WZ SATU BERHAD ( WZ SATU OR THE COMPANY ) (I) (II) (III) (IV) (V) PROPOSED PRIVATE PLACEMENT PROPOSED BONUS ISSUE PROPOSED LONG TERM INCENTIVE PLAN PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL PROPOSED AMENDMENTS 1. INTRODUCTION On behalf of the Board of Directors of ( Board ), Hong Leong Investment Bank Berhad ( HLIB ) wishes to announce that proposes to undertake the following: (iii) (iv) (v) a private placement of up to 25,290,900 new ordinary shares of RM0.50 each in WZ Satu ( ) ( Placement ), representing up to 10% of the existing issued and paid-up share capital of the Company ( Proposed Private Placement ); a bonus issue of up to 74,575,827 new ( Bonus ) on the basis of 1 Bonus Share for every 5 existing held on an entitlement date to be determined later ( Entitlement Date ) ( Proposed Bonus Issue ); the establishment of a long term incentive plan for the eligible executives of and its subsidiaries (collectively, the Group ) (excluding dormant subsidiaries) and executive directors of the Company, comprising an executive share option scheme ( Proposed ESOS ) and an executive share grant scheme ( Proposed ESGS ) (collectively, the Proposed LTIP ); increase in the authorised share capital of from RM250,000,000 comprising 500,000,000 to RM375,000,000 comprising 750,000,000 ( Proposed Increase in Authorised Share Capital ); and amendments to the Memorandum and Articles of Association ( M&A ) of ( Proposed Amendments ). The Proposed Private Placement, the Proposed Bonus Issue, the Proposed LTIP, the Proposed Increase in Authorised Share Capital and the Proposed Amendments are collectively referred to as the Proposals. 2. DETAILS OF THE PROPOSALS 2.1 Proposed Private Placement The Proposed Private Placement will entail the issuance of up to 25,290,900 Placement to third-party investor(s) to be identified and at issue price(s) to be determined later. The 25,290,900 Placement to be issued pursuant to the Proposed Private Placement represent up to 10% of the existing issued and paid-up share capital of as at 20 October 2015, being the latest practicable date prior to this announcement ( LPD ), of RM126,454,617.50 comprising 252,909,235. The Proposed Private Placement is intended to be implemented pursuant to the authority conferred to the Board under the shareholders mandate for the issuance of new under Section 132D of the Companies Act 1965 ( Act ), which was obtained at the 10th annual general meeting ( AGM ) of the Company held on 13 February 2015 ( General Mandate ), which will continue to be in force until the conclusion of the next AGM of the Company. 1
In the event the Proposed Private Placement is not completed prior to the next AGM of WZ Satu, the implementation of the remaining portion of the Proposed Private Placement shall be conditional upon the General Mandate being renewed at the next AGM of the Company. 2.1.1 Placement arrangement The Placement will be placed out to third-party investor(s) to be identified later, in accordance with Paragraph 6.04(c) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Listing Requirements ). Such third-party investor(s) will also be person(s)/party(ies) who qualify under Schedules 6 and 7 of the Capital Markets and Services Act 2007. Subject to prevailing market conditions, the Proposed Private Placement may be implemented in one or more tranches within 6 months from the date of approval of Bursa Securities for the listing of and quotation for the Placement or any extended period as may be approved by Bursa Securities to allow the Company to identify and secure potential investor(s) over a period of time. 2.1.2 Basis for determining the issue price(s) of the Placement The issue price for each tranche of the Placement, where applicable, will be separately fixed by the Board on a date to be determined later ( Price-Fixing Date ) after taking into consideration, inter alia, the prevailing market conditions, in the following manner: a discount of not more than 10% (the actual quantum of which will be determined by the Board) from the 5-day volume-weighted average market price ( VWAMP ) of WZ Satu immediately preceding the Price-Fixing Date; or the par value of of RM0.50 each, whichever is higher. For illustration purposes, where applicable throughout this announcement, the issue price of the Placement is assumed to be at RM1.20 each, which represents a discount of RM0.07 or 5.51% to the 5-day VWAMP of up to and including the LPD of RM1.27. 2.1.3 Ranking of the Placement The Placement shall, upon allotment and issue, rank pari passu in all respects with the existing, save and except that the Placement shall not be entitled to any dividends, rights, allotments and/or other distributions which may be declared, made or paid to shareholders, the entitlement date of which precedes the date of allotment of the Placement. 2.1.4 Listing of and quotation for the Placement An application will be made to Bursa Securities for the listing of and quotation for the Placement on the Main Market of Bursa Securities. 2.1.5 Utilisation of proceeds The actual amount of proceeds to be raised from the Proposed Private Placement cannot be determined at this juncture as the amount to be raised will depend on the actual number of Placement to be issued and the issue price(s) of the Placement. 2
For illustration purposes, assuming that all the Placement are issued at RM1.20 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of up to RM30.3 million. The gross proceeds are intended to be utilised in the following manner: Details of utilisation RM 000 Expected timeframe of utilisation of proceeds from the date of listing of the Placement Working capital 29,979 Within 12 months Estimated expenses in relation to the Proposals 370 Within 3 months 30,349 The details of the utilisation of proceeds are as follows: Working capital The net proceeds arising from the Proposed Private Placement is expected to be utilised for the working capital requirements of the Group s existing and future projects to support the Group s growth via the expansion of its businesses. Such working capital requirements may include, inter alia, payment of trade and other payables, employees salaries, wages and directors emoluments, selling, distribution and marketing expenses as well as other day-to-day expenses of the Group. The breakdown of proceeds to be utilised for each component of working capital has not been determined at this juncture. Moreover, the actual amount to be utilised by each component of working capital may differ subject to the operating requirements of the Group at the time of utilisation. Estimated expenses in relation to the Proposals The estimated expenses of approximately RM370,000 comprise professional fees, fees payable to the relevant authorities, placement commission, expenses to convene the extraordinary general meeting ( EGM ), printing, advertising and other ancillary expenses to be incurred in relation to the Proposals. In the event the actual expenses incurred are higher/lower than budgeted, the deficit/surplus will be funded from/contributed to the portion allocated for working capital purposes. In the event of a variation in the actual gross proceeds raised due to differences in the issue price(s) and/or the number of Placement to be issued, the amount proposed to be allocated for working capital purposes will be varied accordingly. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 3
2.2 Proposed Bonus Issue 2.2.1 Basis and quantum The Proposed Bonus Issue will entail the issuance of up to 74,575,827 Bonus to be credited as fully paid-up, on the basis of 1 Bonus Share for every 5 existing held by shareholders whose names appear in the Record of Depositors of as at the close of business on the Entitlement Date ( Entitled Shareholders ). The maximum number of Bonus to be issued pursuant to the Proposed Bonus Issue is 74,575,827 Bonus. This was arrived at based on the enlarged issued and paid-up share capital of RM186,439,567.50 comprising 372,879,135 after taking into account the existing issued and paid-up share capital of of RM126,454,617.50 comprising 252,909,235 as at the LPD as well as assuming 25,290,900 Placement are allotted and issued and 94,679,000 outstanding warrants 2014/2024 issued pursuant to the deed poll dated 9 October 2014 ( Deed Poll ) ( Warrants 2014/2024 ) as at the LPD are exercised prior to the Entitlement Date. Notwithstanding the above, the actual number of Bonus to be issued will depend on the issued and paid-up share capital of as at the Entitlement Date. Any fractional entitlements that may arise from the Proposed Bonus Issue shall be disregarded and dealt with in such manner as the Board shall in its absolute discretion deem fit or expedient and in the best interest of the Company. The Entitlement Date will be determined and announced at a later date after the receipt of all relevant approvals for the Proposed Bonus Issue. For the avoidance of doubt, in the event the Placement are allotted and issued prior to the Entitlement Date, such Placement will be entitled to the Proposed Bonus Issue. The Proposed Bonus Issue will not be implemented on a staggered basis. For illustration purposes only, where applicable throughout this announcement, the pro forma effects of the Proposed Bonus Issue (assuming that all the Placement are allotted and issued prior to the Entitlement Date and the Proposed Bonus Issue is completed prior to the establishment of the Proposed LTIP) shall be based on the following scenarios: Minimum Scenario Maximum Scenario : Assuming none of the outstanding Warrants 2014/2024 are exercised into new prior to the Entitlement Date. : Assuming all of the outstanding Warrants 2014/2024 are exercised into new prior to the Entitlement Date. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4
2.2.2 Capitalisation of reserves The Proposed Bonus Issue will be implemented by capitalising up to RM37,287,913.50 wholly from the Company s share premium account. For illustration purposes only, based on the latest audited financial statements of for the 16-month financial period ended ( FPE ) 31 August 2014 and the latest unaudited financial results of for the financial year ended ( FYE ) 31 August 2015, the effects of the capitalisation of reserves for the Proposed Bonus Issue are as follows: Minimum Scenario Maximum Scenario Share premium (company level) (RM 000) (RM 000) Audited as at 31 August 2014 14,869 14,869 Add: Adjustments for subsequent events (1) 52,686 52,686 Assuming full issuance of the 17,594 17,594 Placement (2) Assuming full exercise of the outstanding Warrants 2014/2024 - (3) 9,468 Less: Capitalisation for the Proposed Bonus Issue Estimated expenses for the Proposed Bonus Issue 85,149 94,617 (27,820) (37,288) (120) (120) After the Proposed Bonus Issue 57,209 57,209 Minimum Scenario Maximum Scenario Share premium (company level) (RM 000) (RM 000) Unaudited as at 31 August 2015 67,555 67,555 Add: Assuming full issuance of the Placement (2) 17,594 17,594 Assuming full exercise of the outstanding Warrants 2014/2024 Less: Capitalisation for the Proposed Bonus Issue Estimated expenses for the Proposed Bonus Issue - (3) 9,468 85,149 94,617 (27,820) (37,288) (120) (120) After the Proposed Bonus Issue 57,209 57,209 Notes: (1) Adjustments for the following: the issuance of 52.0 million new pursuant to the private placement of the Company over the period between 27 October 2014 and 12 November 2014 ( Placement ); 5
(iii) (iv) (v) the acquisition of 100% equity interest in Misi Setia Oil & Gas Sdn Bhd for a total purchase consideration of RM27.0 million, of which approximately RM16.2 million was satisfied in cash and the balance of approximately RM10.8 million was satisfied via the issuance of 10,588,235 new at an issue price of RM1.02 per WZ Satu Share ( Acquisition ), which was completed on 5 November 2014; recognition of the fair value of the 10,588,235 new issued pursuant to the Acquisition at RM2.44 each, being the market price of the on the date of allotment of the said new on 31 October 2014 ( Fair Value Recognition ); part of the expenses incurred in relation to the Placement, the Acquisition and the issuance of the Warrants 2014/2024, which was completed on 5 November 2014 ( Free Warrants Issue ), which had been set off against the Company s share premium account, amounting to approximately RM2.1 million; and the exercise of 321,000 Warrants 2014/2024 from 29 October 2014 up to the LPD at the exercise price of RM0.60 each. (2) Assuming 25,290,900 Placement are allotted and issued at an issue price of RM1.20 each prior to the Entitlement Date and after writing off the estimated expenses of RM110,000 in relation to the Proposed Private Placement against the share premium account pursuant to Section 60(3) of the Act. (3) Based on the exercise price of RM0.60 per Warrant 2014/2024. Pursuant to Paragraph 6.30(1) of the Listing Requirements, the Board has confirmed that the Company has adequate reserves available to be capitalised for the Proposed Bonus Issue and the reserves to be capitalised for the Proposed Bonus Issue are unimpaired by losses on a consolidated basis based on the Company s latest audited consolidated financial statements for the 16-month FPE 31 August 2014 as well as the unaudited consolidated financial results for the FYE 31 August 2015. Further, pursuant to Paragraph 6.30(3) of the Listing Requirements, the Board will obtain a confirmation from the external auditors/reporting accountants on the adequacy of reserves to be capitalised for the Proposed Bonus Issue, details of which will be disclosed in the circular to shareholders to be issued. 2.2.3 Ranking of the Bonus The Bonus shall, upon allotment and issue, rank pari passu in all respects with the existing, save and except that the Bonus shall not be entitled to any dividends, rights, allotments and/or other distributions which may be declared, made or paid to shareholders, the entitlement date of which precedes the date of allotment of the Bonus. 2.2.4 Listing of and quotation for the Bonus An application will be made to Bursa Securities for the listing of and quotation for the Bonus on the Main Market of Bursa Securities. Upon obtaining all the necessary approvals, the Bonus will be listed and quoted on the Main Market of Bursa Securities on the next market day following the Entitlement Date. The notices of allotment for the Bonus will be issued and despatched to the Entitled Shareholders no later than 4 market days after the date of listing of and quotation for the Bonus on the Main Market of Bursa Securities, or such other period as may be prescribed by Bursa Securities. 2.2.5 Utilisation of proceeds No proceeds will be raised from the Proposed Bonus Issue as the Bonus will be issued at no cost to the Entitled Shareholders. 6
2.3 Proposed LTIP The Proposed LTIP will entail the establishment of a long term incentive plan of up to 15% of the issued and paid-up share capital of (excluding treasury shares) for the executives of the Group (excluding dormant subsidiaries) and executive directors of the Company who are eligible in accordance with the by-laws governing the Proposed LTIP ( By- Laws ) ( Eligible Executives ). The Proposed LTIP will be administered by a committee to be appointed by the Board in accordance with the By-Laws ( LTIP Committee ). The Proposed LTIP will comprise the following: Proposed ESOS The Proposed ESOS is intended to allow the Company to award options to subscribe for new at a pre-determined subscription price ( Options ) to the Eligible Executives subject to the terms and conditions of the By-Laws. An award of Options ( ESOS Award ), once accepted by an Eligible Executive ( ESOS Grantee ), will vest in the ESOS Grantee on the vesting date(s) stipulated in the ESOS Award if the vesting conditions stipulated in the said ESOS Award have been satisfied, including the following: (a) (b) (c) the said ESOS Grantee has not been adjudicated a bankrupt; the said ESOS Grantee remains an executive of the Group (excluding dormant subsidiaries) or executive director of the Company (as the case may be) and has not given notice of resignation or received a notice of termination or has otherwise ceased or had his/her employment terminated as at the vesting date(s); and/or any other conditions as may be determined by the LTIP Committee in accordance with the By-Laws. The price at which an ESOS Grantee shall be entitled to subscribe for each new WZ Satu Share upon the exercise of an Option ( Option Price ) shall be: (a) (b) the weighted average market price of for the 5 market days immediately preceding the date of the ESOS Award, less a discount of not more than 10% from the said weighted average market price or such other percentage of discount as may be permitted by Bursa Securities and/or any other relevant authorities from time to time; or the par value of, provided however that this provision shall cease to apply if, due to a change in law, no par value is legally required to be ascribed to the share capital of the Company under the applicable law then in effect, whichever is higher, as determined by the Board upon recommendation of the LTIP Committee. Proposed ESGS The Proposed ESGS is intended to allow the Company to award such number of WZ Satu without any cash consideration payable to the Eligible Executives, whereby one of the eligibility criteria for participation in the Proposed ESGS is that such person shall hold a senior management rank or such rank or position as may be designated by the LTIP Committee from time to time. 7
The Proposed ESGS shall comprise a retention share plan ( RSP ) and a performance share plan ( PSP ), details of which are set out below: (a) RSP Under the RSP, Eligible Executives may be awarded with such number of with a specified vesting period ( RSP Grants ) which are intended to recognise, incentivise and retain the Eligible Executives. A RSP Grant, once accepted by an Eligible Executive ( RSP Grantee ), will vest in the RSP Grantee at no consideration on the vesting date(s) stipulated in the RSP Grant if the vesting conditions stipulated in the said RSP Grant have been satisfied, including the following: (1) the said RSP Grantee has not been adjudicated a bankrupt; (2) the said RSP Grantee remains an executive of the Group (excluding dormant subsidiaries) or executive director of the Company (as the case may be) and has not given notice of resignation or received a notice of termination or has otherwise ceased or had his/her employment terminated as at the vesting date(s); and/or (3) any other conditions as may be determined by the LTIP Committee in accordance with the By-Laws. (b) PSP Under the PSP, Eligible Executives may be awarded with such number of WZ Satu with a specified vesting period ( PSP Grants ) which are intended to incentivise and motivate the Eligible Executives to contribute to the growth of their respective business segments. A PSP Grant, once accepted by an Eligible Executive ( PSP Grantee ), will vest in the PSP Grantee at no consideration on the vesting date(s) stipulated in the PSP Grant if the vesting conditions stipulated in the said PSP Grant have been satisfied, including the following: (1) the specified performance targets as determined by the LTIP Committee based on, inter alia, individual performance metrics of the Eligible Executives, business segment-specific operational performance of the respective Eligible Executives, overall performance metrics such as the profitability of the Group and/or other performance targets as may be determined by the LTIP Committee from time to time in accordance with the By-Laws and performance period have been satisfied; (2) the said PSP Grantee has not been adjudicated a bankrupt; (3) the said PSP Grantee remains an executive of the Group (excluding dormant subsidiaries) or executive director of the Company (as the case may be) and has not given notice of resignation or received a notice of termination or has otherwise ceased or had his/her employment terminated as at the vesting date(s); and/or (4) any other conditions as may be determined by the LTIP Committee in accordance with the By-Laws. The RSP Grants and PSP Grants are collectively referred to as the ESGS Awards, and the ESOS Awards and ESGS Awards are collectively referred to as the LTIP Awards. 8
In implementing the Proposed LTIP, the LTIP Committee may, at its discretion, decide that any vesting of comprised in an ESGS Award shall be satisfied through: (iii) (iv) the issuance of new ; the acquisition and transfer of existing ; any other methods as may be permitted by the Act; or a combination of any of the above. In considering the mode of satisfaction as referred to in to (iv) above, the LTIP Committee will take into consideration, inter alia, factors such as the prevailing market price of the WZ Satu, funding considerations and dilutive effects of any such issuance on the Company s capital base as well as future returns and cash requirements of the Group. To facilitate the implementation of the Proposed LTIP, the Company may enter into a trust deed with trustee(s) to be appointed by the Company ( Trustee ) to establish a trust whereby the Trustee shall acquire existing from the Main Market of Bursa Securities and/or subscribe for new for the purpose of the Proposed LTIP and transferring them to the RSP Grantees and/or PSP Grantees in accordance with the By-Laws, at such times as the LTIP Committee shall direct. The Trustee shall be entitled to receive funds and/or other permissible assistance under the Act and the Listing Requirements from the Group and/or any third party for the purpose of acquiring existing and/or subscribing for new to be held in trust for the purpose of the Proposed LTIP. The other salient terms of the Proposed LTIP are set out below: 2.3.1 Maximum number of made available under the Proposed LTIP The aggregate number of which may be made available under the Proposed LTIP and any other employee share schemes of the Company which are still subsisting shall not exceed an amount equivalent to 15% of the issued and paid-up share capital of the Company (excluding treasury shares) at any one time throughout the duration of the Proposed LTIP. 2.3.2 Basis of allotment and maximum allowable allotment The aggregate number of that may be allocated to any one category/ designation of Eligible Executives under the Proposed LTIP shall be determined at the discretion of the LTIP Committee after taking into consideration, inter alia, the performance, targets, position, annual appraised performance, seniority and/or length of service, contribution, category or grade of employment of the Eligible Executive as well as such other criteria as the LTIP Committee may deem fit. Notwithstanding the above, not more than 10% of the total number of to be made available under the Proposed LTIP and any other employee share schemes of the Company which are still subsisting shall be allocated to any Eligible Executive who, either singly or collectively through persons connected with the Eligible Executive, holds 20% or more of the issued and paid-up share capital of (excluding treasury shares). In addition, the LTIP Committee shall have the discretion in determining whether the available for vesting under the Proposed LTIP are to be awarded to the Eligible Executive via: one single LTIP Award; or several LTIP Awards, 9
whereby the vesting of the Options and/or comprised in any one single LTIP Award or several LTIP Awards may be staggered in several tranches at such times and on such terms as determined by the LTIP Committee. In the event the LTIP Committee decides that the LTIP Awards or the vesting of any number of comprised in an LTIP Award is to be staggered, the number of comprised in each LTIP Award as well as the vesting date(s) and vesting conditions for each LTIP Award shall be decided by the LTIP Committee at its discretion. Each LTIP Award shall be separate and independent from the others. No Eligible Executives shall participate in the deliberation or discussion of their own respective allocations under the Proposed LTIP. 2.3.3 Eligibility Any executive of the Group (excluding dormant subsidiaries) or executive director of the Company (not being an alternate director) who fulfils the following criteria shall be eligible to participate in the Proposed LTIP if, as at the date of an LTIP Award ( Award Date ): (iii) (iv) such person is at least 18 years of age; such person is not an undischarged bankrupt nor subject to any bankruptcy proceedings; such person is an executive of any company in the Group (excluding dormant subsidiaries) holding a managerial position or rank or such position or rank in the said company as may be designated by the LTIP Committee from time to time or is an executive director of the Company; in respect of a person who is an executive of any company in the Group (excluding dormant subsidiaries), such executive fulfils the following criteria as at the Award Date: (a) (b) (c) such executive 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 3 years with and on the payroll of any company in the Group; the employment of such executive has been confirmed by any company in the Group; and such executive falls within any other eligibility criteria as may be determined by the LTIP Committee from time to time; (v) in respect of a person who is an executive director of the Company (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) (b) (c) such executive director has been appointed as an executive director of the Company; such executive director 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 2 years with and on the payroll of the Company; and such executive director falls within any other eligibility criteria as may be determined by the LTIP Committee from time to time; 10
(vi) in respect of a RSP Grant and PSP Grant, such person shall hold a senior management rank or such rank or position in the Group that may be designated by the LTIP Committee from time to time, who fulfils the criteria as listed under paragraphs to (v) above as at the date of the ESGS Award. Where a specific allocation of Options and/or is proposed to be made pursuant to a LTIP Award to the chief executive officer, executive director or major shareholder of the Company or a person connected with such chief executive officer, executive director or major shareholder of the Company, any such allocation must have been approved by the shareholders of the Company in a general meeting, provided that such chief executive officer, executive director or major shareholder of the Company and/or persons connected with him/her shall not have voted on the resolution approving the said allocation of Options and/or to be made and any such allocation is not prohibited or disallowed by the relevant authorities or by any laws or regulation. 2.3.4 Duration The Proposed LTIP shall be in force for a duration of 10 years commencing from the effective date of implementation of the Proposed LTIP ( Effective Date ), which shall be a date following the full compliance with all relevant requirements of the Listing Requirements in relation to the Proposed LTIP. On the expiry of the duration of 10 years ( Date of Expiry ), any LTIP Award which have yet to be vested (whether fully or partially) shall be deemed terminated and be null and void. The Proposed LTIP may be terminated by the LTIP Committee at any time before the Date of Expiry provided that the Company makes an announcement immediately to Bursa Securities. 2.3.5 Rights attaching to the The new to be allotted and issued under the Proposed LTIP will be subject to the provisions of the Articles of Association of the Company and will, upon allotment and issue, rank pari passu in all respects with the existing, save and except that they shall not be entitled to any dividends, rights, allotments and/or other distributions which may be declared, made or paid to shareholders, the entitlement date of which precedes the date of allotment of the new. In respect of the existing to be transferred to the RSP Grantees and PSP Grantees (as the case may be), such shall not be entitled to any dividends, rights, allotments and/or other distributions, which may be declared, made or paid, the entitlement date of which precedes the date on which the existing are credited into the central depository system accounts of the respective RSP Grantees and PSP Grantees pursuant to the vesting of the comprised in ESGS Awards. 2.3.6 Listing of and quotation for the new to be issued under the Proposed LTIP An application will be made to Bursa Securities for the listing of and quotation for the new WZ Satu to be issued pursuant to the exercise of Options and/or vesting of comprised in ESGS Awards on the Main Market of Bursa Securities. 2.3.7 Alteration of share capital and adjustment In the event of an alteration in the share capital of during the duration of the Proposed LTIP, whether by way of a rights issue, bonus issue or other capitalisation issue, consolidation or subdivision of or reduction or any other variation of capital, the LTIP Committee may, at its discretion, determine whether: in respect of the Proposed ESOS, the Option Price and/or the number of unexercised Options; and 11
in respect of the Proposed ESGS, the number of comprised in unvested ESGS Awards, shall be adjusted and, if so, the manner in which such adjustments should be made. Save as provided for in the By-Laws, the external auditors or the principal adviser (which must be a principal adviser under the Principal Adviser Guidelines issued by the Securities Commission Malaysia) selected by the directors (acting as an expert and not as an arbitrator) must confirm in writing that the adjustments are in their opinion fair and reasonable. 2.3.8 Utilisation of proceeds Save for the Proposed ESOS, no proceeds will be raised from the Proposed LTIP the Eligible Executives will not be required to pay for the to be issued and/or transferred to them pursuant to the vesting of comprised in ESGS Awards under the Proposed ESGS. The actual proceeds to be received pursuant to the exercise of the Options under the Proposed ESOS will depend on the actual number of Options exercised and the Option Price payable upon such exercise. Therefore, the amount of proceeds to be raised from the exercise of the Options is not determinable at this juncture. Any proceeds arising from the exercise of the Options shall be utilised for the working capital of the Group. 2.4 Proposed Increase in Authorised Share Capital As at the LPD, the authorised share capital of is RM250,000,000 comprising 500,000,000, of which RM126,454,617.50 comprising 252,909,235 have been issued and fully paid-up. The Proposed Increase in Authorised Share Capital will entail the increase in the authorised share capital of from RM250,000,000 comprising 500,000,000 to RM375,000,000 comprising 750,000,000 via the creation of 250,000,000 new to facilitate the implementation of the Proposed LTIP and any other potential capital issuances in the future. 2.5 Proposed Amendments The Proposed Amendments will entail, inter alia, the amendments to the M&A of the Company to facilitate and reflect the Proposed Increase in Authorised Share Capital and to reflect the amendments to the Listing Requirements. 3. RATIONALE FOR THE PROPOSALS 3.1 Proposed Private Placement The Proposed Private Placement will allow the Company to raise funds for working capital purposes of the Group as set out in Section 2.1.5 of this announcement. After due consideration of the various funding options available, the Board is of the view that the Proposed Private Placement is the most appropriate avenue for the Company to raise funds as the Proposed Private Placement: will enable to expeditiously raise additional funds without relying entirely on equity funding from shareholders of and without incurring interest costs as compared to bank borrowings; will strengthen the financial position of through the increase of the capital base of the Company; and 12
(iii) may enhance the liquidity and marketability of on the Main Market of Bursa Securities as a result of the increase in the number of in issue. 3.2 Proposed Bonus Issue The Proposed Bonus Issue is intended to reward the shareholders of the Company for their loyalty and continued support to the Group. After due consideration of the various options available, the Board is of the view that the Proposed Bonus Issue is an appropriate avenue for to reward its shareholders, as the Proposed Bonus Issue: (iii) will enable the existing shareholders to have greater participation in the equity of the Company in terms of the number of held, whilst maintaining their percentage of equity interest; will increase the issued and paid-up share capital of the Company to a level which better reflects the current size and scale of the Group s operations and assets employed; and is expected to enhance the marketability and trading liquidity of on the Main Market of Bursa Securities. 3.3 Proposed LTIP The Proposed LTIP is intended to: (iii) (iv) provide with the flexibility to determine the most appropriate instrument or combination of instruments to reward and retain Eligible Executives who have contributed to the success of the Group and whose services are vital to the continued growth and performance of the Group; incentivise the Eligible Executives towards strategic business objectives by rewarding them with an equity stake in the Company; cultivate a sense of loyalty, dedication and commitment among the Eligible Executives by aligning the interests of the Eligible Executives with those of the shareholders of the Company; and make the Group s remuneration scheme more competitive in order to attract prospective executives with relevant skills and experience to join the Group. 3.4 Proposed Increase in Authorised Share Capital The Proposed Increase in Authorised Share Capital is intended to increase the Company s existing authorised share capital to accommodate the issuance of new pursuant to the exercise of Options and/or vesting of comprised in ESGS Awards under the Proposed LTIP as well as any other potential equity capital issuances in future. 3.5 Proposed Amendments The Proposed Amendments are intended to facilitate the Proposed Increase in Authorised Share Capital as well as to align the Articles of Association of the Company with the provisions in the Listing Requirements. 13
4. EFFECTS OF THE PROPOSALS The Proposed Increase in Authorised Share Capital and Proposed Amendments will not have any effect on the issued and paid-up share capital and the shareholdings of the substantial shareholders of the Company, as well as the net assets ( NA ), gearing, earnings and earnings per share ( EPS ) of the Group. The pro forma effects of the Proposed Private Placement, the Proposed Bonus Issue and the Proposed LTIP are set out below: 4.1 Share capital The Proposed LTIP is not expected to have any immediate effect on the issued and paid-up share capital of the Company until such time new are issued under the Proposed LTIP. The issued and paid-up share capital of will increase progressively depending on the number of new issued pursuant to the exercise of Options and/or vesting of comprised in ESGS Awards under the Proposed LTIP. The pro forma effects of the Proposed Private Placement and the Proposed Bonus Issue on the issued and paid-up share capital of the Company is set out below: Minimum Scenario Maximum Scenario Share capital Share capital ( 000) (RM 000) ( 000) (RM 000) Existing as at the LPD 252,909 126,455 252,909 126,455 To be issued pursuant to the 25,291 12,645 25,291 12,645 Proposed Private Placement 278,200 139,100 278,200 139,100 Assuming full exercise of the outstanding Warrants 2014/2024 - - 94,679 47,340 To be issued pursuant to the Proposed Bonus Issue Enlarged issued and paid up share capital 278,200 139,100 372,879 186,440 55,640 27,820 74,576 37,288 333,840 166,920 447,455 223,728 THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 14
4.2 Substantial shareholders shareholdings The Proposed LTIP is not expected to have any immediate effect on the shareholdings of the substantial shareholders of the Company until such time new are issued under the Proposed LTIP. Any effect on the shareholdings of the substantial shareholders will depend on the number of new to be issued pursuant to the exercise of Options and/or vesting of comprised in ESGS Awards under the Proposed LTIP at the relevant point in time. The pro forma effects of the Proposed Private Placement and the Proposed Bonus Issue on the shareholdings of the substantial shareholders of the Company are set out below: Minimum Scenario Substantial shareholders (I) (II) As at the LPD After the Proposed Private Placement After (I) and the Proposed Bonus Issue Direct Indirect Direct Indirect Direct Indirect ( 000) % ( 000) % ( 000) % ( 000) % ( 000) % ( 000) % YM Tengku Dato Sri 62,189 24.59 - - 62,189 22.35 - - 74,627 22.35 - - Uzir Bin Tengku Dato Ubaidillah Tan Ching Kee 38,883 15.37 (1) 3,502 1.38 38,883 13.98 (1) 3,502 1.26 46,659 13.98 (1) 4,202 1.26 Lembaga Tabung Haji 19,000 7.51 - - 19,000 6.83 - - 22,800 6.83 - - Note: (1) Deemed interested by virtue of his spouse s shareholdings in. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 15
Maximum Scenario Substantial shareholders (I) (II) After (I) and assuming full exercise As at the LPD After the Proposed Private Placement of the outstanding Warrants 2014/2024 Direct Indirect Direct Indirect Direct Indirect ( 000) % ( 000) % ( 000) % ( 000) % ( 000) % ( 000) % YM Tengku Dato Sri 62,189 24.59 - - 62,189 22.35 - - 90,063 24.15 - - Uzir Bin Tengku Dato Ubaidillah Tan Ching Kee 38,883 15.37 (1) 3,502 1.38 38,883 13.98 (1) 3,502 1.26 58,774 15.76 (1) 5,253 1.41 Lembaga Tabung Haji 19,000 7.51 - - 19,000 6.83 - - 19,000 5.10 - - Substantial shareholders (III) After (II) and the Proposed Bonus Issue Direct Indirect ( 000) % ( 000) % YM Tengku Dato Sri 108,076 24.15 - - Uzir Bin Tengku Dato Ubaidillah Tan Ching Kee 70,529 15.76 (1) 6,304 1.41 Lembaga Tabung Haji 22,800 5.10 - - Note: (1) Deemed interested by virtue of his spouse s shareholdings in. 16
4.3 NA and gearing Save for the potential impact of the Malaysian Financial Reporting Standards 2 ( MFRS 2 ) on share-based payment issued by the Malaysian Accounting Standards Board as set out in Section 4.4 below, the Proposed LTIP is not expected to have an immediate effect on the NA, NA per share and gearing of the Group until such time the Options are exercised and/or the comprised in ESGS Awards are vested. The effects will depend on the following: in respect of the Proposed ESOS, the number of new to be issued pursuant to the exercise of Options and the Option Price; and/or in respect of the Proposed ESGS, the number of to be issued and/or transferred pursuant to the vesting of comprised in ESGS Awards. The pro forma effects of the Proposed Private Placement and the Proposed Bonus Issue on the NA and gearing of the Group are set out below: Minimum Scenario (I) (II) (III) Audited as at 31 August 2014 (1) Adjustments for subsequent events After (I) and the Proposed Private Placement After (II) and the Proposed Bonus Issue (RM 000) (RM 000) (RM 000) (RM 000) Share capital 95,000 126,455 139,100 166,920 Share premium 14,869 67,555 (2) 85,149 (3) 57,209 Revaluation reserve 5,310 5,310 5,310 5,310 Translation reserve (1,390) (1,390) (1,390) (1,390) Unappropriated profit 27,265 24,819 24,819 (3) 24,679 NA 141,054 222,749 252,988 252,728 in issue ( 000) 190,000 252,909 278,200 333,840 NA per Share (RM) 0.74 0.88 0.91 0.76 Total borrowings (RM 000) 41,841 48,456 48,456 48,456 Gearing (times) 0.30 0.22 0.19 0.19 17
Maximum Scenario (I) (II) (III) (IV) Audited as at 31 August 2014 (1) Adjustments for subsequent events After (I) and the Proposed Private Placement After (II) and assuming full exercise of the outstanding Warrants 2014/2024 After (III) and the Proposed Bonus Issue (RM 000) (RM 000) (RM 000) (RM 000) (RM 000) Share capital 95,000 126,455 139,100 186,440 223,728 Share premium 14,869 67,555 (2) 85,149 94,617 (3) 57,209 Revaluation reserve 5,310 5,310 5,310 5,310 5,310 Translation reserve (1,390) (1,390) (1,390) (1,390) (1,390) Unappropriated profit 27,265 24,819 24,819 24,819 (3) 24,679 NA 141,054 222,749 252,988 309,796 309,536 in issue ( 000) 190,000 252,909 278,200 372,879 447,455 NA per Share (RM) 0.74 0.88 0.91 0.83 0.69 Total borrowings (RM 000) 41,841 48,456 48,456 48,456 48,456 Gearing (times) 0.30 0.22 0.19 0.16 0.16 Notes: (1) Adjustments for the following: the Placement; the Acquisition; (iii) the Fair Value Recognition; (iv) the disposal of 100% equity interest in Weng Zheng Marketing Sdn Bhd to Tan Ching Kee for a cash consideration of RM6,079,394, which was completed on 22 May 2015; (v) expenses incurred in relation to the above corporate exercises (including the Free Warrants Issue) amounting to approximately RM2.8 million; and (vi) the exercise of 321,000 Warrants 2014/2024 from 29 October 2014 up to the LPD at the exercise price of RM0.60 each. (2) Assuming 25,290,900 Placement are allotted and issued at an issue price of RM1.20 each prior to the Entitlement Date and after writing off the estimated expenses of RM110,000 in relation to the Proposed Private Placement against the share premium account pursuant to Section 60(3) of the Act. (3) After writing off the estimated expenses of RM120,000 in relation to the Proposed Bonus Issue against the share premium account pursuant to Section 60(3) of the Act and the remaining estimated expenses of RM140,000 to be charged to the unappropriated profit account. 18
4.4 Earnings and EPS The Proposed LTIP is not expected to have any immediate effect on the earnings and EPS of the Group. In accordance with the MFRS 2, the costs arising from the LTIP Awards are required to be measured at the Award Date and recognised as an expense over the vesting period of the LTIP Award, which will have an effect on the future earnings of the Group. The potential effect of the Proposed LTIP on the earnings and EPS of the Group in the future, as a consequence of the recognition of the expense, cannot be determined at this juncture as it will depend on the number of comprised in the LTIP Awards and various factors that affect the fair value of the Options and/or the ESGS Awards. The fair value would in turn depend on, inter alia, the market price of and the volatility of. While the Proposed Private Placement and the Proposed Bonus Issue are not expected to have any immediate impact on the earnings of the Group, the Proposed Private Placement is expected to contribute positively to the earnings of the Group for the financial year ending 31 August 2016 as the benefits arising from the proposed utilisation of the proceeds from the Proposed Private Placement for working capital as set out in Section 2.1.5 of this announcement are realised. However, there will be a corresponding dilution in the EPS of the Group upon completion of the Proposed Private Placement and the Proposed Bonus Issue as a result of the increase in the number of in issue. 4.5 Convertible securities As at the LPD, save for 94,679,000 outstanding Warrants 2014/2024, does not have any other outstanding convertible securities. Any necessary adjustments to the number and exercise price of the outstanding Warrants 2014/2024 as a result of the Proposed Bonus Issue will be made in accordance with the provisions of the Deed Poll. Such adjustments, which will be determined by the Board in consultation with HLIB and reviewed by the Company s external auditors or reporting accountants, will become effective on the next market day following the Entitlement Date. For illustrative purposes only, the adjustments to the Warrants 2014/2024 arising from the Proposed Bonus Issue are expected to be as follows: Exercise price of Warrants 2014/2024 The current exercise price of the Warrants 2014/2024 is RM0.60 per Warrant 2014/2024. Pursuant to the provisions of the Deed Poll, the exercise price of the Warrants 2014/2024 is expected to be adjusted to RM0.50. Number of Warrants 2014/2024 Pursuant to the provisions of the Deed Poll, the Proposed Bonus Issue is expected to give rise to 1 additional Warrant 2014/2024 for every 5 existing Warrants 2014/2024 held as at the Entitlement Date. The Proposed Private Placement and the Proposed LTIP will not have any effect on the terms and conditions of the outstanding Warrants 2014/2024. 19
5. APPROVALS REQUIRED The Proposals are conditional upon approvals being obtained from the following: Bursa Securities, for the listing of and quotation for the following: (a) (b) (c) (d) (e) the Placement ; the Bonus ; such number of new representing up to 15% of the issued and paid-up share capital of to be issued under the Proposed LTIP; the additional Warrants 2014/2024 arising from the adjustments pursuant to the Proposed Bonus Issue; and the new to be issued arising from the exercise of the additional Warrants 2014/2024, on the Main Market of Bursa Securities; (iii) the shareholders of, for the Proposed Bonus Issue, the Proposed LTIP, the Proposed Increase in Authorised Share Capital and the Proposed Amendments at an EGM to be convened; and other relevant authorities/parties, if required. At the 10th AGM of the Company, which was held on 13 February 2015, the shareholders of the Company had approved the General Mandate conferring authority to the Board, subject to approvals of the relevant governmental/regulatory authorities, to allot and issue new under Section 132D of the Act, provided that the aggregate number of new to be issued does not exceed 10% of the issued and paid-up share capital of the Company for the time being. The General Mandate will continue to be in force until the conclusion of the next AGM of the Company. The Proposed Private Placement, the Proposed Bonus Issue and the Proposed LTIP are not inter-conditional upon each other. However, it is the intention of the Company to complete the Proposed Private Placement prior to the Entitlement Date for the Proposed Bonus Issue. Nonetheless, the Proposed Bonus Issue may still be completed prior to the completion of the Proposed Private Placement, in which event any Placement allotted and issued after the Entitlement Date will not be entitled to the Proposed Bonus Issue. The Proposed Increase in Authorised Share Capital and the Proposed Amendments are interconditional upon each other. The Proposed LTIP is conditional upon the Proposed Increase in Authorised Share Capital and Proposed Amendments but not vice versa. The Proposed Private Placement and the Proposed Bonus Issue are not conditional upon the Proposed Increase in Authorised Share Capital and the Proposed Amendments and vice versa. The Proposals are not conditional upon any other corporate exercise which has been announced by the Company. 20
6. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM 6.1 Proposed Private Placement, Proposed Increase in Authorised Share Capital and Proposed Amendments None of the directors and/or major shareholders of and/or persons connected with them have any interest, direct or indirect, in the Proposed Private Placement, the Proposed Increase in Authorised Share Capital and the Proposed Amendments. 6.2 Proposed Bonus Issue None of the directors and/or major shareholders of and/or persons connected with them have any interest, direct or indirect, in the Proposed Bonus Issue apart from their respective entitlements as shareholders of the Company under the Proposed Bonus Issue, the entitlements of which are also available to all other existing shareholders of the Company. 6.3 Proposed LTIP All the executive directors of the Company, namely YM Tengku Dato Sri Uzir Bin Tengku Dato Ubaidillah, Dato Ir. William Tan Chee Keong, Tan Ching Kee, Tan Teng Heng, Tan Chong Boon and Dato Ir. Mohd Ghazali Bin Kamaruzaman together with the alternate directors, namely Ng Chong Tin and Choi Chee Ken (collectively, the Interested Directors ), by virtue of their eligibility to participate in the Proposed LTIP, are deemed interested to the extent of their respective allocations as well as allocations to persons connected with them (if any) under the Proposed LTIP. Accordingly, the Interested Directors have abstained and will continue to abstain from deliberating and voting at all relevant Board meetings in relation to their respective allocations as well as allocations to persons connected with them (if any) under the Proposed LTIP. They will also abstain and ensure that persons connected with them (if any) will abstain from voting, in respect of their direct and/or indirect interests in, on the resolutions pertaining to their respective allocations as well as allocations to persons connected with them (if any) under the Proposed LTIP at an EGM to be convened. Save as disclosed above, none of the directors and/or major shareholders of and/or persons connected with them have any interest, direct or indirect, in the Proposed LTIP. 7. DIRECTORS STATEMENT The Board (save for the Interested Directors who have abstained from expressing any opinion or recommendation relating to their respective allocations as well as allocations to persons connected with them under the Proposed LTIP, if any), having considered all aspects of the Proposals, including but not limited to the rationale for and the effects of the Proposals, is of the opinion that the Proposals are in the best interest of the Company. 8. ADVISER HLIB has been appointed by as the Adviser for the Proposals and Placement Agent for the Proposed Private Placement. 21