MTQ Corporation Limited

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Acquisition Of Business Assets Of Adelaide Fuel Injection Parts Py Ltd, Adelaide Fuel Injection Service Pty Ltd, And Rund Pty Ltd

BackAug 20, 2003

The Board of Directors of MTQ Corporation Limited ("the Company") is pleased to announce that its wholly-owned subsidiary, MTQ Engine Systems (Aust) Pty Ltd ("MTQES"), has entered into a conditional agreement ("Agreement") today with (i) Australian companies, Adelaide Fuel Injection Service Pty Ltd ("AFIS"), Adelaide Fuel Injection Parts Pty Ltd ("AFIP"), and Rund Pty Ltd ("Rund") (collectively as "AFI Group" or "the Vendors") and (ii) Donald Wilkey and Cheryl Joan Wilkey ("Wilkeys") for the acquisition of the Vendors' business as an on-going concern together with its business assets ("the Assets").

The AFI Group is engaged in the fuel injection business ("the Business") in Australia. It has a servicing arm and trading arm in South Australia operated by AFIS and AFIP respectively, and a service facility in Melbourne run by Rund. Apart from owning the distributorship rights of leading fuel injection equipment manufacturers, the AFI Group is also the service agent for major manufacturers such as Bosch, Denso, Delphi and Stanadyne.

With MTQES' nationwide network in Australia and established business infrastructure, the Directors believe that the acquisition of the AFI Group's Assets could brighten the prospects of MTQES' existing fuel injection business and enable it to become a major parts distributor and service agent in Australia's fuel injection industry.

Under the Agreement, MTQES will purchase the Assets of the AFI Group for a cash consideration of A$5,977,633 subject to adjustments in accordance with the Agreement. MTQES will also offer employment to all employees of the AFI Group (except the Wilkeys) upon completion.

Completion will take place on 1 November 2003 or such other date as the parties may agree ("completion date").

The consideration was arrived at on a "willing-buyer and willing-seller" basis and is based on the net book value of the plant and equipment, motor vehicles, and stocks-in-trade as at 30 June 2003 of A$2,300,329; plus a premium of A$3,677,304 for goodwill ("the Goodwill"), business names, business records, rights and benefits of each of the Vendors under business contracts, rights and benefits of each of the Vendors under leases, and other assets exclusively used in the Business. The acquisition excludes the equity investment in a unit trust, cash in hand or in banks and debts accrued to the AFI Group as at the day before the completion date. MTQES will also not assume any of the debts or liabilities of the Vendors.

In negotiations, the parties took into consideration that each of the Vendors and the Wilkeys undertook that none of them or their respective related corporations or associates will, amongst other things, engage in any business in the various territories of Australia which is directly or indirectly competitive with the Business for 5 years after the completion date.

The final consideration payable is subject to adjustments to take into account the results of a stocktake to be carried out prior to the completion date (with a further adjustment for movements in stock occurring between the stocktake and the completion date), payments made or received by the Vendors prior to completion of the acquisition for items of Assets or goods and services or benefits to be supplied or sold by the Business after completion, apportionment of recurrent outgoings as well as provisions for employee leave entitlements.

The acquisition will be funded through a combination of internal resources and external borrowings.

Completion of the acquisition is subject to the following conditions precedent being obtained or waived by the completion date:

1. the assignment to MTQES of all material business contracts;

2. the completion of due diligence investigations in respect of the Business to the satisfaction of MTQES on or before 20 October 2003; and

3. the approval by the Company's Board of Directors and shareholders being obtained.

Upon completion, MTQES will pay the cash consideration of A$5,977,633 ("Completion Payment") to the Vendor.

Within 5 business days after the finalisation of the purchase price of the stock (and, accordingly, the finalisation of the consideration for the Assets), the Vendors or MTQES (as the case may be) will pay to the other the difference (if any) between the final consideration and the Completion Payment. If the final consideration exceeds the Completion Payment, MTQES will pay the difference to the Vendors. If the final consideration is less than the Completion Payment, the Vendors will pay the difference to MTQES.

The fuel injection activities of the AFI Group generated an unaudited profit before tax of approximately A$1,426,000 for the financial year ended 30 June 2003.

Had the transaction taken place on 1 April 2002, the Company's consolidated earnings per share for the year ended 31 March 2003 would have increased from 6.80 cents to 7.67 cents. The Company's consolidated net tangible assets per share would have decreased from 36.78 cents to 32.58 cents.

To the best of the knowledge and belief of the Directors, having made reasonable enquiries, none of the Directors or substantial shareholders of the Company has any interest, directly or indirectly, in the acquisition.

A copy of the Agreement is available for inspection during normal business hours at the Company's registered office at 182 Pandan Loop, Singapore 128373, for 3 months from the date of this announcement.

By Order of the Board
MTQ Corporation Limited