ZECON BERHAD ( ZECON OR COMPANY ) AND ITS SUBSIDIARY COMPANIES ( GROUP )

Transcription

1 ( ZECON OR COMPANY ) AND ITS SUBSIDIARY COMPANIES ( GROUP ) (I) (II) (III) (IV) (V) (VI) PROPOSED PAR VALUE REDUCTION PROPOSED AMENDMENTS PROPOSED BONUS ISSUE OF SHARES PROPOSED RIGHTS ISSUE OF RCULS WITH FREE SHARES PROPOSED RESTRICTED ISSUE OF WARRANTS PROPOSED LTIP (COLLECTIVELY REFERRED TO AS ) Unless otherwise stated, all abbreviations used herein shall have the same meanings as those stated in the announcements dated 4 July 2016 in relation to the Proposals. 1. INTRODUCTION Reference is made to the Company s announcement dated 4 July 2016 in relation to the Proposals ( Original Announcement ). On behalf of Zecon, KAF Investment wishes to announce that the Board has resolved to vary the terms of the Proposals in light of a significant development to the financial position of Zecon as announced by the Company on 26 August Details on the variation to the terms of the Proposals ( Variations ) are set out in the ensuing sections. 2.0 DETAILS OF THE VARIATIONS 2.1 Proposed Par Value Reduction The Proposed Par Value Reduction shall now involve a cancellation of RM0.80 of the existing par value of every existing ordinary share of RM1.00 each to RM0.20 each in Zecon pursuant to Section 64 of the Act. The variation is as follows:- Existing par value Cancellation of existing par value New Par value (RM) (RM) (RM) As per Original Announcement Variation As at 20 September 2016 (being the latest practicable date prior to this announcement ( LPD )), the Company has an issued and paid-up share capital of RM119,106,150 comprising 119,106,150 ordinary shares of RM1.00 each. In the event any of the 44,168,540 outstanding Warrants 2007/2017 are exercised into new Zecon Shares on or prior to the effective date of the Proposed Par Value Reduction, the new Zecon Shares arising therefrom shall also be subject to the Proposed Par Value Reduction. The Proposed Par Value Reduction will give rise to a total credit of up to RM130,619,752 (Maximum Scenario) which the Company intends to utilise to eliminate its accumulated losses and the balance arising thereafter will be credited to its retained earnings which may be utilised in such manner as the Board deems fit and as permitted by relevant and applicable laws.

2 Details of the issued and paid-up share capital of the Company before and after the Proposed Par Value Reduction are illustrated below:- No. Issued and Paid-up Share Capital Par value of ordinary shares Minimum Scenario Number of ordinary shares Issued and paid-up share capital Maximum Scenario Number of Issued and ordinary paid-up shares share capital (RM) (RM 000) (RM 000) 1. Audited as at 30 June 2015 (1) , , , , Exercise of Warrants 2007/2017 Upon implementation of the Proposed Par Value Reduction ,169 44, ,106 23, ,275 32,655 Credit arising from the Proposed Par Value Reduction - 95,285 95, , ,620 (RM 000) Note:- (1) Based on the annual report of the Company for the FYE 30 June Consequently, the Proposed Par Value Reduction has the following effects on the accumulated losses/retained earnings of Zecon:- Minimum Scenario Audited as at FYE 30 June 2015 Company level Unaudited as at 30 June 2016 Audited as at FYE 30 June 2015 Group level Unaudited as at 30 June 2016 (RM 000) (RM 000) (RM 000) (RM 000) Accumulated losses (52,421) (61,040) (63,224) (32,161) Add: Credit arising from the Proposed Par Value Reduction Resultant earnings retained Maximum Scenario Audited as at FYE 30 June ,285 95,285 95,285 95,285 42,864 34,245 32,061 63,124 Company level Unaudited as at 30 June 2016 Audited as at FYE 30 June 2015 Group level Unaudited as at 30 June 2016 (RM 000) (RM 000) (RM 000) (RM 000) Accumulated losses (52,421) (61,040) (63,224) (32,161) Add: Credit arising from the Proposed Par Value Reduction Less: Amount to be capitalised for Warrants 2007/2017 Resultant retained earnings 130, , , ,620 (35,335) (35,335) (35,335) (35,335) 42,864 34,245 32,061 63,124 2

3 2.2 Proposed Amendments The Proposed Amendments are necessary to facilitate the change in the par value of each Zecon Share from RM1.00 each to RM0.20 each, as a result of the Proposed Par Value Reduction, as follows:- Existing provisions Clause 5 of the Memorandum of Association The share capital of the Company is RM500,000, divided into 500,000,000 shares of RM1.00 each. These shares in the original or any increased capital may be divided into several classes, and there may be attached thereto respectively any preferential, deferred or other special rights, privileges, conditions or restrictions as to dividends, capital, voting or otherwise. Amended provisions The share capital of the Company is RM500,000, divided into 2,500,000,000 shares of RM0.20 each. These shares in the original or any increased capital may be divided into several classes, and there may be attached thereto respectively any preferential, deferred or other special rights, privileges, conditions or restrictions as to dividends, capital, voting or otherwise. Clause 3 of the Articles of Association The authorised share capital of the Company is RM500,000, divided into 500,000,000 shares of RM1.00 each with power for the Company in general meeting to increase, subdivide, consolidate or reduce such capital or to divide, the shares forming the capital original, increased or reduced into several classes. The authorised share capital of the Company is RM500,000, divided into 2,500,000,000 shares of RM0.20 each with power for the Company in general meeting to increase, subdivide, consolidate or reduce such capital or to divide, the shares forming the capital original, increased or reduced into several classes. 2.3 Proposed Bonus Issue of Shares Basis and number of Bonus Shares to be issued The Proposed Bonus Issue of Shares entails an issuance of up to 163,274,690 Bonus Shares on the basis of one (1) Bonus Share for every one (1) existing Zecon Share held by shareholders whose names appear in the Record of Depositors of the Company on Bonus Entitlement Date. The variation is as follows:- As per Original Announcement Number of Bonus Shares Par value Capitalisation of reserves ( 000) (RM) (RM 000) - Minimum Scenario 119, ,911 - Maximum Scenario 163, ,326 Variation - Minimum Scenario 119, ,821 - Maximum Scenario 163, ,655 Please refer to Section 3 of this announcement for further details on the capitalisation of reserves. The Proposed Bonus Issue of Shares will be undertaken after the completion of the Proposed Par Value Reduction and prior to the Proposed Rights Issue of RCULS with Free Shares. In any event, the actual number of Bonus Shares to be issued will be determined based on the issued and paid-up share capital of Zecon on the Bonus Entitlement Date. 3

4 The Bonus Entitlement Date will be determined and announced at a later date upon the receipt of all relevant approvals for the Proposed Bonus Issue of Shares. The Proposed Bonus Issue of Shares is not intended to be implemented in stages over a period of time. There will be no fractional entitlements arising from the Proposed Bonus Issue of Shares as the basis of this exercise is one (1) Bonus Share for every one (1) existing Zecon Share held Ranking of the Bonus Shares The Bonus Shares shall, upon allotment and issuance, rank pari passu in all respects with the then existing Shares, save and except they shall not be entitled to any dividends, rights, allotments and/or other distributions which may be declared, made or paid to shareholders, where the entitlement date precedes the date of allotment of the Bonus Shares Listing of and quotation for the Bonus Shares An application will be made to Bursa Securities for the listing of and quotation for the Bonus Shares on the Main Market of Bursa Securities. The Bonus Shares shall be listed and quoted on the Main Market of Bursa Securities on the next market day following the Bonus Entitlement Date. 2.4 Proposed Rights Issue of RCULS with Free Shares Basis and number of the RCULS and Free shares to be issued The Proposed Rights Issue of RCULS with Free Shares, to be undertaken on a renounceable basis, entails the issuance of up to RM136,062,242 nominal value of RCULS at 100% of the nominal value of RM0.20 each on the basis of twenty-five (25) RM0.20 nominal value of RCULS together with two (2) Free Shares for every twelve (12) Zecon Share held by the Rights Issue Entitled Shareholders on the Rights Issue Entitlement Date. The variation is as follows:- Basis Indicative issue price/nominal value of the RCULS Number of units of the RCULS:- - Minimum subscription level ( 000) - Maximum subscription level ( 000) Gross proceeds:- Original Announcement Twenty five (25) RCULS for every six (6) existing Zecon share of RM1.00 each ( Existing Share ) together with three (3) Free Shares. RM0.10 Variations Twenty five (25) RCULS for every twelve (12) Existing Shares together with two (2) Free Shares. RM , ,353 (1) 1,360, ,311 (2) - Minimum subscription level (RM 000) 24,871 24,871 - Maximum subscription level (RM 000) 136, ,062 Notes:- (1) Based on 238,212,300 Zecon Shares after the Proposed Bonus Issue of Shares. (2) Based on 326,549,380 Zecon Shares after the Proposed Bonus Issue of Shares and assuming full exercise of all Warrants 2007/2017. For avoidance of doubt, the Proposed Rights Issue of RCULS with Free Shares will be implemented after the Proposed Bonus Issue of Shares. The Rights Issue Basis was arrived at after taking into account the following:- 4

5 (i) (ii) (iii) the denomination of the RCULS; the proceeds intended to be raised pursuant to the Proposed Rights Issue of RCULS with Free Shares; and the affordability of participation in the Proposed Rights Issue of RCULS with Free Shares with due regard given to the capital outlay required for the subscription of the RCULS by the Rights Issue Entitled Shareholders. The number of RCULS that could be issued pursuant to the Proposed Rights Issue of RCULS with Free Shares under the Minimum Scenario and Maximum Scenario are as follows:- (a) (b) RM24,870,615 nominal value of RCULS at 100% of the nominal value of RM0.20 each under the Minimum Scenario; or RM136,062,242 nominal value of RCULS at 100% of the nominal value of RM0.20 each under the Maximum Scenario. The actual number of RCULS and the Free Shares arising from the subscription of RCULS to be issued pursuant to the Proposed Rights Issue of RCULS with Free Shares would depend on the issued and paid up share capital of the Company on the Rights Issue Entitlement Date and the level of subscription by the Rights Issue Entitled Shareholders. The entitlements for the RCULS and Free Shares are renounceable in full or in part. However, the RCULS and the Free Shares cannot be renounced separately. Should the Rights Issue Entitled Shareholders renounce all of their RCULS entitlements, they will not be entitled to the Free Shares. The RCULS with Free Shares which are not taken up shall be made available for excess applications by the Rights Issue Entitled Shareholders and/or their renounce(s) (if applicable). It is the intention of the Board to allocate the excess RCULS in a fair and equitable manner on a basis to be determined by the Board and announced later by the Company. The Free Shares will be immediately detached from the RCULS upon issuance and separately traded from the RCULS on the Main Market of Bursa Securities. Any fractional entitlements of the RCULS under the Proposed Rights Issue of RCULS with Free Shares will be disregarded and shall be dealt with in such manner as the Board shall in its absolute discretion deem fit, expedient and in the best interests of the Company. The RCULS will be issued in registered form and constituted by a Trust Deed to be executed by the Company. The indicative principal terms of the RCULS are as set out in Appendix I Basis and justifications of determining the issue price and the conversion price of the RCULS The Conversion Price shall be determined by the Board at a later date after all required approvals for the Proposals have been obtained but prior to the Rights Issue Entitlement Date, after taking into consideration, amongst others, the following:- (i) (ii) (iii) the new par value of Zecon Shares of RM0.20 each; the prevailing share price of Zecon Shares and market conditions on the price-fixing date; and the current and future prospects of the Group, and its funding requirements. For illustration purposes, the conversion price of the RCULS is assumed at RM0.20 each, representing a discount of RM0.017 or approximately 8.70% to the theoretical ex-price of Zecon Shares of RM0.217 per Zecon Share, after the Proposed Par Value Reduction and the 5

6 Proposed Bonus Issue of Shares, calculated based on the five (5)-day VWAP of the existing Zecon shares of RM1.00 each ( Existing Share ) up to and including the LPD of RM0.583 per Existing Share Status of the RCULS and ranking of the new Zecon Shares arising from the conversion of the RCULS The RCULS shall constitute direct, unconditional and unsecured obligations of Zecon and subject to the provisions contained in the Trust Deed, must at all times rank pari passu, without discrimination, preference or priority between themselves and must rank at least pari passu with all present and future direct, unconditional, unsecured and unsubordinated debts and obligations of Zecon except for those which are preferred by law. The new Zecon Shares to be issued arising from the conversion of the RCULS shall, upon allotment and issue, rank pari passu in all respects with the then existing Zecon Shares, save and except that such new Zecon Shares shall not be entitled to any dividends, rights, allotments and/or any other forms of distribution which may be declared, made or paid, the entitlement date of which is prior to the date of allotment of such new Zecon Shares Undertakings and underwriting arrangement Name The Board has determined to undertake the Proposed Rights Issue of RCULS with Free Shares based on the Minimum Scenario of RM24,870,615 nominal value of RCULS after taking into consideration among others, minimum level of funds that the Company wishes to raise from the Proposed Rights Issue of RCULS with Free Shares. The Company will endeavour to procure an irrevocable written undertaking from Dawla Capital Sdn Bhd to subscribe for its Undertaking based on its direct shareholdings in the Company under the Proposed Rights Issue of RCULS with Free Shares. Dawla Capital Sdn Bhd Zecon Shares held as at the LPD ( 000) % After the Proposed Bonus Issue of Shares ( 000) % Nominal value of RCULS entitled to be subscribed (RM 000) Total undertaking Nominal value of RCULS (RM 000) (1) % 59, , ,741 24, Note:- (1) As a percentage of RM (assuming without the full exercise of Warrants 2007/2017), being the total nominal value of RCULS to be issued pursuant to the Proposed Rights Issue of RCULS with Free Shares under the Maximum Scenario. In view that the Minimum Subscription Level can be achieved via the Undertaking, there will be no underwriting arrangement for the remaining portion of the RCULS for which no irrevocable undertaking to subscribe has been obtained Listing of and quotation for the RCULS and the new Zecon Shares arising from the conversion of the RCULS An application will be made to Bursa Securities for the:- (i) (ii) admission of the RCULS to the Official List of the Main Market of Bursa Securities; and listing of and quotation for the RCULS and the new Zecon Shares to be issued arising from the full conversion of the RCULS on the Main Market of Bursa Securities. 6

7 2.4.6 Utilisation of Proceeds Assuming the issue price for the RCULS is fixed at RM0.20 each, the Proposed Rights Issue of RCULS with Free Shares is expected to raise gross proceeds of between RM million (Minimum Scenario) and RM million (Maximum Scenario), which are proposed to be utilised as follows:- Proposed utilisation of proceeds Expected time frame for utilisation from completion date of Proposals Minimum Scenario (RM 000) Maximum Scenario (RM 000) Working capital requirements of the Group (1) Within 9 months 23, ,062 Estimated expenses in relation to the (2) Immediately 1,000 1,000 Proposals Total 24, ,062 Note:- (1) Intended to be utilised for the Group s working capital requirements which comprise of administrative and operating expenses, payment to creditors and purchase of raw materials. The proceeds to be utilised for each component of other working capital are subject to the operating requirements of the Group at the time of utilisation and therefore have not been determined at this juncture. (2) The estimated expenses in relation to the Proposals of RM1.00 million comprise of, amongst others, the estimated professional fees and fees payable to the relevant authorities. The actual gross proceeds to be raised from the Proposed Rights Issue of RCULS with Free Shares would depend on the actual number of nominal value of RCULS to be issued. Any differences between the illustrated proceeds above and the actual proceeds raised from the Proposed Rights Issue of RCULS with Free Shares as well as any differences in the actual expenses in relation to the Proposals shall be adjusted to the allocation for working capital requirements for the Group. 2.5 Proposed Restricted Issue of Warrants Basis and number of New Warrants to be issued The Board has resolved to undertake a proposed restricted issue of warrants which will entail an issuance of up to 88,337,080 new warrants in Zecon to the holders of unexercised Warrant 2007/2017 on the basis of two (2) new warrant(s) ( New Warrants ) for every one (1) Warrant 2007/2017 held on an entitlement date to be determined later ( Proposed Restricted Issue of Warrants ). The maximum number of 88,337,080 New Warrants to be issued under the Proposed Restricted Issue of Warrants was arrived at based on the assumption that none of the existing Warrant 2007/2017 will be exercised by the expiry date. The Company has indicated that it intends to accelerate the expiry date of the existing Warrants 2007/2017 and accordingly terminate the Warrants 2007/2017 at an early expiry date ( Proposed WAC ). In this regards, the Company will convene a warrantholders meeting to procure the approval from the holders of Warrants 2007/2017 to accelerate the expiry date of the Warrants 2007/2017. This is to facilitate the early implementation of the Proposed Restricted Issue of Warrants and the Board also noted that the existing Warrants 2007/2017 are currently out-of-money. 7

8 Fractional entitlements arising from the Proposed Restricted Issue of Warrants, if any, shall be dealt with by the Board in such manner at their absolute discretion as they may deem fit and think expedient in the best interest of the Company. The indicative principal terms of the New Warrants are set out in Appendix II Basis of determination for the issue price and exercise price of the New Warrants The indicative issue price of RM0.01 per New Warrant was arrived at after taking into consideration the expiring Warrant 2007/2017 which is currently out-of-money and a price deemed attractive by the Board to entice the holders of Warrants 2007/2017 to subscribe for the New Warrants. The exercise price of the New Warrants will be determined on a later date by the Board after taking into account the theoretical ex-all price of Zecon Shares immediately before the Price- Fixing Date for the New Warrants, but in any case will not be lower than the par value of Zecon Shares after the Proposed Par Value Reduction Ranking of the new Zecon Shares arising from the exercise of the New Warrants The new Zecon Shares to be issued arising from the exercise of the New Warrants shall, upon allotment and issuance, rank pari passu in all respects with the existing Zecon Shares, save and except that they will not be entitled to any dividends, rights, allotment and/ or any other distributions that may be declared, made or paid prior to the relevant allotment date of the said new Zecon Shares Utilisation of proceeds Based on the issue price of RM0.01 per New Warrant, the Proposed Restricted Issue of Warrants is expected to raise gross proceeds of approximately up to RM0.88 million which will be utilised for the working capital requirement of the Zecon Group. The gross proceeds to be raised from the exercise of New Warrants are dependent on the total number of New Warrants exercised during the tenure of New Warrants. The gross proceeds to be raised from the exercise of New Warrants will be utilised as additional working capital of the Group. As at the LPD, the type of working capital requirements arising from the exercising of the New Warrants, as well as their detailed breakdown has yet to be determined by the Group. As such, the exact timeframe for utilisation of the proceeds is not determinable at this juncture. 2.6 Proposed LTIP Save and except as disclosed below, there is no variation to the terms of the Proposed LTIP:- (i) Eligibility Employee of the Group or executive director of the Company and/or subsidiary companies (excluding dormant subsidiary companies) (not being an alternate director) who fulfils the following criteria shall be eligible to participate in the Proposed LTIP if, as at the Award Date:- (v) in respect of a person who is an executive director of the Company and/or subsidiary companies (not being an alternate director whose eligibility shall be assessed under paragraph (iv) above), such executive director fulfils the following criteria as at the Award Date:- (a) such employee has been employed on a full time basis or is serving in a specific designation under an employment contract for a fixed duration of at least three (3) years with and on the payroll of any company in the Group; 8

9 (b) (c) the employment of such employee has been confirmed by any company in the Group; and such employee falls within any other eligibility criteria as may be determined by the LTIP Committee from time to time. (ii) Consequential effects pursuant to the Proposed Par Value Reduction. 3. CAPITALISATION OF RESERVES Pursuant to the Variations, the Bonus Shares and the Free Shares shall be capitalised from the retained profits of the Company as follows:- Company level Resultant retained earnings / (Accumulated losses) Minimum Scenario Maximum Scenario (1) Audited 30 June 2015 Unaudited 30 June 2016 Audited 30 June 2015 Unaudited 30 June 2016 (RM 000) (RM 000) (RM 000) (RM 000) Audited as at 30 June 2015 (52,421) (52,421) Unaudited as at 30 June 2016 (61,040) (61,040) Add: Credit arising from the Proposed Par Value Reduction 95,285 95,285 95,285 95,285 42,864 34,245 42,864 34,245 Less: Amount to be capitalised (2) (23,821) (23,821) (23,821) (23,821) for Bonus Shares 19,043 10,424 19,043 10,424 Less: Amount to be capitalised for the Free Shares and upon full conversion of (2,189) (2,189) (8,734) (8,734) RCULS (3) 16,854 8,235 10,309 1,690 Add: Termination of Warrants 2007/2017 4,894 4,894 4,894 4,894 Less: Estimated expenses for the Proposals After the Proposed Bonus Issue of Shares and the Proposed Rights Issue of RCULS with Free Shares (1,000) (1,000) (1,000) (1,000) 20,748 12,129 14,203 5,584 Notes:- (1) The effect of full exercise of Warrants 2007/2017 is not computed in view of the exercise price of Warrants 2007/2017 is out-of-money (RM1.06), which is higher than the underlying share price of Zecon of RM0.583 as at the LPD. (2) (3) Being Proposed Bonus Issue of up to 119,106,150 new ordinary shares of RM0.20 each on the basis of (1) Bonus Share for every (1) existing ordinary share of the Company held to be credited as fully paid-up share capital by capitalising from the Company s reserves. Being effect on Company s retained earnings assuming the full conversion of the RCULS. 9

10 Pursuant to Paragraph 6.30(1) of the Listing Requirements, a listed issuer intending to make a bonus issue of securities must ensure that the necessary reserves required for capitalisation of the bonus issue is unimpaired by losses on a consolidated basis, where applicable, based on the listed issuer's latest audited financial statements as well as its latest quarterly report. Further, pursuant to Paragraph 6.30(3) of the Listing Requirements, the Board will obtain a confirmation letter from its external auditors on the adequacy of reserves to cover the capitalisation of the Proposed Bonus Issue of Shares and the Proposed Rights Issue of RCULS with Free Shares, details of which will be disclosed in the circular to shareholders to be issued. The Board confirms that based on the Group s latest audited financial statements for FYE 30 June 2015 and latest unaudited financial statements for the FYE 30 June 2016 as well as after the adjustments set out in the table above, the Group s reserves required to be capitalised for the purposes of the Proposed Bonus Issue of Shares and the Proposed Rights Issue of RCULS with Free Shares is unimpaired by losses on a consolidated basis, in compliance with Paragraph 6.30(1) of the Listing Requirements. 4. RATIONALE FOR THE Save as disclosed below, the Rationale set out in Section 4 of the Original Announcement shall remain the same. 4.1 Proposed Restricted Issue of Warrants The Proposed Restricted Issue of Warrants will:- (i) (ii) allow the existing entitled holders of Warrants 2007/2017 with an opportunity to further participate in the equity of the Company; and allow the Company to raise further proceeds as and when any of the New Warrants are exercised. 5. EFFECTS OF THE The Proposed Amendments will not have any effect on the following:- (i) (ii) (iii) (iv) share capital; NA and gearing; substantial shareholders shareholdings; and earnings and EPS of Zecon. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 10

11 The proforma effects of the Proposals are illustrated in the following scenarios:- Minimum Scenario : (i) none of the Warrants 2007/2017 are exercised prior to the Rights Issue Entitlement Date; (ii) (iii) (iv) the Proposed Rights Issue of RCULS with Free Shares will be implemented under the Minimum Subscription Level whereby only the Undertaking Shareholder will subscribe for the RCULS are mentioned in Section above; no New Warrants are exercised; all RCULS are:- (a) (b) fully redeemed upon maturity; or fully converted into new Zecon Shares upon the maturity of the RCULS at the illustrative Conversion Price of RM0.20. Maximum Scenario : (i) All Warrants 2007/2017 are exercised prior to the Rights Issue Entitlement Date; * (ii) (iii) (iii) the Proposed Rights Issue of RCULS with Free Shares will be implemented under the Maximum Subscription Level whereby the RCULS will be fully subscribed; all New Warrants are exercised; and all RCULS are:- (a) (b) fully redeemed upon maturity; or fully converted into new Zecon Shares upon the maturity of the RCULS at the illustrative Conversion Price of RM0.20. Note:- * For the effects on NA and gearing, the effect of full exercise of Warrants 2007/2017 is not computed in view of the exercise price of Warrants 2007/2017 is out-of-money (RM1.06), which is higher than the underlying share price of Zecon of RM0.583 as at the LPD. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 11

12 5.1 Share Capital The proforma effects of the Proposals (save for the Proposed Amendments) on the issued and paid-up share capital of the Company are as follows:- Minimum Scenario Minimum Scenario No. of Shares Par Value (RM) (RM) Existing issued and paid-up share capital 119,106, ,106,150 Proposed Par Value Reduction - (0.80) (95,284,920) After the Proposed Par Value Reduction 119,106, ,821,230 Proposed Bonus Issue of Shares 119,106, ,821,230 After the Proposed Bonus Issue of Shares 238,212, ,642,460 Free Shares pursuant to Proposed Rights Issue of RCULS with Free Shares 9,948, ,989,649 After the Proposed Rights Issue of RCULS with Free Shares 248,160, ,632,109 Assuming full conversion of the RCULS (1) 124,353, ,870,614 Proposed LTIP (2) 37,224, ,444,816 Enlarged issued and paid-up share capital 409,737, ,947,540 Notes:- (1) No new Zecon Shares will be issued in the event the RCULS are fully redeemed upon the maturity of the RCULS. (2) Based on 15% of the issued and paid-up of the Company after the Proposed Bonus Issue of Shares and the Proposed Rights Issue of RCULS with Free Shares. THE REST OF THE PAGE IS INTENTIONALLY LEFT BLANK 12

13 Maximum Scenario Maximum Scenario No. of Shares Par Value (RM) (RM) Existing issued and paid-up share capital 119,106, ,106,150 Assuming full exercise of Warrant 2007/ ,168, ,168, ,274, ,274,690 Proposed Par Value Reduction - (0.80) (130,619,752) After the Proposed Par Value Reduction 163,274, ,654,938 Proposed Bonus Issue of Shares 163,274, ,654,938 After the Proposed Bonus Issue of Shares 326,549, ,309,876 Free Shares pursuant to Proposed Rights Issue of RCULS with Free Shares 54,424, ,884,979 After the Proposed Rights Issue of RCULS with Free Shares 380,974, ,194,855 Assuming full exercise of New Warrants 88,337, ,667,416 Assuming full conversion of the RCULS (1) 680,311, ,062,242 Proposed LTIP (2) 57,146, ,429,228 Enlarged issued and paid-up share capital 1,206,768, ,353,741 Notes:- (1) No new Zecon Shares will be issued in the event the RCULS are fully redeemed upon the maturity of the RCULS. (2) Based on 15% of the issued and paid-up of the Company after the Proposed Bonus Issue of Shares and the Proposed Rights Issue of RCULS with Free Shares. THE REST OF THE PAGE IS INTENTIONALLY LEFT BLANK 13

14 5.2 Earnings and EPS The Variations is not expected to have any additional effect on the on the earnings of the Group save as disclosed in the Original Announcement. The Proposed Restricted Issue of Warrants is not expected to have any material effects on the earnings of the Group for the FYE 30 June However, the Proposals will result in a corresponding reduction in the EPS of Zecon as a result of the increase in the number of Zecon Shares in issue upon the completion of the Proposed Restricted Issue of Warrants and as and when the New Warrants are exercised into new Zecon Shares. Notwithstanding the above, the proceeds from the Proposed Restricted Issue of Warrants is expected to contribute positively to the earnings of the Group for the ensuing financial years, when the benefits of the utilisation of proceeds are realised. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 14

15 5.3 NA, NA per Share and gearing The pro forma effects of the Proposals on the NA and gearing of the Group are set out below:- Minimum Scenario Group Level (I) (II) (III) (IV) (Va) (Vb) After the After (I) and the Proposed Par Proposed Bonus Value Reduction Issue of Shares After (II) and the Proposed Rights Issue of RCULS w ith Free Shares After (III) and the Proposed Restricted Issue of Warrants After (IV) and full conversion of the RCULS After (IV) and full redemption of the RCULS Audited as at 30 June 2015 (RM'000) (RM'000) (RM'000) (RM'000) (RM'000) (RM'000) (RM'000) Share capital 119,106 23,821 47,642 49,633 49,633 74,503 49,632 Share premium 3,559 3,559 3,559 3,758 3,758 3,758 3,758 RCULS-Equity component ,044 2,044-5,777 Warrant reserves 4,894 4,894 4,894 4,894 5,777 5,777 5,051 Retained Earnings/(Accumulated losses) (63,224) 32,061 8,240 7,240 7,240 5,051 4,194 NA 64,335 64,335 64,335 67,569 68,452 89,089 68,412 - Non controlling interest 4,194 4,194 4,194 4,194 4,194 4,194 4,194 Total Equity 68,529 68,529 68,529 71,763 72,646 93,283 72,606 No. of shares ('000) 119, , , , , , ,161 NA per Share (RM) Total borrow ings (RM'000) 193, , , , , , ,229 Gearing (times) Notes:- (1) The increase in the Share Premium represents a premium of RM0.017 arising from the issuance of Free Shares, being the excess of fair value (or theoretical ex-price) of RM0.217 per Zecon share over the par value. (2) Represents the equity component of the RCULS and the assigned value is computed as a residual amount, after deducting the fair value for the liability component of the RCULS. 15

16 Maximum Scenario (I) (II) (III) (IV) (Va) (Vb) After (II) and After (III) and the Proposed Group Level the Proposed Restricted Issue After the After (I) and the Rights Issue of of Warrants and After (IV) and After (IV) and Audited as at 30 Proposed Par Proposed Bonus RCULS w ith full exercise of full conversion full redemption June 2015 Value Reduction Issue of Shares Free Shares New Warrants of the RCULS of the RCULS (RM'000) (RM'000) (RM'000) (RM'000) (RM'000) (RM'000) (RM'000) Share capital 119,106 23,821 47,642 55,583 73, ,506 73,251 Share premium 3,559 3,559 3,559 4,353 11,667 11,667 11,667 RCULS-Equity component ,159 8, Warrant reserves 4,894 4,894 4,894 4, Retained Earnings/(Accumulated losses) (63,224) 32,061 8,240 7,240 7,240 (1,495) (1,495) NA 64,335 64,335 64,335 80, , ,678 83,423 - Non controlling interest 4,194 4,194 4,194 4,194 4,194 4,194 4,194 Total Equity 68,529 68,529 68,529 84, , ,872 87,617 No. of shares ('000) 119, , , , , , ,914 NA per Share (RM'000) Total borrow ings (RM) 193, , , , , , ,229 Gearing (times) Notes:- (1) The effect of full exercise of Warrants 2007/2017 is not computed in view of the exercise price of Warrants 2007/2017 is out-of-money (RM1.06), which is higher than the underlying share price of Zecon of RM0.583 as at the LPD. (2) The increase in the Share Premium represents represents a premium of RM0.017 arising from the issuance of Free Shares, being the excess of fair value (or theoretical ex-price) of RM0.217 per Zecon share over the par value. (3) Represents the equity component of the RCULS and the assigned value is computed as a residual amount, after deducting the fair value for the liability component of the RCULS. 16

17 5.4 Substantial Shareholder s Shareholdings For illustrative purposes, the proforma effects of the Proposals on the shareholdings of as per register of substantial shareholders of Zecon are as follow:- Minimum Scenario Existing (I) After the Proposed Par Value Reduction (II) After (I) and the Proposed Bonus Issue of Shares Direct Indirect Direct Indirect Direct Indirect No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % Datuk Haji Zainal Abidin bin Haji Ahmad 3,655, ,689, ,655, ,689, ,310, ,378, Datuk Haji Bolhassan Bin 11,500, ,500, ,000, Ahmad Bin Di Dawla Capital Sdn Bhd 59,689, ,689, ,378, (III) After (II) and the Proposed Rights Issue of RCULS with Free Shares (IVa) After (III) and assuming full redemption of the RCULS (IVb) After (III) and assuming full conversion of the RCULS Direct Indirect Direct Indirect Direct Indirect No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % Datuk Haji Zainal Abidin bin Haji Ahmad 7,310, ,327, ,310, ,327, ,310, ,680, Datuk Haji Bolhassan Bin 23,000, ,000, ,000, Ahmad Bin Di Dawla Capital Sdn Bhd 129,327, ,327, ,680, Note:- (1) Deemed interested by virtue of his shareholdings in Dawla Capital. 17

18 Maximum Scenario (I) (II) Existing Assuming full exercise of Warrant 2007/2017 After the Proposed Par Value Reduction After (I) and the Proposed Bonus Issue of Shares Direct Indirect Direct Indirect Direct Indirect Direct Indirect No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % Datuk Haji Zainal Abidin bin Haji Ahmad 3,655, ,689, ,843, ,834, ,843, ,834, ,686, ,669, Datuk Haji Bolhassan Bin 11,500, ,500, ,500, ,000, Ahmad Bin Di Dawla Capital Sdn Bhd 59,689, ,834, ,834, ,669, (III) (IV) (Va) (Vb) After (IV) and full redemption of the RCULS After (II) and the Proposed Rights Issue of RCULS with Free Shares After (III) and assuming full exercise of New Warrants After (IV) and assuming full conversion of the RCULS Direct Indirect Direct Indirect Direct Indirect Direct Indirect No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % No. of Shares % Datuk Haji Zainal Abidin bin Haji Ahmad 8,967, ,281, ,343, ,572, ,887, ,009, ,343, ,572, Datuk Haji Bolhassan Bin 26,833, ,833, ,730, ,833, Ahmad Bin Di Dawla Capital Sdn Bhd 186,281, ,572, ,009, ,572, Note:- * Deemed interested pursuant to Section 6A of the Act by virtue of interest in Dawla Capital Sdn Bhd 18

19 APPENDIX I 6. APPROVALS REQUIRED In addition to the approvals required as disclosed in Section 6 of the Original Announcement, there are no other approvals required save and except for the following:- (i) Bursa Securities, for:- (a) (b) the admission of the New Warrants to the Official List of the Main Market of Bursa Securities; and the listing of and quotation for the New Warrants and the new Zecon Shares to be issued arising from the exercise of the New Warrants on the Main Market of Bursa Securities; (ii) (iii) (iv) the shareholders of Zecon for the Proposed Restricted Issue of Warrants at the EGM to be convened; the warrantholders of Zecon for the termination of existing Warrants 2007/2017 at a warrantholders meeting to be convened; and any other relevant authorities (if applicable). 7. CONDITIONALITY The Proposed Restricted Issue of Warrants is conditional upon the Proposed Par Value Reduction but not vice versa. The Proposed Restricted Issue of Warrants is inter-conditional with the Proposed WAC. Save as disclosed above, the Proposals are not conditional upon any other proposals undertaken or to be undertaken by the Company. 8. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED Save for the Proposed Restricted Issue of Warrants, none of the Directors and/or major shareholders of Zecon and/or persons connected to them have any interest, whether direct or indirect, in the Proposals save for as disclosed in the Original Announcement. The unexercised Warrants 2007/2017 holdings of the Directors and substantial shareholders of Zecon as at the date prior to this announcement are set out below. Direct Indirect Name No. of warrants % No. of warrants % Dawla Capital Sdn Bhd 20,145, Datuk Hj Zainal Abidin bin Hj Ahmad 188, ,145,380 Note:- * Deemed interested by virtue of his shareholdings in Dawla Capital. Interested Directors and major shareholders (1) Datuk Hj Zainal Abidin Bin Hj Ahmad ( Datuk Hj Zainal ), is a Director of Zecon and major shareholder of Zecon by virtue of his holdings in Dawla Capital and also a holder of the Warrants 2007/2017. Hence, he is deemed interested in the Proposed Restricted Issue of Warrants in respect of their entitlement. 19

20 APPENDIX I Accordingly, Datuk Hj Zainal has abstained and will continue to abstain from all Board deliberations and voting in respect of the Proposed Restricted Issue of Warrants at the Board meetings. Datuk Hj Zainal will abstain from voting in respect of his direct and/or indirect shareholdings in the Company on the resolution pertaining to the Proposed Restricted Issue of Warrants to be tabled at the EGM to be convened. Datuk Hj Zainal has also undertaken to ensure that persons connected to him will abstain from voting in respect of his direct and/or indirect shareholdings in the Company, if any, on the resolution pertaining to the Proposed Restricted Issue of Warrants. 9. STATEMENT BY THE BOARD After taking into consideration all relevant aspects of the Proposed Restricted Issue of Warrants, the Board is of the opinion that the Proposals are in the best interests of the Company and the shareholders of the Company. 10. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to all required approvals being obtained, the Board expects the Proposals to be completed by the first (1 st ) quarter of This announcement is dated 28 September

21 APPENDIX I The indicative principal terms of the RCULS as follows:- Issuer Issue size Issue price Form and denomination Zecon Up to RM136,062,242 nominal value of RCULS to be issued pursuant to the Proposed Rights Issue of RCULS with Free Shares. At 100% of the nominal value of RM0.20 each. The RCULS will be issued in registrable form and in denominations and multiples of RM0.20 each. Basis of allotment Twenty-five (25) RM0.20 nominal value of RCULS for every twelve (12) existing Zecon Shares held by the Entitled Shareholders on the Entitlement Date. Issue Date Tenure/Maturity Date Coupon rate and payment Conversion rights The issue date for the RCULS shall be a business day and shall take place within the period commencing from the date of fulfilment of the conditions precedent for issuance of the RCULS and ending on a date falling one (1) year from the date of approval by the SC. Five (5) years from the Issue Date. 5% per annum on the nominal value of the RCULS payable on an annual basis. The RCULS Holders shall have the right to convert all or any amount of the RCULS held by them into fully paid new Zecon Shares at the Conversion Price at any time during the Conversion Period. Once delivered, the conversion notice shall be irrevocable. The RCULS Holders exercise their right to convert all or any amount of the RCULS held by it into new Zecon Shares, no coupon shall be payable on such RCULS as from the Issue Date or the coupon payment date immediately preceding the conversion date, whichever is the later. All the outstanding RCULS which have not been earlier converted on the Maturity Date, shall be automatically converted into new Zecon Shares at the Conversion Price on the Maturity Date ( Automatic Conversion ). In the event of an Automatic Conversion, the RCULS Holders shall be deemed to have submitted a valid conversion notice on the Maturity Date for the purpose of converting such outstanding RCULS into fully paid new Zecon Shares. Any fractional new Zecon Shares arising from the Automatic Conversion shall be disregarded and be dealt with by the Board as it may deem fit and expedient in the best interest of the Company. Conversion period Conversion price Conversion mode Status and ranking Any time after the Issue Date of the RCULS and up to the Maturity Date of the RCULS. RM0.20, being the conversion price of the RCULS for every one (1) new Zecon Share. The conversion of the RCULS will not require any cash payment by the RCULS Holders. The conversion shall be satisfied by surrendering the RCULS with an aggregate nominal value equivalent to the Conversion Price for cancellation by the Company. Any fraction of the new Zecon Shares arising from the conversion of the RCULS shall be disregarded. The RCULS constitute direct, unsubordinated and unsecured obligations of the Company, ranking pari passu without discrimination, preference or priority amongst themselves and pari passu with all present and future unsecured obligations of the Company from time to time (subject to those preferred by law). 21

22 APPENDIX I Redemption on the maturity date Subject to the Company giving irrevocable notice to the RCULS Holders at least thirty (30) days prior to the Maturity Date, the Company shall have the option to redeem the outstanding RCULS (if not earlier converted) in cash at 100% of the nominal amount of the RCULS, in whole or in part (but always in the same proportion in relation to each RCULS Holder), on the Maturity Date. During such notice period but not later than the eighth (8 th ) trading day prior to the Maturity Date, the RCULS Holders shall be entitled to exercise their Conversion Rights. Upon the exercise by the Company of the option to redeem the RCULS on the Maturity Date, the Company shall pay the RCULS Holders (no later than the Maturity Date) all unpaid coupon accruing from the immediately preceding coupon payment date until but excluding the Maturity Date. For the avoidance of doubt, the RCULS Holders shall not have the right to require the Company to redeem the RCULS on the Maturity Date. The RCULS which have been redeemed will be cancelled and cannot be resold. Adjustment in the Conversion Price and/or nominal value of RCULS in the event of alteration to the issued and paid-up share capital RCULS Holders rights to participate in any distribution and/or offer of further securities in the Company Amendments to the RCULS Holders rights Winding up/liquidation The Company shall make the necessary adjustments to the Conversion Price of the RCULS then outstanding in the event of any alteration in the issued and paid-up Zecon Shares on or before the Maturity Date, whether by way of rights issue, capitalisation issue, consolidation of Zecon Shares, subdivision of Zecon Shares or reduction of capital howsoever being effected, in accordance with the provisions of the Trust Deed. The RCULS Holders are not entitled to participate in any distribution and/or offer of securities in the Company until and unless the RCULS have been validly converted into new Zecon Shares, and such shares are allotted prior to the entitlement date of such distribution and/or offer of securities. Save as otherwise provided in the Trust Deed, an extraordinary resolution of the RCULS Holders is required to sanction any modification, variation, abrogation or compromise of or arrangement in respect of the rights of the RCULS Holders against the Company. If a resolution is passed for a voluntary winding-up of the Company whilst any of the RCULS remain capable of being converted then:- (i) (ii) if such winding-up is for the purpose of reconstruction or amalgamation pursuant to a scheme of arrangement to which the RCULS Holders or some person designated by them for such purpose, shall be a party, the terms of such scheme of arrangement if approved by an extraordinary resolution shall be binding on all the RCULS Holders; and in any other case every RCULS Holder shall be entitled to upon and subject to the Trust Deed at any time within six (6) weeks after the passing of such resolution for a members voluntary winding-up of the Company deliver to the Company a duly completed conversion notice in relation to the RCULS to elect to be treated as if he had on the last day of the month immediately before the commencement of such winding-up, exercised the Conversion Rights to the extent specified in the conversion notice(s) and be entitled to receive out of the assets of the Company which will be available in liquidation if he had on such date been the holder of the new Zecon Shares to which he would have become entitled pursuant to such exercise and the liquidator of the Company shall give effect to such election accordingly. Upon such election taking effect, all RCULS converted under such election shall cease to 22

23 APPENDIX I carry any coupon as from the last day of the month immediately preceding the month in which the RCULS are converted or deemed converted under this provision. All conversion Rights which have not been exercised at the expiry date of the said period of six (6) weeks shall laps and cease to be valid for any purpose. Listing status and types of listing, where applicable Selling restriction, including tradability (i.e. tradable or nontradable) Trust Deed Rating Governing law An application will be made to Bursa Securities for the listing of and quotation for the RCULS on the Main Market of Bursa Securities. The RCULS shall be tradable upon listing in board lot of one hundred (100) units of RCULS, or such other denomination as may be determined by Bursa Securities. No selling restriction is imposed on the RCULS. The RCULS shall be constituted by the Trust Deed. The Trust Deed is in compliance with the Trust Deed Guidelines issued by the SC effective 12 August 2011, as amended from time to time. The RCULS will not be rated. Laws and regulations of Malaysia. 23

24 APPENDIX II The indicative principal terms of the New Warrants are set out below:- Issue size Form and Denomination Exercise rights Exercise Period Exercise price Expiry date Mode of Exercise Board lot Listing status Ranking of New Shares Rights of the Warrant Holder Up to 88,337,080 New Warrants to be issued in conjunction with the Proposed Restricted Issue of Warrants to the entitled Warrant 2007/2017 holders of Zecon on the basis of two (2) New Warrants for every one (1) Warrant 2007/2107 held. The New Warrants will be issued in registered form and constituted by a deed poll to be executed by the Company. Each New Warrant entitles the registered holder, at any time during the Exercise Period, to subscribe for one (1) new Zecon Share at the Exercise Price, subject to adjustments in accordance with the provisions of the deed poll. The New Warrants can be exercised at any time during the period of five (5) years commencing from and including the date of issuance of the Warrants up to and including the Expiry Date. The Exercise Price per New Warrant will be determined at a later date, after taking into consideration the theoretical ex-all price and par value of Zecon Shares at a price-fixing date to be determined by the Board. The last day of the period of five (5) years from the date of issuance of the New Warrants. Any New Warrants which have not been exercised and delivered to the registrar during the Exercise Period will thereafter lapse and cease to be valid for any purpose. If the Expiry Date falls on a non-market Day, then the immediate preceding Market Day shall be taken as the Expiry Date. The registered holder of New Warrants is required to lodge a subscription form, as set out in the deed poll, with the Company s registrar, duly completed, signed and stamped together with payment of the Exercise Price by bankers draft or cashier s order drawn on a bank operating in Malaysia or a money order or postal order issued by a post office in Malaysia. For the purpose of trading on Bursa Securities, a board lot of New Warrants shall comprise one hundred (100) New Warrants carrying the right to subscribe for one hundred (100) new Zecon Shares at any time during the Exercise Period, or such denomination as determined by Bursa Securities. Approval to be obtained from Bursa Securities for the admission of the New Warrants to the Main Market of Bursa Securities, and for the listing of and quotation for the New Warrants and new Zecon Shares arising from the exercise of New Warrants. The new Zecon Shares to be issued pursuant to the exercise of the New Warrants, shall upon allotment and issue, rank pari passu in all respects with the existing Zecon Shares, save and except that they will not be entitled to any dividends, rights, allotments, and/ or other distributions that may be declared, made or paid prior to the relevant allotment date of the said new Zecon Shares. The New Warrant holders are not entitled to vote in any general meeting of Zecon or to participate in any distribution and/or offer of further securities in the Company unless and until the New Warrant holder becomes a shareholder of Zecon by exercising his/her New Warrants into Zecon Shares. 24