue, the banking facilities available to the Group and funds generated from its existing operations, the Group will have adequate working capital for its present and foreseeable future requirements.

8.2 Borrowings As at 23 August 2002, being the last practicable date prior to printing of this Abridged Prospectus, the Group had a total outstanding borrowings amounting to RM93.80 million, as follows: RM’000 RM’000

Long-term borrowings - Interest-bearing 31,898 - Non-interest bearing - ------------ 31,898 Short-term borrowings - Interest-bearing 61,897 - Non-interest bearing - ------------ 61,897 ------------ Total outstanding borrowings 93,795 =======

8.3 Contingent liabilities As of the same date, being the latest practicable date prior to the printing of this Abridged Prospectus, the Group had total contingent liabilities of RM78.98 million comprising mainly corporate guarantees given to trade suppliers and financial institutions which in the opinion of the Directors will not substantially affect the ability of the Group to meet its obligations as and when they fall due.



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9. MAJOR SHAREHOLDERS’ UNDERTAKING AND UNDERWRITING ARRANGEMENTS

Sumber Raswira Sdn Bhd, Raja Zainal Abidin bin Raja Hussin and Angkasa Aman Sdn Bhd, the major shareholders of the Company, have given their irrevocable and unconditional undertaking to subscribe in full their entitlements under the Rights Issue based on their respective shareholdings in Gadang at the time of the books closure date for the Rights Issue. The aforementioned major shareholders’ equity interests and their entitlements in the Company as at 23 August 2002 are set out below:

No. of Gadang Shares held as at 23 August 2002

% of the existing issued and paid-up share capital

No. of entitled Rights Shares

Sumber Raswira Sdn Bhd 6,500,000 32.66 9,750,000

Raja Zainal Abidin bin Raja Hussin 412,000 2.07 618,000

Angkasa Aman Sdn Bhd 868,000 4.36 1,302,000

7,780,000 39.09 11,670,000

The total entitlement of the Rights Shares for the above major shareholders totalling 11,670,000 new Gadang Shares pursuant to the Rights Issue will not be underwritten. The Company had on 8 August 2002 entered into an underwriting agreement with the Underwriters to underwrite the remaining 18,180,000 new Gadang Shares representing 60.9% of the Rights Issue at an underwriting commission of 2.5% of the issue price. The underwriting commission of RM454,500 will be borne by the Company.

10. TERMS AND CONDITIONS The Rights Issue is governed by the terms and conditions set out in this Abridged Prospectus for shareholders whose Shares are deposited with MCD.

11. QUOTATION OF THE RIGHTS SHARES An application to the KLSE will be made within three (3) market days from the date of this Abridged Prospectus for the listing of and quotation for the Rights Shares. Official quotation of the Rights Shares will commence after receipt of confirmation from MCD that the CDS accounts of the Entitled Shareholders have been duly credited and notices of allotment have been despatched to them.

12. FURTHER INFORMATION Shareholders are requested to refer to the attached Appendices of this Abridged Prospectus for additional statutory and general information.

Yours faithfully for and on behalf of the Board GADANG HOLDINGS BERHAD DATO’ KAMARUDDIN BIN ABDUL GHANI Chairman

Company No.: 278114-K Gadang Holdings Berhad

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APPENDIX I

CERTIFIED TRUE EXTRACT OF THE ORDINARY RESOLUTION IN RESPECT OF THE RIGHTS ISSUE AS PASSED AT THE EGM OF GADANG CONVENED ON 8 MAY 2002 At the EGM of Gadang convened on 8 May 2002, the following ordinary resolution in respect of the Rights Issue was passed: ORDINARY RESOLUTION IV: PROPOSED RIGHTS ISSUE “THAT, approval be and is hereby given to the Directors of the Company to give effect to the proposed renounceable rights issue of 29,850,000 new ordinary shares of RM1.00 each in the capital of the Company (“Rights Shares”) to shareholders of the Company on the basis of three (3) new ordinary shares, for every two (2) existing ordinary shares held in the Company at an issue price to be determined later, payable in full upon subscription by way of provisional allotments to persons whose names appear in the Record of Depositors maintained by the Malaysian Central Depository Sdn Bhd on a date to be determined by the Directors; AND THAT the Directors be and are hereby authorised to:- (i) allot and issue the Rights Shares of the Company, and that such Rights Shares shall, upon allotment

and issue, rank pari passu in all respects with the then existing ordinary shares of the Company except that they will not be entitled to any dividends, rights, allotments or other distributions which may be declared prior to or on the date of allotment of the Rights Shares; and

(ii) make any modifications, variations and/or amendments in any manner as may be required by the

relevant authorities to give effect to the Rights Issue and take all such steps as they may deem necessary or expedient in order to implement, finalise and give effect to the aforesaid Rights Issue.”


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APPENDIX II INFORMATION ON GADANG 1. HISTORY AND BUSINESS

The Company was incorporated in Malaysia as Lai Sing Holdings Berhad, a public limited company, on 6 October 1993 under the Companies Act, 1965. On 7 November 1997, the Company changed its name to Gadang. Gadang was listed on the Second Board of the KLSE on 2 September 1994. The principal activities of the Company are the provision of management services and investment holding while the principle activities of the subsidiary companies are mentioned in Section 6 of this Appendix.

2. SHARE CAPITAL AS AT 23 AUGUST 2002

No. of Gadang Shares Total RM Authorised 100,000,000 100,000,000 ============ ============ Issued and fully-paid 19,900,000 19,900,000 ============ ============

3. MOVEMENTS IN THE ISSUED AND PAID-UP SHARE CAPITAL

Details of the movements in the issued and paid-up share capital of Gadang since the date of incorporation are as follows:

Date of allotment

No. of

Gadang Shares

Consideration

Cumulative issued and

paid-up share capital

RM

06.10.1993 2 Subscribers’ shares 2 18.06.1994 10,030,906 Issued at par as consideration for the acquisition

of Gadang Engineering (M) Sdn Bhd 10,030,908

29.06.1994 9,869,092 Rights issue of approximately 0.9839 share for

every 1 share held at RM1.15 per share 19,900,000


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4. MAJOR SHAREHOLDERS

The major shareholders of Gadang and their respective shareholdings as at 23 August 2002 are as follows: <-------------------Before the Rights Issue-------------------> <---------------------After the Rights Issue-----------------> <-----------Direct----------> <---------Indirect----------> <-----------Direct----------> <---------Indirect----------> Name No. of

Gadang Shares

%

No. of Gadang

Shares

%

No. of Gadang Shares

%

No. of Gadang Shares

% Sumber Raswira Sdn Bhd 6,500,000 32.66 - - 16,250,000 32.66 - - Dato’ Kok Onn - - 6,500,000 * 32.66 - - 16,250,000 * 32.66 Permodalan Nasional Berhad 1,140,000 5.73 - - 2,850,000 5.73 - - Yayasan Pelaburan Bumiputra - - 1,140,000 + 5.73 - - 2,850,000 + 5.73 Raja Zainal Abidin bin Raja Hussin 412,000 2.07 868,000 # 4.36 1,030,000 2.07 2,170,000 # 4.36

Notes: * By virtue of his shareholding in Sumber Raswira Sdn Bhd + By virtue of its shareholding in Permodalan Nasional Berhad # By virtue of his interest in Angkasa Aman Sdn Bhd, which has an equity interest of 4.36% in Gadang.


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5. DIRECTORS The Board of Directors together with their particulars and shareholdings as at 23 August 2002 are as follows: <---------------Before the Rights Issue--------------> <---------------After the Rights Issue--------------> <---------Direct--------> <-------Indirect--------> <---------Direct--------> <-------Indirect--------> Name

Nationality

No. of Gadang

Shares

%

No. of Gadang

Shares

%

No. of Gadang

Shares

%

No. of Gadang

Shares

%

Dato’ Kamaruddin bin Abdul Ghani Malaysian - - - - - - - - Dato’ Kok Onn Malaysian - - 6,500,000* 32.66 - - 16,250,000* 32.66 Koay Teng Keong Malaysian 200,000 1.0 - - 500,000 1.0 - - Datuk Wan Lokman bin Dato’ Wan Ibrahim

Malaysian - - - - - - - -

Adam bin Bachek Malaysian - - - - - - - - Ling Hock Hing Malaysian - - - - - - - - Chan Ah Kam @ Chan Ah Thoong Malaysian - - - - - - - - Notes:

* By virtue of his shareholding in Sumber Raswira Sdn Bhd


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6. SUBSIDIARY AND ASSOCIATED COMPANIES

The subsidiary companies of Gadang as at 23 August 2002 are as follows:

6.1 Direct subsidiary companies Date and Place of Issued and Effective Name Incorporation Paid-up Capital Ownership Principal Activities

RM %

Gadang Engineering 24 June 1980 20,000,000 100 Earthwork, civil (M) Sdn Bhd Malaysia engineering and construction works

Gadang Land Sdn Bhd 25 July 1996 2 100 Dormant Malaysia

Datapuri Sdn Bhd 13 January 1997 2,000,000 51 Design, construction, Malaysia maintenance and repair of

telecommunication equipment system

Globe Leigh’s Paints (M) 13 March 1997 1,000,000 51 Manufacturing of and Sdn Bhd (formerly known Malaysia trading in protective and as Rising Capital Sdn Bhd) decorative paints

6.2 Indirect subsidiary companies Date and Place of Issued and Effective Name Incorporation Paid-up Capital Ownership Principal Activities RM %

Kartamo Corporation Sdn Bhd 11 July 1984 2,000,000 100 Building and civil Malaysia engineering contractor

Katah Realty Sdn Bhd 8 December 1984 1,000,000 100 Building and civil Malaysia engineering contractor

Bincon Sdn Bhd 17 April 1985 85,000 100 Earthwork contractor Malaysia

Era Berkat Sdn Bhd 9 January 1992 1,100,002 51 Earthwork contractor Malaysia

Gadang Properties Sdn Bhd 7 March 1992 4,100,000 100 Property investment Malaysia and development

Buildmark Sdn Bhd 10 January 1989 2,000,000 100 Property development Malaysia

Gadang Construction 1 August 1988 1,500,000 100 Processing and supply Sdn Bhd Malaysia of rock products and the manufacture of ready mixed concrete

New-Mix Concrete 11 November 1995 10,000 100 Trading in ready mixed Industries Sdn Bhd Malaysia concrete

Magnaway Sdn Bhd 21 December 1992 1,000 100 Dormant Malaysia

Sama Pesona Sdn Bhd 11 July 1996 2 100 Dormant Malaysia

Gadang does not, at present, have any associated company.


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7. PROFIT AND DIVIDEND RECORDS

A summary of the results of the Gadang Group based on its audited financial statements for the past five (5) financial years ended 31 May 2002 are as follows: <-----------------Financial year ended 31 May-------------> 1998 1999 2000 2001 2002 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue 129,713 64,949 63,760 118,738 133,003 ====== ====== ====== ====== ====== EBIDTA# 13,945 1,673 4,217 12,228 5,266 Interest expense (9,122) (11,784) (9,110) (9,079) (5,095) Depreciation and amortisation

(1,780) (2,232) (2,397) (2,224) (2,446)

Exceptional items - (4,957) - - - Share of profits in joint ventures

- - 1,951 453 -

---------- ---------- ---------- ---------- ---------- Profit/(loss) before taxation 3,043 (17,300) (5,339) 1,378 (2,275) Taxation (1,270) 398 1,320 (3,545) (1,248) ---------- ---------- ---------- ---------- ---------- Profit/(loss) after taxation 1,773 (16,902) (4,019) (2,167) (3,523) Minority interests 3 768 (53) (131) (601) ---------- ---------- ---------- ---------- ---------- Profit/(loss) attributable to shareholders

1,776 ======

(16,134) ======

(4,072) ======

(2,298) ======

(4,124) ======

Number of shares in issue (’000)

19,900 19,900 19,900 19,900 19,900

Weighted average no. of shares (’000)

19,900 19,900 19,900 19,900 19,900

Gross EPS/(loss per share) (sen)

15.3 (86.9) (26.8) 6.9 (11.4)

Net EPS/(loss per share) (sen)

8.9 (81.1) (20.5) (11.5) (20.7)

Gross dividend rate (%) - - - - - # Earnings before interest, depreciation, taxation and amortisation


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Notes: 1. For the year ended 31 May 1998, the Group recorded a decrease of revenue of 16.6% from RM155.5

million to RM129.7 million and profit before taxation (“PBT”) of 81.4% from RM16.1 million to RM3.0 million as compared with previous year.

The decrease in revenue of RM25.8 million is mainly due to the Group’s Engineering and Construction division which has secured lower contract value of RM113 million during the year as compared to the last corresponding period of RM386 million. The lower PBT is mainly due to the decline in revenue, lower profit margin and higher interest expense caused by the prevailing economic situation.

2. For the year ended 31 May 1999, the Group recorded a decline in revenue of 49.9% to RM64.9 million and registered a loss before taxation of RM17.3 million as compared to PBT of RM3.0 million in the last corresponding year.

The reduction in revenue was mainly attributable to lower contracts secured in line with the contraction in the property and construction sector, which reported a negative growth of 19.2% in 1998. The loss before taxation was attributable to the reduction in revenue and also contributed by losses on disposals of machinery, higher interest expense, low margin recorded during the year and increase in provision for doubtful debts.

3. For the financial year ended 31 May 2000, the Group registered a marginal decline in revenue of 1.8% to

RM63.8 million with loss before taxation (“LBT”) reduced significantly by 69.1% to RM5.3 million. 4. For the financial year ended 31 May 2001, the Group registered a commendable revenue of RM118.7

million representing an increase of 86.2% as compared to the previous financial year. In line with the increase in revenue, the Group registered a PBT of RM1.4 million representing an increase of 125.8% from a LBT of RM5.3 million recorded previously.

5. For the financial year ended 31 May 2002, the Group registered a commendable revenue of RM133.0

million representing an increase of 12.0% as compared to the previous financial year. However, the Group registered a LBT of RM2.3 million which is mainly due to lower profit margin for existing contracts and provision for diminution in value of quoted investments.


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8. HISTORICAL SHARE PRICES

The monthly high and low share prices of Gadang as traded on the KLSE for the past twelve (12) months are as follows: High

RM Low RM

2001

August 1.58 0.68

September 2.12 0.80

October 1.54 1.04

November 1.40 1.07

December 1.53 1.18

2002

January 1.54 1.25

February 1.41 1.18

March 1.22 1.06

April 1.50 1.07

May 1.69 1.30

June 1.39 1.18

July 1.34 1.05

The last transacted price of Gadang Shares on 2 June 2000, being the last practicable date prior to the announcement of the Proposed Rights Issue is

2.15

The last transacted price of Gadang Shares on 29 August 2002, being the last practicable date prior to the printing of this Abridged Prospectus is

0.94

The last transacted price of Gadang Shares on 26 August 2002, being the date prior to the ex-date is

0.975

Source: Bloomberg

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