PASUKHAS GROUP BERHAD (Company No A) (Incorporated in in Malaysia under the Companies Act, 1965)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. Shareholders of Pasukhas Group Berhad ( PGB ) should rely on their own evaluation to assess the merits and risks of the Proposals (as defined herein). If you are in any doubt as to the course of action you should take, you should consult your stockbroker, THIS CIRCULAR bank manager, IS IMPORTANT solicitor, AND accountant REQUIRES or other YOUR adviser IMMEDIATE immediately. ATTENTION. Bursa Shareholders Malaysia of Pasukhas Securities Group Berhad Berhad ( Bursa ( PGB ) Securities ) should has rely on not their perused own evaluation the contents to assess of this the Circular merits in and relation risks to of the the Proposed Proposals Increase (as defined in Authorised herein). If you Share are Capital in any and doubt the as Proposed to the course Amendments of action (as you defined should herein) take, you prior should to the consult issuance your of stockbroker, this Circular as bank it is manager, an exempt solicitor, document accountant pursuant or to other Guidance adviser Note immediately. 22 of the ACE Market Listing Requirements of Bursa Securities. Bursa Securities takes no responsibility for the contents of this Circular, makes no representation as to its accuracy Bursa Malaysia or completeness Securities Berhad and expressly ( Bursa disclaims Securities ) any has liability not whatsoever perused the for contents any loss of this howsoever Circular arising in relation from to or the in reliance Proposed upon Increase the whole in Authorised any part Share of the Capital contents and of the this Proposed Circular. Amendments (as defined herein) prior to the issuance of this Circular as it is an exempt document pursuant to Guidance Note 22 of the ACE Market Listing Requirements of Bursa Securities. This Circular Bursa has been Securities reviewed takes by no Hong responsibility Leong Investment for the Bank contents Berhad, of this who Circular, is the Adviser makes to no PGB representation for the Proposals as to (as its accuracy defined herein). or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. This Circular has been reviewed by Hong Leong Investment Bank Berhad, who is the Adviser to PGB for the Proposals (as defined herein). PASUKHAS GROUP BERHAD (Company No A) (Incorporated in in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE: PART A (I) (II) (III) (IV) (V) (VI) (VII) PROPOSED ACQUISITION OF PASUKAN KHAS CONSTRUCTION SDN BHD; PROPOSED ACQUISITION OF I.S. ENERGY SDN BHD; PROPOSED DIVERSIFICATION; PROPOSED PRIVATE PLACEMENT; PROPOSED RIGHTS ISSUE; PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL; AND PROPOSED AMENDMENTS PART B INDEPENDENT ADVICE LETTER TO THE NON-INTERESTED SHAREHOLDERS OF PGB IN RELATION TO THE PROPOSED ACQUISITION OF PKC AND NOTICE OF EXTRAORDINARY GENERAL MEETING Principal Adviser for Part A Independent Adviser for Part B Mercury Securities Sdn Bhd ( W) (A (A Participating Organisation of of Bursa Malaysia Securities Berhad) The Notice of of Extraordinary General Meeting ( EGM ) of of PGB to to be be held at at Wisma Modal Khas, Lot 5815-A, Jalan Mawar, Taman Bukit Serdang, Seksyen 9, 9, Seri Kembangan, Selangor Darul Ehsan, Malaysia on on Thursday, 8 December 2016 at at a.m. or or any adjournment, together with the Form of of Proxy, is is enclosed herein. The Form of of Proxy should be be lodged at at the registered office of of PGB at at th th Floor, Menara Hap Seng, No. 1 & 3, 3, Jalan P. P. Ramlee, Kuala Lumpur, not later than forty-eight (48) hours before the time appointed for for holding the EGM. The lodging of of the Form of of Proxy will not preclude you from attending and voting in in person at at the meeting should you subsequently wish to to do do so. for of : Last date and time for lodging the Form of Proxy : Tuesday, 6 December 2016 at at a.m. for : Date and time for the EGM : Thursday, 8 December 2016 at at a.m. or or at at any adjournment thereof This Circular is is dated November 2016

2 CIRCULAR TO SHAREHOLDERS IN RELATION TO PART A (I) (II) (III) PROPOSED ACQUISITION BY PASUKHAS GROUP BERHAD ( PGB ) OF 70% EQUITY INTEREST IN PASUKAN KHAS CONSTRUCTION SDN BHD ( PKC ) FOR A PURCHASE CONSIDERATION OF RM17,223,990 TO BE SATISFIED VIA THE ISSUANCE OF 45,610,566 NEW ORDINARY SHARES OF RM0.10 EACH IN PGB ( PGB SHARES ), AT AN ISSUE PRICE OF RM0.205 PER PGB SHARE AND RM7,873,824 IN CASH ( PROPOSED ACQUISITION OF PKC ); PROPOSED ACQUISITION BY PASUKHAS ENERGY SDN BHD, A WHOLLY OWNED SUBSIDIARY OF PGB, OF 100% EQUITY INTEREST IN I.S. ENERGY SDN BHD ( ISE ) AND THE INTER-COMPANY ADVANCES OWED BY ISE TO ITS HOLDING COMPANY, MASER (M) SDN BHD FOR A TOTAL CASH CONSIDERATION OF RM14.3 MILLION ( PROPOSED ACQUISITION OF ISE ); PROPOSED DIVERSIFICATION OF THE EXISTING CORE BUSINESSES OF PGB TO INCLUDE ENERGY UTILITIES SERVICES AND POWER GENERATION BUSINESS ( PROPOSED DIVERSIFICATION ); (IV) PROPOSED PRIVATE PLACEMENT OF UP TO 37,011,157 NEW PGB SHARES, REPRESENTING 10% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF PGB AFTER THE PROPOSED ACQUISITION OF PKC ( PROPOSED PRIVATE PLACEMENT ); (V) (VI) PROPOSED RIGHTS ISSUE OF UP TO 407,122,722 PGB SHARES ( RIGHTS SHARES ) ON THE BASIS OF 1 RIGHTS SHARE FOR EVERY 1 EXISTING PGB SHARE HELD BY THE SHAREHOLDERS OF PGB ON AN ENTITLEMENT DATE TO BE DETERMINED LATER BY THE BOARD AFTER THE PROPOSED ACQUISITIONS AND PROPOSED PRIVATE PLACEMENT ( PROPOSED RIGHTS ISSUE ); PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL OF PGB ( PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL ); AND (VII) PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF PGB ( PROPOSED AMENDMENTS ). PART B INDEPENDENT ADVICE LETTER TO THE NON-INTERESTED SHAREHOLDERS OF PGB IN RELATION TO THE PROPOSED ACQUISITION OF PKC AND NOTICE OF EXTRAORDINARY GENERAL MEETING

3 DEFINITIONS Act : Companies Act, 1965, as amended from time to time Average PAT : 3-year average PAT of PKC for the FYE 31 December 2013, 2014 and 2015 of RM3,936,912 Balance Settlement Sum Board Bursa Depository Bursa Securities Circular CMSA Code Consideration Shares DSTAK Debt EBITDA EGM Entitled Shareholders Entitlement Date EPS EV EV/EBITDA Ratio FYE FPE GWh : Being the Settlement Sum less the ISE DA Deposit : Board of Directors of PGB : Bursa Malaysia Depository Sdn Bhd : Bursa Malaysia Securities Berhad : Circular dated 16 November 2016 to the shareholders of PGB : Capital Markets and Services Act, 2007, as amended from time to time : Malaysian Code on Take-Overs and Mergers, 2010 which has been subsequently replaced with the Malaysian Code on Take-Overs and Mergers 2016 : 45,610,566 new PGB Shares to be issued at an issue price of RM0.205 per PGB Share as part payment of the PKC Purchase Consideration : Dato Seri Teng Ah Kiong : Inter-company advances owed by ISE to its holding company, Maser as at 30 June 2016 : Earnings before interest, taxation, depreciation and amortisation : Extraordinary General Meeting : Shareholders whose names appear in the Record of Depositors of PGB on the Entitlement Date : A date to be determined by the Board and announced later, on which the shareholders of PGB must be registered in the Record of Depositors as at 5.00 p.m. in order to participate in the Proposed Rights Issue : Earnings per share : Enterprise Value : EV to EBITDA ratio : Financial year ended/ending, as the case may be : Financial period ended/ending, as the case may be : Gigawatt hour i

4 DEFINITIONS (Cont d) HLIB : Hong Leong Investment Bank Berhad IAL : Independent advice letter from Mercury Securities dated 16 November 2016 in relation to the Proposed Acquisition of PKC Independent Adviser or Mercury Securities ISE ISE Completion Date ISE DA ISE DA Deposit ISE Purchase Consideration ISE Shares ISE SSA ISE SSA Consideration ISE SSA Deposit KWH Listing Requirements LAT LPD LTD Maser Maximum Scenario Minimum Scenario : Mercury Securities Sdn Bhd : I.S. Energy Sdn Bhd : 40 days from the date on which all the conditions precedent set out in the ISE SSA are satisfied or waived, unless mutually extended by the parties : Debt settlement agreement dated 2 August 2016 entered into between PESB, Maser and ISE for the settlement of inter-company advances owed by ISE to Maser : Deposit and part payment of the Settlement Sum of RM2,610,000 upon the execution of the ISE DA : The aggregate purchase consideration of RM14,300,000 for the Proposed Acquisition of ISE, comprising the ISE SSA Consideration and Settlement Sum : Ordinary shares of RM1.00 each in ISE : Conditional share sale agreement dated 2 August 2016 entered into between PESB, a wholly owned subsidiary of PGB, and Maser for the Proposed Acquisition of ISE : Purchase price of RM1,000,000 in respect of the sale and purchase of the ISE Shares : Deposit and part payment of the ISE SSA Consideration of RM290,000 upon the execution of the ISE SSA : Kilowatt hour : ACE Market Listing Requirements of Bursa Securities, as amended from time to time : Loss after taxation : 2 November 2016, being the latest practicable date prior to the printing of this Circular : 1 August 2016, being the last trading day prior to the signing of PKC SSA and the date of the first announcement of the Proposals : Maser (M) Sdn Bhd, the holding company of ISE : Assuming all the Entitled Shareholders fully subscribed for their respective entitlements under the Proposed Right Issue : Assuming that the Proposed Rights Issue is to be undertaken on the Minimum Subscription Level ii

5 DEFINITIONS (Cont d) Minimum Subscription Level M&A MW NA PAT PATMI PE Ratio PESB PGB or Company PGB Group or Group PGB Shares or Shares PKC PKC Purchase Consideration PKC Completion Date PKC SHA PKC Shares PKC SSA PKC Vendors Placement Shares Profit Guarantee Proposals : A minimum subscription level of RM30,000,000 value of Rights Shares pursuant to the Proposed Rights Issue : Memorandum and Articles of Association : Megawatt : Net assets : Profit after taxation : Profit after taxation and minority interest : Price to earnings ratio : Pasukhas Energy Sdn Bhd (formerly known as Bidara Majujaya Sdn Bhd), a wholly-owned subsidiary of PGB : Pasukhas Group Berhad : PGB, its subsidiaries and associate company, collectively : Ordinary shares of RM0.10 each in PGB : Pasukan Khas Construction Sdn Bhd (formerly known as Pasukhas Construction Sdn Bhd) : The purchase consideration for the Proposed Acquisition of PKC of RM17,223,990 to be satisfied via the issuance of 45,610,566 PGB Shares, at an issue price of RM0.205 per PGB Share and the remaining RM7,873,824 in cash, subject to the adjustments in accordance with the terms of the PKC SSA : 40 days from the date on which all the the conditions precedent set out in the PKC SSA are satisfied or waived, unless mutually extended by the parties : Shareholders agreement between PGB and the PKC Vendors to govern the material aspects of the joint management and conduct of business of PKC : Ordinary shares of RM1.00 each in PKC : Conditional share sale agreement dated 2 August 2016 entered into between PGB, DSTAK, Wee Hiang Chyn and Ong Mei Lee for the Proposed Acquisition of PKC : DSTAK, Wee Hiang Chyn and Ong Mei Lee : New PGB Shares to be issued pursuant to the Proposed Private Placement : Profit guarantee of RM7,873,824 to be provided by the PKC Vendors : The Proposed Acquisitions, the Proposed Fund Raising Exercises, the Proposed Diversification, the Proposed Increase in Authorised Share Capital and the Proposed Amendments, collectively iii

6 DEFINITIONS (Cont d) Proposed Acquisitions Proposed Acquisition of ISE Proposed Acquisition of PKC Proposed Amendments Proposed Diversification Proposed Fund Raising Exercises Proposed Increase in Authorised Share Capital Proposed Private Placement Proposed Rights Issue Record of Depositors Remaining ISE Purchase Consideration Remaining PKC Cash Consideration Rights Issue Price Rights Shares RM and sen SC Settlement Sum SLC or PESB s Solicitors SSAs : The Proposed Acquisition of PKC and Proposed Acquisition of ISE, collectively : Proposed acquisition by PESB, a wholly-owned subsidiary of PGB, of 100% equity interest in ISE and the Debt owed by ISE to Maser for a total cash consideration of RM14.3 million, subject to adjustments in accordance with the terms of the ISE SSA and ISE DA : Proposed acquisition by PGB of 70% equity interest of PKC from the PKC Vendors for the PKC Purchase Consideration : Proposed amendments to the M&A of PGB to facilitate and implement the Proposed Increase in Authorised Share Capital : Proposed diversification of the existing core business of PGB to include energy utilities services and power generation business : Proposed Private Placement and Proposed Rights Issue, collectively : Proposed increase in the authorised share capital of PGB from RM50,000,000 comprising 500,000,000 PGB Shares to RM100,000,000 comprising 1,000,000,000 PGB Shares : Proposed private placement of up to 10% of the issued and paid-up share capital of our Company : Proposed renounceable rights issue of up to 407,122,722 Rights Shares on the basis of 1 Right Share for every 1 existing PGB Share held by the Entitled Shareholders of PGB on an Entitlement Date to be determined later after the Proposed Acquisition of PKC and Proposed Private Placement : A record of securities holders established by Bursa Depository under the rules of Bursa Depository : Being the ISE Purchase Consideration less the ISE SSA Deposit and ISE DA Deposit : Being the PKC Cash Consideration of RM7,873,824 less the cash deposit of RM1.00 : Issue price of the Rights Shares : Up to 407,122,722 new PGB Shares to be issued pursuant to the Proposed Rights Issue : Ringgit Malaysia and sen, respectively : Securities Commission Malaysia : Cash settlement sum of RM13,300,000 for the ISE DA, subject to adjustment based on the results of the financial due diligence to be carried out by the appointed auditors : Messrs Siew Lee & Co : ISE SSA and PKC SSA, collectively iv

7 DEFINITIONS (Cont d) Supplemental ISE DA Supplemental ISE SSA Supplemental agreement of ISE DA entered between Maser and PESB and ISE to vary and supplement the terms and conditions of ISE DA Supplemental agreement of ISE SSA entered between Maser and PESB to vary and supplement the terms and conditions of the ISE SSA Tara Temasek : Tara Temasek Sdn Bhd Target Companies : PKC and ISE, collectively TERP TNB UHY or Valuer Undertakings Undertaking Shareholders Valuation Report VWAMP : Theoretical ex-rights price : Tenaga Nasional Berhad : UHY FLVS Sdn Bhd, the independent valuer for ISE : Irrevocable written undertakings provided by the Undertaking Shareholders to subscribe in full for their respective entitlements for the Rights Shares and to also apply for a certain portion of the Rights Shares not taken up by the other Entitled Shareholders by way of excess Rights Shares application, so as to meet the Minimum Subscription Level : Tara Temasek, DSTAK and Dato Teng Yoon Kooi, collectively : An independent valuation report on the value of ISE carried by a qualified valuer : Volume weighted average market price All references to our Company in this Circular are to PGB, references to our Group are to PGB and our group of companies, collectively, and references to we, us, our and ourselves (save for in the IAL) are to our Company, and save where the context requires, shall include our subsidiaries and associated companies. All references to you in this Circular are to the shareholders of our Company. Words importing the singular only shall include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall include corporations. All references to the time of day in this Circular are references to Malaysian time, unless otherwise stated. Any discrepancy in the figures included in this Circular between the amounts stated and the totals thereof are due to rounding. For practical reasons, information disclosed in this Circular has been verified to be accurate as of the LPD before the printing of this Circular, unless stated otherwise. v

8 TABLE OF CONTENTS PAGE PART A LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSALS 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSALS 3 3. SALIENT TERMS OF THE AGREEMENTS UTILISATION OF PROCEEDS RATIONALE FOR THE PROPOSALS INDUSTRY OVERVIEW AND PROSPECTS PROSPECTS OF THE TARGET COMPANIES RISK FACTORS EFFECTS OF THE PROPOSALS HISTORICAL SHARE PRICES INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM APPROVALS REQUIRED/OBTAINED CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION RELATED PARTY TRANSACTIONS DIRECTORS STATEMENT AUDIT COMMITTEE S STATEMENT ADVISER AND INDEPENDENT ADVISER ESTIMATED TIMEFRAME FOR COMPLETION EGM FURTHER INFORMATION 51 PART B IAL TO THE NON-INTERESTED SHAREHOLDERS OF PGB IN RELATION TO THE PROPOSED ACQUISITION OF PKC 52 vi

9 TABLE OF CONTENTS (Cont d) APPENDICES I INFORMATION ON PKC 90 II INFORMATION ON ISE 97 III AUDITED FINANCIAL STATEMENTS OF ISE FOR THE FYE 31 DECEMBER IV ACCOUNTANTS REPORT ON PKC 124 V PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE PGB GROUP AS AT 31 DECEMBER 2015 TOGERTHER WITH THE REPORTING ACCOUNTANTS LETTER THEREON 170 VI VALUATION LETTER BY UHY 186 VII DIRECTORS REPORT ON PKC 197 VIII FURTHER INFORMATION 199 NOTICE OF EGM FORM OF PROXY ENCLOSED ENCLOSED THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK vii

10 PASUKHAS GROUP BERHAD (Company No A) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office: 10 th Floor, Menara Hap Seng No. 1 & 3, Jalan P. Ramlee Kuala Lumpur 16 November 2016 Board of Directors Dato Sri Teng Ah Kiong Dato Teng Yoon Kooi Wan Thean Hoe Chan Man Chung Teoh Kim Hooi Yap Chee Keong Bakhtiar Jamilee Bin Hj Abdul (Executive Chairman) (Executive Director) (Executive Director/Chief Executive Officer) (Non-Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director) To: Our shareholders Dear Sir/Madam, (I) (II) (III) (IV) (V) (VI) (VII) PROPOSED ACQUISITION OF PKC; PROPOSED ACQUISITION OF ISE; PROPOSED DIVERSIFICATION; PROPOSED PRIVATE PLACEMENT; PROPOSED RIGHTS ISSUE; PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL; AND PROPOSED AMENDMENTS 1. INTRODUCTION On 2 August 2016, HLIB had, on behalf our Board, announced that our Company had on 2 August 2016 entered into the following:- (i) PKC SSA between PGB and PKC Vendors for the proposed acquisition of 70% equity interest of PKC for the PKC Purchase Consideration; and (ii) ISE SSA between PESB and Maser for the proposed acquisition of 100% equity interest in ISE for the ISE SSA Consideration and concurrently, entered into the ISE DA between PESB, Maser and ISE for the settlement of all the inter-company advances owed by ISE to Maser with payment of the Settlement Sum. 1

11 In addition, on the same date, HLIB announced, on behalf of our Board, that our Company is also undertaking the following proposals:- (i) (ii) (iii) diversification of the existing core businesses of PGB to include energy utilities services and power generation business pursuant to the Proposed Acquisition of ISE; private placement of up to 37.0 million PGB Shares, representing 10% of the issued and paid-up share capital of PGB upon completion of the Proposed Acquisition of PKC; rights issue of up to million Rights Shares on the basis of 1 Rights Share for every 1 existing PGB Share held by our shareholders on the Entitlement Date to be determined later by our Board after the Proposed Acquisitions and Proposed Private Placement; (iv) proposed exemption to Tara Temasek and PACs with Tara Temasek under Section 219 of the CMSA and Paragraph 16.1 (b), Practice Note 9 of the Code from the obligation to undertake a mandatory take-over offer for the remaining PGB Shares not already held by Tara Temasek and the PACs upon the issuance of the Rights Shares to them under Minimum Subscription Level ( Proposed Exemption ); (v) (vi) increase in the authorised share capital of PGB from RM50,000,000 comprising 500,000,000 PGB Shares to RM100,000,000 comprising 1,000,000,000 PGB Shares and the subsequent amendments to the Memorandum of Association of our Company; and proposed amendments to the M&A of PGB. In view of the interests of the interested directors as set out in Section 11 of this Circular, the Proposed Acquisition of PKC is deemed as a related party transaction pursuant to Rule of the Listing Requirements. In this respect, our Board had on 2 August 2016 appointed Mercury Securities as the Independent Adviser to advise our non-interested directors and non-interested shareholders in respect of the Proposed Acquisition of PKC. Subsequently, on 18 August 2016, HLIB had, on behalf of our Board, announced that PGB had on the same day procured the Undertakings from the Undertaking Shareholders that they will subscribe in aggregate not less than RM30.0 million value of Rights Shares to meet the Minimum Subscription Level. In view of the revision in the Undertaking provided by the Undertaking Shareholders, none of the Undertaking Shareholders will trigger any obligation to undertake a mandatory take over offer under the Code. Therefore, Tara Temasek and its PACs are no longer required to seek an exemption from a mandatory general offer obligation pursuant to Paragraph 9(1), Part III of the Code. Accordingly, the appointment of the Independent Adviser and approval from SC for the Proposed Exemption are no longer required. On 3 November 2016, HLIB had, on behalf of our Board, announced that Bursa Securities had vide its letter dated 3 November 2016 approved the listing of the following:- (i) (ii) (iii) 45,610,566 Consideration Shares arising from the Proposed Acquisition of PKC; up to 37,011,157 Placement Shares pursuant to the Proposed Private Placement; and up to 407,122,722 Rights Shares pursuant to the Proposed Rights Issue. On 10 November 2016, HLIB had, on behalf of our Board, announced that PGB, Maser and ISE had on 10 November 2016 mutually agreed to an extension until 31 December 2016 for the fulfillment of the ISE Conditions Precedent of the ISE SSA as well as amend certain terms of the ISE SSA and ISE DA. The salient terms of the Supplemental ISE SSA and Supplemental ISE DA are disclosed in Sections 3.4 and 3.6 of this Circular, respectively. The purpose of Part A of this Circular is to provide you with details and information on the Proposals, to set out our Board s recommendation and to seek your approval for the resolutions pertaining to the Proposals to be tabled at our forthcoming EGM. The Notice of EGM together with the Form of Proxy are enclosed in this Circular. 2

12 YOU ARE ADVISED TO READ AND CONSIDER THE CONTENTS OF THIS CIRCULAR INCLUDING THE INDEPENDENT ADVICE LETTER (AS SET OUT IN PART B OF THIS CIRCULAR) TOGETHER WITH THE APPENDICES BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM OF OUR COMPANY. 2. DETAILS OF THE PROPOSALS 2.1 PROPOSED ACQUISITION OF PKC The Proposed Acquisition of PKC entails the acquisition by PGB of 700,000 PKC Shares, representing 70.0% issued and paid-up ordinary share capital in PKC from the PKC Vendors for the PKC Purchase Consideration of RM17,223,990, subject to adjustment in accordance with the terms of the PKC SSA. The PKC Purchase Consideration is to be satisfied in the following manner:- (i) (ii) cash consideration of RM7,873,824, representing 45.7% of the PKC Purchase Consideration, of which the Remaining PKC Cash Consideration will be fully withheld pursuant to a Profit Guarantee; and issuance of 45,610,566 Consideration Shares, representing 54.3% of the PKC Purchase Consideration, at an issue price of RM0.205 per PGB Share. Upon completion of the Proposed Acquisition of PKC, PKC will be a 70.0% owned subsidiary of PGB. Concurrent with the execution of the PKC SSA, PGB had also on 2 August 2016 finalised the terms of the PKC SHA with the PKC Vendors to govern the material aspects of the joint management and conduct of business of PKC. The PKC SHA will be entered into by PGB and PKC Vendors on the PKC Completion Date. The salient terms of the PKC SSA and PKC SHA are set out in Sections 3.1 and 3.2 of this Circular Details of the Profit Guarantee The PKC Vendors have guaranteed that PKC will achieve an aggregate PAT of RM7,873,824 ( Profit Guarantee Sum ) based on the 24-month period starting from 1 October 2016 to 30 September 2018 pursuant to the PKC SSA ( Profit Guaranteed Period ). The Profit Guarantee Sum of approximately RM7.9 million was arrived at based on the Average PAT multiplied by the 2 year period as illustrated below:- RM PAT for FYE 31 December ,147,933 PAT for FYE 31 December ,419,106 PAT for FYE 31 December ,243,797 3-year average PAT 3,936,912 Profit Guarantee Sum (24-month) = RM3,936,912 x 2 years = RM7,873,824 The PKC Vendors have offered to pledge the entire Remaining PKC Cash Consideration to be withheld by PGB. The Remaining PKC Cash Consideration will be released to the PKC Vendors in the following manner:- (i) in the event PKC achieves the Profit Guarantee Sum or more within the Profit Guarantee Period, the entire PKC Cash Consideration will be released to the PKC Vendors thereto; and 3

13 (ii) in the event PKC achieves an aggregate PAT less than the Profit Guarantee Sum during the Profit Guaranteed Period, the Remaining PKC Cash Consideration will be deducted for an amount equivalent to 70% of the shortfall between the Profit Guarantee Sum and the actual PAT for the Profit Guaranteed Period ( Profit Shortfall ). For illustration purpose, assuming PKC achieves an aggregate PAT of RM6.0 million for the Profit Guaranteed Period, the amount to be compensated by the PKC Vendors pursuant to the Profit Guarantee and the Remaining PKC Cash Consideration payable to the PKC Vendors are calculated in the following manner:- The shortfall amount to be compensated by the PKC Vendors pursuant to the Profit Guarantee: RM Profit Guarantee Sum 7,873,824 Less: Assumed aggregate PAT achieved by PKC for the Profit Guaranteed Period (6,000,000) Profit shortfall 1,873,824 Multiply: X Proportionate ownership of PGB in PKC 70% Shortfall amount 1,311,677 Remaining PKC Cash Consideration to be released to PKC Vendors: RM Remaining PKC Cash Consideration 7,873,823 Less: The shortfall amount to be offset with the PKC Vendors (1,311,677) Remaining PKC Cash Consideration payable 6,562,146 For avoidance of doubt, in the event of an aggregate loss in PKC for the Profit Guaranteed Period, the PKC Vendors shall not be required to make good the losses. However, the amount to be compensated by the PKC Vendors shall not exceed 70% of the Profit Shortfall. Our Board is of the view that the Profit Guarantee provided is realistic after taking into consideration the historical financial performance and the current construction contracts secured by PKC with an aggregate value of more than RM477 million. The details of the key construction projects currently/undertaken by PKC are set out in Section 10 of Appendix I of this Circular Adjustment to the PKC Purchase Consideration On the PKC Completion Date, the PKC Purchase Consideration shall be adjusted based on the re-audit of PKC s financial accounts by the external auditors who will certify the Average PAT of PKC for the FYE 31 December 2013, 2014 and 2015 ( Re-audited Average PAT ) and issue an adjustment certificate to certify the Re-audited Average PAT and the adjustments, if any, required to be made on the PKC Purchase Consideration is based on the following:- (i) If there is a difference of less than 5% between the Re-audited Average PAT and the Average PAT, there shall be no adjustment; (ii) If there is a difference of 5% - 10% between the Re-audited Average PAT and the Average PAT, the parties will adjust the PKC Purchase Consideration upwards or downwards, as the case may be, based on the adjustment amount calculated in the following manner ("Adjustment Amount"):- A = (R - C) x PE Ratio of 6.25 x equity interest of 70% Where: A = Adjustment Amount R = Re-audited Average PAT C = Average PAT 4

14 (iii) In the event of a downward adjustment, PGB shall be entitled to deduct an amount equal to the Adjustment Amount (rounded downwards to the nearest thousand) from the PKC Purchase Consideration; (iv) In the event of an upward adjustment, the PKC Purchase Consideration shall be increased by an amount equal to the Adjustment Amount (rounded downwards to the nearest thousand) and PGB shall on the PKC Completion Date pay an additional sum equivalent to the Adjustment Amount to the PKC Vendors in proportion to the PKC Shares sold by the PKC Vendors as provided in the PKC SSA ( Vendors Proportion ); and (v) If there is a difference of more than 10% between the Re-audited Average PAT and the Average PAT, then both parties shall renegotiate and agree on the new terms of PKC SSA within 2 months from the PKC SSA becomes unconditional pursuant to Section of this Circular, failing which, the PKC SSA shall lapse and Section of this Circular shall apply. The purpose of the re-audit exercise by the external auditors is to determine the final PKC Purchase Consideration payable to the PKC Vendors. The re-audited historical financial statements of PKC for the past 3 FYEs 31 December 2013 to 2015 are set out in Appendix IV of this Circular. Based on the re-audit exercise which was carried out recently by the external auditors, the Re- Audited Average PAT is as set out below:- Audited (RM 000) Re-audited (RM 000) PAT for FYE 31 December ,148 4,812 PAT for FYE 31 December ,419 3,740 PAT for FYE 31 December ,244 2,891 3-year average 3,937 3,814 Difference between Average PAT and Re-Audited Average PAT:- (RM3.814 mil RM3.937 mil) / RM3.937 mil = (3.12)% Since the difference between the Re-audited Average PAT and the Average PAT is less than 5%, there will be no adjustment made to the PKC Purchase Consideration Information on PKC PKC was incorporated in Malaysia as a private company under the Act on 21 May 2001 with the name Pasukhas Construction Sdn Bhd. PKC subsequently changed its name to Pasukan Khas Construction Sdn Bhd on 31 December The principal activity of PKC is to carry on the business as a general contractor. As at LPD, the authorised share capital of PKC is RM5,000,000 comprising 5,000,000 PKC Shares of which 1,000,000 PKC Shares has been issued and fully paid-up. 5

15 As at the LPD, the directors and shareholders of PKC and their respective shareholdings in PKC are set out as follows:- < ----Shareholdings in PKC ---- > No. of shares Name Designation ( 000) % Director Dato Teng Yoon Kooi Director - - Tang Chee Wai Managing Director - - DSTAK Director Wee Hiang Chyn Executive Director Shareholder Ong Mei Lee Total 1, A brief summary of PKC s historical financial information for the past 3 FYEs 31 December 2013, 2014 and 2015 as well as the latest unaudited management accounts for the 6-month FPE 30 June 2016 are disclosed in Appendix I of this Circular Details on the PKC Vendors DSTAK, age 63, Malaysian, is a co-founder of PKC. He was appointed to the board of directors of PKC since the incorporation of PKC on 21 May Presently, DSTAK owns 40% equity interest in PKC. DSTAK is also the Executive Chairman of PGB and a shareholder of PGB. Wee Hiang Chyn, age 54, Malaysian, is a co-founder of PKC. He was appointed to the board of directors of PKC since the incorporation of PKC on 21 May Presently, Wee Hiang Chyn owns 20% equity interest in PKC. Ong Mei Lee, age 55, Malaysian, is a shareholder of PKC with 40% equity interest presently. She is the wife of Tang Chee Wai, who is the Managing Director of PKC. Currently, she also sits on the boards of a few private limited companies Basis of and justification for the PKC Purchase Consideration The PKC Purchase Consideration was arrived at on a willing buyer-willing seller basis, after taking into account the following:- (i) the Average PAT of PKC for the FYE 31 December 2013, 2014 and 2015 multiplied by a PE Ratio of 6.25 times. The PE Ratio of 6.25 times falls within the range of trading PE Ratio of the companies which are listed on Bursa Securities that are involved in similar businesses ( Comparable Companies ) of between 3.79 times and 9.27 times, details of which are set out in this section below. It should be noted that the Comparable Companies used have been selected on a best effort basis and may not be directly comparable with PKC due to among others, composition and geographical coverage of business activities, scale of operations, reputation, profit track record, financial strength, risk profile, asset base and future prospects. (ii) (iii) (iv) the track record and existing secured contracts of PKC of approximately RM477 million as at the LPD which will provide earnings visibility. Details are set out in Appendix I of this Circular; the Profit Guarantee as provided by PKC; and the outlook of the construction industry as set out in Section 6.3 of this Circular. 6

16 For information purposes, the table below sets out the PE Ratio of the Comparable Companies based on the last transacted prices as at the LPD:- Comparable Companies Principal activities (1) Market capitalisation (2) (RM 000) Closing Price (3) (RM) EPS (4) (Sen) PE Ratio (times) DKLS Industries Berhad Manufacture pre-cast concrete piles, provides building and general construction services, quarrying, sells building materials, and develops property. 140, Zelan Berhad Civil engineering and building turnkey contracting services. 139, TRC Synergy Berhad Construction works, sells construction materials and develops property. Hires and services vehicles and manufactures concrete piles and ready-mixed concrete. 206, Ho Hup Construction Company Berhad Provides foundation and civil engineering, constructs building, and leases plant and machinery. Develops property, manufactures and distributes ready-mixed concrete, and engineers, constructs and commissions pipeline system. 274, Gadang Holdings Berhad Provides earthwork, civil engineering, and construction projects. Develops and invests in properties and manufactures readymixed concrete. 742, Kimlun Corporation Berhad Engineering and construction services provider. Specializes in infrastructure and building construction, construction 676, management, provision of industrial building system and manufacturer of concrete products as well as trades in construction and building materials. High 9.27 Low 3.79 Average 6.22 Proposed Acquisition of PKC 6.25 (Sources: Extracted from Bloomberg and based on the latest audited financial statements of the respective Comparable Companies as at the LPD) 7

17 Notes:- (1) Extracted from Bloomberg. (2) Based on the last transacted share price as at the LPD multiplied by the number of ordinary shares in issue. (3) The last transacted share price as at the LPD. (4) Based on the latest audited financial statements of the respective Comparable Companies of the following FYE (being the latest audited financial statements as at the LPD):- Name of company FYE DKLS Industries Berhad 31 December 2015 Zelan Berhad 31 December 2015 TRC Synergy Berhad 31 December 2015 Ho Hup Construction Company Berhad 31 December 2015 Gadang Holdings Berhad 31 May 2016 Kimlun Corporation Berhad 31 December 2015 THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 8

18 2.1.6 Basis of determining the issue price of the Consideration Shares The issue price of RM0.205 per Consideration Share was determined on a willing buyer-willing seller basis and after taking into consideration, amongst others, the prevailing market conditions as well as the historical share price of PGB, including the following:- (i) (ii) (iii) (iv) the 5-day VWAMP of PGB Shares of RM up to and including 1 August 2016, being the last market day immediately preceding the date of PKC SSA; the issue price represents a premium of approximately 2.4% and 5.5% to the 1-month and 3-month VWAMP of PGB Shares up to and including the LTD of RM and RM respectively; the ranges of closing prices of PGB Shares for the past 1 year up to and including the LTD of RM0.130 to RM0.235; and the par value of PGB Shares of RM0.10 each. For illustrative purposes, the issue price of RM0.205 per Consideration Share represents a premium of approximately 0.7% to the 5-day VWAMP of PGB Shares up to and including LTD of RM per PGB Share Mode of settlement of the PKC Purchase Consideration The PKC Purchase Consideration will be satisfied by a combination of PKC Cash Consideration and issuance of Consideration Shares in accordance with the PKC SSA, as set out below:- To be issued To be withheld (1) Equity interest in PKC (%) Cash deposit paid on the date of the PKC SSA (RM) No. of Consideration Shares Remaining PKC Cash Consideration (RM) DSTAK ,244,226 3,149, Wee Hiang ,122,114 1,574, Chyn Ong Mei ,244,226 3,149, Lee Total ,610,566 7,873, Note:- (1) As set out in the Section of this Circular, the PKC Vendors have agreed to pledge the Profit Guarantee Sum in the form of Remaining PKC Cash Consideration with our Company Ranking of the Consideration Shares The Consideration Shares to be issued in relation to the Proposed Acquisition of PKC shall, upon allotment and issue, rank pari passu in all respects with the existing PGB Shares, save and except that they shall not be entitled to any dividends, rights, allotments and/or other distributions that may be declared, made or paid by our Company, the entitlement date of which precedes the date of allotment and issue of the Consideration Shares. For the avoidance of doubt, the holders of the Consideration Shares are entitled to subscribe for the Rights Shares pursuant to the Proposed Rights Issue Listing of and quotation for the Consideration Shares The Consideration Shares will be listed on the ACE Market of Bursa Securities. 9

19 Liabilities to be assumed Other than the operational liabilities, there are no other liabilities, including contingent liabilities and guarantees, to be assumed by our Company pursuant to the Proposed Acquisition of PKC. The PKC Shares shall be acquired by PGB free from all encumbrances, together with all rights, interests, benefits and entitlements attaching thereto as at the PKC Completion Date Additional financial commitment required There are no additional financial commitments required by PGB to put the assets and/or business of PKC on stream Source of funding The Remaining PKC Cash Consideration of approximately RM7.9 million will be funded by the proceeds to be raised from the Proposed Rights Issue. The Remaining PKC Cash Consideration will be paid in accordance to the payment term as disclosed in item (iv) of Section of this Circular. The Board, save for DSTAK and Dato Teng Yoon Kooi, is of the opinion that the settlement of the remaining 54.3% of the PKC Purchase Consideration via the issuance of Consideration Shares will enable PGB Group to enhance its asset base without any immediate impact on the cash flow of PGB as opposed to being fully settled in cash or via bank borrowings. The issuance of the Consideration Shares to partly satisfy the PKC Purchase Consideration is also expected to conserve cash for other working capital purposes. Further, the issuance of the Consideration Shares provides an opportunity to the PKC Vendors to participate in the potential future growth of PGB Group as shareholders. If the Proposed Rights Issue is not approved by the shareholders at the EGM to be convened in respects of the Proposals, the Remaining PKC Cash Consideration will be funded via internal generated funds of our Company Date and original cost of investment The original cost of investment and date of investment by the PKC Vendors are as follows:- Vendors Date of investment Original cost of investment (RM) DSTAK 21 May September , March ,000 Sub-total 400,000 Wee Hiang Chyn 21 May September , March ,000 Sub-total 200,000 Ong Mei Lee 8 December ,100,000 Sub-total 1,100, DETAILS OF THE PROPOSED ACQUISITION OF ISE The Proposed Acquisition of ISE entails the acquisition by PESB of 4,000,000 ISE Shares representing the entire issued and paid-up ordinary share capital in ISE from Maser for the ISE SSA Consideration of RM1.0 million. Concurrent with the execution of the ISE SSA, PESB had also on 2 August 2016 entered into ISE DA with Maser and ISE to settle the Debt with the payment of Settlement Sum of RM13.3 million. The total ISE Purchase Consideration of RM14.3 million is subject to adjustment in accordance with the terms of the ISE SSA and ISE DA. The ISE Purchase Consideration is to be satisfied wholly by cash. Upon completion of the Proposed Acquisition of ISE, ISE will be a wholly-owned subsidiary of PESB. 10

20 For avoidance of doubt, upon the payment of the Settlement Sum by PESB, even if the Settlement Sum is lower than the Debt, the Debt is considered to be fully settled and Maser shall sign a deed of assignment to assign the Debt to PESB. Upon execution of the deed of assignment, the Debt is to be repaid by ISE to PESB. As at 30 June 2016, the Debt owed by ISE to Maser amounted to RM14.4 million. The salient terms of the ISE SSA, Supplemental ISE SSA, ISE DA and Supplemental ISE DA are set out in Sections 3.3, 3.4, 3.5 and 3.6 of this Circular Information on ISE ISE was incorporated in Malaysia as a private company under the Act on 23 April As at the LPD, ISE has an authorised share capital of RM5,000,000 comprising 5,000,000 ISE Shares of which 4,000,000 has been issued and fully paid-up. ISE is principally involved in developing, maintaining and operating mini hydro plants and distribution of electricity. ISE has secured Feed-in Tariff ( FiT ) approval from Sustainable Energy Development Authority (SEDA) on 1 March 2012 for its mini hydro plant at Sungai Rek, Kuala Krai, Kelantan ( Sungai Rek Hydro Power Plant ) with a declared annual availability of 2.8 MW and installed capacity of 3.2 MW. ISE has been granted by the state government of Kelantan Darul Naim to utilise approximately 45 kilometer square (km 2 ) of land area being known as the catchment area for the purpose of its Sungai Rek Hydro Power Plant. ISE has previously signed a concession agreement in May 2007 which entitled ISE a valid temporary occupation licence and rights to use the water of Sungai Rek to generate electricity over the concession period. Under the FiT approval, ISE shall ensure that its renewable energy installation meets an annual minimum performance threshold of no less than 35% of 20,848 MW from year 2013 to ISE has been operating the hydro power plant for over 3 years since its commencement in November On 7 November 2012, ISE signed a Renewable Energy Power Purchase Agreement ( RePPA ) with TNB for a 21 year concession period at a rate of 24 sen per KWH. As at the LPD, the directors and their respective shareholdings in ISE are as set out as follows:- < --Shareholdings in ISE-- > Name Designation No. of shares % Mohammad Azahan Bin Mat Seddek Director - - Ibrahim Bin Mat Seddek Director - - Intan Fadlina Binti Hj Ismail Director - - Total - - As at the LPD, ISE is a wholly owned subsidiary of Maser. A brief summary of ISE s historical financial information for the past 3 FYE 31 December 2013, 2014 and 2015 as well as the latest unaudited management accounts for the 6-month FPE 30 June 2016 are disclosed in Appendix II of this Circular Details on Maser Maser was incorporated in Malaysia as a private company under the Act on 31 December Maser is primarily involved in engineering & services for oil & gas, chemical, power, water and environmental management. As at the LPD, Maser has an authorised share capital of RM25,000,000 comprising 25,000,000 ordinary shares of RM1.00 each in Maser of which 17,500,000 has been issued and paid-up. 11

21 The directors and shareholders of Maser and their shareholdings are as set out below:- < --Shareholdings in Maser-- > No. of shares Name Designation ( 000) % Mohammad Azahan Bin Mat Seddek Director 4, Ibrahim Bin Mat Seddek Director 4, Mat Seddek Bin Adam Director 8, Total 17, Basis and justification of arriving at the ISE Purchase Consideration The ISE Purchase Consideration of RM14.3 million was arrived at based on a willing buyer-willing seller basis after taking into account the following:- (i) (ii) (iii) (iv) (v) the net liability of ISE as at 31 December 2015 of RM158,894 based on the audited financial statements of ISE for the FYE 31 December 2015; purchase price of RM1.0 million in respect of the sale and purchase of the ISE Shares as well as the Debt owed by ISE to Maser amounted to RM14.4 million as at 30 June 2016, which is to be assigned to PESB upon the payment of the Settlement Sum; the potential future earnings contribution from ISE in view of its RePPA with TNB for the remaining 17 years of the 21 years concession period with an available annual capacity of 2.8 MW; the range of indicative values of RM12.8 million and RM15.0 million of the entire equity interest of ISE and amount owing to Maser as at 30 June 2016, by UHY, the independent valuer. In estimating the range of indicative values, UHY has relied on the discounted cash flow method, which value the expected future free cash flows to firm generated by a company over time. Under this method, the cash flow from the investment is discounted at a specified discount rate to arrive at the net present value. For further details, including the key bases and assumptions adopted in arriving at the indicative valuation, please refer to the valuation letter by UHY as set out in Appendix VI of this Circular; and strategic rationale of the Proposed Acquisition of ISE to expand PGB s footprint into energy generation related industries and to diversify its revenue base Mode of settlement of the ISE Purchase Consideration The ISE Purchase Consideration of RM14.3 million to be paid to Maser will be satisfied entirely by way of cash consideration which consists of the ISE SSA Consideration and the Settlement Sum in the following manner:- ISE SSA ISE DA Total RM 000 RM 000 RM 000 ISE SSA Consideration 1,000-1,000 Settlement Sum - 13,300 13,300 Sub-total 1,000 13,300 14,300 Less: ISE SSA Deposit ISE DA Deposit - 2,610 2,610 Remaining ISE Purchase Consideration 710* 10,690 # 11,400 Notes:- * Payment upon ISE Completion Date # RM9,086,500, being 85% of the Balance Settlement Sum of RM10,690,000 is payable upon ISE Completion Date and RM1,603,500, being 15% of the Balance Settlement Sum of RM10,690,000 is payable upon 3 months from ISE Completion Date. 12

22 2.2.5 Liabilities to be assumed Save for the ISE DA and operational liabilities, there are no other liabilities, including contingent liabilities and guarantees, to be assumed by our Company pursuant to the Proposed Acquisition of ISE. The ISE Shares shall be acquired by PESB free from all encumbrances, together with all rights, interests, benefits and entitlements attaching thereto as at the ISE Completion Date Additional financial commitment required Save for the ISE Purchase Consideration and terms and conditions which are set out in Section 3.3 of this Circular, there are no additional financial commitments required by PGB to put the assets and/or business of ISE on stream Source of funding The ISE SSA Deposit and ISE DA Deposit were funded via internally generated funds of our Company. In addition, the Remaining ISE Purchase Consideration is to be settled by way of cash, which will be funded by the proceeds raised from the Proposed Rights Issue. Given that the Proposed Rights Issue will be implemented after the completion of the Proposed Acquisitions and the Proposed Private Placement, the Remaining ISE Purchase Consideration will be funded via short term borrowing and/or internally generated funds of our Company in the interim period. If the Proposed Rights Issue is not approved by the shareholders at the EGM to be convened in respects of the Proposals, the Remaining ISE Purchase Consideration will be funded via bank borrowing and/or internal generated funds of our Company. 2.3 DETAILS OF THE PROPOSED DIVERSIFICATION Our Group is principally involved in the designing, system integration, fabrication, installation, testing and commissioning of electrical and mechanical works for various industries and construction related industries. PGB has also further diversified its business to civil engineering and construction business in In line with the efforts to enhance its revenue and profitability, our Group has been identifying potential new business opportunities which are synergistic to its existing businesses to diversify into. The Proposed Acquisition of ISE will add to the existing business portfolio of PGB Group as ISE s business is in provision of energy utilities services and power generation which will help and diversify PGB Group s income stream in order to mitigate our Group s dependence on their existing business portfolio. Our Board expects the profits from the energy utilities segment will have positive contribution to the total net profits and/or NA value of PGB Group for the future financial years. As such, the Board proposes to seek your approval at our forthcoming EGM for the Proposed Diversification pursuant to Rule of the Listing Requirements. Notwithstanding the Proposed Diversification, our Board intends to continue with our Group s current business in the same manner Appointment of Key Personnel Premise on the power and energy sector that our Group intends to venture into, our Group intends to appoint Mr Chan Man Chung, who is currently the Non-Independent Non-Executive Director of PGB, to be executive director in PESB in order to spearhead the new division. Mr Chan has vast experience in business development and strategic planning and is the former Managing Director of an energy business handling over 31 MW of power plants in Indonesia. In addition, PESB intends to enter into a consultation agreement with Mr Johaness Himawan in due course wherein Mr Johaness Himawan will provide consultation and operational expertise services to PGB Group s new energy division which will be headed by Mr. Chan. After the completion of the Proposed Acquisition of ISE, PGB intends to retain the operational staffs of ISE which consist of engineers and technical on-site staffs. Hence, besides Mr Chan and Mr Johaness, our Company does not intend to appoint any new/additional staff. The profiles of Mr Chan and Mr Johaness are as follows:- 13

23 Mr Chan Man Chung, a Malaysian, age 49, has over 20 years experience in business development and strategic planning and over 7 years experience in power industry. He was the former Managing Director of PT Putra Persada Perkasa ( P3 ), a power generation company from 2009 to At P3, he managed 6 power plants with a total of 31 MW of high speed diesel in various locations in Indonesia. He also set up engineering services and trading businesses at P3 which include the sales, services, rental and spare parts for diesel generating sets and gas generating sets, cables for electrical and telecommunication, and project consultancy and project management. Mr Johaness Himawan, an Indonesian, age 62, has over 20 years experience in power plant business. He is the founder and chairman of PT Bumiloka Tegar Perkasa ( BTP ), a company involved in mini hydro power plant planning, engineering, procurement and construction (EPC), operation and management (O&M), construction services, business consulting and procurement in mining sector and power generation sector since Over the years, he led BTP to expand its business to mini hydro power plant, which presently owns 3 mini hydro power plants in Indonesia with an installed capacity of 5.8 MW. 2.4 DETAILS OF THE PROPOSED PRIVATE PLACEMENT As at the LPD, the issued and paid-up capital of PGB is RM32,450,100 comprising 324,501,000 PGB Shares. The Proposed Private Placement will involve the issuance of up to 37,011,157 Placement Shares, representing 10% of the enlarged issued and paid-up share capital of PGB upon completion of the Proposed Acquisition of PKC. PGB had on 18 April 2016 completed a private placement exercise which was implemented under Section 132D of the Act. In accordance to Rule 6.04(1) of the Listing Requirements, our Company shall seek shareholders approval for the Proposed Private Placement at the EGM to be convened as the previous private placement exercise was implemented within the preceding 12 months of the Proposed Private Placement. The Proposed Placement is intended to be implemented prior to the implementation of the Proposed Rights Issue. As such, the holders of the Placement Shares shall be entitled to the Rights Shares pursuant to the Proposed Rights Issue Allocation to Placees The Placement Shares are intended to be placed to persons other than the following:- (i) (ii) (iii) a director, major shareholder or chief executive of PGB ( Interested Person ); a person connected with an Interested Person; and nominee corporation, unless the names of the ultimate beneficiaries are disclosed. The Placement Shares shall be placed to a placee(s) to be identified at a later date, in accordance with Rule 6.05(c) of the Listing Requirements ( Placee ). Additionally, the Placee(s) shall also be person(s) or party(ies) who/which qualify under Schedules 6 and 7 of the CMSA. The basis of determining the issue price of the Placement Shares will be in accordance with market-based principles Basis of arriving at the issue price of the Placement Shares The issue price of the Placement Shares shall be determined and fixed by our Board at a later date after the receipt of all relevant approvals for the Proposed Private Placement ( Placement Price Fixing Date ). The Placement Shares will not be priced at more than 10% discount to the 5-day VWAMP of PGB Shares immediately before the Placement Price Fixing Date. In any event, the Placement Shares will not be priced lower than RM0.10, being the par value of the PGB Shares. 14

24 For illustrative purposes, the Placement Shares are assumed to be issued at an indicative issue price of RM0.19 per Placement Share, representing a discount of approximately 6.6% to the 5-day VWAMP of PGB Shares up to and including LTD of RM per PGB Share Ranking of the Placement Shares The Placement Shares shall, upon allotment and issue, rank pari passu in all respects with the then existing PGB Shares, save and except that the Placement Shares shall not be entitled to any dividends, rights, allotments and/or other distributions that may be declared, made or paid by our Company, the entitlement date of which precedes the date of allotment and issue of the Placement Shares. For avoidance of doubt, the Proposed Private Placement will be implemented prior to the implementation of the Proposed Rights Issue. In such an event, the holders of the Placement Shares will be entitled to subscribe for the Rights Shares Listing of and quotation for the Placement Shares The Placement Shares will be listed on the ACE Market of Bursa Securities. 2.5 DETAILS OF THE PROPOSED RIGHTS ISSUE The Proposed Rights Issue involves the issuance of up to 407,122,722 Rights Shares on the basis of 1 Rights Share for every 1 existing PGB Share held by the Entitled Shareholders on the Entitlement Date. As at the LPD, the issued and paid-up share capital of PGB is RM32,450,100 comprising 324,501,000 PGB Shares. Upon completion of the Proposed Acquisition of PKC and Proposed Private Placement, the enlarged issued and share capital of PGB will comprise of 407,122,722 PGB Shares. Under the Maximum Scenario, the Proposed Rights Issue will entail the issuance of maximum 407,122,722 Rights Shares. The Proposed Rights Issue is renounceable in full or in part. Accordingly, the Entitled Shareholders can subscribe for and/or renounce their entitlements to the Rights Shares in full or in part. Any Rights Shares which are not taken up or not validly taken up shall be made available for excess application by the other Entitled Shareholders and/or their renouncee(s). It is the intention of our Board to allocate the excess Rights Shares, if any, in a fair and equitable manner, and on such basis as it may deem fit or expedient and in the best interest of our Company, which will be determined by our Board and announced later by our Company. There will not be any fractional entitlements pursuant to the Proposed Rights Issue due to the basis of 1 Rights Share for 1 PGB Share Basis and justification in determining the issue price of the Rights Shares The issue price of the Rights Shares will be determined by our Board and announced closer to the implementation of the Proposed Rights Issue after taking into consideration, amongst others, the followings:- (i) (ii) the then prevailing market conditions; and the TERP, calculated based on the 5-day VWAMP of PGB Shares up to and including the last market day immediately preceding the price-fixing date for the Proposed Rights Issue. The actual issue price of the Rights Shares shall be fixed at a discount of up to 30% to the TERP, calculated based on the 5-day VWAMP of PGB Shares up to and including the last market day immediately preceding the price-fixing date for the Proposed Rights Issue. In any event, the issue price of the Rights Shares will not be lower than RM0.10, which is the par value of PGB Shares. 15

25 For illustrative purposes, the Rights Shares are assumed to be issued at an issue price of RM0.12 per Rights Share, representing a discount of approximately 25.8% to the TERP of RM per PGB Share based on the 5-day VWAMP of PGB Shares up to and including LTD of RM per PGB Share Ranking of the Rights Shares The Rights Shares shall, upon allotment and issue, rank pari passu in all respects with the then existing PGB Shares, save and except that the Rights Shares shall not be entitled to any dividends, rights, allotments, and/or other distributions that may be declared, made or paid by our Company, on the entitlement date of which precedes the date of allotment and issue of the Rights Shares Listing of and quotation for the Rights Shares The Rights Shares will be listed on the ACE Market of Bursa Securities Minimum Subscription Level and Undertakings Our Company proposes that the Proposed Rights Issue to be undertaken on a minimum level of subscription which will raise minimum proceeds of RM30.0 million to meet our Group s funding requirement. Our Company has procured an irrevocable written undertaking from Undertaking Shareholders that they will:- (i) (ii) subscribe in full for their entitlements under the Proposed Rights Issue as at the Entitlement Date; and apply for a certain portion of the Rights Shares not taken up by the other Entitled Shareholders by way of excess Rights Shares application, so as to meet the Minimum Subscription Level; Details of the Undertakings are as follow:- Undertaking Shareholders Shareholdings as at the LPD No. of PGB Shares 000 % (1) Entitlement (A) No. of Rights Shares 000 % (2) RM 000 Tara Temasek 56, , ,720 DSTAK 11, ,724 (3) 4.5 3,567 Dato Teng Yoon Kooi 5, , Total 73, , ,975 (Cont d) Excess Rights Shares (B) Total Undertakings (A + B) Undertaking No. of Rights Shares No. of Rights Shares Shareholders 000 % (2) RM % (2) RM 000 Tara Temasek 85, , , ,000 DSTAK 62, ,551 92, ,118 Dato Teng Yoon Kooi 9, ,194 15, ,882 Total 158, , , ,000 16

26 Notes:- (1) Based on the issued and paid-up share capital as at the LPD. (2) Based on the enlarged issued and paid-up share capital of PGB of 657,122,722 PGB Shares upon issuance of 45,610,566 Consideration Shares pursuant to the Proposed Acquisition of PKC, up to 37,011,157 Placement Shares pursuant to the Proposed Private Placement and 250,000,000 Rights Shares pursuant to the Proposed Rights Issue under Minimum Scenario. (3) Computed based on 11,480,000 PGB Shares held by DSTAK as at the LPD and including 18,244,226 PGB Shares to be issued to DSTAK pursuant to the Proposed Acquisition of PKC. Accordingly, the Undertaking Shareholders have confirmed vide their letters dated 2 November 2016 that they have sufficient financial resources to subscribe for their respective entitlements under the Proposed Rights Issue and excess Rights Shares totalling up to RM30,000,000. HLIB has verified that they have sufficient resources to subscribe the Right Shares pursuant to the Undertakings. In view of the Undertakings and Minimum Subscription Level, underwriting will not be required for the Proposed Rights Issue. After taking into consideration the Undertakings, our Company confirmed that the abovementioned subscription of the Rights Shares will not give rise to any consequences of mandatory general offer obligation pursuant to the Code. Details of the eventual shareholdings of the Undertaking Shareholders are disclosed in Section 9.5 of this Circular. 2.6 DETAILS OF THE PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL As at the LPD, the authorised share capital of PGB stood at RM50,000,000 comprising 500,000,000 PGB Shares of which RM32,450,100 comprising 324,501,000 PGB Shares have been issued and fully paid-up. In order to accommodate the issuance of the Consideration Shares, Placement Shares and Rights Shares, our Company proposed to increase its authorised share capital from RM50,000,000 comprising 500,000,000 PGB Shares to RM100,000,000 comprising 1,000,000,000 PGB Shares. The Proposed Increase in Authorised Share Capital is also undertaken to facilitate and cater for any potential corporate exercise which may be undertaken by PGB in the future. 2.7 DETAILS OF THE PROPOSED AMENDMENTS The Proposed Amendments involves the consequential amendments to the M&A of our Company to facilitate and effect the Proposed Increase in Authorised Share Capital. The full details of the Proposed Amendments are set out below:- Existing clause Clause 6 of the Memorandum of Association The capital of the Company is RM50,000, Malaysian Currency divided into 500,000,000 shares of RM0.10 each. The shares in the original or any increased capital may be divided into several classes and there may be attached thereto respectively any preferential, deferred or other special rights, privileges, conditions or restrictions as to dividends, capital, voting or otherwise. Proposed Amendments Clause 6 of the Memorandum of Association The capital of the Company is RM100,000, Malaysian Currency divided into 1,000,000,000 shares of RM0.10 each. The shares in the original or any increased capital may be divided into several classes and there may be attached thereto respectively any preferential, deferred or other special rights, privileges, conditions or restrictions as to dividends, capital, voting or otherwise. 17

27 3. SALIENT TERMS OF THE AGREEMENTS 3.1 SALIENT TERMS OF THE PKC SSA Term of payment of the PKC Purchase Consideration and Profit Guarantee (i) (ii) (iii) (iv) The PKC Purchase Consideration of RM17,223,990 shall be paid by PGB to the PKC Vendors based on the Average PAT multiplied by a PE Ratio of 6.25 times; The cash sum of RM1.00 shall be paid as deposit on the execution of the PKC SSA; On the PKC Completion Date, PGB shall issue 45,610,566 PGB Shares to PKC Vendors at an issue price of RM0.205 per PGB Share in the Vendors Proportion; and Remaining PKC Cash Consideration of RM7,873,823 to be paid within 3 business days from the issuance of the special audit written report and certificate, subject to the compensation payable to PGB in the event PKC cannot meet the Profit Guarantee. To facilitate this, a special audit will be conducted and completed by external auditors appointed by PGB within a period of 3 months from 30 September 2018 to ascertain the PAT for the Profit Guarantee Period and to determine whether the Profit Guarantee Sum has been met during the Profit Guarantee Period. The written report and certificate will be issued within 15 business days from the date of completion of the special audit. In the event of a Profit Shortfall, the PKC Vendors shall compensate PGB for an amount equivalent to 70% of the Profit Shortfall by reducing the amount of the Remaining PKC Cash Consideration to be paid by PGB to the PKC Vendors in the Vendors Proportion. In the event PKC suffers any losses during the Profit Guarantee Period, the PKC Vendors shall not be liable to make up any losses in addition to the Profit Guarantee PKC Conditions Precedent The Proposed Acquisition of PKC is conditional upon the following conditions precedent being fulfilled or performed within a period of 120 days from the date of the PKC SSA, or such extended time as the PKC Vendors and PGB may agree in writing ( PKC Conditions Precedent ):- (a) (b) (c) (d) Board of directors and shareholders resolution of PGB to approve the Proposed Acquisition of PKC, and the execution of the PKC SHA; PGB shall obtain the approval from Bursa Securities and any other relevant authorities, if applicable; the due diligence inspection that is conducted by PGB or persons authorised by PGB ( PKC Due Diligence Inspection ) is satisfactory to PGB; and the re-audit referred to in Section of this Circular. As at the LPD, save for the shareholders resolution of PGB to approve the Proposed Acquisition of PKC, the rest of the PKC Conditions Precedent have been fulfilled Terms of approvals of relevant authorities If any of the approvals contain terms and conditions which are not acceptable to PGB or the PKC Vendors ( PKC Affected Party ), the PKC Affected Party shall notify the other party within 30 days from the date the PKC Affected Party was notified of such terms and conditions, failing which, such approvals shall be deemed to have been obtained. However, if the PKC Affected Party upon giving the required notice aforesaid desires or seeks to waive or vary such terms or conditions as are imposed by the relevant authority, PGB shall make an application to the relevant authority for such waiver or variation within 30 days of notification of the terms and conditions. Until such time when the relevant authority accedes to the request of waiver or variation, the approvals shall be deemed not to have been obtained. 18

28 3.1.4 PKC Due Diligence Inspection (i) The PKC Due Diligence Inspection shall be conducted by PGB or persons authorised by PGB for a period of 60 days from the date of the PKC SSA ( PKC Agreed Due Diligence Period ), to carry out a full and thorough audit to verify the net tangible asset position, financial, accounting, operational, and legal matters in respect of PKC. If there are no material adverse findings resulting from the PKC Due Diligence Inspection, it must be notified to the PKC Vendors not later than 14 days following the PKC Agreed Due Diligence Period or such later date as may be agreed upon by the PKC Vendors in writing, if not, this condition precedent will be deemed to be fulfilled. Under the PKC SSA, the term material which is quantifiable in monetary terms shall mean a contractual value or potential loss or liability of RM500,000 or more and, if not quantifiable in monetary terms, means any matter which would have a material and adverse impact on the business of PKC or their assets. (ii) In the event that the PKC Due Diligence Inspection shall yield any material adverse findings, PGB s auditors and/or solicitors conducting the PKC Due Diligence Inspection shall provide a written list of notable items to be highlighted to PKC Vendors prior to the finalisation of their due diligence findings (and, in any event, on or before the last day of the PKC Agreed Due Diligence Period) for the consideration of PKC Vendors. The PKC Vendors shall have 30 days, or any longer period allowed by PGB to:- (a) clarify and/or give representations in relation to such material adverse findings; or (b) remedy such material adverse findings which are capable of being remedied (as the case may be); and the PKC Agreed Due Diligence Period shall, if necessary, be extended for the number of days as mutually agreed upon in writing by PKC Vendors and PGB to give clarifications or representations in relation to such material adverse findings or to otherwise remedy such material adverse findings. Failure by PKC Vendors to give clarifications or representations in relation to such material adverse findings or to otherwise remedy such material adverse findings within such 30 days period or within such other period as the parties may mutually agree in writing will not be treated as a breach of the PKC SSA by PKC Vendors and in this regard item (iii) below shall apply. (iii) In the event that PKC Vendors fails to give clarifications or representations in relation to material adverse findings, PGB shall be entitled to further discuss and negotiate with PKC Vendors on any variations of the terms of the PKC SSA or terminate the PKC SSA in accordance with the PKC SSA under Section below. If PGB elects to further discuss any non-satisfactory findings arising from the PKC Due Diligence Inspection, and the parties fail to reach any mutual consensus in relation to the same within 21 days following the PKC Agreed Due Diligence Period or the expiry of the 30 days period for PKC Vendors to clarify, represent or remedy, on the material adverse findings, whichever is later, this condition precedent in respect of PKC Due Diligence Inspection shall not be deemed satisfied. The PKC SSA shall then lapse and automatically terminate in accordance with the PKC SSA under Section below Termination if the PKC Conditions Precedent are not satisfied If the PKC Conditions Precedent are not satisfied or waived within their respective cut off dates or such extended time as the PKC Vendors and PGB may agree in writing, then the PKC SSA shall lapse and terminate automatically. PGB shall be entitled to the refund of the deposit, and PKC Vendors and PGB shall have no further liability against each other under the PKC SSA, but without prejudice to the rights of the parties for any antecedent breaches of the provisions in the PKC SSA. 19

29 3.1.6 Termination of PKC SSA (i) Default by PGB In the event all the PKC Conditions Precedent are fulfilled, but PGB in the absence of breach by PKC Vendors of any of the terms of the PKC SSA fails to pay the Remaining PKC Purchase Consideration or any of the PGB s warranties contained in the PKC SSA found to be misleading or PGB is in breach of any material terms of the PKC SSA, PKC Vendors shall be entitled to terminate the PKC SSA by written notice to PGB. The deposit and another sum of RM500,000 shall be paid to PKC Vendors as liquidated damages. Alternatively, PKC Vendors may elect to enforce specific performance of PKC SSA against PGB. (ii) Default by PKC Vendors In the event all the PKC Conditions Precedent are fulfilled, but PKC Vendors in the absence of breach by PGB of any of the terms of the PKC SSA fail to proceed with the completion of the PKC SSA or any of the PKC Vendors warranties contained in the PKC SSA found to be misleading or the PKC Vendors are in breach of any material terms of the PKC SSA, PGB shall be entitled to terminate the PKC SSA by written notice to the PKC Vendors. The PKC Vendors shall within 14 days from the date of such written notice refund the deposit to PGB together with another sum of RM500,000 as liquidated damages. Alternatively, PGB may elect to enforce specific performance of the PKC SSA or to waive the breach and proceed to completion, without prejudice to the right of PGB to bring a claim against PKC Vendors. 3.2 SALIENT TERMS OF THE PKC SHA Equity participation PGB and PKC Vendors equity participation in PKC shall be on 70:30 equity basis with a board representation of 3 directors from PGB and 3 directors from the PKC Vendors. The chairman of the board shall be a director from PGB who shall be entitled to a casting vote in the event of a tie Board reserved matters There are certain matters as listed in the PKC SHA that require unanimous voting from all the directors present and voting (or in the case of a resolution in writing, from all the directors of the company) Shareholders reserved matters There are certain matters as listed in the PKC SHA that require unanimous voting from all the shareholders present and voting Pre-emption right and deed of accession No shareholder may during the term of the PKC SHA sell, transfer, assign, charge, mortgage, encumber, grant options over or otherwise dispose of or encumber their shares, except in compliance with the provisions of the PKC SHA which sets out the provisions of first right of refusal to the other shareholders. No shares may in any way be transferred unless the transferee executes a deed of ratification and accession in accordance with the PKC SHA. 20

30 3.3 SALIENT TERMS OF THE ISE SSA Terms of payment of the ISE SSA Consideration The ISE Purchase Consideration shall be paid by PESB as follows:- (a) upon the execution of the ISE SSA, a deposit of RM290,000 to be paid to SLC as stakeholder and invest the same in a fixed deposit account pending the satisfaction of the conditions precedent as stipulated in the ISE SSA. The deposit shall be released to Maser within 3 working days of the satisfaction of all the conditions precedent; (b) PESB shall pay the balance of the ISE SSA Consideration in the sum of RM710,000 to Maser on the ISE Completion Date; and (c) the settlement of liabilities of ISE pursuant to the ISE DA which is tentatively agreed to be RM13.3 million subject to the financial due diligence audit set out below. The salient terms of the ISE DA are set out in Section 3.5 below. Further to the above, Maser and PESB agree that the sale and purchase of the ISE Shares are on the basis that Maser shall bear the entire costs of the upgrade of the road and drainage works along pipeline route at Sungai Rek Hydro Power Plant ( Upgrade Sum ). Maser has paid a portion of the Upgrade Sum amounting to RM150,000 as at the LPD, therefore, an audit has been carried out to ascertain and determine the outstanding Upgrade Sum. The balance of ISE SSA Consideration after minus the ISE SSA Deposit shall be adjusted to take into account of the deduction of the outstanding Upgrade Sum. The amount shall be determined through the full and thorough audit in ISE to verify the net tangible asset position, financial, accounting, operational, technical competence of the Sungai Rek Hydro Power Plant and legal matters ( ISE Due Diligence Inspection ) ISE Conditions Precedent The Proposed Acquisition of ISE is conditional upon the following conditions precedent being fulfilled or performed within a period of 90 days from the date of the ISE SSA, or such extended time as the Maser and PESB may agree in writing ( ISE Conditions Precedent ):- (i) Board of directors and shareholders resolution of PESB, Maser and PGB to approve the Proposed Acquisition of ISE, and the execution of the ISE SSA and the ISE DA; (ii) application for the approvals from the relevant authorities: (a) Maser to obtain the approval from SEDA for the Proposed Acquisition of ISE, which had been obtained on 28 September 2016; and (b) PGB to obtain the approval from Bursa Securities. (c) Any other relevant authorities, if applicable. In this respect, Maser has obtained the approval from Energy Commission for the Proposed Acquisition of ISE on 8 November (iii) ISE Due Diligence Inspection of the Sungai Rek Hydro Power Plant and the Valuation Report are deemed satisfactory to PESB. As at the LPD, save for the shareholders resolution of PGB to approve the Proposed Acquisition of ISE, the rest of the ISE Conditions Precedent have been fulfilled. 21

31 3.3.3 Terms of approvals of relevant authorities Any letter or document from the relevant authority to the effect that it has no objection to the Proposed Acquisition of ISE shall be deemed to be an approval of the relevant authority. If any of the approvals contain terms and conditions which are not acceptable to Maser or PESB ( ISE Affected Party ), the ISE Affected Party shall notify the other party within 14 days from the date the ISE Affected Party was notified of such terms and conditions, failing which, such approvals shall be deemed to have been obtained. However, if the ISE Affected Party upon giving the required notice aforesaid desires or seeks to waive or vary such terms or conditions as are imposed by the relevant authority, the ISE Affected Party shall make an application to the relevant authority for such waiver or variation within 14 days of notification of the terms and conditions. Until such time when the relevant authority accedes to the request of waiver or variation, the approvals shall be deemed not to have been obtained for the purpose of this clause ISE Due Diligence Inspection and Valuation Report (i) PESB and/or its advisers shall conduct the ISE Due Diligence Inspection and obtain the Valuation Report on ISE within 60 days from the date of the ISE SSA ( ISE Agreed Due Diligence Period ). If there are no negative findings on notable matters or circumstances resulting from the ISE Due Diligence Inspection and Valuation Report, it must be notified to Maser not later than 14 days following the ISE Agreed Due Diligence Period or such later date as may be agreed upon by Maser in writing, if not, this condition precedent will be deemed to be fulfilled. (ii) In the event that the ISE Due Diligence Inspection and/or the Valuation Report shall yield any negative findings, PESB s auditors and/or solicitors conducting the ISE Due Diligence Inspection, and the Valuer preparing the Valuation Report shall provide a written list of notable items to be highlighted to Maser prior to the finalisation of their due diligence findings and/or the Valuation Report (and, in any event, on or before the ISE Agreed Due Diligence Period) for the consideration of Maser. Maser shall have 14 days, or any longer period allowed by PESB to:- (a) clarify and/or give representations in relation to such negative findings; or (b) remedy such negative findings which are capable of being remedied (as the case may be), and the ISE Agreed Due Diligence Period shall, if necessary, be extended for the number of days as mutually agreed upon in writing by Maser and PESB for Maser to give clarifications or representations in relation to such negative findings or to otherwise remedy such negative findings. Failure by Maser to give clarifications or representations in relation to such negative findings or to otherwise remedy such negative findings within such 14 days period or within such other period as both parties may mutually agree in writing will not be treated as a breach of the ISE SSA by Maser and in this regard item (iii) below shall apply. (iii) In the event that PESB is not fully satisfied with the results of the ISE Due Diligence Inspection and/or the Valuation Report, and/or Maser fails to give clarifications or representations in relation to any negative findings in accordance with the terms of the ISE SSA, PESB shall be entitled to further discuss and negotiate with Maser on any variations of the terms of ISE SSA or terminate the ISE SSA in accordance with Section below. If PESB elects to further discuss any non-satisfactory findings arising from the ISE Due Diligence Inspection and/or the Valuation Report, and the parties fail to reach any mutual consensus in relation to the same within 21 days following the ISE Agreed Due Diligence Period or the expiry of the 14 days period for Maser to clarify, represent or remedy, on the material adverse findings, whichever is later, this condition precedent in respect of ISE Due Diligence Inspection and/or the Valuation Report shall not be deemed satisfied. The ISE SSA shall then lapse and automatically terminate in accordance with the ISE SSA under Sections below. 22

32 3.3.5 ISE DA Maser and ISE shall also enter into the ISE DA, together with execution of the ISE SSA in respect of the Debt which is tentatively agreed to be RM13.3 million, and adjusted in accordance with the ISE DA based on the financial due diligence inspections to be carried out under the ISE SSA. The ISE SSA and the ISE DA are conditional upon each other and the ISE DA shall complete simultaneously with the completion of the ISE SSA. The parties will also on completion of the Proposed Acquisition of ISE sign any deed of assignment of debts to assign the Debt settled under the ISE DA to PESB Termination if the ISE Conditions Precedent are not satisfied If the ISE Conditions Precedent are not satisfied or waived within their respective cut off dates or such extended time as Maser and PESB may agree in writing, the ISE SSA shall lapse and terminate automatically. In such event, Maser and PESB agree that neither party shall have no further liability against the other party in connection with the ISE SSA, save and except for any antecedent breach of the ISE SSA. SLC shall refund the ISE SSA Deposit and interests accrued to PESB Termination of ISE SSA (i) Default by PESB In the event all the ISE Conditions Precedent are fulfilled, but PESB in the absence of breach by Maser of any of the terms of the ISE SSA fails to pay the balance purchase price, Maser shall be entitled to terminate the ISE SSA by written notice to PESB and the PESB s Solicitors. The deposit and any interests accrued shall be forfeited by Maser as liquidated damages. (ii) Default by Maser In the event all the ISE Conditions Precedent are fulfilled, but Maser, in the absence of breach by PESB of any of the terms of the ISE SSA, fails to proceed with the completion of the ISE SSA or any of the Maser s warranties contained in the ISE SSA found to be misleading or Maser is in breach of any material terms of the ISE SSA, PESB shall be entitled to terminate the ISE SSA by written notice to Maser and shall receive the ISE SSA Deposit with interests accrued within 14 days from the date of such written notice together with another sum of RM290,000 only as agreed liquidated damages. Alternatively, PESB may elect to enforce specific performance of the ISE SSA or to waive the breach and proceed to completion, without prejudice to the right of PESB to bring a claim against Maser. 3.4 SALIENT TERMS OF THE SUPPLEMENTAL ISE SSA Extension of Time Both Maser and PESB agreed to an extension until 31 December 2016 for the fulfillment of the ISE Conditions Precedent in the ISE SSA Release of ISE SSA Deposit The ISE SSA Deposit shall be released to Maser upon the signing of the Supplemental ISE SSA. All other terms and conditions of ISE SSA remain unchanged. Maser and PESB shall obtain their directors and members resolution in respect of the Supplemental ISE DA and the Supplemental ISE SSA 23

33 3.4.3 Termination if the ISE Conditions Precedent are not satisfied If the ISE SSA lapsed and terminated due to the non-satisfaction of the ISE Conditions, Maser shall refund the ISE SSA Deposit to PESB Termination of ISE SSA in the event of default by PESB In the event all the ISE Conditions Precedent are fulfilled, but PESB in the absence of breach by Maser of any of the terms of the ISE SSA fails to pay the balance purchase price, Maser shall be entitled to terminate the ISE SSA by written notice to PESB and the PESB s Solicitors. The deposit and any interests accrued which has been released by the PESB s Solicitors to Maser upon the signing of the Supplemental ISE SSA shall be forfeited by Maser as liquidated damages Termination of ISE SSA in the event of default by Maser In the event all the ISE Conditions Precedent are fulfilled, but Maser, in the absence of breach by PESB of any of the terms of the ISE SSA, fails to proceed with the completion of the ISE SSA or any of the Maser s warranties contained in the ISE SSA found to be misleading or Maser is in breach of any material terms of the ISE SSA, PESB shall be entitled to terminate the ISE SSA by written notice to Maser and Maser shall refund to PESB the ISE SSA Deposit with interests accrued within 14 days from the date of such written notice together with another sum of RM290,000 only as agreed liquidated damages. 3.5 SALIENT TERMS OF THE ISE DA Settlement of Debt PESB will pay the ISE DA Deposit to SLC. SLC shall hold the same as stakeholders pending the satisfaction of the ISE Conditions Precedent and must release the same together with the interests accrued thereon to the party entitled to the ISE DA Deposit within 3 working days of either:- (a) the satisfaction of last of the ISE Conditions Precedent and Maser shall receive the ISE DA Deposit together with the interests accrued; or (b) if the ISE Conditions Precedent are not fulfilled, PESB shall be entitled to the ISE DA Deposit together with the interests accrued Settlement Sum The Settlement Sum of RM13.3 million is subject to a final adjustment, based on the result of the financial due diligence to be carried out by the appointed auditors for the financial position of ISE as at 30 June For information purpose, the Debt of RM14.4 million incurred in the period of 2008 to 30 June 2016 was advances from Maser to ISE for the purposes below:- RM 000 Material / Equipment purchase 7,328 Subcontractor fees paid 4,978 Site expenses paid 2,124 Total 14,430 24

34 3.5.3 Full Settlement of the Debt PESB shall pay the Balance Settlement Sum as full and final settlement of the Debt, even if the Settlement Sum is lower than the Debt in 2 tranches:- (a) on the ISE Completion Date - a sum being 85% of the Balance Settlement Sum; (b) 3 months from the ISE Completion Date - a sum being 15% of the Balance Settlement Sum Termination if the ISE Conditions Precedent are not satisfied If the ISE Conditions Precedent are not satisfied within their respective cut off dates or such extended time as Maser and PESB may agree in writing, then the ISE DA shall lapse and terminate automatically, and PESB s Solicitors shall refund the ISE DA Deposit with the interest accrued to PESB but without prejudice to the rights of the parties for any antecedent breaches of the provisions in the ISE DA Inter-conditionality of the ISE DA with the ISE SSA (i) (ii) Completion of the ISE DA shall be conditional upon the simultaneous completion of the ISE SSA. In the event that the ISE SSA is terminated for whatever reason, the ISE DA shall also terminate automatically and simultaneously. On the ISE Completion Date, upon the payment of the Balance Settlement Sum, Maser will issue a statement in which it will state that the Debt is fully settled and it has no outstanding claims of any kind against ISE, and assign the Debt to PESB through a deed of assignment and release in favour of PESB Termination of ISE DA (i) Default by PESB In the event all the ISE Conditions Precedent are fulfilled, but PESB in the absence of breach by Maser and/or ISE of any of the terms of the ISE DA, fails to pay the Balance Settlement Sum and complete the ISE DA, then either party may issue a notice of termination to terminate the ISE DA. In such event, PESB s Solicitors shall within 3 working days from the date of such written notice refund the ISE DA Deposit and interests accrued to PESB, if the ISE DA Deposit is still held by PESB s Solicitors. In the event the ISE DA Deposit has been released to Maser, Maser shall refund the ISE DA Deposit and interests accrued to PESB within 3 working days of receipt of such notice. (ii) Default by Maser and/or ISE (a) (b) In the event Maser and/or ISE, in the absence of breach by PESB of any of the terms of the ISE DA fail to proceed to completion, PESB shall be entitled to terminate the ISE DA by written notice to the Maser and/or ISE. In such event, PESB s Solicitors shall within 3 working days from the date of such written notice refund the ISE DA Deposit and interests accrued to PESB if the ISE DA Deposit is still held by PESB s Solicitors. In the event the ISE DA Deposit has been released to Maser, Maser shall also refund the ISE DA Deposit and interests accrued to PESB within 3 working days of receipt of such notice. Alternatively, PESB may elect to enforce specific performance of the ISE DA or to waive the breach and proceed to completion, without prejudice to the right of PESB to bring a claim against Maser and/or ISE. (iii) Consequences of termination Following the giving of a notice of termination, the ISE DA shall become null and void, subject to the refund of the ISE DA Deposit, none of the parties shall have any claims against the other parties save and except for any antecedent breaches. 25

35 3.6 SALIENT TERMS OF THE SUPPLEMENTAL ISE DA Release of the ISE DA Deposit Both Maser and PESB agreed that the ISE DA Deposit shall be released in the following manner: (a) a sum of RM1,210,000 being part of the ISE DA Deposit shall be released to Maser upon the signing of the Supplemental ISE DA; and (b) a sum of RM1,400,000 being the balance of the ISE DA Deposit shall be released to the solicitors of Maser within 3 working days from the date PGB has obtained its shareholders approval for the Proposed Acquisition of ISE; provided that the ISE DA Deposit shall be refunded to the party entitled to it (with the interest accrued thereon) upon the issuance of the termination notice pursuant to the ISE DA Extension of Time The extension of time for fulfillment of ISE Conditions Precedent shall be applicable to ISE DA. All other terms and conditions of the ISE DA remain unchanged Termination if the ISE Conditions Precedent are not satisfied If the ISE DA is lapsed or terminated due to the non-satisfaction of the ISE Conditions Precedent, the ISE DA Deposit with the interest accrued thereon shall refunded to PESB in the following manner: (a) the sum of RM1,210, being part of the ISE DA Deposit which has been released to Maser shall be refunded by Maser to PESB; and (b) the sum of RM1,400, being the balance of the ISE DA Deposit shall be refunded to PESB Termination of ISE DA in the event of default by Maser and/or ISE In the event Maser and/or ISE, in the absence of breach by PESB of any of the terms of ISE DA fail to proceed to Completion, despite the fulfillment of all the ISE Conditions Precedent, PESB shall be entitled to terminate the ISE DA by written notice to Maser and/or ISE. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 26

36 4. UTILISATION OF PROCEEDS The Proposed Fund Raising Exercises are expected to raise the gross proceeds as follows:- Gross proceeds raised Minimum Scenario Maximum Scenario RM 000 RM 000 Proposed Private Placement (1) 7,032 7,032 Proposed Rights Issue (2) 30,000 48,855 Total 37,032 55,887 Notes: (1) Assume indicative issue price of RM0.19 per Placement Share and all the Placement Shares are placed out. (2) Assume indicative issue price of RM0.12 per Rights Share. The proceeds will be utilised in the following manner:- Details of utilisation Payment of Remaining PKC Cash Consideration Payment of Remaining ISE Purchase Consideration Working capital requirements Estimated expenses in relation to the Proposals Note Minimum Maximum Expected time Scenario Scenario frame for the utilisation of Proceeds from the last date of receipt of RM 000 % RM 000 % proceeds 7, , Within 30 months (1) 11, , Within 6 months (2) 16, , Within 18 months (3) 1, , Within 1 month Total estimated proceeds 37, , Notes:- (1) As the ISE Purchase Consideration is subject to adjustments as set out in Sections and of this Circular, any excess/shortfall in the actual amount to be utilised for payment of Remaining ISE Purchase Consideration would be adjusted to/from working capital. (2) PGB Group intends to utilise for working capital requirements of about RM16.1 million from proceeds raised from the Proposed Private Placement and Proposed Rights Issue of approximately RM7.0 million and approximately RM9.1 million respectively under the Minimum Scenario. Whilst under the Maximum Scenario, PBG intends to utilise about RM35.0 million from proceeds raised from the Proposed Private Placement and Proposed Rights Issue of approximately RM7.0 million and approximately RM28.0 million respectively. The breakdown of the working capital requirements are as follows:- Minimum Scenario (RM 000) Maximum Scenario (RM 000) General requirements* 5,000 10,000 Project development and 11,158 25,013 construction expenditures^ Total 16,158 35,013 27

37 Notes:- * To finance the day-to-day operations to support our Group s business operations. The operational expenses include, but not limited to, payment of trade and other payables, marketing expenses, staff costs, finance costs and advertisement expenses. The breakdown of the operational expenses is as follows:- Minimum Scenario Maximum Scenario RM 000 RM 000 Payment of trade and other 2,000 7,000 payables Marketing and advertisement expenses Staff costs 2,000 2,000 Finance costs Total 5,000 10,000 ^ PGB Group is actively seeking to increase its order book for its construction division. PGB Group is currently in the process of bidding for several construction projects and potential joint ventures which include building works for commercial and residential development and construction related contracts. PGB will be able to participate in larger construction contracts and may utilise the proceeds from the Proposed Rights Issue to fund such future construction projects and joint ventures which may include the payment of contractors, suppliers of goods and services, and sourcing of manpower such as construction workers. The proceeds have not been identified for specified construction projects or joint ventures at this juncture to provide flexibility in determining the ultimate use of the working capital while assuring that the proceeds will be used for our core businesses. (3) The estimated expenses in relation to the Proposals comprise professional fees such as the advisers, lawyers, regulatory fees, placement fees and other related costs. Any excess/shortfall in the actual amount to be utilised for defraying the estimated expenses relating to the Proposals would be adjusted to/from working capital. In the event of a variation in the actual gross proceeds raised due to the difference in the issue price and/or number of Placement Shares and Rights Shares to be issued, our Company will vary the utilisation amount for project development and construction expenditures, accordingly. Pending the utilisation of the proceeds by PGB, the proceeds will be placed in interest-bearing deposit accounts or investments in money markets as our Board may deem fit. 5. RATIONALE FOR THE PROPOSALS 5.1 Rationale for the Proposed Acquisition of PKC PKC is principally involved in construction business. It is registered with Construction Industry Development Board Malaysia (CIDB) with Grade G7 in Building (B04) and Civil Engineering (CE21) which allows PKC to participate in any project in Malaysia without any limitation on project/contract sum in Malaysia. PKC has an experienced management team, with established networks in the construction industry, who had created a presence in construction projects in the country. The key current projects and completed projects of PKC are set out in Appendix I of this Circular. 28

38 PGB had in the year of 2014 obtained its shareholders approval to diversify into civil engineering and construction business. Since then, PGB had been undertaking various type of projects in the construction industry and had completed and delivered not less than RM100 million contracts either on a joint venture basis or by PGB alone. Given PKC s established track records and expertise in construction where they had undertaken numerous projects of which, amongst others, include the involvement in construction of the 4 storey building mall known as the Aeon Mall in Mukim 5, Alma, Seberang Perai Tengah, Pulau Pinang, design, construction and completion of subsea facility (Phase 2) and associated works at Tanjung Pelepas, Johor, construction of the headquarters of Lembaga Hasil Dalam Negeri (LHDN) in Cyberjaya, Selangor Darul Ehsan, construction of the Aquaria KLCC, the Proposed Acquisition of PKC is expected to produce synergistic benefits in the form of greater economies of scale upon consolidation of existing operations of both PGB Group and PKC. With greater assets and infrastructure, optimisation of resources and a larger distribution network after the completion of the Proposed Acquisition of PKC, PGB will be poised to widen its client base and hence improve the earnings and revenue source of PGB. 5.2 Rationale for the Proposed Acquisition of ISE In view of the Malaysian government s ( Government ) push for the development of renewable energy as the fifth national fuel with the implementation of the FiT system, the Proposed Acquisition of ISE will allow PGB to diversify its earnings into power and energy sector. The FiT system supports the developer of renewable energy by fixing a premium tariff for electricity generated from non-fossil fuel sources, such as small-hydro schemes, biomass, and solar. Furthermore, the introduction of the Renewable Energy Act 2011 provides a mandatory requirement for TNB to buy renewable energy power. In the case of small-hydro plants, the FiT rate payable by TNB is 24 sen per KWH for a mandatory period of 21 years. The Proposed Acquisition of ISE is expected to contribute positively to PGB s long term revenue and profits, thus enhancing PGB s growth potential. In addition, the long term stable income stream derived from the energy utilities services and power generation will reduce PGB s dependence on income derived from its existing business activities. 5.3 Rationale for the Proposed Diversification The Proposed Diversification would allow our Group to widen its income generating stream by diversifying into the provision of energy utilities services and power generation. The Proposed Diversification is expected to provide an additional stream of income and cash flow, which is expected to bode well for the financial position of our Group moving forward and at the same time reduce our Group s dependence on its existing business portfolios. Upon the completion of the Proposed Diversification, our Group s existing business would remain and continue as part of the core business of our Group. For information purposes, for the financial year ended 31 December 2015, approximately 60.8% of the PGB Group s revenue is derived from civil engineering and construction works carried out by Pasukhas Sdn Bhd. 5.4 Rationale for the Proposed Fund Raising Exercises The Proposed Fund Raising Exercises are undertaken to raise funds to finance the acquisitions of PKC and ISE, which is expected to contribute positively to the future performance of the PGB Group. The Proposed Fund Raising Exercises will also enable PGB to raise funds for working capital purposes as stated in Section 4 of this Circular. 29

39 After due consideration of the various funding methods available to our Company, our Board is of the view that the Proposed Fund Raising Exercises are currently the most appropriate avenues of fund raising after taking into consideration, amongst others, the following factors: (i) (ii) (iii) enables our Company to raise funds without incurring interest cost as compared to bank borrowings, thereby reducing the PGB Group s exposure to interest rate fluctuations, which in turn will enable the PGB Group to manage their cash flows more efficiently; as part of PGB s capital management strategy to strengthen its capital position to support the continuous business growth of PGB Group and enhance the liquidity and marketability of PGB Shares to attract potential investors; and the Proposed Rights Issue will also provide the Entitled Shareholders with an equal and attractive opportunity to increase their equity participation in PGB on a pro-rata basis which will be at a discount to the prevailing market price of the PGB Shares. 5.5 Rationale for the Proposed Increase in Authorised Share Capital The Proposed Increase in Authorised Share Capital is to accommodate the increase in the issued and paid-up share capital of PGB pursuant to the Proposed Acquisition of PKC and Proposed Fund Raising Exercises. The Proposed Increase in Authorised Share Capital is also undertaken to facilitate and cater for any potential corporate exercise which may be undertaken by PGB in the future. 5.6 Rationale for the Proposed Amendments The Proposed Amendments is to facilitate and effect the Proposed Increase in Authorised Share Capital. 6. INDUSTRY OVERVIEW AND PROSPECTS 6.1 Overview and outlook of the global economy Global economy grew by 3.1% in 2015 and expected to improve to 3.4% in 2016 although considerable downside risks remain. The global economy is expected to improve at a modest pace in The growth outlook, however, remains vulnerable to considerable downside risks arising from policy developments in the major economies, high uncertainty surrounding the direction of global commodity prices and abrupt financial market adjustments. Growth in the advanced economies is expected to proceed at a gradual and uneven pace. Even with highly accommodative monetary policies, the advanced economies are experiencing persistent economic slack stemming from unresolved structural issues and weakness in domestic demand. For the emerging economies, growth is projected to recover from the shock to external demand experienced in (Source: Outlook and policy in 2016, Annual Report 2015, Bank Negara Malaysia) In the second quarter of 2016, the global economy expanded at a more moderate pace, with uneven growth momentum across economies. Growth remained modest in the advanced economies amid continued cyclical and structural weaknesses. In Asia, economic expansion was supported by domestic demand, but was weighed down by persistent weakness in export performance. While the initial impact from the result of the UK s EU referendum created uncertainty and heightened risk aversion, financial market volatility has since subsided. Amid continued growth concerns and low inflation, several major and regional central banks conducted further easing to support economic activity. 30

40 International financial market conditions became more volatile, particularly in June. During the first half of the quarter, equity markets declined due to the release of weaker Chinese economic data and the continued decline in oil prices. However, both major and regional equities rose from May onwards, following tentative signs of stabilisation in oil prices and the Federal Reserve (Fed) s decision to keep its federal funds rate unchanged during the June Federal Open Market Committee s meeting. Nevertheless, the unexpected outcome of the UK s EU referendum in June resulted in an initial financial market shock, with the British pound declining to a 31-year-low against the US dollar. In this environment of heightened risk aversion, the Japanese yen appreciated due to safe haven flows, while most regional currencies ended the quarter lower against the US dollar. Financial market volatility subsided in the week following the referendum, as concerns abated. (Source: Quarterly Bulletin Second (2 nd ) Quarter 2016, Bank Negara Malaysia) 6.2 Overview and outlook of the Malaysian economy Overall, the Malaysian economy is expected to grow by 4 4.5% in 2016 (2015: 5.0%). Domestic demand will continue to be the principal driver of growth, sustained primarily by private sector spending. The pace of expansion in domestic demand, however, is expected to be more moderate amid ongoing adjustments by consumers and investors to the challenging economic environment. Private consumption growth is projected to trend below its long-term average, as households continue to make expenditure adjustments in response to the lingering effects of the GST implementation, and changes in administered prices. Household spending will also be affected by weaker consumer sentiments due to the uncertain conditions in the labour and financial markets. (Source: Outlook and policy in 2016, Annual Report 2015, Bank Negara Malaysia) The Malaysian economy expanded by 4.0% in the second quarter of 2016 (1Q 2016: 4.2%). Private sector expenditure remained the key driver of growth (6.1%; 1Q 2016: 4.5%), and contributed towards the continued expansion in domestic demand. However, growth was affected by the continued decline in net exports and a significant drawdown in stocks. While real exports registered a better performance (1.0%; 1Q 2016: -0.5%) due to higher demand for manufactured products, real imports increased at a faster rate of 2.0% (1Q 2016: 1.3%) on account of improvement in growth of capital and intermediate goods. As a result, net exports continued to register a negative growth during the quarter, albeit at a slower pace of -7.0% (1Q 2016: -12.4%). The drawdown in stocks was attributed to lower production in agriculture and manufactured products. On a quarter-on-quarter seasonally-adjusted basis, the economy recorded a growth of 0.7% (1Q 2016: 1.0%). Domestic demand grew by 6.3% in the second quarter of the year (1Q 2016: 3.6%), with private sector expenditure expanding at a stronger pace of 6.1% (1q 2016: 4.5%). private consumption growth expanded by 6.3% (1q 2016: 5.3%), supported by continued wage and employment growth, as well as the additional disposable income from government measures. private investment registered a higher growth of 5.6% in the second quarter (1Q 2016: 2.2%), underpinned mainly by continued capital spending in the services and manufacturing sectors, amid some improvements in business confidence. Public consumption recorded a stronger growth of 6.5% (1Q 2016: 3.8%), as a result of higher spending on supplies and services. Public investment turned around to register a positive growth of 7.5% (1Q 2016: -4.5%), driven by higher spending on fixed assets by both the Federal Government and public corporations. In terms of total investment, gross fixed capital formation (GFCF) registered a faster expansion of 6.1% (1Q 2016: 0.1%), supported by both public and private investment. By type of assets, the higher capital spending was due to the turnaround in machinery and equipment investment (8.1%; 1Q 2016: -7.1%) and the continued growth in structures investment (5.9%; 1Q 2016: 5.7%). (Source: Quarterly Bulletin Second (2 nd ) Quarter 2016, Bank Negara Malaysia) 31

41 6.3 Overview and prospects of the construction industry in Malaysia The construction sector is estimated to expand by 10.3% per annum during the plan period. This is attributed to continued civil engineering works and a growing residential subsector to fulfil the demand for housing, particularly from the middle-income group. Demand for affordable housing by the low-income group will also remain favourable, which will be supported by several Government initiatives, such as Program Perumahan Rakyat 1Malaysia (PR1MA), Rumah Idaman Rakyat and Rumah Mesra Rakyat 1Malaysia. Other subsectors such as civil engineering and non-residential will remain robust in line with the development of major projects such as the Tun Razak Exchange, KL118 Tower, Refinery and Petrochemical Integrated Development (RAPID), and the Pan-Borneo Highway. (Source: Eleventh Malaysian Plan, ) Value-added of the construction sector recorded a strong growth of 8.4% during the first half of 2016 (January June 2015: 7.6%). The acceleration of civil engineering works and sustained expansion in residential activities outweighed the tapering growth in the non-residential subsector. Overall, these three property subsectors contributed the highest share (more than 80%) of all construction activities. Total value of construction works completed during the first half of 2016 expanded 11.4% to RM62 billion with 11,881 projects (January June 2015: 11.6%; RM56 billion; 12,158 projects). The civil engineering subsector contributed 33.2% to the total value of construction works, followed by non-residential (32.1%), residential (29.8%) and specialised construction activities (4.9%) subsectors. The private sector continued to dominate construction activity with a share of 66.3% in the first half of For the year, the construction sector is expected to expand 8.7% (2015: 8.2%). The civil engineering subsector recorded a double-digit growth of 21.4%, supported by investment in petrochemical industries and ongoing infrastructure works (January June 2015: 2.9%). These include the construction of Refinery and Petrochemical Integrated Development (RAPID); Independent Deepwater Petroleum Terminal Phase 2 Pengerang; and Petronas LNG Complex Bintulu. The upgrading of Klang Valley Double Track Rawang Salak Selatan Line; construction of new Deep Water Terminal at Kuantan Port, Pan Borneo Highway Phase 1 and Water Supply Scheme Kuala Terengganu North; as well as road upgrading works, especially in Selangor, Pahang and Johor are expected to further augment the growth of this subsector. The construction sector is projected to grow 8.3% (2016: 8.7%) mainly supported by the commencement of large infrastructure projects such as Mass Rapid Transit (MRT) Sungai Buloh Serdang Putrajaya Line, Pan Borneo Highway, Sungai Besi Ulu Klang Elevated Expressway and Damansara Shah Alam Elevated Expressway. The upgrading road works from Klang Container Terminal North Port and the construction of infrastructure in Malaysia Vision Valley are expected to further support the sector. The residential subsector is projected to expand driven by affordable housing programmes, particularly 1Malaysia Civil Servants Housing. Meanwhile, the non-residential subsector is expected to benefit from the mixed commercial development mainly in Klang Valley, Johor and Pahang. (Source: Economic Report 2016/2017, Ministry of Finance Malaysia) 32

42 6.4 Overview and prospects of the power and energy sector in Malaysia The government is intensifying the development of renewable energy, as the fifth fuel resource under the country s Fuel Diversification Policy. The policy, which was set out in 2001, had a target of renewable energy providing 5% of electricity generation by 2005 which is equal to between 500 and 600 MW of electricity generation installed capacity at that time. As the initiatives were not very successful, the government then launched the Green Technology Policy and Initiatives in July The policy was later strengthen by the introduction of Renewable Energy Act 2011 (Act 725) and establishment of SEDA which continues the previous policy where electricity generated from the renewable resources such as biomass, waste, small hydro and solar can be connected to TNB electricity distribution network but not under a willing seller and willing buyer arrangement but to sell electricity to TNB through the FiT arrangement. The Renewable Energy Act 2011 encourages the connection of small renewable power generation plants to the distribution network with up to 30 MW of installed capacity and sells the electricity generated to TNB, under a 21-year license agreement. The Renewable Energy Act 2011 also reinforces fiscal incentives such as investment tax allowances and pre-determined FiT structure which provides favourable return on investment as compared to the electricity selling tariff prior to the introduction of the FiT. Based on the Renewable Energy Act and quota, power generation in total capacity of 490 MW has been targeted for small hydro power development by (Source: 2.8 MW Sg Rek Small Hydropower Plant Technical Due Diligence Report by Transenergia Sdn Bhd, Oct 2016) There has always been a strong correlation between the country s gross domestic product and its electricity consumption where the predominance of certain types of economic activities affected the electricity demand at the sectoral basis. However, during these recent years, the encouraging economy growth did not reflect the Peninsular Malaysia electricity growth trend and this could be contributed by the energy efficiency and renewable energy initiatives aggressively implemented in the country. Details of the installed capacity and the list of power plants in operation as of December 2015 are described in the following tables: Since the electricity tariff hike in January 2014, which involved an average tariff increment of 14.89% (from sen/kwh to sen/kwh), consumer awareness towards electricity consumption and energy efficiency have increased. Implementation of renewable energy projects are expected to intensify and will contribute significantly to the overall generation mix in terms of capacity. It was expected that the cumulative annual growth rate of renewable energy capacity which consisted of mini hydro, biomass, biogas and solar photovoltaic plants by 2020 will be more than 11% to reach at least 2,080 MW of installed capacity. Latest generation fuel mix forecast includes contribution from renewable energy plants due to sizable output expected in the future. The renewable energy share in the overall fuel mix is projected to gradually increases up to 3% of total energy generated in However, renewable energy is anticipated to play a complementary role to fossil fuels due to factors such as output intermittency, location and system constraints, technology development and potential limitation. 33

43 (Source: Peninsular Malaysia Electricity Supply Industry Outlook 2016, Energy Commission) 7. PROSPECTS OF THE TARGET COMPANIES 7.1 Future plans and prospects of PKC PKC is equipped with G7 registration which allows PKC to participate in any civil engineering works in the country without limitation on project/contract sum. With the G7 registration, the management of PKC intends to secure more construction projects within Malaysia in the near future. Nevertheless, the management of PKC intends to be more selective in participating in any tender in view of the resources, probability of securing contracts, and timing of the implementation of projects. PKC may also explore the possibility of forming strategic alliance or joint venture with other companies in projects that require specific skills sets, experience and additional resources. Currently, PKC is exploring with an existing infrastructure company to participate jointly in tendering on future infrastructure projects as the management of PKC believes that the strategic alliance could increase their competitiveness in securing more and bigger infrastructure contracts. To secure regular clients as well as maintaining good reputation, PKC will continue to maintain a good rapport with existing clients, consultants and suppliers. In addition, the management of PKC believes that they can benefit from the growth of the general construction sector, which remains attractive on the back of continued government development policies with strong emphasis on infrastructure development projects. The significance of the industry will continue to evolve and it will become increasingly critical as Malaysia becomes a developed nation. The overview and prospects of the construction industry in Malaysia is set out in Section 6.3 of this Circular. 34

44 7.2 Future plans and prospects of ISE As mentioned in Section of this Circular, upon the completion of the Proposed Acquisition of ISE, PGB intends to appoint Mr Chan Man Chung as an Executive Director of PESB as well as engage Mr Johaness Himawan as a consultant who both have the relevant experience and skill sets in the power and energy sector to spearhead the new division. With experienced and skilled personnel while retaining the operational staffs which consist of engineers and technical on-site staffs, there will be minimal disruption on the operations of ISE during the handover of the Proposed Acquisition of ISE. Besides, to improve the profitability of ISE, PGB Group intends to mitigate the high head office administration cost issue by absorbing it at group level. PGB Group also plans to enhance and improve the efficiency of the production capacity of the hydro plant after completion of the Proposed Acquisition of ISE by various measures such as mitigating down time of servicing turbines, equipment and generators by upgrading to better quality mechanical bearings for the hydro plant. Further, the transmission line cables from the TNB sub-station to the hydro plant is approximately 9 kilometres long while transmitting the power will typically lose about 3%-5% of power generated. In order to mitigate such loss in power, PGB Group is considering to install better and more efficient power cables in order to reduce such power losses within a year upon completion of the Proposed Acquisition of ISE. The above plan to upgrade and installation is estimated to cost up to RM1 million which is to be funded via internally generated fund. Our Company also intends to continuously on the lookout to further expand on its power and energy related business in the near future. Given the Government s support in providing an economically viable platform for investments in the power and energy sector, the overall prospects for ISE is positive. 8. RISK FACTORS 8.1 Political, economic and regulatory risk The Target Companies financial and business prospects in the industry which they operate in will depend to some degree on the developments in the economic fundamental, political stability and regulatory front in Malaysia. Amongst the economic, political and regulatory factors are changes in inflation rates, interest rates, war, terrorism activities, riots, expropriations, changes in political leadership and unfavourable changes in the Governments policies on the construction and power and energy industry. The construction industry can be characterised as cyclical in nature and is somewhat correlated to the general economic conditions of Malaysia. Adverse developments in political, regulatory and economic conditions in Malaysia could materially affect the construction industry in the country. Political, regulatory and economic uncertainties include changes in labour laws, interest rates, fiscal and monetary policies, risk of expropriation of land by authorities and methods of taxation. Presently, the construction sector and residential sub-sectors are expected to grow together with the Government s initiatives to improve the property sector, given the Government s agenda to transform the country to a high income nation by Upon the completion of the Proposed Acquisitions, PGB will ensure that the management of the Target Companies will continue to adopt effective measures such as prudent financial management and efficient operating procedures to mitigate effects arising from these risks. Such measures may provide the Target Companies with adequate financial resources as well as allow them to continuously monitor the level of market demand for their products in order to weather adverse effects arising from changes in political, economic and regulatory environment. However, there can be no assurance that adverse economic, political and regulatory changes will not materially affect the Target Companies business. 35

45 8.2 Integration risk The various synergistic benefits to be realised from the Proposed Acquisition of PKC are dependent upon the successful integration of PKC into the enlarged PGB Group. The Proposed Acquisition of PKC may potentially expose PGB Group to new risks including amongst others, those associated with the assimilation of new operations and personnel and the degree of success by which the management teams of PKC are absorbed into our Group s existing business. Accordingly, there can be no assurance that the anticipated benefits from the Proposed Acquisition of PKC will be realised, and that the enlarged PGB Group will be able to generate sufficient revenues to offset the associated costs arising from the Proposed Acquisition of PKC. To mitigate such risk, our Board will continue to exercise due care and take appropriate and reasonable measures in planning the successful integration of PKC with its existing business operations. 8.3 Diversification risk Our Group has not participated in power and energy business in the past. The Proposed Acquisition of ISE forms part of our Group s plan to venture into power and energy business. Pursuant thereto, our Group will face challenges in the form of relatively limited experience in operating in power and energy business. Notwithstanding the foregoing, in relation to the Proposed Acquisition of ISE, our Group intends to appoint an executive director and engage a technical consultant for its consultation and operational expertise services are as set out in Section in this Circular. PGB also intends to retain the operational staff which consist of engineers and technical on-site staffs who currently run the day-to-day operations of ISE. Despite the above, no assurance can be given that any developments in the power and energy industry following the completion of the Proposed Acquisition of ISE would not have any material impact on our Group in the future. 8.4 Non-fulfillment of obligations under the Profit Guarantee Pursuant to the terms of the PKC SSA, PKC Vendors severally represent, undertake and guarantee the Profit Guarantee. In the event of any shortfall between actual profit achieved and the Profit Guarantee, the PKC Vendors shall be required to make up for up to 70% of such shortfall. The risk is mitigated by virtue of the PKC Cash Consideration being fully pledged as security for the Profit Guarantee under the PKC SSA, of which the PKC Cash Consideration will be withheld by PGB. Further details of the Profit Guarantee are set out in Section of this Circular. 8.5 Financing risk Construction is a capital intensive business, more so for companies involved in infrastructure projects. The availability of the ability to secure adequate financing is critical to our Group s ability to successfully run the construction business, which will subsequently enable our Group to reduce its gearing level via the future earnings and cash flows to be generated from its construction business following the completion of the Proposed Acquisition of PKC. Notwithstanding with the above, our Board will endeavour to ensure that the management of PGB will continuously monitor and if necessary, refine and adjust its business strategies to changes in the economic environment and the availability of new infrastructure and/or other construction project to mitigate the risk of having inadequate funding for the construction projects being undertaken. In this regard, our Board will endeavour to ensure that any funding obligations are met in a timely manner by ensuring that the financing can be obtained successfully. 36

46 8.6 Dependence on key personnel The performance and success of our Group in the new energy utilities services and power generation business is dependent to a certain extent on the skills, abilities, experience and competencies of ISE s key operation personnel managing the business. There can be no assurance that the loss of any key operation personnel through the possibility of resignation without suitable and timely replacement would not affect the operations and financial performance of the business. In order to mitigate the risk, PGB intends to, as mentioned in Section 8.3 of this Circular, retain the operational staff which consist of engineers and technical on-site staffs who currently run the day-to-day operations of ISE. Our Group also has in place efforts to incorporate effective human resource management and development which includes competitive remuneration packages, training and personnel development programmes to attract new staff and/or retain qualified and competent staff. 8.7 Acquisition risk The Proposed Acquisitions are expected to enhance our Company s earnings in the long term. However, there is no guarantee that we can realise the anticipated benefits of the Proposed Acquisitions or we will be able to generate sufficient revenue from the Proposed Acquisitions to offset the costs of investment in PKC and ISE. Furthermore, our enlarged Group will assume the customary operational liabilities and obligations of the PKC and ISE in connection with the Proposed Acquisitions. The PKC Vendors and Maser will indemnify our Group for losses arising from their breaches of warranties as stipulated in the PKC SSA and ISE SSA respectively, save and except the breach of warranties as disclosed in the letter of disclosure under the SSAs. In addition, under the PKC SSA, the aggregate maximum liability of the PKC Vendors in respect of all and any claims for breach of the warranties shall not exceed a sum equivalent to 70% of the re-audited net tangible assets of PKC 1 for the FYE 31 December 2015, as certified by the auditors and agreed to by the PKC Vendors. Our Company cannot assure you that the amount recovered from the PKC Vendors pursuant to a warranty claim will be sufficient to cover the liabilities we assume or other losses incurred in connection with the Proposed Acquisition of PKC. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 1 Messrs Crowe Horwath, being the reporting accountants for the Proposals, has carried out a re-audit exercise on the net tangible assets of PKC for the FYE 31 December 2015 which amounts to RM20,485,

47 9. EFFECTS OF THE PROPOSALS The Proposed Diversification, Proposed Increase in Authorised Share Capital and Proposed Amendments will not have any effect on the share capital, earnings and EPS, NA and gearing and shareholdings of substantial shareholders of PGB. In addition, the Proposed Acquisition of ISE will not have any effect on the share capital and shareholdings of substantial shareholders of PGB. For illustrative purpose, the pro forma effects of the Proposed Acquisitions, Proposed Private Placement and Proposed Rights Issue on the share capital, earnings and EPS, NA and gearing and substantial shareholders shareholdings of PGB are set out based on the following scenario:- Minimum Scenario : Maximum Scenario : Assuming that the Proposed Rights Issue is to be undertaken on a Minimum Subscription Level. Assuming all the Entitled Shareholders subscribe to their entitlement of the Rights Shares on a full subscription level. 9.1 Share capital For illustrative purposes, the pro forma effects of the Proposals on the issued and paid-up share capital of our Company are shown below:- Minimum Scenario No. of PGB Shares RM ( 000) ( 000) Maximum Scenario No. of PGB Shares RM ( 000) ( 000) Existing issued and paid-up share capital of PGB as at the LPD To be issued pursuant to the Proposed Acquisition of PKC To be issued pursuant to the Proposed Private Placement To be issued pursuant to the Proposed Rights Issue Enlarged issued and paid-up share capital 324,501 32, ,501 32,450 45,611 4,561 45,611 4, ,112 37, ,112 37,011 37,011 3,701 37,011 3, ,123 40, ,123 40, ,000 25, ,123 40, ,123 65, ,246 81,424 Total public shareholdings ( 000) (1) 287, ,787 Percentage of public shareholdings (%) Note:- (1) Assuming the Placement Shares are issued to placees who individually own less than 5% shareholding in PGB As at the LPD, the public shareholding spread of PGB stands at 223,516,000 PGB Shares or 68.88%. Upon completion of the Proposals, the pro forma public shareholding spread of PGB will be reduced to 43.81% consisting 287,893,496 PGB Shares under the Minimum Scenario and 70.71% consisting 575,787,146 PGB Shares under the Maximum Scenario. 38

48 9.2 NA and gearing For illustrative purposes, the pro forma effects of the Proposals on the consolidated NA, NA per share and gearing ratio of PGB based on the audited consolidated statement position of PGB as at 31 December 2015 are set out below:- Minimum Scenario Audited as at 31 December 2015 Adjusted for subsequent event (1) Pro forma I Pro forma II Pro forma III Pro forma IV Upon completion of the Proposed Acquisition of PKC After Pro forma I and upon completion of the Proposed Acquisition of ISE After Pro forma II and upon completion of the Proposed Private Placement After Pro forma III and upon completion of the Proposed Rights Issue (2) RM 000 RM 000 RM 000 RM 000 RM 000 Share capital 29,500 32,450 37,011 37,011 40,712 65,712 Share premium 933 2,803 7,592 7,592 10,923 (3) 15,126 (4)(5) Merger deficit (10,500) (10,500) (10,500) (10,500) (10,500) (10,500) Fair value reserve Retained profits 10,450 10,335 10,335 11,241 11,241 9,572 (4) Shareholders equity / NA 30,400 35,105 44,455 45,361 52,393 79,927 No. of PGB Shares in issue ( 000) 295, , , , , ,123 NA per share (sen) Borrowings 12,715 12,715 14,393 28,996 28,996 28,996 Gearing ratio (times) Notes:- (1) On 18 April 2016, PGB completed a private placement exercise which involved the issuance of 29,500,000 PGB Shares at RM per PGB Share. (2) After the utilisation of proceeds as set out in Section 4 of this Circular. (3) The Proposed Private Placement is computed based on an indicative issue price of RM0.19 per Placement Share. (4) Accounted for estimated expenses in relation to the Proposals of RM1.6 million. (5) The Proposed Rights Issue is computed based on an indicative issue price of RM0.12 per Right Share. 39

49 Maximum Scenario Audited as at 31 December 2015 Adjusted for subsequent event (1) Pro forma I Pro forma II Pro forma III Pro forma IV Upon completion of the Proposed Acquisition of PKC After Pro forma I and upon completion of the Proposed Acquisition of ISE After Pro forma I and upon completion of the Proposed Private Placement After Pro forma II and upon completion of the Proposed Rights Issue (2) RM 000 RM 000 RM 000 RM 000 RM 000 Share capital 29,500 32,450 37,011 37,011 40,712 81,424 Share premium 933 2,803 7,592 7,592 10,923 (3) 18,269 (4)(5) Merger deficit (10,500) (10,500) (10,500) (10,500) (10,500) (10,500) Fair value reserve Retained profits 10,450 10,335 10,335 11,241 11,241 9,572 (4) Shareholders equity / NA 30,400 35,105 44,455 45,361 52,393 98,782 No. of PGB Shares in issue ( 000) 295, , , , , ,246 NA per share (sen) Borrowings 12,715 12,715 14,393 28,996 28,996 28,996 Gearing ratio (times) Notes:- (1) On 18 April 2016, PGB completed a private placement exercise which involved the issuance of 29,500,000 PGB Shares at RM per PGB Share. (2) After the utilisation of proceeds as set out in Section 4 of this Circular. (3) The Proposed Private Placement is computed based on an indicative issue price of RM0.19 per Placement Share. (4) Accounted for estimated expenses in relation to the Proposals of RM1.6 million. (5) The Proposed Rights Issue is computed based on an indicative issue price of RM0.12 per Right Share. Please refer to the pro forma consolidated statements of financial position of the PGB Group as at 31 December 2015 together with the Reporting Accountants letter thereon in Appendix V of this Circular for further details. 40

50 9.3 Earnings and EPS The Proposed Fund Raising Exercises are not expected to have a material effect on the earnings of the PGB Group for the financial year ending 31 December However, the EPS of the PGB Group may be diluted as a result of the increase number of PGB Shares in issue after the issuance of Consideration Shares, Placement Shares and Rights Shares. Nevertheless, the utilisation of the Proceeds from the Proposed Fund Raising Exercises, in the manner as set out in Section 4 of this Circular may contribute positively to the future earnings of our Group. For illustrative purposes, assuming that the Proposed Fund Raising Exercises and the Proposed Acquisitions had been effected at the beginning of the FYE 31 December 2015 and taking into consideration the Profit Guarantee which would form part of the profit attributable to equity holders of our Company as well as the issuance of the Consideration Shares, the effects on the profit per PGB Share shall be as follows:- Minimum Scenario (I) (II) (III) (IV) (V) Pro forma PATMI for the FYE 31 December 2015 (RM 000) Audited as at 31 December 2015 Adjustments for subsequent events (1) After (I) and upon completion of the Proposed Acquisition of PKC After (II) and upon completion of the Proposed Acquisition of ISE After (III) and upon completion of the Proposed Private Placement After (IV) and upon completion of the Proposed Rights Issue (2) 2,807 (3) 2,307 (4) 2, (5) No. of PGB Shares in issue ( 000) 295, , ,112 (6) 370, , ,123 Earnings per PGB Share (sen) Notes:- (1) Adjustments for the 29,500,000 PGB Shares issued pursuant to the private placement of our Company, which had completed on 18 April (2) Less the expenses of approximately RM0.11 million for a private placement exercise which was completed on 18 April (3) Assuming PATMI of approximately RM2.02 million after taking into consideration the Profit Guarantee Sum. (4) Including the loss after taxation of ISE for the FYE 31 December 2015 of approximately RM1.40 million and the bargain purchase from the Proposed Acquisition of ISE of approximately RM0.91 million. (5) Less the estimated expenses in relation to the Proposals of approximately RM0.803 million which will be charged to the profit and loss and the difference of approximately RM0.87 million between the fair value of the contingent consideration of RM7,007,675 and the expected consideration to be paid of RM7,873,824 for the Proposed Acquisition of PKC. (6) Including the 45,610,566 Consideration Shares to be issued pursuant to the Proposed Acquisition of PKC. 41

51 Maximum Scenario (I) (II) (III) (IV) (V) Pro forma PATMI for the FYE 31 December 2015 (RM 000) Audited as at 31 December 2015 Adjustments for subsequent events (1) After (I) and upon completion of the Proposed Acquisition of PKC After (II) and upon completion of the Proposed Acquisition of ISE After (III) and upon completion of the Proposed Private Placement After (IV) and upon completion of the Proposed Rights Issue (2) 2,807 (3) 2,307 (4) 2, (5) No. of PGB Shares in issue ( 000) 295, , ,112 (6) 370, , ,246 Earnings per PGB Share (sen) Notes:- (1) Adjustments for the 29,500,000 PGB Shares issued pursuant to the private placement of our Company, which had completed on 18 April (2) Less the expenses of approximately RM0.11 million for a private placement exercise which was completed on 18 April (3) Assuming PATMI of approximately RM2.02 million after taking into consideration the Profit Guarantee Sum. (4) Including the loss after taxation of ISE for the FYE 31 December 2015 of approximately RM1.40 million and the bargain purchase from the Proposed Acquisition of ISE of approximately RM0.91 million. (5) Less the estimated expenses in relation to the Proposals of approximately RM0.803 million which will be charged to the profit and loss and the difference of approximately RM0.87 million between the fair value of the contingent consideration of RM7,007,675 and the expected consideration to be paid of RM7,873,824 for the Proposed Acquisition of PKC. (6) Including the 45,610,566 Consideration Shares to be issued pursuant to the Proposed Acquisition of PKC. 9.4 Convertible securities As at the LPD, PGB does not have any convertible securities. 42

52 9.5 Shareholdings of substantial shareholders The pro forma effects of the Proposed Acquisition of PKC, Proposed Private Placement and Proposed Rights Issue on the substantial shareholders shareholdings are set out below:- Minimum Scenario Pro forma I Existing as at the LPD Upon completion of the Proposed Acquisition of PKC < Direct > < Indirect > < Direct > < Indirect > No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % Tara Temasek 56, , Wan Thean Hoe (1) , , Chan Man Chung (1) , , Yew Ai Boon 27, , DSTAK 11, , Dato Teng Yoon Kooi (2) 5, , Wee Hiang Chyn (2) , Ong Mei Lee (2) , THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 43

53 Pro forma II Pro forma III After Pro forma I and upon completion of the After Pro forma II and upon completion of the Proposed Proposed Private Placement Rights Issue < Direct > < Indirect > < Direct > < Indirect > No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % Tara Temasek 56, , Wan Thean Hoe (1) , , Chan Man Chung (1) , , Yew Ai Boon 27, , DSTAK 29, , Dato Teng Yoon Kooi (2) 5, , Wee Hiang Chyn (2) 9, , Ong Mei Lee (2) 18, , Notes:- (1) Deemed interested pursuant to Section 6A of the Act by virtue of their interest in Tara Temasek. (2) For illustration only, shares issuance pursuant to the Proposed Acquisition of PKC or Proposed Rights Issue who is not a substantial shareholder. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 44

54 Maximum Scenario Pro forma I Upon completion of the Proposed Acquisition of PKC Existing as at the LPD < Direct > < Indirect > < Direct > < Indirect > No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % Tara Temasek 56, , Wan Thean Hoe (1) , , Chan Man Chung (1) , , Yew Ai Boon 27, , DSTAK 11, , Dato Teng Yoon Kooi (2) 5, , Wee Hiang Chyn (2) , Ong Mei Lee (2) , THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 45

55 Pro forma II Pro forma III After Pro forma I and upon completion of the Proposed After Pro forma II and upon completion of the Private Placement Proposed Rights Issue < Direct > < Indirect > < Direct > < Indirect > No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % No. of PGB Shares 000 % Tara Temasek 56, , Wan Thean Hoe (1) , , Chan Man Chung (1) , , Yew Ai Boon 27, , DSTAK 29, , Dato Teng Yoon Kooi (2) 5, , Wee Hiang Chyn (2) 9, , Ong Mei Lee (2) 18, , Notes:- (1) Deemed interested pursuant to Section 6A of the Act by virtue of their interest in Tara Temasek. (2) For illustration only, shares issuance pursuant to the Proposed Acquisition of PKC or Proposed Rights Issue who is not a substantial shareholder. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 46

56 10. HISTORICAL SHARE PRICES The monthly high and low prices of PGB Shares as traded on the ACE Market of Bursa Securities for the past 12 months are set out below:- High Low RM RM 2015 November December January February March April May June July August September October Last transacted price of PGB Shares on the LTD Last transacted price of PGB Shares on the LPD (Source: Bloomberg) 11. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM DSTAK, who is the Executive Chairman and a shareholder of PGB and Dato Teng Yoon Kooi, who is the Executive Director and a shareholder of PGB, are also the director and shareholder of PKC. In view of their interests as director and shareholder in PGB and PKC, the Proposed Acquisition of PKC is deemed to be related party transaction under Rule of the Listing Requirements. Further, in view of the Proposed Rights Issue is conditional upon the Proposed Acquisition of PKC, DSTAK and Dato Teng Yoon Kooi are also deemed interested in the Proposed Rights Issue. Accordingly, DSTAK and Dato Teng Yoon Kooi have abstained and will continue to abstain from any deliberations and voting in meetings of our Board to consider the Proposed Acquisition of PKC and the Proposed Rights Issue. In addition, DSTAK and Dato Teng Yoon Kooi will abstain and will also ensure that persons connected to them will abstain from voting, where relevant, in respect of their direct and indirect interests in PGB, on the resolutions pertaining to the Proposed Acquisition of PKC and the Proposed Rights Issue at the forthcoming EGM to be convened. Save as disclosed above, none of the Directors and/or major shareholders of PGB and/or persons connected to the Directors and/or major shareholders of PGB has any interest, direct or indirect, in the Proposals other than their respective entitlements as the shareholders (if applicable) in relation to the Proposed Rights Issue and their right to apply for excess Rights Shares pursuant to the Proposed Rights Issue for which all the existing shareholders are also entitled to. 47

57 12. APPROVALS REQUIRED/OBTAINED The Proposals are subject to approvals being obtained from the following: (i) (ii) (iii) Bursa Securities for the listing of the Consideration Shares, Placement Shares and Rights Shares to be issued pursuant to the Proposed Acquisition of PKC, Proposed Private Placement and Proposed Rights Issue on the ACE Market of Bursa Securities; the shareholders of PGB for the Proposals, which will be obtained at the forthcoming EGM to be convened; and any other relevant authorities/parties, if required. The approval of Bursa Securities, which was obtained vide its letter dated 3 November 2016 is subject to the following conditions: Conditions Status of compliance (i) (ii) (iii) (iv) PGB and HLIB must fully comply with the relevant provisions under the Listing Requirements pertaining to the implementation of the Proposed Acquisition of PKC, Proposed Private Placement and Proposed Rights Issue respectively; PGB and HLIB to inform Bursa Securities upon the completion of the Proposed Acquisition of PKC, Proposed Private Placement and Proposed Rights Issue respectively; PGB and HLIB to furnish Bursa Securities with a certified true copy of the resolutions passed by the shareholders approving the Proposed Acquisitions, Proposed Private Placement, Proposed Rights Issue, Proposed Diversification and Proposed Amendments respectively prior to the quotation; and HLIB to furnish Bursa Securities with a written confirmation of its compliance with the terms and conditions of Bursa Securities approval once the Proposed Acquisition of PKC, Proposed Private Placement and Proposed Rights Issue are completed. Noted. To be complied. To be complied. To be complied. The Proposed Acquisition of ISE is conditional upon the Proposed Diversification. The Proposed Rights Issue is conditional upon the Proposed Acquisitions. The Proposed Acquisitions are not conditional upon the Proposed Rights Issue. The Proposed Acquisition of PKC and Proposed Acquisition of ISE are not inter-conditional upon each other. The Proposed Increase in Authorised Share Capital and Proposed Amendments are inter-conditional upon each other. The Proposed Acquisition of PKC, Proposed Private Placement and Proposed Rights Issue are conditional upon the Proposed Increase in Authorised Share Capital and Proposed Amendments. The Proposals are not conditional upon any other corporate proposal undertaken by PGB which has been announced but pending completion. For avoidance of doubt, the inter-conditionality of the Proposals will only apply in terms of the shareholders approval of our Company and shall not apply to the manner and sequence of completion of the Proposals. The Proposals are not conditional upon any other corporate exercise undertaken or to be undertaken by our Company. 48

58 13. CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION Save for the Proposals, there is no other corporate proposal which has been announced but has yet to be completed as at the LPD. 14. RELATED PARTY TRANSACTIONS In view of the interests disclosed in Section 11 of this Circular, the Proposed Acquisition of PKC is deemed a related party transaction pursuant to Rule of the Listing Requirements. As at the date of this Circular, save for the recurrent related party transaction that was disclosed in the Circular to shareholders dated 29 April 2016, which has been approved by the shareholders of our Company on 25 May 2016, there were no other related party transactions transacted with the interested Directors and interested major shareholders (including persons connected with them) for the 12 months preceding the date of this Circular. 15. DIRECTORS STATEMENT Our Board (save for DSTAK and Dato Teng Yoon Kooi (collectively, the Interested Directors ) who have abstained from all deliberation and opinion on the Proposed Acquisition of PKC and Proposed Rights Issue), having considered and deliberated on all aspects of the Proposals, is of the opinion that the Proposals, if implemented, will be in the best interests of our Company. Accordingly, our Board (save for the Interested Directors) recommends that you vote in favour of the resolutions pertaining to the Proposals at the forthcoming EGM to be convened. 16. AUDIT COMMITTEE S STATEMENT The Audit Committee of PGB, after having considered all aspects of the Proposed Acquisition of PKC, is of the view that the Proposed Acquisition of PKC is:- (i) (ii) (iii) in the best interest of our Company; fair and reasonable and on normal commercial terms; and not detrimental to the interests of the non-interested shareholders of our Company. In arriving at the above view, the Audit Committee has taken into consideration, amongst others, the following:- (i) (ii) (iii) (iv) (v) the advice from the Independent Adviser; the basis of arriving at the PKC Purchase Consideration; the basis of pricing of the Consideration Shares; the rationale for the Proposed Acquisition of PKC; and the prospects of the industry in which PKC operates. 49

59 17. ADVISER AND INDEPENDENT ADVISER Our Board has appointed HLIB to act as the Principal Adviser for the Proposals. Mercury Securities Sdn Bhd has been appointed by our Company as the Independent Adviser to advise the non-interested Directors and the non-interested shareholders of our Company on whether the terms of the Proposed Acquisition of PKC are fair and reasonable so far as the noninterested shareholders are concerned and whether the transactions are to the detriment of the non-interested shareholders of our Company. 18. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to all required approvals being obtained, our Board expects the Proposals to be completed by the first quarter of The tentative timeline for the implementation of the Proposals are set out below: Key milestones Tentative timeline EGM for the Proposals 8 December 2016 Completion of the Proposed Acquisitions Mid December 2016 Completion of the Proposed Private Placement End December 2016 Announcement of the Entitlement Date for the Proposed Rights Early January 2017 Issue Entitlement Date and issuance of abridged prospectus in relation End January 2017 to the Proposed Rights Issue Commencement of trading of rights entitlements End January 2017 Closing date of acceptance of and applications for the Rights Mid February 2017 Shares Listing of and quotation for the Rights Shares on the ACE Market End February 2017 of Bursa Securities 19. EGM An EGM will be held at Wisma Modal Khas, Lot 5815-A, Jalan Mawar, Taman Bukit Serdang, Seksyen 9, Seri Kembangan, Selangor Darul Ehsan, Malaysia, on Thursday, 8 December 2016 at a.m., to consider and, if thought fit, to pass the resolutions to give effect to the Proposals. If you are unable to attend and vote in person at the EGM, please complete the Form of Proxy, which is attached in this Circular, in accordance with the instructions contained therein the Form of Proxy should be lodged at our Registered Office of our Company at 10 th Floor, Menara Hap Seng, No. 1 & 3, Jalan P. Ramlee, Kuala Lumpur no later than 48 hours before the adjourned EGM. The last day and time for you to lodge the Form of Proxy is on Tuesday, 6 December 2016 at a.m.. The lodging of the Form of Proxy will not preclude you from attending and voting in person at our EGM should you subsequently decide to do so. 50

60 20. FURTHER INFORMATION You are advised to refer to the attached appendices for further information. Yours faithfully, for and on behalf of the Board PASUKHAS GROUP BERHAD Wan Thean Hoe Executive Director cum Chief Executive Officer 51

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