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1. INTRODUCTION

AmMerchant Bank Berhad, on behalf of the Board of Directors of Engtex (Board), is pleased to announce that the Company proposes to:

(a) implement a bonus issue of 15,000,000 new ordinary shares of RM1.00 each (Bonus Shares ) on the basis of one (1) new ordinary share for every four (4) existing ordinary shares held on an entitlement date to be determined later (Proposed Bonus Issue); and

(b) implement an employees' share option scheme (ESOS) of up to ten percent (10%) of the issued and paid-up share capital of Engtex (ESOS Shares).

(Collectively referred to as the Proposals).

2. DETAILS OF THE PROPOSED BONUS ISSUE

2.1 Capitalisation of Reserves

The Proposed Bonus Issue is to be capitalised from the share premium account of Engtex. As at 31 December 2002, the audited share premium account of Engtex was RM15,579,610.
The movement of the share premium account of the Company after taking into consideration the Proposed Bonus Issue is as illustrated in Table 1.

2.2 Rationale for the Proposed Bonus Issue

The Proposed Bonus Issue will increase the capital base of the Company to a level which will better reflect the Companys current scale of operations and the increase in the assets employed by the Company. The Proposed Bonus Issue will also serve to reward the shareholders for their continuous support to the Company.

2.3 Ranking of the Bonus Shares

The Bonus Shares shall, upon allotment and issuance, rank pari passu in all respects with the existing Shares of the Company, except that they will not be entitled to participate in any dividends, rights, allotments and/or any other forms of distribution that may be declared, made or paid before the allotment of the Bonus Shares.

3. DETAILS OF THE PROPOSED ESOS

3.1 Size of ESOS

The maximum number of ESOS Shares to be offered and accepted under the Proposed ESOS shall not in aggregate exceed ten percent (10%) of the issued and paid-up share capital of the Company at any point in time during the existence of the Proposed ESOS.

3.2 Eligibility

All employees, including the executive directors of the Engtex Group (Engtex and its subsidiary companies) will be eligible to participate in the Proposed ESOS provided they meet the conditions for eligibility stipulated in the By-Laws. The Proposed ESOS will be administered by an option committee appointed by the Board. The number of options to be offered to each eligible employee shall be determined at the discretion of the option committee after taking into consideration (inter alia) the position, the seniority, performance and number of years in service of each eligible employee.

3.3 Duration

The Proposed ESOS shall be in force for a period of five (5) years from its effective date. Engtex may, if the Board deems fit and upon the recommendation of the options committee extend the Proposed ESOS for a further period of five (5) years.

3.4 Subscription Price

The price payable upon the exercise of the ESOS options under the Proposed ESOS shall be the higher of the following:-

(a) the weighted average market price of the Shares as shown in the daily official list issued by the KLSE for the five (5) Market Days immediately preceding the date of offer, subject to a discount of not more than ten percent (10%) at the option committees discretion; or

(b) the par value of the Shares.

3.5 Rationale for the Proposed ESOS

The rationale for the Proposed ESOS are as follows:

(a) to recognise the contribution of eligible employees and executive directors whose services are valued and considered vital to the operations and continued growth of the Engtex Group;

(b) to motivate eligible employees and executive directors of the Engtex Group towards better performance through greater productivity and loyalty;

(c) to create a greater sense of belonging and dedication since eligible employees and executive directors are given the opportunity to participate directly in the equity of the Company;

(d) to encourage eligible employees to remain with the Engtex Group thus ensuring that the loss of key personnel is kept to a minimum level; and

(e) to reward eligible employees and executive directors by allowing them to participate in the Companys profitability and eventually realise capital gains arising from any appreciation in the value of the Companys shares.

3.6 Ranking

The ESOS Shares, upon allotment and issuance, shall rank pari passu in all respects with the existing Shares of the Company except that they will not be entitled to any dividend or other distribution which may be declared, made or paid prior to the date of allotment of the ESOS Shares.

4. FINANCIAL EFFECTS

The financial effects of the Proposals shall be as follows:

4.1 Share Capital

Upon completion of the Proposed Bonus Issue and the Proposed ESOS, assuming the full exercise of the options granted under the Proposed ESOS, the issued and paid-up share capital of the Company will be increased from RM60,000,000 to RM82,500,000 comprising 82,500,000 Shares as shown in Table 1.

4.2 Net Tangible Assets (NTA)

Based on the audited consolidated accounts of the Engtex Group as at 31 December 2002, the effects of the Proposed Bonus Issue and Proposed ESOS, assuming the full exercise of the options granted on the NTA of the Engtex Group are shown in Table 1.

4.3 Substantial Shareholders

The effects of the Proposals on the substantial shareholders of the Engtex Group are shown in Table 2.

4.4 Earnings

Both the Proposed Bonus Issue and Proposed ESOS are not expected to have any material effect on the earnings of the Engtex Group for the financial year ending 31 December 2004. There will however be a proportionate reduction in Engtex Group's earnings per share as a result of the increase in the issued and paid-up share capital of Engtex Group arising from the Proposed Bonus Issue for the financial year ending 31 December 2004. Any potential earnings effect of the Proposed ESOS will depend on the number of options granted and exercised at any point in time as well as the price payable upon the exercise of the options.

4.5 Dividends

The Company paid a gross dividend of 7.0% for the financial year ended 31 December 2002. Barring any unforeseen circumstances, the Company expects to maintain the quantum of dividends for the financial year ending 31 December 2003.

5. DIRECTORS AND SUBSTANTIAL SHAREHOLDERS INTEREST

Save for the respective entitlements of the Directors and substantial shareholders of Engtex pursuant to the Proposed Bonus Issue, which entitlement is also available to all the other shareholders of Engtex and as disclosed below, none of the other Directors or substantial shareholders of Engtex or persons connected to the Directors or substantial shareholders of Engtex have any interest direct or indirect, in the Proposed Bonus Issue.

Ng Hook, Ng Chooi Guan, Yap Seng Kuan and Ng Yik Soon, being the Executive Directors of the Company (collectively referred as "Interested Directors"), are entitled to participate in the Proposed ESOS and are therefore deemed interested in respect of their respective entitlements under the Proposed ESOS. The aforesaid Interested Directors have abstained and will continue to abstain from all deliberations and voting on their respective entitlements under the Proposed ESOS at the relevant meetings of the Board.

The Interested Directors will abstain from voting in respect of their direct and indirect shareholdings in Engtex on the ordinary resolutions pertaining to their respective entitlements under the Proposed ESOS to be tabled at the forthcoming EGM and undertake to ensure that persons connected to them will also abstain from voting on the same matter.

6. CONDITIONS TO THE PROPOSALS

The Proposals are subject to the following approvals being obtained:-

(a) the Securities Commission for the Proposed Bonus Issue via capitalisation of the share premium account and for the Proposed ESOS;

(b) the shareholders of Engtex at an EGM to be convened to approve the Proposals;

(c) the KLSE for the listing of and quotation of the Bonus Shares and new shares arising from the exercise of the options under the Proposed ESOS; and

(d) any other relevant authorities.


7. DIRECTORS STATEMENT

The Board is of the opinion that the Proposed Bonus Issue is in the best interests of the Company.

Save for the Interested Directors (who have abstained from expressing any opinion and recommendation relating to their specific entitlements under the Proposed ESOS), the Board is also of the opinion that the Proposed ESOS is in the best interests of the Company.

8. ADVISER

AmMerchant Bank has been appointed by Engtex as adviser for the Proposals.

9. DEPARTURE FROM THE SCS POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES (SC GUIDELINES)

To the best knowledge of the Board, there are no departures from the SC Guidelines in undertaking the Proposals.

10. SUBMISSION TO THE SC

The submission to the SC for the Proposals is expected to be made within three (3) months from the date of this announcement.


11. EXPECTED TIMEFRAME FOR COMPLETION

The Proposals are expected to be completed by first half of 2004.

This announcement is dated 11 September 2003.

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