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On behalf of the Board of Directors of ASB and UMG, Perdana Merchant Bankers Berhad ("Perdana Bankers") is pleased to announce that UMF, a wholly-owned subsidiary of UMG, which is in turn a 50.75%-owned subsidiary of ASB, has on 30 March 1999 entered into a Definitive Agreement with Danamodal to finalise the terms and conditions for Danamodal's capital injection into UMF.

1.0 Introduction

On 6 October 1998, UMF entered into a conditional agreement with Danamodal to provide UMF with the ability to seek such additional capital as may be deemed necessary to facilitate and expedite the proposed merger of UMF with BBMB-Kewangan ("BBMB-K"), Delta Finance Berhad ("DFB"), Interfinance Berhad ("IFB") and Perdana Finance Berhad ("PFB") and to strengthen the capital base of the enlarged UMF.

On 20 October 1998, a facility agreement between UMF and Danamodal was entered into, the terms of which Danamodal agreed to make available to UMF a non-revolving term loan facility up to the maximum aggregate principal amount of RM800 million ("Interim Facility"). An amount of RM800 million was drawndown pursuant to the facility agreement. As the facility was intended to be temporary, the facility agreement was to be replaced by a definitive agreement upon the finalisation of its terms.

On 12 February 1999, it was announced that UMF, together with BBMB-K, DFB and IFB have agreed to mutually terminate negotiations on the previously proposed merger.

The Definitive Agreement has now been finalised and on 30 March 1999 formalised between UMF and Danamodal. In brief, the Definitive Agreement would entail the following:-

· Of the non-revolving term loan facility of RM800 million drawn-down, an amount of RM317 million would be converted into 317 million Irredeemable Non-Cumulative Convertible Exchangeable Preference Shares of RM1.00 each ("INCEPS") in UMF at the subscription price of RM1.00; and

· the remaining amount of RM483 million has been repaid to Danamodal.

Further details on the Definitive Agreement is set out in Section 2.0 of this announcement.

2.0 Salient features of the Definitive Agreement

Danamodal shall subscribe for 317 million INCEPS of UMF at a subscription price of RM1.00 each.

Each INCEPS shall confer the holder the right to receive semi-annual non-cumulative preferential dividend at the rate of 8% per annum (less tax) subject to the approval of Bank Negara Malaysia and the availability of sufficient net profit after taxation for distribution for the relevant year. The payment of the dividend shall be in priority to any payment in respect of any other class of shares in the capital of UMF.

The INCEPS shall not entitle the holder to participate in the profits or assets of UMF other than the preferential dividend.

Danamodal as a holder of the INCEPS shall have voting rights as prescribed in a Power of Attorney in addition to the following entitlement:-

· the right to receive notice of and attend any general meeting of UMF;
· the right to vote for each INCEPS held upon any resolution which varies or is deemed to vary the rights and privileges attaching to the INCEPS and upon any resolution for the winding up of UMF; and
· the right to vote for each INCEPS held on any resolution in a general meeting if at the date of the notice convening the general meeting, preferential dividend attributable to INCEPS holders is in arrears for more than three (3) months.

The holder of the INCEPS shall be entitled to convert within ten (10) years from the date of its issue, the INCEPS into ordinary shares of UMF at the ratio of one ordinary share of RM1.00 for every one INCEPS of RM1.00 held.

The Definitive Agreement also sets out the various options available to UMF, UMG and Danamodal as follows:-

· UMG is entitled to a ten (10) year call option period to purchase from Danamodal all the UMF ordinary shares and/or INCEPS held by Danamodal at a price embodying a fixed rate of return to Danamodal.

· A Put Option entitles Danamodal to require UMG to purchase from Danamodal any number of UMF ordinary shares and/or INCEPS at a price embodying a fixed rate of return to Danamodal within a ten (10) year period.

• An Exchange Option entitles Danamodal to exchange UMF ordinary shares and/or INCEPS for new ordinary shares of UMG based on, amongst others, the 30 days' average closing market price of UMG on the Kuala Lumpur Stock Exchange and a price embodying a fixed rate of return to Danamodal within a ten (10) year period.

· Danamodal is also entitled under a Call Option, to exercise only once, the purchase from UMG of such number of UMG's holding of existing UMF ordinary shares based on an agreed formula within a ten-year period.

The Definitive Agreement is conditional upon inter-alia, the approvals of various authorities namely the Securities Commission, the Minister of Finance, Bank Negara Malaysia, the Foreign Investment Committee, the approval of shareholders of UMF, UMG and Danamodal at extraordinary general meetings to be held, the various agreements in relation to the Definitive Agreement namely the Call Option Agreement, the Put Option and Exchange Agreement and the UMG Call Option Agreement becoming unconditional, the Shareholders Agreement becoming unconditional save for payment by Danamodal of RM317 million and the repayment by UMF to Danamodal of the outstanding amount of RM483 million in relation to the Interim Facility.

3.0 Danamodal's Representatives

Danamodal shall be entitled to nominate at least two (2) directors as its representatives to the Board of UMF, one of whom shall have executive functions. In addition, Danamodal is also entitled to nominate additional directors to reflect its proportion of shareholding in the total share capital of UMF.


4.0 Effects of the Proposed Recapitalisation Exercise:

4.1 Share Capital

UMF

The Proposed Recapitalisation Exercise will have no effect on the ordinary share capital of UMF. There will however be an issue of 317 million INCEPS to Danamodal.

UMG

The Proposed Recapitalisation Exercise will have no effect on the ordinary share capital of UMG. However, in the event of the exercise of the Exchange Option, UMG will issue new UMG ordinary shares to Danamodal.

4.2 Earnings

UMF

With the expected completion of the Proposed Recapitalisation Exercise before August 1999, and barring any adverse economic events and circumstances, UMF's earnings for the financial year ending 31 December 1999 should improve and its prospects in the following financial years will be enhanced.

UMG

As UMF would remain a subsidiary of UMG, the effect on UMG's earnings would correspond with that on UMF above.

4.3 Net Tangible Assets ("NTA")

UMF

Upon the subscription of RM317 million of INCEPS and full conversion of the INCEPS, UMF's proforma NTA based on the latest audited accounts as at 31 December 1997 would decrease from RM1.40 to RM1.17 per ordinary share.

UMG

UMG's NTA per ordinary share would remain unchanged until such time Danamodal exercises its rights under the Exchange Option.

4.4 Substantial shareholders

UMF

If Danamodal exercise its rights in accordance with and under the specific circumstances set out in the Definitive Agreement to convert the INCEPS into ordinary shares or to exercise its Call Option as mentioned in Section 2.0 of this announcement, Danamodal will emerge as a substantial shareholder of UMF based on UMF's current issued share capital.

However, UMG has a right under the UMG Call Option to repurchase the UMF shares and INCEPS held by Danamodal and reduce Danamodal's stake in UMF over a ten-year period.

UMG

Should Danamodal fully exercise its rights provided in the Exchange Option, Danamodal will become a substantial shareholder in UMG based on UMG's current issued share capital.

4.5 Risk Weighted Capital Ratio ("RWCR")

The RWCR of UMF as at 28 February 1999 is expected to improve from 8.6% to 16.0%.


5.0 RATIONALE FOR THE PROPOSED RECAPITALISATION EXERCISE

With the Proposed Recapitalisation Exercise, UMF's capital base would be strenghtened so that the stronger better capitalised UMF would be able to enhance its contribution towards the recovery of the Malaysian economy.

6.0 DIRECTORS' INTEREST

None of the Directors and/or substantial shareholders and/or persons connected with the Directors and substantial shareholders of UMF, UMG and ASB have any interest, direct or indirect in the Proposed Recapitalisation Exercise.

7.0 SERVICE CONTRACTS

As of the date of this announcement there are no proposals for any service contracts for any new directors to be appointed in UMF. Such service contracts, if any, will be subject to the approval of Bank Negara Malaysia.


8.0 DIRECTORS' RECOMMENDATION

The Board of Directors of ASB and UMG, after having considered all aspects of the Proposed Recapitalisation Exercise, are of the opinion that the Proposed Recapitalisation Exercise is currently in the best interest of the Company.


9.0 APPLICATION TO THE AUTHORITIES

The relevant applications to the authorities shall be made within two (2) months from the date of this announcement.

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