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TAN CHONG MOTOR HOLDINGS BERHAD ("TCMH" OR "COMPANY")PROPOSED GRANT OF AUTHORITY TO THE COMPANY TO PURCHASE ITS OWN SHARES ("PROPOSED SHARE BUY-BACK")

Contents :

1. INTRODUCTION

On behalf of the Board of Directors of TCMH (“Board”), Commerce International Merchant Bankers Berhad (“CIMB”) wishes to announce that the Company proposes to seek authority from its shareholders to purchase up to 67,200,000 ordinary shares of RM0.50 each in the Company (“TCMH Shares”) representing up to ten per centum (10.0%) of its issued and paid-up share capital, subject to prevailing laws and relevant regulations, rules and guidelines as may be issued by the relevant authorities and the availability of retained profits and/or share premium of the Company.

2. DETAILS OF THE PROPOSED SHARE BUY-BACK

The Company proposes to seek authority from its shareholders to purchase up to ten per centum (10.0%) of its issued and paid-up share capital. Based on the issued and paid-up share capital of TCMH as at 31 December 2000 of RM336,000,000 comprising 672,000,000 TCMH Shares, a total of RM33,600,000 comprising 67,200,000 TCMH Shares may be purchased by the Company. The share purchase will be effected through the Kuala Lumpur Stock Exchange (“KLSE”) via a stockbroker to be appointed at a later date.

The approval from the shareholders for the Proposed Share Buy-Back would be effective immediately upon the passing of the ordinary resolution pertaining to the Proposed Share Buy-Back and shall be valid until the conclusion of the subsequent AGM of TCMH (unless earlier revoked or varied by an ordinary resolution of the shareholders of TCMH in a general meeting).

Nevertheless, shareholders’ approval for the Proposed Share Buy-Back does not impose an obligation on the Company to purchase its own shares on the KLSE.

Rather, the Proposed Share Buy-Back gives Directors of the Company the discretion to exercise the authority granted to purchase the TCMH Shares as and when they deem fit in accordance with the working capital requirements of the Company and the pricing of the TCMH Shares.

The Company may retain the purchased shares as treasury shares or cancel the shares purchased or a combination of both.

3. RATIONALE FOR THE PROPOSED SHARE BUY-BACK

The Proposed Share Buy-Back will enable TCMH to utilise its surplus financial resources to purchase the TCMH Shares as and when the Directors deem fit in the interest of its shareholders during the tenure the authority granted is in effect.

In addition, the purchased shares may be held as treasury shares and resold on the KLSE with the intention of realising a potential gain without affecting the total issued and paid-up share capital of the Company. Should any treasury shares be distributed as share dividends, this would serve to reward the shareholders of the Company.

4. EFFECTS OF THE PROPOSED SHARE BUY-BACK

The Proposed Share Buy-Back is not expected to have any immediate effect on the share capital, net tangible assets (“NTA”), working capital and earnings of TCMH and its subsidiaries (“TCMH Group”). However, the effects of the actual share purchase by the Company of up to ten per centum (10%) of its issued and paid-up share capital as authorised under the Proposed Share Buy-Back are as follows:

(i) Share capital

In the event that the maximum number of shares authorised under the Proposed Share Buy-Back are purchased and cancelled, the issued and paid-up share capital of TCMH as at 31 December 2000 will decrease from RM336,000,000 comprising 672,000,000 TCMH Shares to RM302,400,000 comprising 604,800,000 TCMH Shares.

However, if all the TCMH Shares purchased are retained as treasury shares, the share purchase will not have any effect on the issued and paid-up share capital of the Company, although rights on the treasury shares will be suspended.

(ii) NTA and working capital

The effect of the share purchase on the NTA per share of the TCMH Group will depend on the purchase prices of the TCMH Shares and the effective funding cost or any loss in interest income to the Company.

The share purchase would reduce the NTA per share of the TCMH Group if the purchase price exceeds the NTA per share at the relevant point in time. Conversely the NTA per share of the TCMH Group would increase if the purchase price is less than the NTA per share at the relevant point in time.

The share purchase will reduce the working capital of the TCMH Group, the quantum of which will depend on the purchase prices of the TCMH Shares and the number of TCMH Shares purchased.

(iii) Earnings

The effect of the share purchase on the earnings per share of the TCMH Group is dependent on the purchase prices of the TCMH Shares and the effective funding cost or loss in interest income to the Company.

5. APPROVALS REQUIRED

The Proposed Share Buy-Back is subject to the approval of shareholders.

6. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

Save for the corresponding increase in the percentage of shareholdings and/or voting rights in their capacity as the shareholders of the Company as a consequence of the share movement pursuant to the Proposed Share Buy-Back, none of the Directors or substantial shareholders of the Company or persons connected to them, has any interest, direct or indirect, in the Proposed Share Buy-Back.

7. DIRECTORS’ RECOMMENDATION

The Board, after having considered all aspects of the Proposed Share Buy-Back, is of the opinion that the Proposed Share Buy-Back is in the best interest of the TCMH Group.

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