GADANG HOLDINGS BERHAD ( GADANG OR THE COMPANY ) (I) (II) (III) (IV) (V) (VI) PROPOSED SHARE SPLIT; PROPOSED BONUS ISSUE OF SHARES; PROPOSED BONUS ISSUE OF WARRANTS; PROPOSED ESOS; PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL; AND PROPOSED AMENDMENTS (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) 1. INTRODUCTION On behalf of the Board of Directors of Gadang ( Board or Directors ), RHB Investment Bank Berhad ( RHB Investment Bank ) wishes to announce that the Company proposes to undertake the following:- (i) (ii) Proposed share split involving the subdivision of every one (1) ordinary share of RM1.00 each in Gadang ( Existing Share(s) ) into two (2) ordinary shares of RM0.50 each in Gadang ( Subdivided Share(s) or Gadang Share(s) or Share(s) ) held by the entitled shareholders of the Company whose names appear in the Record of Depositors ( Entitled Shareholder(s) ) on an entitlement date to be determined and announced later ( Entitlement Date ) ( Proposed Share Split ); Proposed bonus issue of 129,311,689 new Subdivided Shares ( Bonus Share(s) ) on the basis of one (1) Bonus Share for every four (4) Subdivided Shares held by the Entitled Shareholders on the Entitlement Date after the completion of the Proposed Share Split ( Proposed Bonus Issue of Shares ); (iii) Proposed bonus issue of 129,311,689 warrants ( Warrant(s) ) on the basis of one (1) Warrant for every four (4) Subdivided Shares held by the Entitled Shareholders on the Entitlement Date after the completion of the Proposed Share Split ( Proposed Bonus Issue of Warrants ); (iv) (v) (vi) Proposed establishment of an employees share option scheme ( ESOS ) of up to fifteen percent (15%) of the issued and paid-up share capital of the Company (excluding treasury shares) at any point in time to be granted to the eligible Directors and employees of Gadang and its subsidiaries ( Gadang Group or the Group ) which are not dormant ( Proposed ESOS ); Proposed increase in the authorised share capital of Gadang from RM400,000,000 comprising 400,000,000 ordinary shares of RM1.00 each to RM500,000,000 comprising 1,000,000,000 ordinary shares of RM0.50 each ( Proposed Increase in Authorised Share Capital ); and Proposed amendments to the Memorandum and Articles of Association of Gadang as a consequence of the Proposed Share Split and Proposed Increase in Authorised Share Capital ( Proposed Amendments ). Further details on the Proposals are set out in the ensuing sections of this announcement. 1
2. DETAILS OF THE PROPOSALS 2.1 Proposed Share Split 2.1.1 Basis and number of Subdivided Shares The Proposed Share Split entails the subdivision of every one (1) Existing Share into two (2) Subdivided Shares held by the Entitled Shareholders on the Entitlement Date. As at 16 August 2016, being the latest practicable date prior to this announcement ( LPD ), the issued and paid-up share capital of Gadang is RM258,623,378 comprising 258,623,378 Existing Shares. Accordingly, upon completion of the Proposed Share Split, the issued and paid-up share capital of Gadang will be RM258,623,378 comprising 517,246,756 Subdivided Shares. Fractional entitlements arising from the Proposed Share Split, if any, shall be dealt with in such manner as the Board shall in its absolute discretion deem fit and expedient, and in the best interest of the Company. 2.1.2 Ranking of the Subdivided Shares The Subdivided Shares shall, upon allotment and issue, rank pari passu in all respects with each other, save that the Subdivided Shares will not be entitled to any dividends, rights, allotments and/or any other forms of distributions that may be declared, made or paid prior to the relevant date of allotment and issuance of the Subdivided Shares. 2.1.3 Listing of and quotation for the Subdivided Shares An application will be made to Bursa Malaysia Securities Berhad ( Bursa Securities ) for the Proposed Share Split. No suspension will be imposed on the trading of the Existing Shares on the Main Market of Bursa Securities for the purpose of implementing the Proposed Share Split. Subject to obtaining all the relevant approvals, the Subdivided Shares shall be listed and quoted on the Main Market of Bursa Securities on the next market day following the Entitlement Date. The notice of allotment for the Subdivided Shares will be issued and despatched to the Entitled Shareholders no later than four (4) market days after the date of listing of and quotation for the Subdivided Shares on the Main Market of Bursa Securities, or such other period as may be prescribed by Bursa Securities. As the Subdivided Shares are prescribed securities under Section 14(5) of the Securities Industry (Central Depositories) Act, 1991 ( SICDA ), the Subdivided Shares will be subjected to the SICDA and the Rules of Bursa Malaysia Depository Sdn Bhd. Accordingly, the Subdivided Shares will be credited into the respective Central Depository System accounts of the Entitled Shareholders and no physical share certificate will be issued. 2
2.2 Proposed Bonus Issue of Shares 2.2.1 Basis and number of Bonus Shares to be issued Based on the enlarged issued and paid-up share capital of the Company after the Proposed Share Split of RM258,623,378 comprising 517,246,756 Subdivided Shares, the Proposed Bonus Issue of Shares will entail an issuance of 129,311,689 Bonus Shares to be credited as fully paid-up, on the basis of one (1) Bonus Share for every four (4) Subdivided Shares held by the Entitled Shareholders as at the close of business on the Entitlement Date. The Proposed Bonus Issue of Shares shall be implemented after the completion of the Proposed Share Split. Fractional entitlements of the Bonus Shares arising from the Proposed Bonus Issue of Shares, if any, shall be dealt with in such manner as the Board shall in its absolute discretion deem fit and expedient, and in the best interest of the Company. The Company does not intend to implement the Proposed Bonus Issue of Shares in stages. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 3
2.2.2 Capitalisation of reserves The Proposed Bonus Issue of Shares shall be capitalised from the share premium and retained profits of the Company. Based on the Company s latest audited financial statements for the financial year ended ( FYE ) 31 May 2015 and the latest unaudited financial statements for the FYE 31 May 2016, the effects of the Proposed Bonus Issue of Shares on the share premium and retained profits of the Company are as follows:- Company level Audited as at 31 May 2015 (RM 000) Unaudited as at 31 May 2016 (RM 000) Share premium 12,736 38,041 Add: Share premium arising from the issuance 19,984 - of 23,511,000 new ordinary shares in Gadang at an issue price of RM1.85 on 28 April 2016 Less: Amount to be capitalised for the Proposed (32,720) (38,041) Bonus Issue of Shares (1) Balance after the Proposed Bonus Issue of Shares - - Retained profits 15,696 27,471 Add: Total dividends received from the subsidiary companies of Gadang subsequent to FYE 31 May 2015:- - Interim dividend received from 14,700 - Gadang Engineering (M) Sdn Bhd - Interim dividend received from Achwell Property Sdn Bhd 10,400 - Add: Proposed dividends to be received from the subsidiary companies of Gadang subsequent to FYE 31 May 2016:- - Interim dividend to be received from Gadang Engineering (M) Sdn Bhd 25,000 25,000 Less: Total dividends paid subsequent to FYE (11,756) - 31 May 2015 (2) Less: Proposed dividends declared for the FYE - (18,104) 31 May 2016 and to be paid prior to the Entitlement Date (3) Less: Amount to be capitalised for the Proposed (31,936) (26,615) Bonus Issue of Shares (1) Less: Estimated expenses for the Proposals (330) (330) Balance after the Proposed Bonus Issue of Shares 21,774 7,422 Notes:- (1) Calculated based on the issuance of 129,311,689 Bonus Shares multiplied by the par value of RM0.50 per Subdivided Share totalling approximately RM64.66 million. (2) First and final dividend of RM0.05 per Existing Share, amounting to approximately RM11.76 million, which was paid on 23 December 2015. (3) Estimated at the proposed first and final single tier dividend of RM0.07 per Existing Share multiplied by the issued and paid-up share capital of 258,623,378 Existing Shares as at the LPD. The proposed dividend in respect of the FYE 31 May 2016 was previously announced on 21 July 2016 and is subject to the approval of the shareholders at the forthcoming annual general meeting. The entitlement date and the payment date of the proposed first and final single tier dividend shall be announced later. 4
Based on the latest audited financial statements for the FYE 31 May 2015 and latest unaudited financial statements for the FYE 31 May 2016, as well as after taking into consideration the dividends received from Gadang s subsidiary companies, the Board confirms that the available reserves of the Company required for capitalisation of the Proposed Bonus Issue of Shares are unimpaired by losses on a consolidated basis and are adequate for the capitalisation of the Proposed Bonus Issue of Shares. Furthermore, the Board will obtain a confirmation from the external auditors/reporting accountants on the adequacy of reserves to cover the capitalisation of the Proposed Bonus Issue of Shares, details of which will be disclosed in the circular to shareholders to be issued. 2.2.3 Ranking of the Bonus Shares The Bonus Shares shall, upon allotment and issue, rank pari passu in all respects with each other and the Existing Shares, save and except that the Bonus Shares will not be entitled to any dividends, rights, allotments and/or other distributions that may be declared, made or paid where the Entitlement Date precedes the date of allotment of such new Bonus Shares. 2.2.4 Listing of and quotation for the Bonus Shares An application will be made to Bursa Securities for the listing of and quotation for the Bonus Shares on the Main Market of Bursa Securities. Upon obtaining all the approvals, the Bonus Shares will be listed and quoted on the Main Market of Bursa Securities concurrently with the Subdivided Shares on the next market day following the Entitlement Date. 2.3 Proposed Bonus Issue of Warrants 2.3.1 Basis and number of Warrants to be issued Based on the enlarged issued and paid-up share capital of the Company after the Proposed Share Split of RM258,623,378 comprising 517,246,756 Subdivided Shares, the Proposed Bonus Issue of Warrants will entail an issuance of 129,311,689 Warrants, on the basis of one (1) Warrant for every four (4) Subdivided Shares held by the Entitled Shareholders as at the close of business on the Entitlement Date. A total of 129,311,689 new Subdivided Shares will be issued upon the full exercise of the Warrants. The Proposed Bonus Issue of Warrants shall be implemented after the completion of the Proposed Share Split. As such, the Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants shall give each holder an option to subscribe for new Subdivided Shares. Fractional entitlements of the Warrants arising from the Proposed Bonus Issue of Warrants, if any, shall be dealt with in such manner as the Board may in its absolute discretion deem fit and expedient, and in the best interest of the Company. 2.3.2 Basis of determining the exercise price of the Warrants The new Warrants will be issued free to the Entitled Shareholders. The exercise price of the Warrants will be determined by the Board at a later date, after the receipt of all relevant approvals but before the announcement of the Entitlement Date, after taking into consideration the theoretical ex-all price after the Proposed Share Split and Proposed Bonus Issue of Shares. 5
In any event, the exercise price of the Warrants will not be lower than the par value of RM0.50 per Gadang Share. For illustration purposes only, the indicative exercise price of the Warrants is assumed to be RM1.06 per Warrant, representing the theoretical ex-all price after the Proposed Share Split and Proposed Bonus Issue of Shares, calculated based on the five (5)-day volume weighted average market price ( VWAP ) of the Existing Shares up to and including the LPD of RM2.66 per Existing Share. 2.3.3 Utilisation of proceeds The quantum of proceeds that may be raised by Gadang from the exercise of the Warrants by the holders of the Warrants ( Warrantholder(s) ) in the future would depend on the actual number of Warrants exercised by the Warrantholder(s) during the tenure of the Warrants as well as the exercise price of the Warrants, which will be determined at a later date. Such proceeds will be utilised for the working capital requirements of the Gadang Group. 2.3.4 Ranking of the Warrants and new Shares to be issued arising from the exercise of the Warrants The Warrantholder(s) will not be entitled to any voting rights or right to participate in any form of distribution other than on winding up, compromise or arrangement of Gadang as set out in the deed poll governing the Warrants and/or offer of further securities in Gadang until and unless such Warrantholders exercise their Warrants into new Shares. The new Shares to be issued arising from the exercise of the Warrants will, upon allotment and issuance, rank pari passu in all respects with the existing Shares, save and except that the new Shares to be issued arising from the exercise of the Warrants will not be entitled to any dividends, rights, allotments and/or any other forms of distribution that may be declared, made or paid prior to the relevant date of allotment and issuance of the new Shares arising from the exercise of the Warrants. 2.3.5 Listing of and quotation for the Warrants and the new Shares to be issued arising from the exercise of the Warrants An application will be made for the admission of the Warrants to the official list of Bursa Securities as well as for the listing of and quotation for the Warrants and the new Shares to be issued arising from the exercise of the Warrants on the Main Market of Bursa Securities. 2.3.6 Indicative salient terms of the Warrants The Warrants will be traded separately from the existing Shares. The Warrants will be issued in a registered form and constituted by the deed poll to be executed by the Company. The indicative salient terms of Warrants are set out in Appendix I of this announcement. 6
2.4 Proposed ESOS The Proposed ESOS will involve granting of options to subscribe for the new Subdivided Shares at a pre-determined price ( ESOS Option(s) ) or Option(s) ), in accordance with the by-laws governing the Proposed ESOS ( By-Laws ). The Options shall be offered to all the eligible employees and Directors of Gadang Group (excluding subsidiaries which are dormant) who meet the eligibility criteria for participation in the Proposed ESOS ( Eligible Person(s) ). The Proposed ESOS will be administered by the ESOS committee to be duly appointed and authorised by the Board ( ESOS Committee ). 2.4.1 The salient terms of the Proposed ESOS are as follows:- (i) Maximum number of new Shares available under the Proposed ESOS The maximum number of new Shares to be allotted and issued pursuant to the exercise of the Options that may be granted under the Proposed ESOS shall not in aggregate exceed fifteen percent (15%) of the issued and paid-up share capital of the Company (excluding treasury shares) at any point in time throughout the duration of the Proposed ESOS as provided in the By-Laws. (ii) Basis of allotment and maximum entitlement Subject to any adjustments which may be made under the By-Laws, the aggregate number of new Shares to be allotted and issued to an Eligible Person pursuant to the exercise of the Options shall be at the sole and absolute discretion of the ESOS Committee after taking into consideration, amongst other factors, the performance, contribution, employment grade, seniority and length of services of the said Eligible Person and/or such other factors that the ESOS Committee may in its sole and absolute discretion deem fit, subject to the following:- (a) (b) that the number of new Shares issued pursuant to the exercise of the ESOS Options granted under the Proposed ESOS shall not exceed the amount stipulated in Section 2.4.1(i) of this announcement; and the number of Shares allocated to any Eligible Person who, either singly or collectively, through persons connected with the Eligible Person, holds twenty percent (20%) or more of the issued and paidup share capital of the Company (excluding treasury shares), must not exceed ten percent (10%) of the total number of new Shares to be issued under the Proposed ESOS, provided always that it is in accordance with any prevailing guidelines issued by Bursa Securities, Main Market Listing Requirements of Bursa Securities ( Listing Requirements ) or any other relevant authorities as amended from time to time. The specific entitlements/allotments under the Proposed ESOS shall be approved by the shareholders of Gadang in a general meeting. (iii) Eligibility to participate in the Proposed ESOS The employees, executive directors and non-executive directors of the Gadang Group (excluding subsidiaries which are dormant), who meet the criteria of eligibility for participation in the Proposed ESOS as set out in the By-Laws are eligible to participate in the Proposed ESOS. 7
(iv) Duration of the Proposed ESOS Subject to the By-Laws, the Proposed ESOS shall be in force for a period of five (5) years from the date of the Proposed ESOS ( Effective Date ), which shall be the date of Gadang s full compliance with all relevant requirements of the Listing Requirements, including the following:- (a) (b) (c) (d) (e) submission of the final copy of the By-Laws to Bursa Securities together with a letter of compliance pursuant to paragraph 2.12 of the Listing Requirements and a checklist showing compliance with Appendix 6E of the Listing Requirements; receipt of approval-in-principle from Bursa Securities for the listing of and quotation for the new Shares to be issued pursuant to the exercise of Options granted under the Proposed ESOS; procurement of the shareholders approval for the Proposed ESOS at an extraordinary general meeting ( EGM ); receipt of the approval of any other relevant authorities for the Proposed ESOS, if any; and fulfilment of all conditions attached to the above approvals, if any. The Proposed ESOS may be extended or renewed (as the case may be) for a further period of five (5) years, at the sole and absolute discretion of the Board upon the recommendation of the ESOS Committee, provided always that the initial Proposed ESOS period stipulated above and such extension of the Proposed ESOS made pursuant to the By-Laws shall not in aggregate exceed a duration of ten (10) years from the Effective Date or such other period as may be prescribed by Bursa Securities or any other relevant authorities from the Effective Date. For the avoidance of doubt, no further sanction, approval or authorisation of the shareholders of the Company in a general meeting is required for any such extension or renewal (as the case may be) provided that the Company shall serve notices on each grantee of the ESOS Options ( Grantee(s) ) and make an announcement to Bursa Securities (if required). (v) Subscription Price The price payable for the Shares upon the exercise of any ESOS Options granted pursuant to the Proposed ESOS ( Subscription Price ) shall be the higher of:- (a) (b) the five (5)-day VWAP of the Shares, as quoted on Bursa Securities, immediately preceding the date the ESOS Options are offered in writing, with a discount of not more than ten percent (10%), or such lower or higher limit in accordance with any prevailing guidelines issued by Bursa Securities and/or any other relevant authorities, as amended from time to time; or the par value of the Shares at the material time, as determined by the Board upon recommendation of the ESOS Committee which shall be binding and conclusive. 8
(vi) Ranking of new Shares arising from the Proposed ESOS and rights of a Grantee The Grantee will not be entitled to any voting rights or right to participate in any form of distribution and/or offer of further securities in the Company until and unless the Grantees exercise their ESOS Options into new Shares. The new Shares to be allotted and issued upon any exercise of the ESOS Options shall, upon such allotment and issuance, rank pari passu in all respects with the then existing Shares, except that the new Shares issued to the Grantee will not be entitled to any dividends, rights, allotments and/or other distribution where the Entitlement Date precedes the date of allotment of such new Shares. (vii) Listing of and quotation for the new Shares arising from the exercise of Options The Company shall make the necessary application to Bursa Securities for the listing of and quotation for the new Shares, representing up to fifteen percent (15%) of the issued and paid-up share capital of Gadang (excluding treasury shares), to be issued pursuant to the exercise of the Options to be granted under the Proposed ESOS. (viii) Retention/Restriction period of Shares Except as provided in the By-Laws, the new Shares allotted and issued to a Grantee pursuant to the exercise of an Option will not be subject to any retention period or restriction on transfer. However, the Grantees are encouraged to hold the new Shares as an investment rather than for immediate realisation to yield profit. Notwithstanding the above, a non-executive director in the Group must not sell, transfer or assign the Shares obtained through the exercise of the Options offered to him/her within one (1) year from the date of the offer of such Options. (ix) Vesting conditions The ESOS Committee has the discretion in determining whether the ESOS Options granted will be on staggered basis over the duration of the Proposed ESOS or in one (1) single grant and/or whether the options are subject to any vesting period and if so the vesting conditions, if any, of which such determination will be carried out at a later date after the establishment of the Proposed ESOS. (x) Termination of the Proposed ESOS Subject to compliance with the requirements of Bursa Securities and any other relevant authorities, the Proposed ESOS may be terminated by the Company at any time before its expiry without obtaining the approvals from the Grantees or its shareholders provided that the Company makes an announcement immediately to Bursa Securities. 9
2.4.2 Utilisation of proceeds The proceeds to be received by the Company pursuant to the exercise of the Options under the Proposed ESOS will depend on, amongst others, the number of Options granted and exercised at the relevant point in time as well as the Subscription Price. As such, the amount of proceeds to be received from the exercise of the Options is not determinable at this juncture. However, Gadang intends to utilise the net proceeds from the exercise of the ESOS Options for the working capital requirements of the Group. 2.5 Proposed Increase in Authorised Share Capital Gadang proposes to increase its authorised share capital from RM400,000,000 comprising 400,000,000 Existing Shares to RM500,000,000 comprising 1,000,000,000 Gadang Shares to facilitate the implementation of the Proposed Share Split, Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants and Proposed ESOS as well as any future issuance of equity capital, including any other future corporate exercises. 2.6 Proposed Amendments The Proposed Amendments involves amendment to the relevant clause in the Memorandum of Association of Gadang to facilitate the implementation of the Proposed Share Split and Proposed Increase in Authorised Share Capital. 3. RATIONALE AND JUSTIFICATION FOR THE PROPOSALS 3.1 Proposed Share Split The Proposed Share Split will not have any direct impact on the market capitalisation of the Company. However, the Proposed Share Split will result in an adjustment to the market price of the ordinary shares of Gadang and will result in the Subdivided Shares being more affordable, thus potentially appealing to a wider group of public shareholders to participate in the growth of the Company. Furthermore, the Proposed Share Split is expected to improve the trading liquidity of Gadang Shares on the Main Market of Bursa Securities by increasing the number of shares in issue. 3.2 Proposed Bonus Issue of Shares The Proposed Bonus Issue of Shares aims to reward the existing shareholders of the Company for their loyalty and continuing support, by enabling them to have a greater participation in the equity of the Company in terms of number of shares held, whilst maintaining their percentage of equity interest. Similar to the Proposed Share Split, the Proposed Bonus Issue of Shares is expected to improve the trading liquidity of Gadang Shares on the Main Market of Bursa Securities by increasing the number of shares in issue. 3.3 Proposed Bonus Issue of Warrants The Proposed Bonus Issue of Warrants aims to reward the existing shareholders of the Company for their loyalty and continuing support, by providing an option to further increase their equity participation in the Company at a pre-determined price over the tenure of the Warrants. The increase in the number of Shares of the Company pursuant to the exercise of the Warrants is also expected to provide additional working capital to the Group. 10
3.4 Proposed ESOS The establishment of the Proposed ESOS is to:- (i) (ii) reward, recognise, motivate and retain the Eligible Persons, who would be given the opportunity to participate in the equity of the Company and thereby, relate their contribution directly to the performance of the Gadang Group; and provide a continuing incentive to the Eligible Persons without adversely affecting the cash flow of the Gadang Group whilst at the same time, contributing positively to its continuing growth through the intended stimulation of greater commitment, productivity and efforts on the part of the Eligible Persons towards the Gadang Group. The Proposed ESOS is also extended to non-executive directors of the Group as they discharge important functions and their services and contributions are valued by the Company. 3.5 Proposed Increase in Authorised Share Capital The Proposed Increase in Authorised Share Capital is to facilitate the implementation of the Proposed Share Split, issuance of new Gadang Shares pursuant to the Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants and Proposed ESOS, as well as to facilitate any further issuance of shares in the future. 3.6 Proposed Amendments The Proposed Amendments is undertaken as a consequence of the Proposed Share Split and Proposed Increase in Authorised Share Capital. 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 of the Company, net assets ( NA ) per share, gearing, earnings and earnings per share ( EPS ) and shareholdings of the substantial shareholders of Gadang. The pro forma effects of the Proposed Share Split, Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants and Proposed ESOS are set out in the following sections, where applicable: 4.1 Issued and paid-up share capital The Proposed ESOS will not have an immediate effect on the existing issued and paid-up share capital of the Company until and unless when the ESOS Options granted under the Proposed ESOS are exercised. However, the issued and paid-up share capital of the Company will increase with time, depending on the number of new Shares to be issued pursuant to the exercise of the ESOS Options that may be granted under the Proposed ESOS. 11
For illustrative purposes, the pro forma effects of the Proposed Share Split, Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants and Proposed ESOS on the issued and paid-up share capital of Gadang are as follows:- Par value (RM) No. of ordinary shares in Gadang (RM) Existing issued and paid-up share capital of the 1.00 258,623,378 258,623,378 Company as at the LPD After the Proposed Share Split 0.50 517,246,756 258,623,378 Shares to be issued pursuant to the Proposed Bonus Issue of Shares 0.50 129,311,689 64,655,845 After the Proposed Bonus Issue of Shares, 0.50 646,558,445 323,279,223 Proposed Bonus Issue of Warrants and the Proposed ESOS Shares to be issued assuming full exercise of the 0.50 129,311,689 64,655,845 Warrants After the full exercise of the Warrants 775,870,134 387,935,068 Shares to be issued assuming full exercise of the ESOS 0.50 116,380,520 58,190,260 Options (1) Enlarged issued and paid-up share capital of the Company 0.50 892,250,654 446,125,328 Note:- (1) Assuming the full exercise of the Warrants, a maximum grant and full exercise of the ESOS Options of up to fifteen percent (15%) of the enlarged issued and paid-up share capital of the Company. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 12
4.2 NA per share and gearing Based on the audited consolidated balance sheet of Gadang as at 31 May 2015, the pro forma effects of the Proposed Share Split, Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants on the NA per share and gearing of Gadang are as follows:- Pro forma I Pro forma II Pro forma III Pro forma IV Audited consolidated as at 31 May 2015 (RM 000) (1) After adjustments for subsequent events (RM 000) After Pro forma I and the Proposed Share Split (RM 000) After Pro forma II, the Proposed Bonus Issue of Shares and the Proposed Bonus Issue of Warrants (RM 000) After Pro forma III and the full exercise of Warrants (RM 000) Share capital 216,369 258,623 258,623 323,279 387,935 Share premium 12,736 38,894 38,894 (3) - (4) 72,415 Capital reserves 1,347 1,347 1,347 1,347 1,347 Warrant reserve 6,173 - - - - Foreign exchange translation reserve (4,613) (4,613) (4,613) (4,613) (4,613) Retained profits 149,345 137,589 (2) 137,259 (3) 111,497 111,497 Shareholders equity / NA 381,357 431,840 431,510 431,510 568,581 Non-controlling interest 7,030 7,030 7,030 7,030 7,030 Total equity 388,387 438,870 438,540 438,540 575,611 No. of ordinary shares in issue ( 000) 216,369 258,623 517,247 646,558 775,870 Borrowings (RM 000) 193,012 193,012 193,012 193,012 193,012 NA per ordinary share (RM) 1.76 1.67 0.83 0.67 0.73 Gearing (times) 0.51 0.45 0.45 0.45 0.34 13
Notes:- (1) After adjusting for the following events:- (a) (b) (c) Conversion of 18,742,935 warrants into 18,742,935 Existing Shares at an issue price of RM1.00 each; First and final dividend of RM0.05 per Existing Share, amounting to approximately RM11.76 million paid on 23 December 2015; and Issuance of 23,511,000 Existing Shares at an issue price of RM1.85. (2) After deducting estimated expenses amounting to RM330,000. (3) After capitalising the Proposed Bonus Issue of Shares from the share premium and the remaining amount from retained profits. (4) Based on the indicative exercise price of RM1.06 per Warrant, being the theoretical ex-all price. Save for the potential impact of MFRS2 Share-Based Payment issued by the Malaysian Accounting Standards Board ( MFRS 2 ), details as set out in Section 4.3 below, the Proposed ESOS is not expected to have an immediate effect on the Group s NA, NA per Share and gearing of the Group until such time that the ESOS Options are exercised. The effect on the Group s NA would depend on the number of ESOS Options granted and the fair value of the ESOS Options after taking into account, inter-alia, the Subscription Price as well as any vesting conditions. Whilst the granting of the ESOS Options under the Proposed ESOS is expected to result in recognition of a charge in the income statements of the Group pursuant to MFRS 2, the recognition of such MFRS 2 charge would not have any material impact on the NA of the Group as the corresponding amount will be classified as an equity reserve which forms part of the shareholders equity. In the event that none of the ESOS Options are exercised within the duration of the Proposed ESOS, the outstanding amount in the said equity reserve would be transferred into the Company s retained earnings. On the other hand, if the ESOS Options are exercised, the outstanding amount in the said equity reserve would be transferred into the Company s share capital and/or share premium account. 4.3 Earnings and EPS The Proposed Share Split, Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants are not expected to have any material effect on the earnings of the Gadang Group for the FYE 31 May 2017. However, there will be a corresponding dilution in the EPS of the Group upon the completion of the Proposed Share Split and the Proposed Bonus Issue of Shares. Further, pursuant to the Proposed Bonus Issue of Warrants, the EPS of the Group may be diluted as a result of the increase in the number of shares in issue as and when the Warrants are exercised into new Shares. The Proposed ESOS is not expected to have any immediate effect on the consolidated EPS of the Group until such time when the ESOS Options are exercised. Any potential effect on the consolidated earnings and EPS in the future will depend on factors such as the number of ESOS Options granted and exercised at any point in time. Under MFRS 2, the cost arising from the issuance of the ESOS Options is measured by the fair value of the ESOS Options, which is expected to vest at the grant date, and is recognised as an expense in the income statement over the vesting period of the ESOS Options, thereby reducing the earnings of the Gadang Group. The extent of such impact cannot be determined at this juncture as it is dependent on several factors including but not limited to the Subscription Price of the ESOS Options to be granted, the market price of the Shares and duration and timing of the exercise period. 4.4 Convertible Securities As at the LPD, there are no options, warrants or convertible securities issued by the Company. 14
4.5 Substantial shareholders shareholdings The Proposed ESOS is not expected to have any immediate effect on the shareholdings of the substantial shareholders of the Company until such time when the ESOS Options to be granted are exercised. Any potential effect on the shareholdings of the substantial shareholders would depend on the number of new Shares to be issued pursuant to the exercise of the ESOS Options granted under the Proposed ESOS at the relevant point in time. For illustrative purposes only, the pro forma effects of the Proposed Share Split, Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants on the substantial shareholders shareholdings in Gadang are set out below:- Substantial Shareholder Pro forma I Shareholdings as at the LPD * After the Proposed Share Split Direct Indirect Direct Indirect No. of No. of No. of No. of Existing Shares % Existing Shares % Subdivided Shares % Subdivided Shares % Sumber Raswira Sdn Bhd 32,550,161 12.59 - - 65,100,322 12.59 - - Tan Sri Dato Kok Onn 5,536,666 2.14 (1) 67,537,327 26.11 11,073,332 2.14 (1) 135,074,654 26.11 Meloria Sdn Bhd 34,987,166 13.53 - - 69,974,332 13.53 - - Puan Sri Datin Chan Ngan Thai - - (2) 34,987,166 13.53 - (2) 69,974,332 13.53 Substantial Shareholder Pro forma II Pro forma III After Pro forma I, the Proposed Bonus Issue of Shares and the After Pro forma II and assuming full exercise of the Warrants Proposed Bonus Issue of Warrants Direct Indirect Direct Indirect No. of Subdivided Shares % No. of Subdivided Shares % No. of Subdivided Shares % No. of Subdivided Shares % Sumber Raswira Sdn Bhd 81,375,403 12.59 - - 97,650,483 12.59 - - Tan Sri Dato Kok Onn 13,841,665 2.14 (1) 168,843,318 26.11 16,609,998 2.14 (1) 202,611,981 26.11 Meloria Sdn Bhd 87,467,915 13.53 - - 104,961,498 13.53 - - Puan Sri Datin Chan Ngan Thai Notes:- - - (2) 87,467,915 13.53 - - (1) Deemed interested through Sumber Raswira Sdn Bhd and Meloria Sdn Bhd by virtue of Section 6A of the Companies Act, 1965 ("Act"). (2) Deemed interested through Meloria Sdn Bhd by virtue of Section 6A of the Act. (2) 104,961,498 13.53 15
5. APPROVALS REQUIRED The Proposals are conditional upon the following approvals being obtained:- (i) Bursa Securities for the following:- (a) (b) (c) the Proposed Share Split; the listing of and quotation for the Subdivided Shares, Bonus Shares, Warrants and new Shares to be issued pursuant to the exercise of Warrants and ESOS Options on the Main Market of Bursa Securities on the Main Market of Bursa Securities; the admission of the Warrants to the Official List of Bursa Securities; (ii) (iii) the shareholders of Gadang at an EGM to be convened; and any other relevant authority and/or party, if required. The Proposed Share Split, Proposed Increase in Authorised Share Capital and Proposed Amendments are inter-conditional upon each other. The Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants and Proposed ESOS are conditional upon the Proposed Share Split, Proposed Increase in Authorised Share Capital and Proposed Amendments and not vice versa. However, the Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants and Proposed ESOS are not conditional upon each other. In addition, the Proposals are not conditional upon any other corporate exercise undertaken or to be undertaken by Gadang. 6. INTEREST OF DIRECTORS AND MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM 6.1 Proposed Share Split, Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants, Proposed Increase in Authorised Share Capital and Proposed Amendments None of the Directors and major shareholders of the Company and/or persons connected to them has any interest, whether direct or indirect, in the Proposed Share Split, Proposed Bonus Issue of Shares, Proposed Bonus Issue of Warrants, Proposed Increase in Authorised Share Capital and Proposed Amendments save for their respective entitlements as shareholders of the Company under the Proposed Share Split, Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants, which are also available to all other shareholders of the Company on a pro-rata basis. 6.2 Proposed ESOS All the Directors of Gadang are eligible to participate in the Proposed ESOS and are therefore deemed interested in the Proposed ESOS to the extent of their respective allocations under the Proposed ESOS. Notwithstanding this, the Directors of the Company have deliberated on the Proposed ESOS, and have agreed to present the Proposed ESOS to the shareholders of the Company for their consideration and approval. In respect of any specific allocation of ESOS Options to the Directors of the Company under the Proposed ESOS, the respective Directors shall accordingly abstain from all board deliberation and voting. In addition, the respective Directors shall also abstain from voting in respect of their direct and/or indirect shareholdings, if any, at the EGM to be convened in respect of the resolutions to be tabled for their respective proposed allocation, if any, as well as the specific allocations to any persons connected to them under the Proposed ESOS. 16
Further, all the Directors of the Company have undertaken that they will ensure that all persons connected to them will abstain from voting in respect of their direct and/or indirect shareholdings in Gadang, if any, on the relevant resolutions pertaining to the entitlements of the respective Directors and the persons connected to them under the Proposed ESOS to be tabled at an EGM to be convened. 7. BOARD S RECOMMENDATION The Board, having considered all aspects of the Proposals, is of the opinion that the Proposals are in the best interest of the Company. However, in view that individual members of the Board are deemed interested in the Proposed ESOS to the extent of their respective allocations (if any) under the Proposed ESOS, they will abstain from expressing an opinion and making any recommendation on their respective allocations (if any) under the Proposed ESOS. 8. ADVISER RHB Investment Bank has been appointed by the Company to act as the Principal Adviser for the Proposals. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Board expects the Proposals to be completed by the end of 2016. 10. APPLICATION TO RELEVANT AUTHORITIES Barring any unforeseen circumstances, the applications to the relevant authorities for the Proposals are expected to be submitted within one (1) month from the date of this announcement. This announcement is dated 25 August 2016. 17
APPENDIX I The indicative salient terms of Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants, are set out as follows:- Issue size : 129,311,689 Warrants to be issued in conjunction with the Proposed Bonus Issue of Warrants. Form and denomination : The Warrants will be issued in registered form and constituted by the deed poll. Exercise Rights : Each Warrant entitles the Warrantholders, at any time during the Exercise Period, to subscribe for one (1) new Share at the Exercise Price, subject to adjustments in accordance with the provisions of the deed poll. Exercise Period : The Warrants may be exercised at any time within a period of five (5) years commencing from and including the date of issuance of the Warrants and ending at 5.00 p.m. on the Expiry Date. Any Warrants not exercised during the Exercise Period will thereafter lapse and cease to be valid. Exercise Price : The exercise price of the Warrants will be determined by the Board and announced at a later date, after taking into consideration, amongst others, the theoretical ex-all price of the Shares at a price-fixing date to be determined by the Board and the par value of the Shares, subject further to any adjustments in accordance with the provisions of the deed poll. Expiry Date : The day falling immediately before the fifth (5th) anniversary of the date of issuance of the Warrants and if such date is not a market day, then it shall be the market day immediately preceding the said non market day, but excluding those days during that period on which the Record of Depositors and/or the warrants register is or are closed. Mode of exercise : The Warrantholder must complete and sign the exercise notice (which shall be irrevocable) and deliver the duly completed and executed exercise notice to the Company s registrar together with a remittance by way of banker s draft or cashier s order or money order or postal order drawn on a bank or post office operating in Malaysia. Board lot : For the purpose of trading on Bursa Securities, a board lot of Warrants shall comprise of 100 Warrants or as varied from time to time by any relevant authorities carrying the right to subscribe for 100 new Shares. Adjustments in the Exercise Price and/or number of Warrants Rights of the Warrantholders : Subject to the provisions of the deed poll, the Exercise Price and/or number of Warrants shall be adjusted by the Board in consultation with an approved adviser appointed by the Company and/or certification by the auditors of the Company in the event of alteration to the share capital of the Company. : The Warrantholders shall not be entitled to participate in any dividends, rights, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the new Shares upon the exercise of the Warrants. The Warrantholders are not entitled to any voting rights or right to participation in any form of distribution and/or offer of securities in the Company until and unless such Warrantholders exercise their Warrants into new Shares. 18
APPENDIX I Rights in the event of winding up, liquidation, compromise and/or arrangement : If a resolution is passed for a members voluntary winding up of the Company or there is a compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with one or more companies, then:- (i) for the purposes of such winding-up, compromise or arrangement (other than a consolidation, amalgamation or merger in which the Company is the continuing corporation) to which the Warrantholders, or some persons designated by them for such purpose by a special resolution will be a party, the terms of such winding up, compromise and arrangement shall be binding on all the Warrantholders; or (ii) every Warrantholder shall be entitled (subject to the conditions) at any time within six (6) weeks after the passing of such resolution for a members voluntary winding up of the Company or six (6) weeks after the granting of the court order approving the compromise or arrangement, by the irrevocable surrender of his Warrants to the Company, elect to be treated as if he had immediately prior to the commencement of such winding up, compromise or arrangement exercised the Exercise Rights represented by such Warrants to the extent specified in the exercise notice(s) and be entitled to receive out of the assets of the Company which would be available in liquidation as if he had on such date been the holder of the Shares to which he would have become entitled pursuant to such exercise and the liquidator of the Company shall give effect to such election accordingly. Upon the expiry of the above six (6) weeks, all exercise rights of the Warrants shall lapse and cease to be valid for any purpose. Modification of rights of the Warrantholders : The Company may, from time to time, without the consent or sanction of the Warrantholders but in accordance with the deed poll, modify the deed poll, if such modification made does not materially prejudice the interests of the Warrantholders or is made to correct a manifest error or to comply with prevailing laws of Malaysia, Rules of Bursa Malaysia Depository Sdn Bhd, Securities Industry (Central Depositories) Act, 1991 and/or the Listing Requirements. Subject to the approval of any relevant authority, any modification, alteration or abrogation of the covenants or provisions contained in the deed poll proposed or agreed to by the Company must be sanctioned by special resolution of the Warrantholders, effected by the deed poll, executed by the Company and expressed to be supplemental and comply with the requirements of the deed poll. Listing status : The Warrants shall be listed and quoted on the Main Market of Bursa Securities. Governing Law : The deed poll shall be governed by the laws and regulations of Malaysia. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 19