Symbol: SUNTEC
Headline: Notice of Additional Information (Revise)
Time: 23 Jun 2004 09:16:53
May 27, 2004
Re: Notice of Additional Information
To: President
Stock Exchange of Thailand
Ref: Notification letter of the Company Regarding the Additional Information of the Company
No. STG. 023/2547 dated March 17, 2004
Suntech Group Public Company Limited (the "Company") clarified facts in respect
of transactions with related companies to the Stock Exchange of Thailand ("SET")
on March 17, 2004 as detailed in the letter mentioned above.
The Company would like to provide additional information regarding the said transactions
to ensure consistent understanding between the Company and the SET on the following issues:
1. Investment in Hemaraj Land and Development Public Company Limited ("Hemaraj")
1.1 The approval for purchase of 14,000,000 shares of Hemaraj from Mr. Sawasdi Horrungruang,
Miss Nuchanart Horrungruang, and Mr. Prawit Horrungruang, is deemed as a connected
transaction of a listed company because these three persons are considered as related persons
of a listed company. Subject to the regulations on connected transactions of the SET,
the Company is required to submit a report of connected transactions to the SET and request
approval thereof from a shareholders meeting. In this regard, the Company proposed that
the Extraordinary Shareholders Meeting No. 1/2540 on March 3, 1997, consider a joint investment
in Hemaraj and the Meeting resolved to approve such joint investment as detailed in a copy of
the report of connected transactions submitted to the SET, as detailed in a copy of the Minutes
of the Extraordinary Shareholders Meeting No. 1/2540 on March 3, 1997. The Company would like to
inform you that the purchase of Hemaraj's shares from these three persons is made to expand
investment in other businesses for the purpose of the Company's growth.
1.2 With respect to the sale and purchase of Hemaraj's ordinary shares, a memorandum of agreement
was made on March 5, 1997 (the "Memorandum") which prescribes that the seller may deliver partial
shares to the Company and the delivery of the full number thereof shall be delivered completely
by the last day the purchaser applies for transfer of shares, no later than December 31, 1997.
In this regard,the seller gave notice of the reason of non-delivery of shares on the execution
date of the Memorandum,that is that Hamaraj's shares were then in the possession of a closed
financial institution. At that time,the Board of Directors considered and acknowledged and
was of the opinion that since the seller had sponsored and given financial support to the
Company, it is concurred that the seller can make delivery of Hemaraj's shares in installments
under the agreed conditions.
1.3 Upon the expiration of time as specified in the Memorandum, December 31, 1997, the Company
received the transfer of 8,945,600 shares but the remaining 5,054,400 shares had not been
transferred. Thereafter,the Company asked for delivery of the remaining shares, thus another
3,888,606 shares were delivered to the Company on August 19, 1998. The seller informed the
Company that the rest would be delivered within September 1998 but upon the lapse of such period,
the seller sent a request for extension of delivery because the shares were in the possession of
a closed financial institution under the supervision of FRA. However,the Company accelerated
the transfer of ownership of shares and informed the seller of a penalty to be paid as detailed
in the demand notices of delivery dated July 13, 1998 and January 7, 1999 and requests for
extension of delivery dated September 28, 1998 and January 18, 1999. The seller rapidly
delivered shares to the Company and the last delivery of 1,164,000 was made on December 24, 2003.
The seller, however, has not delivered some 3,940 shares to the Company which have been demanded
from the seller as detailed in the demand notice of delivery dated February 23, 2004. As a result,
the seller delivered another 3,940 shares to the Company on 20 April 2004 so the complete number
of shares was delivered under the Memorandum.
1.4 Subject to the Memorandum, if the seller cannot transfer the ownership of shares, the seller will
compensate the purchaser for damages based on the share value in regard to the shares pf which
the ownership cannot be transferred, at the rate of 15 percent per year calculated from the date
the purchase applies for the transfer of shares to the date the seller transfers the ownership of
shares as requested. In this regard, the Company asked for the payment of a penalty and the
Company was of the opinion that if it cannot follow-up or demand the penalty from the seller,
the Company will take any legal action against the seller.
1.5 The Company would like to further inform you of the objective of investment which is that the
Company intends to make a long-term investment in Hamaraj and not purchasing for speculate to
make a profit in short-term Therefore, the delay in delivery of shares will not affect the
acquisition of shares since on February 1999, the seller agreed and consented to grant the
voting right and all other available rights in respect to shares to the Company as detailed
in the Memorandum on dated February 19, 1999.
2. Legal suits filed against the Company in respect of payment by postdated checks to connected companies
2.1 The Company would like to clarify that payments by postdated checks to connected companies i.e.
Baht 265 Million to NTS Steel Group Public Company Limited ("NTS"), Baht 23.96 Million to Metal
Star Company Limited ("Metal Star") and Baht 30 Million to Nakornthai Integrated Steel Company
Limited were not made by the Company but by STG International Trading Company Limited ("STG"),
which carries out the business of supplying and trading in all types of steel and is a subsidiary
(in which the Company holds 299,993 shares, representing 99 percent of registered capital)
as detailed below:
2.2 STG entered into steel purchase agreements with the three companies named above, details of which
appear in steel purchase agreements and the termination letters of such agreements as follows:
(1) On December 13, 1996 STG entered into two steel purchase agreements with NTS and made payment
for steel by postdated checks for Baht 104,000,000 and Baht 161,600,000 and then on April 30,
1997 and June 25, 1997 STG terminated both such agreements, respectively. At the time the
transactions were made, the directors and shareholders of STG and NTS are listed below:
List of Directors
STG NTS
Mr. Sawasdi Horrungruang, Mr. Sawasdi Horrungruang,
Mr. Chamni Chanchai Mr. Chamni Chanchai
Mr. Chaiyaphon Horrungruang, Miss Patama Horrungruang,
Mr. Prawit Horrungruang, Mr. Santi Kittikote
List of Shareholders
STG NTS
Suntech Group Public Company Limited Mr. Sawasdi Horrungruang,
Miss Siriporn Horrungruang
Mr. Sawai Horrungruang,
(2) On February 22, 1997 STG entered into an agreement with Metal Star
and made payment for steel by a postdated check for Baht 23,956,460
and then on March 11, 1997 STG terminated such agreement.
At the time the transaction was made, the directors and shareholders of
STG and Metal Star are listed below:
List of Directors
STG Metal Star
Mr. Sawasdi Horrungruang, Mr. Soonthorn Chayleamlak
Mr. Chamni Chanchai Mr. Sakda Horrungruang,
Mr. Chaiyaphon Horrungruang,
Mr. Prawit Horrungruang,
List of Shareholders
STG Metal Star
Suntech Group Public Company Limited Mr. Soonthorn Chayleamlak
Mr. Sakda Horrungruang,
Mr. Surapon Chitbat
(3) On January 17, 1997 STG entered into an agreement with NIS and
made payment for steel by a postdated check for Baht 30,000,000
and then on April 18, 1997 STG terminated such agreement.
At the time the transaction was made, the directors and shareholders
of STG and NIS are listed below:
List of Directors
STG Metal Star
Mr. Sawasdi Horrungruang, Mr. Kosol Horrungruang,
Mr. Chamni Chanchai Mr. Mitree Sattapornphan
Mr. Chaipol Horrungruang, Mr. Winai Taptimteth
Mr. Prawit Horrungruang,
List of Shareholders
STG Metal Star
Suntech Group Public Company Limited Mr. Sawai Horrungruang,
Mr. Soonthorn Chayleamlak
Mr. Sawasdi Horrungruang,
2.3 Termination of the aforesaid agreements was made because
at that time steel price considerably fluctuated so that the seller
could not deliver goods to STG within the period as specified in
the agreements.
2.4 After the terminations of the agreements, STG asked the three
companies to return such postdated checks as detailed in the notice
requesting return of postdated checks.
2.5 The Company failed to submit the three such transactions to a
shareholders meeting for approval since the Company understood
that they were connected transactions which were exempt from being
reported to the SET (considering the regulations of connected transactions
at the time of transactions) and did not require approval from a shareholders
meeting. This is because the three transaction were made in the normal
course of business and under general trading conditions of listed companies
or subsidiaries and the trading price is the general market price.
2.6 In the case of NTS, which is in the business rehabitation process under
the Bankruptcy Act B.E. 2483 (1940) (as amended B.E. 2542 (1999),
STG as Creditor No. 42 filed an application for debt repayment pursuant to
the business reorganization process under the Bankruptcy Act B.E. 2483 (1940)
(as amended B.E. 2542 (1999) as detailed in the evidence of application for
debt repayment dated November 23, 2000. Currently, debt repayment is in
process under a debt rehabitation plan. If there is any progress or the Company
receives repayment, the Company will promptly give notice thereof to the SET.
2.7 In the case of Metal Star and NIS, STG asked for repayment and then made
confirmations of debt with the two companies as evidence for enforcement of
repayment against these two companies as detailed in the confirmations dated
May 8, 1997 with Metal Star and dated May 9, 1997 with NIS. Furthermore, the
Company is of the opinion that if STG cannot follow up or demand repayment from
the two companies, STG may apply legal measures against the two companies.
2.8 On March 17, 2004, the Company clarified the facts regarding payment by postdated
checks to the connected companies to the SET. Due to faulty internal cooperation, an
officer preparing the letter replying to enquires stated that the Company made payment
by such postdated checks but actually the payments were made by STG. The Company
hereby clarifies such mistake.
2.9 With respect to the sale and purchase of goods, payment by a postdated check is made
in the normal course of business in which third party sellers are treated in the same way.
In making prepayment for goods, normally, partial payment will be made to enable the seller
to have working capital for the purchase of raw materials and production planning to ensure
delivery of goods to its customers. The seller shall make payment when it receives the goods
completely. To show that payment for goods by a postdated check is made in the normal course
of business, the Company uses this payment method with other business partners. The following
are examples of steel trade transactions: steel trade transactions with W. Rungruang Steel dated
December 1, 1993, with Ruangroj Steel Company Limited dated January 12, 1994 and with C. Steel
Work (1993) Partnership Limited dated March 21, 1994.
3. Debt obligations which may result from guarantees for connected companies
3.1 The Company gave guarantee against Metal Star's debt in a limit of not more than Baht 200,000,000.
This is because the Company entered into a steel scrap sale and purchase agreement with Metal Star
on September 30 1995, with 12-month contract period. In this regard, Metal Star requested deposit
for such purchase of steel but the Company could not do so, the Company then negotiated with Metal
Star to act as its guarantor for credit facilities in which Metal Star would receive credit
facilities from a financial Institution for the purpose of gathering steel scrap instead.
The Company submitted this matter to the Board of Directors for approval of the guarantee as
detailed in the Minutes of the Board of Directors Meeting No. 13/2538 dated October 19, 1995.
3.2 The Company's reasons and necessities in providing guarantee against Metal Star's debt is that
in 1995 the Company had a sales volume from sale of steel scrap of more than Baht 1,400 Million
and due to greater demand for steel scrap and a problem of expansion of steel scrap gathering
base outside the area, it was necessary for the Company to make a plan for the scrap steel business
expansion by entering into a future agreement to sell and to purchase steel scrap with Metal Star,
as business partner. This is to enable Metal Star to gather and supply the steel scrap to the Company
for a period of 12 months as detailed in the steel scrap sale and purchase agreement with Metal Star
dated September 30, 1995. At that time, Metal Star requested a deposit from the Company to use to
guarantee the working capital for gathering and supplying the steel scrap in numbers as per the
Company's demand. The Company could not respond to Metal Star's request but for the maximum trade
benefit of the Company, the Company, therefore, negotiated with Metal Star to act as guarantor,
including placing the Company' assets as security for credit facilities which the financial
institution granted to Metal Star for the purpose of gathering and supplying the steel scrap.
3.3 The reason that the Company failed to submit this transaction to a shareholders meeting for
approval as per the regulations on connected transactions of the SET is that the Company's
officer understood that the transaction size is lower than that requiring approval from a
shareholders meeting so it was submitted to the Board of Directors only. In this case, the Company
did not intend to avoid compliance with the regulations of the SET. Although this transaction
was not permitted or approved by a shareholders meeting, the plan administrator, who is a person
authorized to act on behalf of the existing shareholders, is of the view that this transaction
should be properly made to ratify such transaction pursuant to the power granted to it under the
business restructuring plan of the Company. However, the Company represents that in the future,
the Company will carefully undertake all connected transactions and will not allow the occurrence
of any mistake.
3.4 The Company has never disclosed the guarantee transaction in the financial statements since the
Company is of the view that the creditors will exercise their rights to claim for debt repayment
under the business rehabilitation plan if the Company fulfills the condition precedent of the plan.
Therefore, the Company had not recorded such guarantee transaction in the financial statement but
finally disclosed it in the financial statement ending 30 June 2003 since:
(a) The creditor of Metal Star (Asset Management Corporation ("AMC") gave notice of exercising the
claim against the Company as guarantor as detailed in the notice of exercising the claim under
the business rehabilitation plan of AMC dated June 18, 2001 and the AMC's demand notice under the
guarantee agreement and notice of pledge dated September 21, 2001.
(b) The Office of the Securities and Exchange Commission ("Office of SEC") sent Letter No. GorLorTor.
Jor. 2/2547, Re: Audit of 2003 Financial Statements dated January 5, 2004 to the Company giving
the opinion that the Company should record such guarantee transaction as debt of the Company
because Metal Star is unable to make debt repayment to the creditor. In addition, the creditor
sent notice of exercising the claim against the Company as guarantor so the Company should
record the whole amount of such debt in the financial statement ending June 30, 2003.
Please be informed accordingly.
Sincerely yours,
( Dr. Chaiyaphon Horrungruang )
President