NOVA MSC BERHAD (“NMSC” OR THE “COMPANY”) – PROPOSED EMPLOYEE SHARE OPTION SCHEME OF UP TO FIFTEEN PERCENT (15%) OF THE ISSUED AND PAID-UP CAPITAL OF THE COMPANY (“PROPOSED ESOS”); AND – PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE COMPANY (“PROPOSED AMENDMENTS TO THE ARTICLES”) (COLLECTIVELY KNOWN AS “PROPOSALS”)

NOVA MSC BERHAD
5 Jul 2004

Contents :

1. INTRODUCTION

On behalf of the Board of Directors of NMSC (“Board”), OSK Securities Berhad (“OSK”) wishes to announce that the Company proposes to implement an employee share option scheme (“ESOS”) of up to fifteen percent (15%) of the issued and paid-up capital of the Company.

In conjunction with the Proposed ESOS, the Board proposes that the Company’s Articles of Association be amended to allow the Company to extend the ESOS options to its Non-Executive Directors.

2. DETAILS OF THE PROPOSED ESOS

The Proposed ESOS will involve the granting of options to eligible Directors and employees of the NMSC Group who meet the criteria of eligibility for participation in the ESOS (“Eligible Employees”) as set out in the By-Laws containing the terms and conditions of the ESOS (“By-Laws”).

2.1 Number of Shares

The maximum number of new Shares to be offered under the Proposed ESOS shall be subject to a maximum of fifteen percent (15%) of the issued and paid-up share capital of NMSC at any one time during the existence of the Proposed ESOS, and further, the following shall be complied with:

(i) Not more than fifty percent (50%) of the new NMSC Shares available under the Proposed ESOS shall be allocated, in aggregate, to directors and senior management; and

(ii) Not more than ten percent (10%) of the new NMSC Shares available under the Proposed ESOS shall be allocated to any person, who singly or collectively through connected persons, holds twenty percent (20%) or more of the issued and paid-up share capital of NMSC.
2.2 Eligibility

Only Directors and confirmed employees of the NMSC Group (save and except for companies which are dormant) who meet the criteria of eligibility for participation in the Proposed ESOS as set out in the By-Laws are eligible to participate.
2.3 Duration of the Proposed ESOS

The Proposed ESOS, when implemented, shall be in force for a period of five (5) years commencing from the date of the last requisite approvals for the Proposed ESOS have been obtained.

The Proposed ESOS may be extended for a further period of up to five (5) years at the discretion of the Board upon recommendation of the ESOS Committee, a committee appointed by the Board to administer the Proposed ESOS (“ESOS Committee”).

2.4 Subscription Price

Pursuant to the Listing Requirements of Bursa Malaysia for the MESDAQ Market, the subscription price shall be determined based on a discount of not more than ten percent (10%) to the weighted average market price of the NMSC Shares for the five (5) market days immediately preceding the offer date or at the par value of the shares, whichever is the higher.

2.5 Ranking of ESOS Shares
The new Shares to be allotted upon the exercise of any options granted pursuant to the Proposed ESOS (“ESOS Shares””) shall, upon allotment and issue, rank pari passu in all respects with the existing Shares of the Company, except that they shall not be entitled to any dividend, right, allotment and/or other distribution, the entitlement date of which precedes the relevant dates of allotment of the ESOS Shares.

The new NMSC Shares issued will be subject to all the provisions of the Articles of Association of the Company.

3. DETAILS OF THE PROPOSED AMENDMENTS TO THE ARTICLES

In conjunction with the Proposed ESOS, the Board also proposes that the Company’s Articles of Association be amended to allow the Company to extend the ESOS options to its Non-Executive Directors.

4. RATIONALE FOR THE PROPOSALS

The rationale for the Proposed ESOS are as follows:-

(a) To recognise the contributions of Eligible Employees who are vital to the continued operations and growth of the NMSC Group;

(b) To motivate Eligible Employees of the NMSC Group towards higher performance and loyalty;

(c) To retain Eligible Employees of the NMSC Group, and ensure key personnel remain committed to continue building the Group; and

(d) To reward the Eligible Employees of the NMSC Group by allowing them to participate in the growth and success of the Company.Participation in the Proposed ESOS is extended to the Non-Executive Directors of the NMSC Group to recognise their contribution and commitment to the development and success of the Group.The rationale for the Proposed Amendments to the Articles is to update the Articles of Association of the Company in order to be in line with the recent amendments made to the Listing Requirements of Bursa Malaysia for the MESDAQ Market in relation to the allocation of ESOS Options to Non-Executive Directors.

5. EFFECTS OF THE PROPOSED ESOS

The financial effects of the Proposed ESOS are summarised as follows:-
5.1 Issued and Paid-up Share Capital

The effects of the Proposed ESOS on the issued and paid-up share capital of NMSC are shown in Table 1.

5.2 Earnings

The effects of the Proposed ESOS on the future earnings of the NMSC Group will depend on the utilisation of the proceeds raised. However, the earnings per share (“EPS”) of the NMSC Group may be diluted due to the new shares that will be issued pursuant to the Proposed ESOS.
5.3 Net Tangible Assets (“NTA”) and Gearing
The Proposed ESOS is not expected to have an immediate material effect on the NTA and the NTA per Share of NMSC. Nevertheless, NTA is expected to increase progressively depending on the number of new NMSC Shares to be issued upon the exercise of the options under the Proposed ESOS and the subscription price which is to be determined at the time an offer is made. The pro forma effects of the Proposed ESOS on the Group’s NTA based on the unaudited consolidated balance sheet of the NMSC Group as at 31 March 2004 are detailed in Table 2.

5.4 Major Shareholders
Dilution of the shareholdings of the major shareholders of the Company arising from the Proposed ESOS would depend on the number of options granted and exercised at any point in time.

The effects of the Proposed ESOS on the shareholdings of major shareholders of NMSC are shown in Table 3.

5.5 Dividends

The Proposed ESOS is not expected to have any material effect on the dividend policy of the NMSC Group. Any dividend to be declared by the Group in the future will be determined by the Board after all due considerations.

6. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS

All the Directors of the Company, namely Y.A.M. Tunku Dato’ Seri Nadzaruddin Ibni Tuanku Ja’afar, Mr Chan Wing Kong, Dr Victor John Stephen Price, Dr Kwa Lay Keng, Mr Yap Yuh Foh, Mr Lim Ee-Jin and Mr Onn Kien Hoe, are deemed interested in the Proposed ESOS by virtue of their eligibility for options to be allocated under the Proposed ESOS to them in their capacity as a Director. Although the Directors have deliberated and voted on the Proposed ESOS on the whole and the Proposed Amendments to the Articles, the directors have abstained and will continue to abstain from all deliberations and voting at the Board meetings on the proposed allocation of options to themselves under the Proposed ESOS.

All the Directors will abstain from voting in respect of their direct and indirect shareholdings (if any) on the resolutions pertaining to the Proposed ESOS and their respective entitlements under the Proposed ESOS to be tabled at an EGM to be convened.

As the Proposed Amendments to the Articles is to allow the Company to extend ESOS options to its Non-Executive Directors, all the Non-Executive Directors of the Company, namely Y.A.M. Tunku Dato’ Seri Nadzaruddin Ibni Tuanku Ja’afar, Dr Kwa Lay Keng, Mr Yap Yuh Foh, Mr Lim Ee-Jin and Mr Onn Kien Hoe, are deemed interested in the Proposed Amendment to the Articles. The said Non-Executive Directors have abstained and will continue to abstain from all deliberations and voting at the Board meetings on the Proposed Amendments to the Articles. They will abstain from voting in respect of their direct and indirect shareholdings (if any) on the resolution pertaining to the Proposed Amendments to the Articles to be tabled at an Extraordinary General Meeting (“EGM”) to be convened. Additionally, they will ensure that persons connected with them will abstain from voting in respect of their direct and indirect shareholdings (if any) on the resolution pertaining to the Proposed Amendments to the Articles to be tabled at an EGM to be convened.

7. DIRECTOR’S RECOMMENDATION

The Board has abstained from making any recommendation or opinion with regards to the Proposed ESOS as all the Directors are deemed interested in the Proposed ESOS.

The Board (save for Y.A.M. Tunku Dato’ Seri Nadzaruddin Ibni Tuanku Ja’afar, Dr Kwa Lay Keng, Mr Yap Yuh Foh, Mr Lim Ee-Jin and Mr Onn Kien Hoe, who are deemed interested in the Proposed Amendments to the Articles), after having considered all aspects of the Articles, is of the opinion that the Proposed Amendments to the Articles is necessary to facilitate the extension of ESOS options to Non-Executive Directors of the Company.

8. CONDITIONS OF THE PROPOSALS

The Proposals are conditional upon approvals being obtained from the following:-(i) Bursa Malaysia Securities Berhad, for the Proposed ESOS and for the listing of and quotation for such number of ordinary shares representing up to 15% of the issued and paid-up share capital of NMSC at any time during the existence of the Proposed ESOS;

(ii) The shareholders of NMSC, for the Proposed ESOS and the Proposed Amendments to Articles at an Extraordinary General Meeting to be convened; and

(iii) Any other relevant authority, if required.

The Proposed Amendments to Articles is conditional upon the Proposed ESOS.

9. ADVISER

OSK has been appointed by NMSC to act as Adviser for the Proposals.

10. APPLICATIONS TO THE RELEVANT AUTHORITIES

Applications to the relevant authorities for the Proposals are expected to be submitted within two (2) months from the date of this announcement.

 
This announcement is dated 5 July 2004.