HARTALEGA ( HARTALEGA OR THE COMPANY ) PROPOSED BONUS ISSUE 1. INTRODUCTION On behalf of the Board of Directors of Hartalega ( Board ), RHB investment Bank Berhad ( RHB Investment Bank ) wishes to announce that the Company proposes to undertake the a proposed bonus issue of up to 1,714,282,414 new ordinary shares in the Company ( Hartalega Shares or Shares ) ( Bonus Shares ) on the basis of 1 Bonus Share for every 1 existing Hartalega Share held on an entitlement date to be determined and announced later ( Entitlement Date ) ( Proposed Bonus Issue ). 2. DETAILS OF THE PROPOSED BONUS ISSUE 2.1 Basis and number of Bonus Shares to be issued The Proposed Bonus Issue will entail the issuance of up to 1,714,282,414 Bonus Shares on the basis of 1 Bonus Share for every 1 existing Hartalaga Share held by the entitled shareholders of Hartalega whose names appear in the Record of Depositors of Hartalega at the close of business on the Entitlement Date. The actual number of Bonus Shares to be issued will depend on the number of issued Hartalega Shares prior to the implementation of the Proposed Bonus Issue. As at 30 January 2018, being the latest practicable date prior to the date of this announcement ( LPD ): (i) the issued share capital of Hartalega is RM881,541,684 comprising 1,652,905,014 Hartalega Shares; and there are 61,377,400 outstanding options granted under Hartalega s existing employees share options scheme ( ESOS Options ) ( Outstanding ESOS Options ) which have not been exercised. Based on the above, assuming the Outstanding ESOS Options are exercised prior to the implementation of the Proposed Bonus Issue, a total of 1,714,282,414 Bonus Shares will be issued pursuant to the Proposed Bonus Issue. Fractional entitlements arising from the Proposed Bonus Issue, if any, shall be disregarded and dealt with in such manner as the Board shall in its absolute discretion deem fit and expedient, and to be in the best interest of the Company and its shareholders. The Proposed Bonus Issue will not be implemented on a staggered basis. For illustration purposes, based on the 5-day volume weighted average price ( VWAP ) of Hartalega Shares up to and including the LPD of RM11.79, the theoretical ex-bonus share price of Hartalega Shares is RM5.90. Further, the Board confirms that the share price adjusted for the Proposed Bonus Issue is not less than RM0.50 based on the daily VWAP during the past 3-month period up to the LPD in accordance with Paragraph 6.30(1A) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Listing Requirements ). 1
2.2 Capitalisation of reserves The Proposed Bonus Issue shall be capitalised wholly from the retained earnings of the Company at RM0.25 for each Bonus Share. Based on the Company s latest audited financial statements for the financial year ended ( FYE ) 31 March 2017 and the latest unaudited financial statements for the 9 months financial period ended ( FPE ) 31 December 2017, the proforma effects of the Proposed Bonus Issue on the retained earnings of the Company and taking into consideration certain events, are illustrated based on the following scenarios: Minimum : Assuming that none of the Outstanding ESOS Options are exercised into new Hartalega Shares prior to the implementation of the Proposed Bonus Issue. Maximum : Assuming that the Outstanding ESOS Options are exercised into 61,377,400 new Hartalega Shares prior to the implementation of the Proposed Bonus Issue. Audited as at 31 March 2017 Unaudited as at 31 December 2017 Company level Minimum Maximum Minimum Maximum RM 000 RM 000 RM 000 RM 000 Retained earnings 49,543 49,543 43,680 43,680 Events: Add: Receipt of dividends from wholly-owned subsidiaries (1) 620,521 620,521 498,515 498,515 Less: Payment of dividend to shareholders of Hartalega (2) (131,959) (131,959) - - Adjusted balance 538,105 538,105 542,195 542,195 Less: Amount to be capitalised for the Proposed Bonus Issue Estimated expenses for the Proposed Bonus Issue Balance after the Proposed Bonus Issue (413,226) (428,571) (413,226) (428,571) (230) (230) (230) (230) 124,649 109,304 128,739 113,394 2
Notes: (1) Being interim dividend received between 1 April 2017 to LPD from the following wholly-owned subsidiaries of Hartalega: Subsidiaries Hartalega Sdn Bhd Total dividend received between 1 April 2017 to LPD (RM 000) Total dividend received between 1 January 2018 to LPD (RM 000) - Third interim dividend received on 19 June 2017 31,364 - - Final interim dividend received on 21 September 2017 32,932 - - First interim dividend received on 22 December 2017 57,710 - - Second interim dividend received on 22 January 2018 407,732 407,732 Hartalega NGC Sdn Bhd - First interim dividend received on 22 January 2018 90,783 90,783 Total 620,521 498,515 (2) Payment of dividend to the shareholders of the Company comprising the following: Payment of Dividend Third interim single tier dividend of 2.0 sen per Share in respect of the FYE 31 March 2017 paid on 23 June 2017 Final interim single tier dividend of 2.5 sen per Share in respect of the FYE 31 March 2017 paid on 27 September 2017 First interim single tier dividend of 3.5 sen per Share in respect of the FYE 31 March 2018 paid on 28 December 2017 RM 000 32,879 41,255 57,825 Total 131,959 There was no payment of dividend to the shareholders of the Company between 1 January 2018 to LPD. The Board confirms that based on the Company s audited financial statements for the FYE 31 March 2017 and the unaudited financial statements for the 9 months FPE 31 December 2017 after taking into consideration the subsequent events between 1 April 2017 to LPD, the Company has sufficient reserves available for the capitalisation of the Bonus Shares in compliance with Paragraph 6.30(2)(b) of the Listing Requirements. The Board will obtain a letter from the Reporting Accountants for the Proposed Bonus Issue, namely Messrs. Deloitte, confirming that based on the Company s audited financial statements for the FYE 31 March 2017 and the unaudited financial statements for the 9 months FPE 31 December 2017 after taking into consideration the subsequent events between 1 April 2017 to LPD, the Company has sufficient reserves available for the capitalisation of the Bonus Shares pursuant to Paragraph 6.30(2)(b) of the Listing Requirements. 2.3 Ranking of the Bonus Shares The Bonus Shares shall, upon allotment and issuance, rank pari passu in all respects with the then existing Hartalega 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 is before the allotment date of the Bonus Shares. 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. 3
3. RATIONALE AND JUSTIFICATION FOR THE PROPOSED BONUS ISSUE The Board is of the view that the Proposed Bonus Issue is the most appropriate avenue of rewarding the existing shareholders of the Company for their continuous support while at the same time, enhance the Company's capital base as the Proposed Bonus Issue will: (i) increase the Company's issued share capital to a level which would be more reflective of its current scale of operations and assets employed by Hartalega and its subsidiaries ( Group ); and possibly able to encourage trading liquidity of Hartalega Shares on Bursa Securities and greater participation by investors as well as potentially broadening the shareholder base of the Company. 4. EFFECTS OF THE PROPOSED BONUS ISSUE 4.1 Issued share capital For illustration purposes, the proforma effects of the Proposed Bonus Issue on the share capital of Hartalega are as follows: Minimum No. of Shares 000 RM 000 Maximum No. of Shares 000 RM 000 Share capital as at LPD 1,652,905 881,542 1,652,905 881,542 Issuance of Hartalega Shares pursuant to the exercise of the Outstanding ESOS Options Transfer from the share-based payment reserves upon exercise of ESOS Options - - 61,377 270,463 - - - 40,944 1,652,905 881,542 1,714,282 1,192,949 Shares to be issued pursuant to the Proposed Bonus Issue 1,652,905 413,226 1,714,282 428,571 Enlarged share capital 3,305,810 1,294,768 3,428,564 1,621,520 THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 4
4.2 Net assets ( NA ) per Share and gearing Based on the latest audited consolidated financial statements of Hartalega as at 31 March 2017, the proforma effects of the Proposed Bonus Issue on the NA per Share and gearing of the Group are as follows: Minimum Maximum (I) (II) (I) (II) (III) After (I) and assuming full Group level Audited as at 31 March 2017 (1) After adjustment for subsequent events After (I) and the Proposed Bonus Issue (1) After adjustment for subsequent events exercise of the Outstanding ESOS Options (3) After (II) and the Proposed Bonus Issue RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Share capital 830,316 881,542 1,294,768 881,542 (5) 1,192,949 1,621,520 Translation reserves 805 (8) (8) (8) (8) (8) Share-based payment reserves 37,508 (2) 40,944 40,944 (2) 40,944 (5) - - Retained earnings 813,532 (3) 1,004,109 (4) 590,653 (3) 1,004,109 1,004,109 (4) 575,308 Shareholders equity / NA 1,682,161 1,926,587 1,926,357 1,926,587 2,197,050 2,196,820 No. of Shares in issue ('000) 1,643,010 1,652,905 3,305,810 1,652,905 1,714,282 3,428,564 NA per Share (RM) 1.02 1.17 0.58 1.17 1.28 0.64 Total borrowings (RM'000) 310,042 294,228 294,228 294,228 294,228 294,228 Gearing (times) 0.18 0.15 0.15 0.15 0.13 0.13 Notes: (1) Reflects the unaudited results for the 9 months FPE 31 December 2017. (2) Includes share-based payment of approximately RM0.21 million for the grant of ESOS Options from 1 January 2018 up to LPD. (3) After reducing the share-based payment as set out in Note (2) above. (4) After deducting the estimated expenses in relation to the Proposed Bonus Issue amounting to RM230,000. (5) After taking into consideration of the following: (i) Assuming all Outstanding ESOS Options are exercised; and The transfer of share-based payment reserves upon the exercise of all Outstanding ESOS Options. 5
4.3 Earnings and earnings per Share ( EPS ) The Proposed Bonus Issue is not expected to have any material effect on the earnings of the Group for the financial year ending 31 March 2018. However, there will be a corresponding dilution in the EPS of the Group as a result of the increase in the number of Hartalega Shares in issue pursuant to the Proposed Bonus Issue. 4.4 Substantial shareholders shareholdings The Proposed Bonus Issue will not have any effect on the substantial shareholders shareholdings in Hartalega as the Bonus Shares will be allotted on a pro-rata basis to all the shareholders of the Company. However, the number of Hartalega Shares held by the substantial shareholders will increase proportionately pursuant to the Proposed Bonus Issue. 4.5 Convertible securities As at LPD, save for the Outstanding ESOS Options, the Company does not have any existing convertible securities. Consequential to the Proposed Bonus Issue, the number and exercise price of the granted ESOS Options which have not been exercised prior to the Entitlement Date may be adjusted in accordance with the Company s by-laws governing the ESOS Options. Any such adjustment will only be finalised on the Entitlement Date and will be effective on the next market day after the Entitlement Date, and the relevant notification will be despatched to the holders of the ESOS Options at a later date. 5. APPROVALS REQUIRED The Proposed Bonus Issue is conditional upon the following approvals being obtained: (i) (iii) Bursa Securities for the listing of and quotation for the Bonus Shares on the Main Market of Bursa Securities; the shareholders of Hartalega at an extraordinary general meeting to be convened for the Proposed Bonus Issue; and any other relevant authorities and/or parties, if required. The Proposed Bonus Issue is not conditional upon any other corporate exercise undertaken or to be undertaken by the Company. 6. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders of Hartalega and/or persons connected to them have any interest, either direct or indirect, in the Proposed Bonus Issue, apart from their respective entitlements to the Proposed Bonus Issue, which are also available to all other shareholders of the Company. 6
7. DIRECTORS STATEMENT The Board, having considered all aspects of the Proposed Bonus Issue, is of the opinion that the Proposed Bonus Issue is in the best interests of the Company and its shareholders. 8. ADVISER RHB Investment Bank has been appointed as the Adviser to the Company for the Proposed Bonus Issue. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to all requisite approvals being obtained, the Proposed Bonus Issue is expected to be completed in the first quarter of 2018. 10. APPLICATION TO THE RELEVANT AUTHORITIES Barring any unforeseen circumstances, the application to the relevant authorities in relation to the Proposed Bonus Issue is expected to be made within one month from the date of this announcement. This announcement is dated 6 February 2018. 7