UD Trucks | The Processes of Issuing Preferred Stock and cancellation of Dhares,and Enhancing Corporate Value

Recent interest in issuing preferred stock originated as a managerial issue the company faced in 2002.

Financial fundamentals of the company was in very delicate situation in 2002. In order to improve this, the company shifted to a cash-flow management, and for financial strengthening for the foreseeable future, issued preferred stock to the extent of \106 billion by means of a debt equity swap.

More recently, the emphasis on cash-flow management has paid off and the company has steadily improved its financial fundamentals. This has encouraged the company to prevent dilution of ordinary shares in the future, as might be caused by the preferred stock, and starting in August 2005 began cancellation of the preferred stock.

After that, a new medium-term business plan, Plan for Vision (PFV), intended to further enhance the corporate value, went into effect in April 2006. It is believed that cancellation of the preferred stock earlier than had been anticipated will help the company attain the objectives of this plan.

What we have done regarding the preferred stock since 2002 is represented by the diagram below.

*DES:Debt Equity Swap

Click here for information on the preferred stock outline at the time of issue

Management's Challenge in 2002

Approach

*	N.B. Concerning the preferred stock
	By means of cooperation by the three major banks used by the company, and the major shareholder at the time (Nissan Motor), preferred stock was issued in exchange for loans from and obligations to the three major banks and Nissan Motor, as a means of reducing the debt burden and raising corporate value.

Results

*	Measures were adopted by the regular shareholders meeting of June 2004 to reduce the cumulative debt and in the March 2005 term it was removed from the balance sheet.

Click here for information about our financial restructuring

Management's Challenge in 2005

Because conversion of preferred stock into ordinary shares would roughly triple the number of outstanding shares, prevention of such a dilution, and protection of the rights of ordinary-share owners, was seen as a managerial challenge in 2005, as was the raising of the corporate value.

Number of ordinary shares after conversion of preferred stock *1

	Total issued price (\ billion)	Converted to ordinary shares (1,000 shares)
Class I	26.5	126,787 *2
Class II	26.5	126,787 *2
Class III	26.5	126,787 *2
Class IV	26.5	126,787 *2
Total	106	507,146 *2

*1 Number of ordinary shares outstanding as of this time: 244,166,000.
*2 Round off numbers

Securing the funds for cancellation of preferred stock

The medium-term business plan for 2003-05 resulted in increases for both sales and profits, and equity was greatly improved.

Result

Approach

By canceling, on three occasions, Class IV, III, and II, 70% of the entire issue was cancelled.

Click here to see details on cancellation of Class IV Preferred Stock

Click here to see details on cancellation of Class III Preferred Stock

Click here to see details on cancellation of Class II Preferred Stock

Achievements and Plans for Cancellation of Preferred Stock

	Timing of cancellation	Book value	Resources for cancellation
Class IV Preferred Stock	August 2005	\22.5 billion	Reserves
Class III Preferred Stock	March 2006	\26.5 billion	Public offering
Class II Preferred Stock	August 2006 (Plan)	\22.5 billion	Reserves
Total		\71.5 billion	－

Click here for details on cancellation of preferred stock, and change in equity

Click here for time series data for preferred stock issues

Effects in terms of preventing a dilution of ordinary shares

	Effects in terms of preventing a dilution of ordinary shares
Class IV Preferred Stock	107,650,000 shares
Class III Preferred Stock	126,787,000 shares
Class II Preferred Stock	107,650,000 shares
Total	342,087,000 shares (equivalent to 111.6% of ordinary shares outstanding)

Click here for time series data for outstanding and potential ordinary shares by the preferred shares

Reduction of dividend payment obligations

	Dividend obligations
Class IV Preferred Stock	\498 million
Class III Preferred Stock	\518 million
Class II Preferred Stock	\367 million
Total	\1,383 million

Management's Challenge from 2006 on

Approach

When Nissan Motor sold 13% of its shares to Volvo in March 2006, Volvo became a major shareholder. This relationship has encouraged us to consider a synergistic collaboration with Volvo. At the present time, we are exploring the potential of working together in a broad range of areas, and are confident that certain items that can be realized within a short term will contribute to achieving the objectives of our medium-term business plan, PFV. Furthermore, Volvo acquired 6% of UD Trucks's shares held by Nissan Motor Co.,Ltd. on September 28,2006.As a result of this acquisition, Volvo hold 19% of UD Trucks's shares.

Synergy with Volvo
1.Products:

Both companies plan to execute co-works to develop suitable and competitive product in global markets, and at the same time try to maximize product commonization including complementation of power-train components and parts.

2.R&D:

Making up collaborations scheme mainly in the area of efficient fuel consumption, safety and IT.

3.Production:

Ensuring manufacturing competitiveness globally through the evaluation of each performance.

4.Distribution:

Making up sales collaboration scheme globally by enhancing both strengths in the market.

5.Purchasing:

Trying to receive the full benefit from volume effect.

Continuation of the Nissan Motor relationship

Relations with Nissan Motor will be continued, with an emphasis on light-duty trucks and diesel engines.

Page Top