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On behalf of MBSB, Commerce International Merchant Bankers Berhad ("CIMB") wishes to announce that the Company has on 6 March 2003 entered into a subscription agreement ("Subscription Agreement") with Employees Provident Fund Board ("EPF") and Permodalan Nasional Berhad ("PNB") for the issuance of 165 million redeemable convertible preference shares of RM1.00 each ("RCPS") in MBSB ("Proposed Restricted Issue").

Pursuant to the Subscription Agreement, EPF and PNB are to subscribe for 140 million and 25 million RCPS respectively at an issue price of RM2.00 each. The salient terms of the Subscription Agreement are detailed in Section 4 below.

In addition to the Proposed Restricted Issue, the Company also proposes the following:
(i) an employee share option scheme ("ESOS") for eligible employees and Executive Directors of MBSB and its subsidiaries ("MBSB Group") ("Proposed ESOS"); and

(ii) amendments to the memorandum and articles of association ("M&A") of MBSB to facilitate the issuance of the RCPS pursuant to the Proposed Restricted Issue as well as to update the M&A of the Company ("Proposed M&A Amendments").
(The Proposed Restricted Issue, Proposed ESOS and Proposed M&A Amendments are collectively known as "Proposals")

2.1 Proposed Restricted Issue
The Proposed Restricted Issue involves the issuance of 140 million and 25 million RCPS in MBSB to EPF and PNB respectively at an issue price of RM2.00 each.

The consideration for the RCPS will be settled by EPF via the conversion of RM280 million of its outstanding loans extended to MBSB, while PNB will settle the consideration for the RCPS via the conversion of RM50 million of its deposits maintained with MBSB.

The terms of the RCPS are set out in Table 1 below.
The new shares to be issued pursuant to the conversion of the RCPS will, upon allotment and issue, rank pari passu in all respects with the then existing MBSB ordinary shares of RM1.00 each ("MBSB Shares") save and except that they will not be entitled to any dividends, rights and/or distributions, the entitlement date of which precedes the date of allotment of the new MBSB Shares.
2.2 Proposed ESOS
The Company's existing ESOS has expired in August 2002. As such, the Proposed ESOS will give the Company an opportunity to have a fresh ESOS for eligible Executive Directors and employees of the MBSB Group.

The Proposed ESOS will involve the granting of options to eligible Executive Directors and employees to subscribe for new MBSB Shares. The Proposed ESOS is proposed to be in force for a period of five (5) years.

An employee (including Executive Directors) of the MBSB Group shall be eligible to participate in the Proposed ESOS if as at the date the offer is made, the Executive Director/employee is in the employment and on the payroll of a company within the MBSB Group (other than a company which is dormant).

The maximum number of new MBSB Shares to be issued upon the exercise of the options granted under the ESOS will not exceed 10% of the issued and paid-up share capital of MBSB at the time of the offer.
The new shares to be issued pursuant to the exercise of the options granted under the Proposed ESOS will, upon allotment and issue, rank pari passu in all respects with the then existing MBSB Shares save and except that they will not be entitled to any dividends, rights and/or distributions, the entitlement date of which precedes the date of allotment of the new MBSB Shares.

The subscription price at which an eligible Executive Director/employee is entitled to subscribe for the new MBSB Shares pursuant to the options shall be based on the 5-day weighted average market price ("WAP") of MBSB Shares immediately preceding the date the offer is made to the eligible Executive Director/employee, provided that:
(i) a discount, if any, of not more than 10% from the 5-day WAP may be granted; and

(ii) the price so determined shall not be less than the par value of the MBSB Shares.

2.3 Proposed M&A Amendments
The Proposed M&A Amendments will involve the following:
(i) amendments to the M&A to facilitate the issuance of RCPS pursuant to the Proposed Restricted Issue;

(ii) amendments to the M&A to increase the authorised share capital of MBSB to accommodate the issuance of RCPS and the new MBSB Shares that may arise from the conversion of the RCPS; and

(iii) other amendments for the purpose of clarity and to update the M&A of MBSB to be in line with current corporate developments.
2.4 Inter-conditionality
The Proposed Restricted Issue is conditional on the Proposed M&A Amendments. The Proposed ESOS is not conditional on the Proposed Restricted Issue or Proposed M&A Amendments.

The financial crisis in 1997/1998 had significantly slowed down the investment activities of Malaysia especially in the property and construction sectors. As a result, MBSB's financial performance had been adversely affected given the substantial decrease in its lending activities and huge provisions made.

As at 31 December 2001, the MBSB Group's audited shareholders' funds stood at RM193.9 million, while its audited borrowings and accumulated losses stood at RM2.3 billion and RM691.4 million respectively.
The Proposed Restricted Issue will strengthen the shareholders' funds of the MBSB Group and reduce its gearing level, thus strengthening the financial position of the MBSB Group. It is also an expedient means for MBSB to raise equity funds at minimal costs and in view of the limited options available considering that the market price of MBSB Share has been below its par value of RM1.00 for more than the past one (1) year.

3.2 Proposed ESOS
The Proposed ESOS is intended to motivate employees of the MBSB Group towards better performance through greater dedication and loyalty to the MBSB Group with the view to enhancing productivity. It is also intended to reward and retain dedicated and loyal employees.
3.3 Proposed M&A Amendments
The Proposed M&A Amendments will facilitate the issuance of the RCPS by MBSB pursuant to the Proposed Restricted Issue and to update the M&A of the Company.

The salient terms of the Subscription Agreement include, among others, the following:
(i) MBSB shall allot and issue 140 million and 25 million of the RCPS to EPF and PNB respectively, the subscription price of which shall be satisfied by way of offsetting against RM280 million of the outstanding loans owed by MBSB to EPF and RM50 million deposits maintained by PNB with MBSB;
(ii) The Proposed Restricted Issue shall be conditional upon the approvals of the relevant authorities/parties as set out in Section 6 of this Announcement having been obtained; and

(iii) In the event a condition is imposed or the indicative terms of the RCPS are in any way varied in connection with any approval granted by the approving authority, which condition or variation, as the case may be, affect the parties of the Subscription Agreement, the affected party of the Subscription Agreement may in writing to other party/parties terminate the Subscription Agreement or appeal to the terms or conditions imposed by the relevant approving authority.

The proforma effects of the Proposals on the share capital, net tangible assets ("NTA"), gearing, earnings and shareholdings of substantial shareholders of the MBSB Group are as follows:
5.1 Share Capital
The proforma effects of the Proposals on the issued and paid-up share capital of MBSB are set out in Table 2 below.
5.2 NTA and Gearing
The proforma effects of the Proposals on the NTA and gearing of the MBSB Group are set out in Table 3 below.

5.3 Earnings
The Proposed Restricted Issue is expected to contribute positively to the earnings of the MBSB Group for the financial year ending 31 December 2003 as a result of interest savings. The Proposed ESOS is not expected to have a material effect on the earnings of the MBSB Group.
5.4 Substantial Shareholders
The proforma effects of the Proposals on the shareholdings of the substantial shareholders of MBSB based on the Register of Substantial Shareholders as at 31 December 2002 are set out in Table 4 below.

The Proposals are conditional upon approvals being obtained from:
(i) the Securities Commission ("SC") for the Proposed Restricted Issue and Proposed ESOS and the listing of and quotation on the Main Board of the Kuala Lumpur Stock Exchange ("KLSE") for the new MBSB Shares arising from the conversion of the RCPS and the exercise of the options under the Proposed ESOS;


(ii) the Foreign Investment Committee for the Proposed Restricted Issue;

(iii) the KLSE for the listing of and quotation on the Main Board of the KLSE for the new MBSB Shares arising from the conversion of the RCPS and the exercise of the options under the Proposed ESOS; and

(iv) the shareholders of MBSB for the Proposals at an extraordinary general meeting ("EGM") to be convened.

Save as disclosed below, none of the Directors and substantial shareholders of MBSB and persons connected to the Directors and substantial shareholders of MBSB have any interest, direct or indirect, in the Proposals.

Tan Sri Abdul Halim bin Ali, Datuk Azlan bin Mohd Zainol and Cindy Tan Ler Chin are nominees of EPF on the Board of Directors of MBSB and as such are deemed interested in the Proposed Restricted Issue and Proposed M&A Amendments (in so far as they relate to the Proposed Restricted Issue). They have and will continue to abstain from voting at all Board of Directors deliberations pertaining to the Proposed Restricted Issue and Proposed M&A Amendments (in so far as they relate to the Proposed Restricted Issue).
Wan Roshdi bin Wan Musa, a nominee of PNB on the Board of Directors of MBSB, who has resigned on 5 November 2002, was deemed interested in the Proposed Restricted Issue and Proposed M&A Amendments (in so far as they relate to the Proposed Restricted Issue). He had abstained from voting at all Board of Directors deliberations pertaining to the Proposed Restricted Issue and Proposed M&A Amendments (in so far as they relate to the Proposed Restricted Issue).

EPF and PNB, who are major shareholders of MBSB, are interested in the Proposed Restricted Issue and Proposed M&A Amendments (in so far as they relate to the Proposed Restricted Issue). As such, EPF and PNB will abstain from voting at the EGM of the Company for the Proposed Restricted Issue and Proposed M&A Amendments (in so far as they relate to the Proposed Restricted Issue).

The Board of Directors of MBSB is of the opinion that the Proposals are in the best interest of MBSB.

Applications to the regulatory authorities pertaining to the Proposals will be made within six (6) months from the date of this announcement.

CIMB has been appointed as the adviser for the Proposals.

MM-030303-54169 (Tables).pdf

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