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The Board of Directors of KKB Engineering Berhad ("KKB" or "the Company") is pleased to inform the Exchange that in respect of the RM7.84 million received from the rights issue exercise mentioned above, RM6.10 million of the total proceeds have been allocated for the upgrading of the Group's existing LPG cylinder plant located in Bintawa Industrial Estate, Kuching. As set out in the Abridged Prospectus dated 5th April 2001, the upgrading of the LPG cylinder plant will be undertaken in stages over a period of eighteen (18) months from the date of the receipt of the rights issue proceeds, ie. by the 17th November 2002. Upon completion of the upgrading of the plant, the productivity of the plant is expected to increase by 15%.

As of todate, the Company has utilized approximately RM3.30 million for the upgrading of its LPG cylinder plant via the acquisition of various equipment and machinery. Taking into consideration the current moderate off-take of the LPG cylinders due to the weak sales and market conditions and given the upgrading of the plant todate, the Board of the Company is of the view that the productivity of the plant has increased to a satisfactory level for the present level of off-take of cylinders.

Notwithstanding the above, the Company had identified a further utilization of RM1.30 million for the acquisition of additional equipment and machinery which is expected to improve the productivity of the LPG cylinder plant at higher off-take level. However, due to the current weak market sentiments as explained above, the Board is proposing to withhold this further expenditure till market situation is clearer. Accordingly, the Board wishes to advise that this abovementioned RM1.30 million expenditure is expected to be completed within ONE (1) year from 17th November 2002.

Based on the above, the balance of RM1.50 million allocated for the upgrading of the LPG cylinder plant will no longer be required. The Company has decided to utilize this balance amount for the working capital of the Company.