Contents :

1. INTRODUCTION

• 
  This announcement is dated 18 April 2001.
  
  On behalf of the Board of Directors of TM, Arab-Malaysian Merchant Bank Berhad ("Arab-Malaysian") wish to announce that the Company proposes to :
  
  i) amend its Articles of Association ("Proposed Amendments to the Articles of Association");
  
  ii) amend certain provisions in the existing ESOS Bye-Laws ("Existing Bye-Laws") ("Proposed Amendments to ESOS Bye-Laws");
  
  iii) grant ESOS Options to the Chief Executive ("Proposed Granting of ESOS Options to the Chief Executive");
  
  iv) list VADS Berhad ("VADS"), its wholly-owned subsidiary, on the Second Board of the Kuala Lumpur Stock Exchange ("KLSE") ("Proposed Listing of VADS") subject to approvals of relevant authorities and shareholders; and
  
  v) issue up to 10,000 VADS ordinary shares of RM1.00 each ("Shares") per person to the directors of TM as part of the initial public offering in conjunction with the Proposed Listing of VADS ("Proposed Issue of VADS Shares to the Directors of the Company").
  
  

2. DETAILS OF THE PROPOSALS

• • • The KLSE had on 22 January 2001, released its revamped listing requirements ("KLSE’s revamped Listing Requirements") with a view to (inter alia) enhancing corporate governance and transparency and enhancing efficiency in capital market activities. All listed issuers are expected to amend their articles of association by 31 January 2002. In view of this and changes in other guidelines and regulations, as well as to improve general administrative efficiency, the Board of Directors of TM proposes to amend the Company’s Articles of Association.
  2.1 Proposed Amendments to the Articles of Association
  

• • • 
      The Board of Directors of TM proposes to amend certain provisions in the Existing Bye-Laws of TM via a proposed Supplemental Bye-Laws.
      
      The Proposed Amendments to the existing Bye-Laws are designed to have the following salient effects :
      
      i) enable the options committee to grant new ESOS Options to eligible employees with an exercise price set at a discount of not more than 10% from the five (5) day weighted average market price of the underlying shares at the date the option is granted. Currently, the discount to the exercise price of the ESOS options is only applicable to employees who did not participate in TM’s previous employee share participation scheme;
      
      ii) streamline the timing and maximum limits exercisable by the ESOS holders as there is no longer the differentiation between ESOS holders who obtained the discount on exercise price and those who did not. Currently, ESOS holders who obtained the discount on exercise price could not exercise any of their ESOS options for (1) year from the date the ESOS options were granted. This rule is proposed to be deleted; and
      
      iii) streamline certain sections of the ESOS Bye-Laws to take into account changes in guidelines and regulations in relation to approving authorities, share buy-back and time-frame to issue shares pursuant to the exercise of ESOS.
  2.2 Proposed Amendments to the ESOS Bye-Laws

• • • 
      In accordance with Clause 3.3 of the existing Bye-Laws, any employee who has served at least twelve (12) months of service with the Company including a full-time Executive Director of the Company is eligible to participate in the ESOS. Subject to the approval of the relevant authorities, Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman, the Chief Executive will be entitled to participate in the ESOS for up to a maximum of 330,000 ESOS Options after having served at least twelve (12) months with the Company.
      
      His specific entitlement under the ESOS is required to be approved by the Shareholders of the Company in a general meeting.
  2.3 Proposed Granting of ESOS Options to the Chief Executive

• • • The Board has approved the proposed listing of VADS, a wholly-owned subsidiary of TM on the Second Board of the KLSE subject to approvals of the relevant authorities and shareholders. Arab-Malaysian has been appointed as Adviser for the Proposed Listing of VADS.
      
      VADS was incorporated in Malaysia under the Companies Act, 1965 on 29 November 1990 as a private limited company under the name of Dashwin Sdn Bhd. Subsequently on 21 January 1991, the company changed its name to VADS Sdn Bhd. On 4 April 2001, VADS was converted to a public company and assumed its present name.
  2.4 Proposed Listing of VADS
  

• • • The present authorised share capital of VADS is RM20,000,000 comprising 20,000,000 Shares, of which 15,000,000 Shares have been issued and are fully paid-up.
    • The principal activities of VADS are the provision of value added data services and electronic telecommunication services. VADS is also engaged in the provision of network and system integration services, electronic commerce solutions, value added reselling, maintenance, monitoring and support services, business internet access, facilities management and other consultation services.
      
      VADS’s head office is located in Plaza IBM, Taman Tun Dr Ismail, Kuala Lumpur, Malaysia. VADS currently has two (2) wholly owned subsidiaries, namely Electronic Commerce Services Sdn Bhd ("ECS") and The Network Connections Sdn Bhd ("TNC"). ECS is principally involved in providing customised electronic commerce and other related services for the Malaysian market. ECS was granted the MSC status by the Multimedia Development Corporation in October 1997. TNC was recently acquired from TM and would in the future house the system integration arm of VADS. TNC was acquired from TM for a nominal purchase consideration of RM1.00 and the acquisition was completed on 31 March 2001.

• • • The net profit for the year ended 31 December 2000 and the shareholders’ funds of the VADS group based on its audited accounts as at 31 December 2000 are RM7.16 million and RM25.77 million respectively.
      
      The listing proposal for VADS, which would be conditional upon approval of all relevant authorities comprises the following :
      
      · Capitalisation of VADS through a proposed bonus issue increasing existing issued and paid up share capital from RM15.0 million to RM25.0 million.
      · Further capitalisation of VADS through a proposed new issue of 5.0 million shares to both TM and eligible employees of VADS. A minimum of 2.5 million shares is to be issued to TM at par and up to 2.5 million shares is to be issued to eligible employees of VADS under its employee share participation scheme at an indicative issue price of RM1.10 per share. The issue price for the shares will be set upon finalisation of the IPO price, subject to the condition that it would not be below the NTA value of VADS of RM1.03 per Share after completion of the bonus issue (based on the audited balance sheet as at 31 December 2000). Any shares not taken up by VADS employees would be taken up by TM at par.
      · Proposed public issue of 10.0 million new VADS shares to the public comprising a maximum of 2.0 million shares reserved for eligible directors and employees of VADS and the Board of TM; and 8.0 million shares for application by TM’s shareholders, or for private placement or application by the Malaysian public, of which at least 30% is to be set aside for Bumiputera individuals, companies, societies, co-operatives and institutions. The final basis of allocation for the 10.0 million new VADS Shares will be determined after receiving regulatory approvals and taking into consideration market conditions before the launch of the issue.
      
      Further details on the Proposed Listing of VADS will be set out in the circular to shareholders scheduled to be despatched on 19 April 2001.
      

3. PROPOSED ISSUE OF VADS SHARES TO THE DIRECTORS OF THE COMPANY

• The Proposed Public Issue of 10.0 million new VADS Shares includes a maximum of 2.0 million Shares representing 5.0% of the enlarged share capital of the company that is proposed to be offered to eligible directors and employees of VADS Group and the Board of TM under a Pink Form allocation. The proposal to offer VADS Shares to the Directors of TM as part of the Proposed Public Issue was recommended by the board of directors of VADS (save for Tan Poh Keat who is also a director of TM and is therefore deemed to be interested and has abstained from making any recommendation) and is subject to the approval of relevant authorities and shareholders of TM. In compliance with the SC guidelines, the total number of VADS Shares that can be allocated to the Directors of TM would not be more than 10,000 Shares per person. If relevant approvals are not obtained where applicable, the proposed issue to the relevant director(s) will not be made.
  

4. RATIONALE FOR THE PROPOSALS

• • • In general, the purpose of the Proposed Amendments to the Articles of Association are :
    • i) to ensure that the Articles comply with KLSE’s revamped Listing Requirements, the Securities Industry (Central Depositories) Act 1991, the Securities Industry (Central Depositories) (Foreign Ownership) Regulations 1996, the Rules of the Malaysian Central Depository Sdn Bhd and the Companies Act 1965; and
      
      ii) to update the Articles of Association so as to enhance the administrative efficiency of the Company.
  4.1 Proposed Amendments to the Articles of Association
  

• • • 
      TM’s Scheme was established to act as an incentive to stimulate greater effort on the part of the employees and encourage further commitment and contribution to TM. The Proposed Amendments to the ESOS Bye-Laws is primarily intended to allow all eligible employees to benefit from the SC’s current guidelines on ESOS pricing and is expected to further motivate the employees towards improved performance through greater dedication and loyalty with a view to enhancing productivity. Certain other amendments are proposed to be made in order to streamline the ESOS Bye-Laws in light of current regulations and guidelines.
  4.2 The Proposed Amendments to the ESOS Bye-Laws

• • • 
      The approval for the Proposed Granting of ESOS Options to the Chief Executive would enable the Company to grant and subsequently allot the Shares upon him being eligible to participate in the ESOS in the future.
  4.3 The Proposed Granting of ESOS Options to the Chief Executive

• • • VADS has met the quantitative profit track record for a listing on the Second Board of the KLSE. The Proposed Listing of VADS is expected to unlock the value of VADS, adding value to TM through the market valuation of VADS. In addition, a listing is expected to benefit VADS as it should among others enable the company to tap the capital markets, amplify market perception of VADS’ value and facilitate future expansion through mergers and acquisitions.
  4.4 The Proposed Listing of VADS
  

• • • 
      The allocation of VADS Shares to the Board of TM as outlined above complies with the provisions of the SC guidelines. The Proposed Issue of VADS Shares to the Directors of the Company as recommended by the board of directors of VADS (save for Tan Poh Keat who is also a director of TM and is therefore deemed to be interested and has abstained from making any recommendation) is in cognisance of the Board’s support of VADS.
  4.5 Proposed Issue of VADS Shares to the Directors of the Company

5. FINANCIAL EFFECTS OF THE PROPOSALS

• 
  The financial effects of the Proposals are as follows:-

• • • The Proposed Amendments to the Articles of Association, the Proposed Listing of VADS and the Proposed Issue of VADS Shares to the Directors of the Company will not have an impact on the Company’s share capital. The proposals in respect of the Company’s ESOS will not have an immediate effect on the share capital of the Company. However, assuming all ESOS Options allowable by the guidelines are to be granted and these options together with existing unexercised options are fully exercised, the issued and paid-up share capital of TM will increase from RM3.089 billion (as at 9 March 2001) to RM3.280 billion comprising ordinary shares of RM1.00 each, as tabulated in Table 1 below.
  5.1 Share Capital
  

• • • 
      The Proposals are not expected to have any material effect on the earnings and NTA of the Group for the financial year ending 31 December 2001.
      
      In respect of the ESOS, any potential effect on the earnings and NTA of the Group in future would depend on the level of ESOS options granted and exercised as well as the exercise price payable upon the exercise of aforementioned options.
      
      The Proposed Listing of VADS is not expected to have any material effect on the earnings and NTA of the Group for the financial year ending 31 December 2001. The listing of VADS on the Second Board of the KLSE is expected to contribute positively to the earnings and NTA of the Group in the long term.
  5.2 Earnings and NTA

6. CONDITIONS OF THE PROPOSALS

• 
  The Proposals, which are not inter-conditional upon one another (save for the Proposed Issue of VADS Shares to the Directors of the Company which is conditional upon the Proposed Listing of VADS) are subject to the approvals of the following :-

• • • 
      i) SC;
      
      ii) KLSE (in respect of the Proposed Amendments to the Articles of Association and the Proposed Amendments to the Bye-Laws);
      
      iii) shareholders of the Company at the forthcoming EGM; and
      
      iv) any other relevant authority.
      
  6.1 The Proposed Amendments to the Articles of Association and the Proposed Amendments to the ESOS Bye-Laws6.2 The Proposed Granting of ESOS Options to the Chief Executive

i) shareholders of the Company at the forthcoming EGM; and ii) any other relevant authority.

• • • i) SC;
      
      ii) KLSE (in respect of the admission to the Official List and the listing and quotation of VADS Shares on the Second Board of the KLSE);
      
      iii) Foreign Investment Committee;
      
      iv) Ministry of International Trade and Industry;
      
      v) shareholders of the Company at the forthcoming EGM; and
      
      vi) any other relevant authority.
      
    • i) SC;
      
      ii) shareholders of the Company at the forthcoming EGM; and
      
      iii) any other relevant authority.
  6.3 Proposed Listing of VADS
  6.4 Proposed Issue of VADS Shares to the Directors of the Company

7. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTEREST IN THE PROPOSALS

• 
  Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman, the Chief Executive will be entitled to the ESOS options whilst Y Bhg. Dato’ Dr. Abd. Rahim bin Haji Daud, the Executive Director is already entitled to the ESOS options. Therefore, Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman and Y Bhg. Dato’ Dr. Abd. Rahim bin Haji Daud are deemed interested in the Proposed Amendments to the ESOS Bye-Laws, and Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman is deemed interested in the Proposed Granting of ESOS Options to the Chief Executive and they have abstained from all deliberations and voting at the Board meeting in respect of the aforementioned matters.
  
  In addition, the Board is deemed interested in the Proposed Issue of VADS Shares to the Directors of the Company and the individual Directors have abstained from all deliberations and voting at the Board meeting in respect of their respective allocation under the Proposed Issue of VADS Shares to the Directors of the Company. The Proposed Issue of VADS Shares to the Directors of the Company was recommended by the board of directors of VADS (save for Tan Poh Keat who is also a director of TM) in cognisance of the Board’s support of VADS.

• The following Directors and persons connected to them as defined under Section 122A of the Companies Act, 1965 will also abstain from voting in respect of their direct and indirect interests in the forthcoming EGM to be convened in respect of the following resolutions :
  
  · Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman and persons connected to him in relation to the Proposed Amendments to the ESOS Bye-Laws and Proposed Granting of ESOS Options to the Chief Executive;
  
  · Y Bhg. Dato’ Dr. Abd. Rahim bin Haji Daud and persons connected to him in relation to the Proposed Amendments to the ESOS Bye-Laws; and
  
  · Y Bhg. Dato’ Ir. Muhammad Radzi bin Haji Mansor, Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman, Y Bhg. Dato’ Dr. Abd. Rahim bin Haji Daud, Y Bhg. Dato’ Abdul Majid bin Haji Hussein, Y Bhg. Dato’ Dr. Halim bin Shafie, YB Tuan Joseph Salang Gandum, Y Bhg. Dato’ Dr. Mohd. Munir bin Abdul Majid, YB Dato’ Ir Haji Mohd Zin bin Mohamed, Encik Lim Kheng Guan, Encik Ir. Prabahar N.K. Singam, Encik Rosli bin Man and Encik Tan Poh Keat in respect of their respective allocation under the Proposed Issue of VADS Shares.
  

As at 4 April 2001, Y Bhg. Dato’ Ir. Muhammad Radzi bin Haji Mansor has a direct and indirect interest in TM Shares of 98,000 Shares and 25,500 Shares respectively. Y Bhg. Dato’ Dr. Abd. Rahim bin Haji Daud’s has a direct and indirect interest in TM Shares of 10,500 Shares and 1,500 Shares respectively. YB Tuan Joseph Salang Gandum has an indirect interest in 15,000 TM Shares and Encik Tan Poh Keat holds 15,000 TM Shares. Save as disclosed, none of the other directors have any direct or indirect interest in TM Shares.

• 
  Save for the above, none of the other Directors and/or substantial shareholders and/or persons connected to Directors and/or substantial shareholders of TM Group have any interest, either direct or indirect, in the Proposals.
  

8. DIRECTORS' RECOMMENDATION

• 
  The Board is deemed interested in the Proposed Issue of VADS Shares to the Directors of the Company, and thus has abstained from making any recommendations on this matter. The Board of Directors of VADS (save for Tan Poh Keat who is also a director of TM) recommends the Proposed Issue of VADS Shares to the Directors of the Company in cognisance of their support of and contribution to VADS.
  
  Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman and Y Bhg. Dato’ Dr. Abd. Rahim bin Haji Daud are deemed interested in respect of the Proposed Amendments to the ESOS Bye-Laws, and additionally Y Bhg. Dato’ Dr. Md. Khir bin Abdul Rahman is deemed interested in respect of the Proposed Granting of ESOS Options to the Chief Executive, and they have therefore abstained from recommending in respect of the aforementioned matters.
  
  Save for the above, the Board has considered the rationale for the Proposals and the advice of Arab-Malaysian, and is of the opinion that the Proposals are in the long term and best interests of the Company.
  

9. ADVISER

• 
  Arab-Malaysian has been appointed as the adviser to TM for the Proposals, except for the Proposed Amendments to the Articles of Association.
  
  

10. SUBMISSION TO THE SC

• 
  An application to the SC for the Proposed Amendments to the ESOS Bye-Laws and the Proposed Listing of VADS will be made within 1 month from the date of this announcement.
  

Table 1 : Movement in Share Capital

	Number of Shares ‘million	Amount RM’million
Existing as at 9 March 2001	3,088.6	3,088.6
Add Shares to be issued upon the exercise of existing unexercised Options	128.7	128.7
Add Shares to be issued upon the exercise of all future Options *	63.0	63.0
Enlarged share capital upon full exercise of ESOS Options	3,280.3	3,280.3

* assuming the Company grants the maximum number of Options allowable, ie 10% of its existing issued and paid-up capital, less options exercised under the Previous ESOS and Options offered under the present Scheme. TM intends to make an application to the SC for exemption from the requirement to deduct options exercised under the Previous ESOS in arriving at the total number of ESOS Options that may be granted. Should this exemption be granted, the number of additional Options that may be granted would increase by 28.58 million.