Bonus in Shares

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On April 30, 2019, the Extraordinary General Meeting of Lojas Renner S.A. ("Company") approved a bonus share at the ratio of 10% (ten percent), corresponding to the issue of 72,002,450 new common shares, whereby 1 (one) new share will be issued for every 10 (ten) existing common shares as at that date with an attributed unit cost of R$ 14.44.

The new shares will be distributed free of charge to shareholders in an amount equivalent the latter’s shareholding stake in the Company and the ratio mentioned above. Bonus shares will be entitled in full to the rights attributed to them as from the date of the Meeting and credited to shareholder positions on May 7, 2019. As from May 2, 2019 the shares issued by the Company have been traded "ex-rights" bonus shares.

Consequently, the price of the LREN3 shares opened the trading day, May 2, 2019 reflecting the bonus, the share price having been adjusted by -9.0909%. Thus, LREN3 which closed on April 30, 2019 at R$ 46.88 reopened the following day at R$ 42.62 (-9.0909%).

PROCEDURES FOR ENTERING THE BONUS SHARES IN THE PERSONAL TAX RETURN (IRPF) OR FOR THE PURPOSES OF CALCULATING INCOME TAX IN THE EVENT OF A SALE OF THE SHARES

The bonus shares should be entered to the Shareholder’s Personal Income Tax Return under the Exempted Income and Non-Taxable section, line 18 - Incorporation of Reserves to Capital / Bonus Shares. The amount to be considered will be found by multiplying the attributed unit cost by the number of bonus shares. This same amount should be added to the historical cost of the shares already recorded in the section Assets and Rights, line 31 - Shares.


Example of an entry:

On December 31, 2018, the shareholder held 1,000 common shares issued by Lojas Renner S.A. (LREN3) and reported in his Income Tax Return at the unit cost of R$ 24.00, totaling R$ 24,000.00 (representing the amount paid for the acquisition of the shares).


Following the approval of the aforementioned bonus, and should he have maintained his position of 1,000 shares up to May 2, 2019, the shareholder would have received 100 bonus shares (10% calculated on the shareholding position of 1,000 shares), thus holding a new outstanding balance of 1,100 shares.


As per the Notice to Shareholders, the unit cost for each one of the Company’s bonus shares is R$ 14.44 per share. Hence, the total cost of these bonus shares received by the shareholder is R$ 1,444.00 (R$ 14.44 of the attributed unit cost multiplied by 100 shares received by way of the bonus).


Should the shareholder continue to maintain these shares until December 31, 2019, this amount should be entered in the Income Tax Return, under the Exempted Income and Non-Taxable section, line 18 - Incorporation of Reserves to Capital / Bonus Shares, at the same time adding the amount to the historical cost of the shares in the Assets and Rights section of the Return.


Continuing with the example described above, the shareholder who has recorded the historical cost of R$ 24,000,00 for his 1,000 shares in his Income Tax Return, shall now show a total cost of R$ 25,444.00 for his 1,100 shares at a unit cost of R$ 23.13.


When he eventually sells his 1,100 shares, for the purposes of calculating income tax on the capital gain, this same shareholder should consider the new historical cost of the shares, that is R$ 25,444.00.