ANN JOO RESOURCES BERHAD ( ANN JOO OR COMPANY ) PROPOSED RIGHTS ISSUE OF RCPS; PROPOSED DRP; PROPOSED IASC; AND PROPOSED AMENDMENTS

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1 ANN JOO RESOURCES BERHAD ( ANN JOO OR COMPANY ) (I) (II) (III) (IV) (V) PROPOSED RIGHTS ISSUE OF RCPS; PROPOSED LTIP; PROPOSED DRP; PROPOSED IASC; AND PROPOSED AMENDMENTS (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) 1. INTRODUCTION On behalf of the Board of Directors of Ann Joo ( Board ), Affin Hwang Investment Bank Berhad ( Affin Hwang IB ) wishes to announce that Ann Joo proposes to undertake the following: (i) (iii) (iv) (v) a renounceable rights issue of up to 125,142,220 new redeemable convertible cumulative preference shares of RM0.01 each in Ann Joo ( RCPS ) convertible into ordinary shares of RM1.00 each in Ann Joo ( Ann Joo Shares or Shares ) on the basis of 1 RCPS for every 4 existing Ann Joo Shares held on an entitlement date to be determined later ( Entitlement Date ) ( Proposed Rights Issue of RCPS ); proposed establishment of a long term incentive plan of up to 15% of the issued and paid-up ordinary share capital of Ann Joo (excluding treasury shares) at any time during the period of the long term incentive plan, for the selected key personnel and/or senior management of Ann Joo and its subsidiaries ( Ann Joo Group or the Group ) who fulfil the eligibility criteria set out in Section 2.2.3(iii) below ( Proposed LTIP ); proposed dividend reinvestment plan that provides the shareholders of Ann Joo ( Shareholders ) with the option to elect to reinvest their cash dividends declared by Ann Joo (whether interim, final, special or any other cash dividends) ( Dividends ) in new Ann Joo Shares ( Proposed DRP ); proposed increase in the authorised share capital of Ann Joo from RM1,000,000,000 comprising 1,000,000,000 Ann Joo Shares to RM1,005,000,000 comprising 1,000,000,000 Ann Joo Shares and 500,000,000 RCPS ( Proposed IASC ); and proposed amendments to the Memorandum and Articles of Association of Ann Joo to facilitate the Proposed IASC and the issuance of the RCPS pursuant to the Proposed Rights Issue of RCPS ( Proposed Amendments ). Further details on the Proposals are set out in the ensuing sections. 1

2 2. DETAILS OF THE PROPOSALS 2.1 Proposed Rights Issue of RCPS Details of the Proposed Rights Issue of RCPS The Proposed Rights Issue of RCPS entails the issuance of up to 125,142,220 RCPS at an illustrative issue price of RM0.50 per RCPS, on the basis of 1 RCPS for every 4 existing Ann Joo Shares held by the entitled shareholders of Ann Joo whose names appear in the Record of Depositors of the Company ( Entitled Shareholders ) on the Entitlement Date and announced by the Board after obtaining all relevant approvals for the Proposals. As at 29 April 2016, being the latest practicable date prior to the date of this announcement ( LPD ), the issued and paid-up share capital of Ann Joo is RM522,708,178, comprising 522,708,178 Ann Joo Shares (including 22,139,300 treasury shares). The Proposed Rights Issue of RCPS will be undertaken on a minimum subscription level basis, where the Proposed Rights Issue of RCPS would entail a minimum issuance of 84,401,921 RCPS raising a minimum gross proceeds of approximately RM42.20 million pursuant to the undertakings of the Identified Shareholders (as defined in Section 2.1.5) ( Minimum Subscription Level ). Notwithstanding the above, assuming all entitled shareholders subscribe for their respective entitlements of the RCPS, the Proposed Rights Issue of RCPS would entail a maximum issuance of 125,142,220 RCPS raising a maximum gross proceeds of approximately RM62.57 million. The RCPS will be provisionally allocated to the Entitled Shareholders on the Entitlement Date after obtaining all the relevant approvals in respect of the Proposals. Any fractional entitlements under the Proposed Rights Issue of RCPS will be disregarded and will be dealt with in such manner as the Board shall in its absolute discretion deem fit and/or expedient and in the best interest of the Company. The Proposed Rights Issue of RCPS is renounceable in full or in part. Accordingly, the Entitled Shareholders can subscribe for and/or renounce their entitlements to the RCPS in full or in part. The RCPS which are not taken up or not validly taken up shall be made available for excess RCPS applications by the other Entitled Shareholders and/or their renouncee(s) ( Excess Rights Applicants ). It is the intention of the Board to allocate the excess RCPS in a fair and equitable manner and on such basis as the Board deems fit and/or expedient and announced later by the Company. For illustrative purposes throughout this announcement, the effects of the Proposed Rights Issue of RCPS shall be based on the following scenarios:- Minimum Scenario Assuming none of the treasury shares as at the LPD are resold on the open market of Bursa Malaysia Securities Berhad ( Bursa Securities ) and the Proposed Rights Issue of RCPS is undertaken on the Minimum Subscription Level basis pursuant to the undertakings of the Identified Shareholders (as defined in Section 2.1.5). 2

3 Maximum Scenario Assuming none of the treasury shares as at the LPD are resold on the open market of Bursa Securities and all Entitled Shareholders fully subscribe to their entitlements of the RCPS. Ann Joo confirms that none of the treasury shares will be resold prior to the Entitlement Date for the Proposed Rights Issue of RCPS. There is no guarantee or security for the RCPS. The RCPS will not be rated Basis and justification of arriving at the issue price and conversion price of the RCPS The issue price and the conversion price of the RCPS shall be determined and fixed by the Board at a later date ( Price Fixing Date ) after receipt of all relevant approvals but before the announcement of the Entitlement Date, and taking into consideration, amongst others, the following:- (i) (iii) the funding requirements of the Ann Joo Group; the net assets per Share of the Ann Joo Group as at 31 December 2015 of RM1.85; 5-day volume weighted average market price ( VWAP ) of Ann Joo Shares immediately preceding the Price Fixing Date; (iv) the indicative salient terms of the RCPS as set out in Section 2.1.4; (v) (vi) the par value of the RCPS of RM0.01; and the then prevailing market conditions. In any event, the issue price of the RCPS shall not be lower than the par value of RM0.01 per RCPS. For illustration purposes only, the illustrative issue price and conversion price of the RCPS are assumed to be at RM0.50 and RM1.80 per RCPS, respectively. The RCPS are convertible into new Ann Joo Shares at the option of the RCPS holders at the conversion price of RM1.80 per RCPS. Based on the illustrative issue price of the RCPS of RM0.50 and the illustrative conversion price of the RCPS of RM1.80, the RCPS holders would be required to surrender 1 RCPS together with cash consideration of RM1.30 per RCPS for conversion of the RCPS into 1 new Ann Joo Share, as tabulated below:- Upon Conversion:- To surrender 1 RCPS for conversion into 1 new Ann Joo Share Illustrative issue price 0.50 Illustrative conversion price 1.80 Cash consideration for conversion 1.30 The conversion price shall be subject to adjustments under certain circumstances in accordance with the provisions of the Articles of Association of the Company. RM 3

4 The illustrative conversion price of the RCPS of RM1.80 per RCPS represents:- (i) a discount of RM0.05 or 2.70% to the net assets per Share of the Ann Joo Group as at 31 December 2015 of RM1.85; and a premium of RM0.61 or 51.26% to the 5-day VWAP of up to and including the LPD of RM1.19 per Ann Joo Share Ranking of the RCPS and new Shares arising from the conversion of the RCPS The RCPS shall rank pari passu amongst themselves. The new Shares to be issued upon conversion of the RCPS shall rank pari passu in all respects with the then existing Shares, except that the new Shares shall not be entitled to participate in any dividends, rights, allotments and/or any other distributions that may be declared, made or paid, the entitlement date of which is prior to the date of conversion of the RCPS into new Shares Indicative salient terms of the RCPS Terms Issuer Issue Size Issue Price Par Value Form and Denomination Board Lot Dividend Details : Ann Joo. : Up to 125,142,220 RCPS, convertible into up to 125,142,220 new Ann Joo Shares (subject to adjustments, if any). : RM0.50 per RCPS. The final issue price of the RCPS will be determined and announced later by the Board. : RM0.01 per RCPS. : The RCPS shall be issued in registered form in denomination or multiples of RM0.01 each. : For the purpose of trading on Bursa Securities, a board lot of RCPS will be 100 RCPS. : The RCPS shall carry the right to receive a fixed cumulative dividend rate of 5.0% per annum or 2.5 sen per RCPS (net of tax) ( Fixed Dividend ) calculated based on the issue price of the RCPS and on the amount of RCPS outstanding. The Fixed Dividend is payable semi-annually, subject to availability of distributable profits, as the Board deems fit and/or expedient and in the best interest of the Company. Tenure Maturity : 8 years commencing from and including the date of issuance of the RCPS. : The date occurring on the day immediately preceding the 8 th anniversary from the date of issuance of the RCPS. 4

5 Terms Redemption Details : The issuer may redeem the RCPS on a pro-rata basis or in its entirety, at the option of the Issuer at the issue price of the RCPS, at any time up to maturity but always subject to the requirement of Section 61 of the Companies Act, 1965 currently in force and as may be amended from time to time and any reenactment thereof ( Act ). The issuer shall give not less than 30 days notice to the RCPS holders prior to the redemption date. The redemption price is at the issue price of the RCPS together with cumulative unpaid dividends up to the date of redemption. The redemption shall be in cash and in one lump sum at a redemption price. Any outstanding RCPS not converted or redeemed at the maturity date shall automatically be redeemed by the issuer at the issue price of the RCPS on maturity together with cumulative unpaid dividends up to the date of redemption. Conversion Price Conversion Period Conversion Rights Conversion Mode Adjustment to Conversion Price : RM1.80 per RCPS for 1 Ann Joo Share, subject to adjustments if any. The final conversion price will be determined and announced later by the Board. : The period commencing from the date of listing of the RCPS up to and including the maturity date. : The RCPS shall be convertible at the option of the RCPS holder into new Ann Joo Shares, at any time during the conversion period. : The RCPS holder shall surrender 1 RCPS, being equivalent to the value of RM0.50 and cash consideration of RM1.30 towards satisfying the illustrative conversion price of RM1.80 for each Ann Joo Share. : The issuer shall make the necessary adjustments to the conversion price in the event of any alteration to its share capital occurring prior to the expiry of the conversion period, whether by way of rights issue, capitalisation issue, consolidation of shares, subdivision of shares or reduction of capital howsoever being effected, in accordance with the provisions of the Articles of Association. 5

6 Terms Rights Details Distribution of assets upon winding-up A RCPS does not carry any right to vote at any general meeting of the Company except for the right to vote in person or by proxy at such meeting in each of the following circumstances: (a) on a proposal to reduce the Company s share capital; (b) on a proposal for the disposal of a substantial portion of the Company s property, business and undertaking; (c) on a proposal that affects rights attached to the RCPS; (d) on a proposal to wind up the Company; and (e) during the winding up of the Company. Changes in capital Ann Joo may not create and issue further preference shares ranking in priority to the RCPS save with the requisite approval of the RCPS holders. Subject to such approval, the issue of further RCPS ranking in priority to or in pari passu with the RCPS will be deemed to be a variation of the special rights attaching to such RCPS. Directorship The RCPS does not entitle any holders to be represented on the Board. Rights to receive notices, reports and attend meetings The holders of the RCPS shall have the right to receive notices, reports and accounts and attend meetings, being the same as those which ordinary shareholders are entitled. Ranking of RCPS : The RCPS will rank ahead in regards to payment of dividends in all classes of shares of Ann Joo. 6

7 Terms Listing Ranking of New Shares to be Issued Arising from the Conversion of the RCPS Listing Status of New Shares Governing law Details : The RCPS shall be listed on the Main Market of Bursa Securities. : The new Ann Joo Shares to be issued pursuant to the conversion of the RCPS, if any, shall, upon allotment and issue, rank pari passu in all respects with the then existing issued and fully paid-up Ann Joo Shares, save and except that they will not be entitled to any dividends, rights, allotments and/or distributions that may be declared, made or paid, the entitlement date for which is prior to the date of conversion of the RCPS. : The new Shares to be issued upon conversion of the RCPS will be listed on the Main Market of Bursa Securities. : Laws of Malaysia Minimum Subscription Level and Shareholders Undertaking The Proposed Rights Issue of RCPS is intended to be undertaken on a minimum subscription basis to raise minimum gross proceeds of approximately RM42.20 million. The Minimum Subscription Level has been determined by the Board after taking into consideration, amongst others, the ability of the Ann Joo Group to raise financing and the minimum level of funds that the Group wishes to raise from the Proposed Rights Issue of RCPS for the purpose of the proposed utilisation as set out in Section 3 of this announcement. In order to achieve the Minimum Subscription Level, the Company intends to procure written irrevocable undertakings from certain shareholders of Ann Joo, namely Ann Joo Corporation Sdn Bhd ( AJC ), Lim Seng Chee & Sons Sdn Bhd, LSQ & Sons Sdn Bhd, Lim Sin Seong Sdn Bhd, Dato Lim Kiam Lam and Dato Lim Hong Thye (all the aforementioned shareholders to be collectively referred to as the Identified Shareholders ) to subscribe or procure subscription in full for their respective entitlements for the RCPS (all the aforementioned undertakings to be collectively referred to as the Undertakings ) under the Proposed Rights Issue of RCPS as at the Entitlement Date. As the Proposed Rights Issue of RCPS will be undertaken on a Minimum Subscription Level basis taking into account the Undertakings, Ann Joo does not intend to procure any underwriting arrangement for the remaining RCPS not subscribed for by other Entitled Shareholders and/or their renouncees pursuant to the Proposed Rights Issue of RCPS. As at LPD, the Identified Shareholders collectively hold 337,607,682 Ann Joo Shares, representing an aggregate of 67.44% of the issued and paid-up share capital of Ann Joo (excluding treasury shares). The Identified Shareholders will, in due course, provide confirmations that they have sufficient financial resources to take up their Undertakings as mentioned above. 7

8 2.2 Proposed LTIP The Proposed LTIP serves to attract, retain, motivate and reward valuable selected key personnel and/or senior management of the Ann Joo Group who fulfil the eligibility criteria set out in Section (iii) below ( Eligible Persons ) through the award of Ann Joo Shares or the rights to subscribe for Ann Joo Shares as determined by a committee for the Proposed LTIP ( LTIP Committee ). The LTIP Committee will be appointed by the Board with the responsibility of amongst others, implementing, allocating and administering the Proposed LTIP in accordance to the by-laws governing the Proposed LTIP ( By-Laws ). The Board will also formulate and approve the terms of reference of the LTIP Committee. The Proposed LTIP shall comprise the Proposed SGP and the Proposed SOP (as defined below). The Proposed LTIP is intended to reward and retain the SGP Participants and/or SOP Participants (as defined in Sections and below, respectively) for their commitment, dedication, loyalty and attainment of higher performance. The Proposed LTIP will also serve to incentivise the SGP Participants and/or SOP Participants to participate more actively in the operations and contribute towards the development, growth and success of Ann Joo Group and the strategic direction to drive long term shareholder value enhancement of Ann Joo Group. In offering the SGP Awards and/or SOP Awards (as defined in Sections and below, respectively) to the Eligible Persons under the Proposed LTIP, the LTIP Committee shall be guided by the principles set out in the By-Laws, including the prescription of financial and performance targets or criteria, if any, and the period within which the said financial and performance targets or criteria are to be achieved. The salient features of the Proposed LTIP, details of which will be governed by the By- Laws, are set out in the ensuing sections Proposed Share Grant Plan ( Proposed SGP ) Under the Proposed SGP, Ann Joo Shares will be awarded at no consideration to the Eligible Persons ( SGP Awards ) on an annual basis, or such other period as determined by the LTIP Committee. Once the SGP Awards are accepted by the Eligible Persons (hereinafter referred to as SGP Participants ), the Ann Joo Shares will be vested to the SGP Participants over a period of up to 5 years, subject to the SGP Participants fulfilment of certain vesting conditions as determined by the LTIP Committee in accordance to the terms of the By-Laws. In implementing the Proposed SGP, the LTIP Committee may at its discretion decide that the vesting of any Shares comprised in a SGP Awards be satisfied by any of the following methods: (i) (iii) (iv) allotment and issuance of new Shares by Ann Joo to the Eligible Persons, who accepted the SGP Awards offers being made in writing to the Eligible Persons ( Offers ); acquisition of existing Shares from the Main Market of Bursa Securities by the trustee, followed by the transfer of such Shares purchased by the trustee to the SGP Participants. The details of the trust arrangement are set out in Section 2.2.3(vii) below; any other methods as may be permitted by the Act; or any combination of any of the above. 8

9 In considering the settlement mode of the SGP Awards as described in (i) to (iv) above, the LTIP Committee will take into consideration, amongst others, factors such as the prevailing market price of the Shares and the dilutive effects on Ann Joo s share capital base, funding consideration and cash requirements of the Group Proposed Share Option Plan ( Proposed SOP ) Under the Proposed SOP, the Eligible Persons will be awarded with the right to subscribe for new Ann Joo Shares at a prescribed subscription price ( Option ), subject to the terms and conditions of the By-Laws. The award of Options ( SOP Awards ), once accepted by the Eligible Persons (hereinafter referred to as SOP Participants ), will be vested to the SOP Participants in tranches over a period of up to 5 years, as determined by the LTIP Committee. The subscription price payable for each Ann Joo Share upon exercise of the Option ( Option Price ) shall be determined based on the 5-day VWAP of Ann Joo Shares immediately preceding the date of the SOP Awards, subject to a discount of not more than 10% but shall not be less than the par value of Ann Joo Shares Salient Terms and Conditions of the By-Laws The LTIP Committee shall have the discretion to determine or vary the terms and conditions of the Proposed LTIP from time to time, such as the eligibility criteria and allocation with respect to each award, the timing and frequency of the award, the performance targets and/or other conditions, and the vesting conditions. (i) Size of the Proposed LTIP The total number of new Ann Joo Shares which may be issued under the Proposed LTIP ( LTIP Shares ) and/or any other scheme involving new issuance of Ann Joo Shares which may be implemented from time to time by Ann Joo, on any date shall not exceed 15% of the issued and paid-up ordinary share capital of Ann Joo (excluding treasury shares) at any time during the period of the Proposed LTIP. Basis of allocation and maximum allowable allotment The allocation of Ann Joo Shares to be made available for the SGP Awards and SOP Awards (collectively, LTIP Awards ) under the Proposed LTIP shall be determined by the LTIP Committee annually, or such other period as determined by the LTIP Committee. The total number of Ann Joo Shares awarded to any one Eligible Person under the Proposed LTIP shall be determined at the absolute discretion of the LTIP Committee, after taking into consideration, amongst others, the work performance, his/her potential for future development and contribution to the success and development of the Ann Joo Group, and such other criteria as the LTIP Committee may deem relevant, and subject to the following conditions:- (i) the total number of Ann Joo Shares made available under the Proposed LTIP shall not exceed the amount as stated in Section 2.2.3(i) above; 9

10 (iii) (iv) up to 100% of the total Shares to be issued under the Proposed LTIP would be allocated, in aggregate, to the selected key personnel and/or senior management who are Eligible Persons. This is intended to incentivise the selected key personnel and/or senior management of the Ann Joo Group for their continued contribution towards the development, growth, success and the strategic direction to drive long term shareholders value enhancement of the Ann Joo Group. This is also to reward and retain the selected key personnel and/or senior management of the Ann Joo Group for their commitment, dedication, loyalty and attainment of higher performance. not more than 10% (or such other percentage as may be permitted by Bursa Securities or any other relevant authorities from time to time) of the total Shares made available under the Proposed LTIP shall be allocated to any Eligible Persons who, either singly or collectively through persons connected with the Eligible Persons (as defined in the Main Market Listing Requirements of Bursa Securities ( Listing Requirements ), holds 20% (or such other percentage as may be permitted by Bursa Securities or any other relevant authorities from time to time) or more of the issued and paid-up share capital of the Company (excluding treasury shares); the key personnel and/or senior management of the Group do not participate in the deliberation or discussion of their respective allocations; and provided always that it is in accordance with any prevailing guidelines issued by Bursa Securities, Listing Requirements or any other relevant authorities as amended from time to time. The total LTIP Awards under the Proposed LTIP shall be staggered over the duration of the Proposed LTIP subject to the size restrictions of the Proposed LTIP as set out under Section 2.2.3(i) to encourage the SOP Participant or SGP Participant (collectively, LTIP Participants ) to remain in the Ann Joo Group and to foster a greater sense of involvement, dedication and loyalty to the Ann Joo Group. (iii) Eligibility Any key personnel and/or senior management of the Ann Joo Group who fulfils the following as at the date of the LTIP Awards under the Proposed LTIP shall be eligible to participate in the Proposed LTIP: (i) (iii) has attained the age of 18 years and is not an undischarged bankrupt nor subject to any bankruptcy proceedings; has entered into a full-time or fixed-term contract in an executive position with, and is on the payroll of, the Ann Joo Group and whose service has been confirmed; has fulfilled any other eligibility criteria as may be set by the LTIP Committee at any time and from time to time at its absolute discretion; and 10

11 (iv) if he/she is an Executive Director of Ann Joo, the specific allocation of Ann Joo Shares or Options awarded by Ann Joo to him/her in his/her capacity as an Executive Director of Ann Joo under the Proposed LTIP has been approved by the shareholders of Ann Joo at a general meeting. (iv) Period of the Proposed LTIP The Proposed LTIP shall continue to be in force for a period of 5 years commencing from the effective date of implementation of the Proposed LTIP ( Effective Date ), being the date after full compliance with the relevant requirements of the Listing Requirements in relation to the Proposed LTIP. The Proposed LTIP may be extended by the Board at its absolute discretion for up to another 5 years immediately from the expiry of the first 5 years, and shall not in aggregate exceed 10 years from the Effective Date or such longer period as may be allowed by the relevant authorities. On expiry of the Proposed LTIP, either immediately after the first 5 years or 10 years, if extended from the Effective Date, any LTIP Awards or Options which have yet to be vested or exercised (as the case may be and whether fully or partially) shall be deemed cancelled and be null and void. (v) Ranking of the LTIP Shares Any new LTIP Shares to be allotted and issued shall, upon issuance and allotment, rank equally in all respects with the existing Ann Joo Shares and shall:- (i) be subject to all the provisions of the Memorandum and Articles of Association of Ann Joo; and rank in full for all entitlements, including dividends or other distributions declared or recommended in respect of the then existing Ann Joo Shares, the record date for which is on or after the date on which the Ann Joo Shares are transferred to the central depository system account of the LTIP Participants and shall in all other respects rank pari passu with other existing Ann Joo Shares then in issue. Notwithstanding any provision in the By-Laws, the LTIP Participants shall not be entitled to any rights, dividends or other distributions attached to the LTIP Shares prior to the date on which the LTIP Shares are credited into their respective Central Depository System ( CDS ) accounts. (vi) Listing of and quotation for the new Ann Joo Shares to be issued pursuant to the Proposed Long Term Incentive Plan An application will be made for the listing of and quotation for the new Ann Joo Shares to be issued pursuant to the Proposed LTIP on the Main Market of Bursa Securities. 11

12 (vii) Trust arrangement 2.3 Proposed DRP Where existing Shares are to be transferred to the SGP Participants under the Proposed SGP, Ann Joo will establish a trust to be administered by the trustee for purposes of acquiring existing Shares from the Main Market of Bursa Securities in accordance with the trust deed, at such times as the LTIP Committee shall direct. The LTIP Committee shall have the discretion to direct the trustee to acquire existing Shares at any time and from time to time and also to revoke or suspend any such direction that has earlier been given to the trustee. The trustee shall administer the trust in accordance with the trust deed Details of the Proposed DRP The Proposed DRP will provide the Shareholders with the option to reinvest in whole or in part of their Dividends in new Ann Joo Shares in lieu of receiving cash. In relation to the Dividends to be declared, the Board may, at its absolute discretion, determine whether to offer the Shareholders an option to reinvest such Dividends in new Ann Joo Shares ( Reinvestment Option ) and where applicable, the size of the option of such Dividends to which the Reinvestment Option applies ( Electable Portion ). Shareholders should note that the Company is not obliged to undertake the Proposed DRP for every Dividend to be declared. In this respect, the Electable Portion may encompass the whole Dividends declared or only a portion of the Dividends. In the event the Electable Portion is not applicable for the whole Dividends declared (as determined by the Board), the remaining portion of the Dividends ( Non-Electable Portion ) will be paid in cash. Please refer to Appendix I of this announcement for a process flow chart illustrating how the Proposed DRP is intended to be administered. Unless determined by the Board that the Reinvestment Option will apply to a particular Dividend (or a part thereof), all Dividends as may be declared by Ann Joo will be paid wholly in cash to the Shareholders in the usual manner through a non-interest bearing account opened to facilitate the payment of Dividends ( Dividend Payment Account ) Election to reinvest Dividends in new Ann Joo Shares The Shareholders shall have the following options in respect of the Reinvestment Option under the Proposed DRP:- (i) to elect to participate by reinvesting in whole or in part the Electable Portion at the Issue Price (as defined in Section 2.3.5) for new Ann Joo Shares and, in the event only part of the Electable Portion is so reinvested, to receive wholly in cash for the following:- (a) (b) the remaining portion of the Electable Portion not reinvested ( Balance Electable Portion ); and the Non-Electable Portion; or to elect not to participate in the Reinvestment Option and thereby receive the entire Dividend wholly in cash. 12

13 The election to reinvest the Dividends in new Ann Joo Shares can be made via the notice of election in relation to the Reinvestment Option ( Notice of Election ) which will be despatched to Shareholders after the book closure date in relation to a Dividend to which the Proposed DRP applies ( Book Closure Date ). Instructions will be provided in the Notice of Election in respect of the action to be taken by Shareholders should they wish to exercise the Reinvestment Option. The Notice of Election will also state, inter-alia, the last day (i.e. a date to be fixed and announced by the Board) by which an election to be made by the Shareholder in relation to the Electable Portion must be received by the Company ( Expiry Date ). In addition, the Company shall transfer funds amounting to the total net Dividends (after the deduction of any Dividends reinvested in new Ann Joo Shares and the deduction of any applicable income tax) from its account to the Dividend Payment Account held in trust for the Shareholders. In accordance with Paragraph 6.09 of the Listing Requirements, Ann Joo will within 8 market days from the Expiry Date or such date as may be prescribed by Bursa Securities, allot and issue the new Ann Joo Shares and despatch notices of allotment to Shareholders (who exercise the Reinvestment Option) ( Allotment Date ). Further, in accordance with Paragraphs 8.26(2) and 9.19(2)(a) of the Listing Requirements, a cash dividend must be paid within 1 month from the Book Closure Date and in any event, within 3 months from the date of the declaration of the dividend or the date on which the approval is obtained in a general meeting of the Company, whichever is applicable. For avoidance of doubt, Dividends for the Shareholders who do not exercise their Reinvestment Option will also be paid concurrently on the Allotment Date, in cash, in the usual manner. Other than funds to be transferred from the Dividend Payment Account, there will be no new funds to be raised under the Proposed DRP. An announcement in respect of the day on which the new Ann Joo Shares will be listed and quoted on the Main Market of Bursa Securities will also be released by the Company accordingly. For further information on the administration of the Proposed DRP, please refer to Appendix I of this announcement. Shareholders will receive the Electable Portion in cash if they do not expressly elect in writing to exercise the Reinvestment Option in accordance with the instructions set out in the Notice of Election. As such, Shareholders who wish to receive their Dividends wholly in cash need not take any action with regards to the Notice of Election. The percentage shareholding of a Shareholder of Ann Joo will be diluted should he/she not exercise his/her Reinvestment Option. However, the extent of the dilution will depend on the number of new Ann Joo Shares issued pursuant to the level of the Reinvestment Option exercised by the other Shareholders. 13

14 2.3.3 Eligibility to participate in the Proposed DRP All Shareholders are eligible to participate in the Proposed DRP provided that:- (i) such participation will not result in a breach of any restrictions on their holding of Ann Joo Shares which may be imposed by any of their contractual obligations, or by any statute, law or regulation in force in Malaysia or any other relevant jurisdiction, or by any relevant authorities as the case may be (unless the requisite approvals under the relevant statute, law or regulation or from the relevant authorities are first obtained or the relevant contractual obligation is otherwise waived in accordance with the terms and conditions of the relevant contracts); or there are no restrictions for such participation as prescribed in the Company s Memorandum and Articles of Association. The Notice of Election will not be sent to Shareholders whose address in the Company s Record of Depositors is not in Malaysia ( Foreign Addressed Shareholder(s) ) to avoid any violation on the part of the Company of any securities laws applicable outside Malaysia. Foreign Addressed Shareholders who wish to participate in the Proposed DRP are strongly advised to collect the documents relating to the Proposed DRP from the Company s share registrar, Symphony Share Registrars Sdn Bhd ( Share Registrar ) located at Level 6, Symphony House, Block D13, Pusat Dagangan Dana I, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan, Malaysia or at such address in Malaysia as may be announced by the Company from time to time and the Share Registrar may in such an event be entitled to satisfy itself as to the identity and authority of the person collecting the documents relating to the Proposed DRP. Alternatively, the Foreign Addressed Shareholders who wish to participate in the Proposed DRP may provide the Share Registrar with their respective address in Malaysia no later than the relevant Book Closure Date in respect of any particular Dividend to which the Reinvestment Option is offered by the Board. The Foreign Addressed Shareholders who wish to permanently change their address for service of documents to an address in Malaysia should inform their respective stockbrokers to effect the change of address. Such notification should be done prior to the Book Closure Date if they wish to participate in the Proposed DRP. The Foreign Addressed Shareholders will be solely responsible for seeking advice as to the laws of any jurisdiction that they may be subjected to, and participation by Foreign Addressed Shareholders in the Proposed DRP will be on the basis that he may lawfully so participate without the Company, its Directors and employees and its advisers and the employees of the advisers being in breach of the laws of any jurisdiction Taxation Irrespective of whether an election is made by the Shareholders, a tax voucher will be despatched to all Shareholders. For income tax purposes, the Shareholders will have received a cash distribution equivalent to the amount of the Dividends declared, which or part of which, may be reinvested in new Ann Joo Shares depending on whether they elect to exercise the Reinvestment Option, if applicable. Hence, the election for the Reinvestment Option does not relieve the Shareholder of any income tax obligations (if applicable) and there is no tax advantage to be gained in exercising the Reinvestment Option or otherwise. 14

15 2.3.5 Pricing of new Ann Joo Shares The issue price of the new Ann Joo Shares to be issued pursuant to the Proposed DRP ( Issue Price ) will be fixed by the Board on a Price Fixing Date to be announced later and shall be the higher of the following:- (i) at an Issue Price of not more than 10% discount to the five (5)-day VWAP of the Ann Joo Shares immediately preceding the Price Fixing Date to be determined. The five (5)-day VWAP shall be adjusted ex-dividend before applying the said discount in fixing the Issue Price; or the par value of Ann Joo Shares of RM1.00 each at the material time. The new Ann Joo Shares will be issued free from any brokerage fees and other related transaction costs to the Shareholders unless otherwise provided by any statute, law or regulation. The Issue Price will be announced on or before the announcement of the Book Closure Date in relation to a Dividend to which the Reinvestment Option applies is made. An approval for the listing of and quotation for the new Ann Joo Shares on the Main Market of Bursa Securities will be sought from Bursa Securities and the announcement of the Book Closure Date will be made after receipt of the said approval from Bursa Securities and such approval from other relevant authorities, if any Odd lots and fractional shares Under the Proposed DRP, Shareholders who exercise the Reinvestment Option and receive new Ann Joo Shares will be allotted such new Ann Joo Shares in multiples of and not less than 100 new Ann Joo Shares. The amount of the Dividend relating to the entitlement of new Ann Joo Shares of less than 100 new Ann Joo Shares will be added to the Non-Electable Portion and paid in cash to the Shareholders in the usual manner through the Dividend Payment Account. For the avoidance of doubt, the Shareholders will not be receiving odd lots of new Ann Joo Shares arising from their election to exercise the Reinvestment Option Maximum number of new Ann Joo Shares The maximum number of new Ann Joo Shares to be issued under the Proposed DRP will depend on, amongst others:- (i) (iii) (iv) (v) the quantum of the Dividends; the Board s decision on the proportion/size of the Electable Portion; the number of Shareholders who elect to exercise the Reinvestment Option and the extent of their election; the Issue Price; and any necessary downward adjustment by the Board to the final number of new Ann Joo Shares to be allotted and issued to any of the Shareholders. The new Ann Joo Shares to be issued pursuant to the Proposed DRP will not be underwritten. 15

16 2.3.8 Ranking of new Ann Joo Shares The new Ann Joo Shares to be issued pursuant to the Proposed DRP shall rank pari passu in all respects with the then existing Ann Joo Shares, save and except that the new Ann Joo Shares shall not be entitled to any Dividends, rights, allotments and/or other distributions that may be declared, made or paid prior to the date of allotment of the new Ann Joo Shares. As the new Ann Joo Shares to be issued pursuant to the Proposed DRP are prescribed securities, the new Ann Joo Shares will be credited directly into the respective CDS accounts of the Shareholders who have elected to reinvest their Electable Portion. No physical share certificates will be issued Modification, suspension and termination of the Proposed DRP If the Board considers that by reason of any event or circumstance (whether arising before or after the Board has determined that the Proposed DRP shall apply to any Dividend and before the allotment and issuance of the new Ann Joo Shares in respect of the Electable Portion) or by reason of any matter whatsoever it is no longer expedient or appropriate to implement the Proposed DRP in respect of a particular Electable Portion, the Board shall have the power to modify, suspend (in whole or in part) or terminate the Proposed DRP at any time it deems fit and expedient, and without assigning any reason thereof, by giving the Shareholders notice in such manner as the Board deems fit. Subject to any statute, law or regulation in force in Malaysia, as the case may be, the abovementioned power of the Board shall be valid and subsisting irrespective of whether an election to exercise the Reinvestment Option has been made and notwithstanding any other provisions or terms and conditions stated herein or otherwise. In the event the Board decides to cancel the application of the Proposed DRP in relation to the Electable Portion, Shareholders will receive the Electable Portion, in cash, in the usual manner from the Dividend Payment Account General The grant of the right to participate in the Proposed DRP will be made to all Shareholders, including directors of Ann Joo, major Shareholders and other interested persons (including persons connected with a director or major Shareholder) of the Company who hold Ann Joo Shares, subject to the restrictions referred to in Section of this announcement. Shareholders approval for the issuance of such number of new Ann Joo Shares as may be required pursuant to the exercise of the Reinvestment Option by the Shareholders may be obtained specifically at the annual general meeting ( AGM ) of Ann Joo on an annual basis. Subsequent approvals for future issuances of new Ann Joo Shares pursuant to the Proposed DRP will be sought at the Company s AGM on an annual basis where applicable. Nonetheless, the Shareholders approval for the Proposed DRP will be sought at the forthcoming extraordinary general meeting ( EGM ). 16

17 For avoidance of doubt, the specific approval to be obtained from the Shareholders for the issuance of new Ann Joo Shares arising from the Proposed DRP is in addition to the general mandate (i.e. the Shareholders approval under Section 132D of the Act for general purpose, where the Shares to be issued shall not exceed 10% of the nominal value of the total issued and paid-up share capital of the Company) sought at the Company s AGM on an annual basis. Amendments to the Memorandum and Articles of Association of Ann Joo are not required under the Proposed DRP as neither the Memorandum and Articles of Association of Ann Joo nor the Act prohibits the implementation of any dividend reinvestment plan. Further details on the Proposed DRP will be provided in a Circular which will be despatched to the shareholders of the Company at a later date, upon the finalisation of the terms and conditions of the Dividend Reinvestment Plan Statement ( DRP Statement ) governing the Proposed DRP Implication of the Malaysian Code on Take-Overs and Mergers 2010 ( Code ) Under Section 9(1) of Part III of the Code and Section 217 of the Capital Markets and Services Act, 2007, a Shareholder should note that he/she may be under an obligation to extend a mandatory take-over offer for the remaining Ann Joo Shares not already owned by him/her and persons acting in concert with him/her (collectively referred to as Affected Parties ), if:- (i) by participating in the Proposed DRP in relation to the reinvestment of the Electable Portion, the Affected Parties have obtained control via the acquisition or holding of, or entitlement to exercise or control the exercise of voting shares or voting rights of 33% or more, or such other amount as may be prescribed in the Code, in the Company, howsoever effected; or the Affected Parties acquire (including by participating in the Proposed DRP in relation to any Electable Portion) more than 2% of the voting shares or voting rights of the Company in any 6-month period, and the Affected Parties hold more than 33% but not more than 50% of the voting shares or voting rights of the Company during the said 6 months period. Therefore, in the event an obligation to undertake a mandatory take-over offer is expected to arise resulting from the exercise of the Reinvestment Option, the Affected Parties may make an application to the Securities Commission Malaysia to obtain approval for an exemption from the obligation to undertake a mandatory take-over offer pursuant to the Code prior to exercising their Reinvestment Option. The statements herein do not purport to be a comprehensive or exhaustive description of all the relevant provisions of, or all implications that may arise under, the Code or other relevant legislation or regulations. Shareholders who are in doubt as to whether they would incur any obligation to make a take-over offer under the Code as a result of any subscription of new Ann Joo Shares through their participation in the Proposed DRP are advised to consult their professional advisers at the earliest opportunity. 17

18 Other shareholding limits Shareholders are reminded to ensure that their participation will not result in a breach of any restrictions on their respective holding of Ann Joo Shares which may be imposed by any of the Shareholders contractual obligations, or by statute, law or regulation in force in Malaysia or any other relevant jurisdiction, or by any relevant authorities, as the case may be (unless the requisite approvals under the relevant statute, law or regulation or from the relevant authorities are first obtained or the relevant contractual obligation is otherwise waived in accordance with the terms and conditions of the relevant contracts), or as prescribed in the Company s Memorandum and Articles of Association. In view of the shareholding limits referred to the above, the Board shall be entitled but not obligated to (save and except where required by law) reduce or limit the number of new Ann Joo Shares to be issued to any Shareholder should the Board be aware or be informed in writing of any expected breach of such shareholding limits as a result of the exercise of the Reinvestment Option by such Shareholder. 2.4 Proposed IASC As at the LPD, the authorised share capital of Ann Joo is RM1,000,000,000 comprising 1,000,000,000 Ann Joo Shares, of which RM522,708,178, comprising 522,708,178 Ann Joo Shares (including 22,139,300 treasury shares) have been issued and fully paid up. In order to facilitate the issuance of the RCPS pursuant to the Proposed Rights Issue of RCPS, the Board proposed to increase the authorised share capital of Ann Joo from RM1,000,000,000 comprising 1,000,000,000 Ann Joo Shares to RM1,005,000,000 comprising 1,000,000,000 Ann Joo Shares and 500,000,000 RCPS by creation of 500,000,000 new RCPS. 2.5 Proposed Amendments The Proposed Amendment entails the amendment to the Memorandum and Articles of Association of Ann Joo to facilitate the following:- (a) (b) the Proposed IASC; and the issuance of RCPS pursuant to the Proposed Rights Issue of RCPS. 18

19 3. PROPOSED UTILISATION OF PROCEEDS FROM THE PROPOSALS 3.1 Proposed Rights Issue of RCPS The actual gross proceeds to be raised from the Proposed Rights Issue of RCPS will depend on the final issue price for the RCPS and the actual number of RCPS to be issued. Based on the illustrative issue price of RM0.50 per RCPS, the Proposed Rights Issue of RCPS is expected to raise gross proceeds of RM42.20 million and up to RM62.57 million under the Minimum Scenario and Maximum Scenario, respectively, which shall be utilised as follows:- Details of utilisation Minimum Scenario (RM mil) Maximum Scenario (RM mil) Estimated timeframe for the utilisation Working capital (1) Within 12 months Estimated expenses (2) Upon completion of the Proposals Total Notes:- (1) The proceeds for working capital will be utilised to finance the day-to-day operations of the existing business of the Group, such as purchase of inventory and raw materials, repayment to creditors, staff salaries and general administrative expenses as well as other general operating expenses as and when need arises. The breakdown of proceeds to be utilised for each component of working capital has not been determined at this juncture and will be dependent on the operating and funding requirements at the time of utilisation. (2) Estimated expenses include all costs related to the Proposed Rights Issue of RCPS, including professional fees, estimated fees payable to the relevant authorities and printing cost. If the actual expenses are higher than budgeted, the deficit will be funded out of the portion allocated for working capital. Conversely, if the actual expenses are lower than budgeted, the excess will be utilised for working capital purposes. Any variation in the actual proceeds raised from the Proposed Rights Issue of RCPS and the consequential changes to the actual utilisation of proceeds will be adjusted to or from the amount allocated for working capital. Pending utilisation of the proceeds from the Proposed Rights Issue of RCPS for the abovementioned purposes, the proceeds will be placed in deposits with financial institutions or short-term money market instruments. The interest income derived from the deposits with financial institutions or any gains arising from the short-term money market instruments will be used as additional working capital of the Ann Joo Group. Based on the illustrative issue price of the RCPS of RM0.50 and the illustrative conversion price of the RCPS of RM1.80, the RCPS holders shall have the right to convert the RCPS into new Ann Joo Shares by surrendering 1 RCPS together with cash consideration of RM1.30 per RCPS for conversion of the RCPS into 1 new Ann Joo Share. The gross proceeds to be raised from the conversion of the RCPS into new Ann Joo Shares are dependent on the total number of RCPS converted during the tenure of the RCPS. For illustrative purposes only, the maximum gross proceeds that are expected to be raised upon the full conversion of the RCPS is up to approximately RM million based on the cash consideration for conversion of RM1.30 per RCPS at the illustrative conversion price of RM1.80 per RCPS. The Company intends to utilise the proceeds arising from the conversion of the RCPS for the working capital requirements of the Group in the future. 19

20 3.2 Proposed LTIP Ann Joo will not receive any proceeds pursuant to the Proposed SGP, as the SGP Participants will not be required to pay for the new Ann Joo Shares to be issued and transferred to them pursuant to the SGP Awards. Ann Joo will receive proceeds from the exercise of the Options by the SOP Participants under the Proposed SOP. However, the amount of proceeds to be received cannot be determined at this juncture as it will depend on, amongst others, the number of Options granted and exercised at the relevant point in time and the Option Price. Ann Joo intends to utilise the net proceeds from the exercise of the Options for the working capital of the Ann Joo Group. 3.3 Proposed DRP The total cash reinvested into the Company from the Proposed DRP cannot be ascertained at this juncture. Therefore, the timeframe for utilisation of such cash proceeds cannot be determined. Nevertheless, the net cash proceeds from the Proposed DRP (after the reduction of estimated expenses in respect of the Proposed DRP) will be utilised for the working capital purposes of the Ann Joo Group. 4. RATIONALE FOR THE PROPOSALS 4.1 Proposed Rights Issue of RCPS After due consideration of the various funding options available to the Company, the Board is of the opinion that the Proposed Rights Issue of RCPS is the most appropriate avenue of fund raising for the Company after taking into consideration, amongst others, the following factors: (i) (iii) (iv) the issuance of RCPS will not result in an immediate dilution effect on the earnings per share ( EPS ) of the Group, which would otherwise have an immediate upfront impact from a full issue of Shares, as the RCPS are expected to be converted over a period of time; RCPS bearing an illustrative dividend yield of 5.0% per annum will serve as an unsecured fixed funding cost to Ann Joo for the tenure of the RCPS of 8 years, which will consequently mitigate Ann Joo s exposure to any interest rate fluctuation and hence provide better cash flow management. Further, the RCPS also serves as an attractive investment alternative for Ann Joo s shareholders; the Proposed Rights Issue of RCPS will provide the shareholders of Ann Joo with an opportunity to further increase their equity participation in the Company via the option to convert the RCPS into Ann Joo Shares. Furthermore, taking into account the illustrative conversion price of RM1.80, shareholders may also benefit from any upside from potential future capital appreciation of the RCPS and/or Ann Joo Shares; and any conversion of the RCPS will further strengthen the Company s capital base and provide additional funding for the Company via the cash consideration for conversion of RM1.30 per RCPS at the illustrative conversion price of RM1.80 per RCPS, and hence improve its gearing levels as well as potentially increase the liquidity of Ann Joo Shares. 20