AND NOTICE OF EXTRAORDINARY GENERAL MEETING. Adviser M&A SECURITIES SDN BHD (15017-H) M&A SECURITIES SDN BHD (15017-H)

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1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. solicitor, accountant or other professional advisers immediately. If Bursa you are Malaysia in any Securities doubt as Berhad to the ( Bursa course Securities ) of action to has be not taken, perused you the should contents consult of this your Circular stockbroker, in relation bank to the manager, Proposed solicitor, Bonus Issue accountant of Shares or (as other defined professional herein) prior advisers to the issuance immediately. of this Circular as the contents of this Circular in relation to the Bursa Proposed Malaysia Bonus Securities Issue of Berhad Shares ( Bursa is an Exempt Securities ) Circular has pursuant not perused to Practice the contents Note 18 of of this the Main Circular Market in relation Listing to Requirements the Proposed of Bonus Bursa Issue Securities. of Shares Bursa (as Securities defined herein) takes prior no responsibility to the issuance for of its this contents, Circular makes as the contents no representation of this Circular as to in its relation accuracy to the or Proposed completeness Bonus and Issue expressly of Shares disclaims an Exempt any liability Circular whatsoever pursuant for to any Practice loss howsoever Note 18 of arising the Main from Market or in Listing reliance Requirements upon the whole of Bursa or any Securities. part of the Bursa contents Securities of this Circular. takes no responsibility for its contents, makes no representation as to its accuracy 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. (Company (Company No.: No.: H) H) (Incorporated in in Malaysia) Malaysia) CIRCULAR TO SHAREHOLDERS CIRCULAR TO SHAREHOLDERS IN RELATION TO THE IN RELATION TO THE (I) PROPOSED BONUS ISSUE OF 48,400,000 NEW ORDINARY SHARES IN SCGM BHD ( SCGM ) ( SCGM SHARE(S) OR SHARE(S) ) ( BONUS SHARE(S) ) ON THE BASIS OF 1 BONUS SHARE FOR EVERY 3 EXISTING SCGM SHARES HELD ON AN ENTITLEMENT DATE TO BE DETERMINED LATER ( PROPOSED BONUS ISSUE OF SHARES ) (II) PROPOSED BONUS ISSUE OF 19,360,000 NEW WARRANTS IN SCGM ( WARRANT(S) ) ON THE BASIS OF 2 WARRANTS FOR EVERY 15 EXISTING SCGM SHARES HELD ON THE SAME ENTITLEMENT DATE AS THE PROPOSED BONUS ISSUE OF SHARES ( PROPOSED BONUS ISSUE OF WARRANTS ) AND NOTICE OF EXTRAORDINARY GENERAL MEETING Adviser M&A SECURITIES SDN BHD (15017-H) M&A SECURITIES SDN BHD (15017-H) (A Wholly-Owned Subsidiary of Insas Berhad) (A Participating (A Wholly-Owned Organisation Subsidiary of Bursa Malaysia of Insas Securities Berhad) Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) The Notice convening the Extraordinary General Meeting ( EGM ) in respect of the abovementioned proposals to be held at Lot 3304, Batu 24 ½, Jalan Kulai Air Hitam, Kulai, Johor Darul Takzim on Friday, 7 July 2017 at a.m. or any adjournment thereof, together with the Proxy Form are enclosed in this Circular. The Notice convening the Extraordinary General Meeting ( EGM ) in respect of the abovementioned proposals to be held at Lot A shareholder 3304, Batu 24 entitled ½, Jalan to attend Kulai and Air vote Hitam, at the EGM is Kulai, entitled Johor to appoint Darul Takzim a proxy on to attend Friday, and 7 July vote 2017 on his at behalf a.m. The Proxy or any Form adjournment must be deposited thereof, together at the Registered with the Proxy Office Form of SCGM are enclosed at Level in 15-2, this Circular. Bangunan Faber Imperial Court, Jalan Sultan Ismail, Kuala Lumpur, on or before the date and time indicated below in order for it to be valid. The lodging of the Proxy Form will A not shareholder preclude entitled a shareholder to attend from and attending vote at and the EGM voting is in entitled person to at appoint the EGM a proxy should to the attend shareholder and vote subsequently on his behalf. wish The to Proxy do so. Form must be deposited at the Registered Office of SCGM at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, Kuala Lumpur, on or before the date and time indicated below in order for it to be valid. The lodging of the Proxy Form Last will date not and preclude time for a shareholder lodging the from Proxy attending Form : and Wednesday, voting in 5 person July 2017, at the at EGM should a.m. the shareholder subsequently wish to do Date so. and time of EGM : Friday, 7 July 2017, at a.m. or any adjournment thereof Last date and time for lodging the Proxy Form : Wednesday, 5 July 2017, at a.m. Date and time of EGM : Friday, 7 July 2017, at a.m. or any adjournment thereof This Circular is dated 22 June 2017 This Circular is dated 22 June 2017

2 DEFINITION Except where the context otherwise requires, the following definition shall apply throughout this Circular: Board Bonus Share(s) Bursa Securities : Board of Directors of SCGM : 48,400,000 new SCGM Share(s) to be issued pursuant to the Proposed Bonus Issue of Shares : Bursa Malaysia Securities Berhad ( W) Circular : This circular to shareholders dated 22 June 2017 Deed Poll EGM Entitled Shareholders Entitlement Date FPE FYE LPD M&A Securities MMLR NA Reporting Accountants SCGM or Company SCGM Group or Group SCGM Share(s) or Share(s) Proposals Proposed Bonus Issue of Shares Proposed Bonus Issue of Warrants : The deed poll governing the Warrants to be executed by the Company : Extraordinary general meeting : Shareholders of SCGM whose names appear in SCGM s Record of Depositors on the Entitlement Date : A date to be determined and announced later by the Board, as at the close of business on which the shareholders of SCGM must be registered in the Record of Depositors of the Company in order to be entitled to participate in the Proposals : Financial period ended : Financial year ended/ending 30 April, as the case may be : 22 May 2017, being the latest practicable date prior to the printing of this Circular : M&A Securities Sdn Bhd (15017-H) : Main Market Listing Requirements of Bursa Securities, as may be amended from time to time : Net assets : Messrs SJ Grant Thornton : SCGM Bhd ( H) : SCGM and its subsidiary, collectively : Ordinary share(s) in SCGM : The Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants, collectively : Proposed bonus issue of 48,400,000 Bonus Shares on the basis of 1 Bonus Share for every 3 existing SCGM Shares held on the Entitlement Date : Proposed bonus issue of 19,360,000 Warrants on the basis of 2 Warrants for every 15 existing SCGM Shares held on the Entitlement Date i

3 DEFINITION (cont d) Record of Depositors RM and sen Warrant(s) 5D-VWAP : A record of securities holders established and maintained by Bursa Malaysia Depository Sdn Bhd under the rules of Bursa Malaysia Depository Sdn Bhd : Ringgit Malaysia and sen, respectively : 19,360,000 detachable warrant(s) to be issued pursuant to the Proposed Bonus Issue of Warrants : 5-day volume weighted average market price For the purpose of this Circular, all references to a time of day shall be a reference to Malaysian time unless otherwise stated. In this Circular, words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine gender and vice versa. References to persons shall, where applicable, include corporations. Certain figures included in this Circular have been subject to rounding adjustments. References to we, us, our and ourselves are to our Company save where the context otherwise requires, our subsidiaries and to you or your are to the shareholders of the Company. The remainder of this page is intentionally left blank ii

4 TABLE OF CONTENTS Page LETTER TO THE SHAREHOLDERS OF SCGM CONTAINING: 1. INTRODUCTION 1 2. THE PROPOSALS 2 3. UTILISATION OF PROCEEDS 7 4. RATIONALE FOR THE PROPOSALS 7 5. FINANCIAL EFFECTS OF THE PROPOSALS 8 6. INDUSTRY OVERVIEW AND PROSPECTS APPROVALS REQUIRED SHARE PRICE PERFORMANCE DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS DIRECTORS RECOMMENDATION ESTIMATED TIMEFRAME FOR COMPLETION OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION EGM FURTHER INFORMATION 17 APPENDICES I LETTER FROM THE REPORTING ACCOUNTANTS ON THE ADEQUACY OF RESERVES 18 II FURTHER INFORMATION 22 NOTICE OF EGM PROXY FORM ENCLOSED ENCLOSED iii

5 (Company No.: H) (Incorporated in Malaysia) Directors: Dato Sri Lee Hock Seng (Executive Chairman) Dato Sri Lee Hock Chai (Managing Director) Dato Sri Lee Hock Guan (Deputy Managing Director) Lee Hock Meng (Executive Director) Amrik Singh Harcharan Singh (Independent Non-Executive Director) Wong Tun Boon (Independent Non-Executive Director) Tang Nai Soon (Independent Non-Executive Director) To: The Shareholders of SCGM Bhd Dear Sir / Madam, Registered Office: Level 15-2 Bangunan Faber Imperial Court Jalan Sultan Ismail Kuala Lumpur 22 June 2017 PROPOSED BONUS ISSUE OF SHARES; AND PROPOSED BONUS ISSUE OF WARRANTS 1. INTRODUCTION On 28 April 2017, M&A Securities, on behalf the Board, had announced that the Company proposes to undertake the following: (i) (ii) Proposed Bonus Issue of Shares; and Proposed Bonus Issue of Warrants. Subsequently, on 13 June 2017, M&A Securities had announced that Bursa Securities had vide its letter dated 13 June 2017 approved in-principle the following: (i) (ii) (iii) listing of 48,400,000 Bonus Shares to be issued pursuant to the Proposed Bonus Issue of Shares; admission to the official list and listing of 19,360,000 Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants; and the listing of up to 19,360,000 new SCGM Shares to be issued arising from the exercise of Warrants on the Main Market of Bursa Securities. 1

6 Bursa Securities approval-in-principle is subject to the following conditions: (i) (ii) (iii) (iv) (v) (vi) Conditions SCGM and M&A Securities must fully comply with the relevant provisions under the MMLR pertaining to the implementation of the Proposed Bonus Issue of Shares and the Proposed Bonus Issue of Warrants; SCGM and M&A Securities to inform Bursa Securities upon the completion of the Proposals; SCGM to furnish Bursa Securities with a written confirmation of its compliance with the terms and conditions of Bursa Securities approval once the Proposals are completed; SCGM to furnish Bursa Securities with a certified true copy of the resolutions passed by the shareholders at the forthcoming EGM for the Proposals; SCGM and M&A Securities are required to make the relevant announcements pursuant to the MMLR; and Payment of additional listing fees pertaining to the exercise of Warrants, if relevant. In this respect, SCGM is required to furnish Bursa Securities on a quarterly basis a summary of the total number of shares listed pursuant to the exercise of Warrants as at the end of each quarter with a detailed computation of listing fees payable. Status of Compliance To be complied To be complied To be complied To be complied Noted Noted The purpose of this Circular is to provide you with details of the Proposals, to set out the Board s opinion and recommendation in relation to the Proposals and to seek your approval for the resolutions pertaining to the Proposals to be tabled at the forthcoming EGM of the Company, scheduled to be held at Lot 3304, Batu 24 ½, Jalan Kulai Air Hitam, Kulai, Johor Darul Takzim on Friday, 7 July 2017 at or any adjournment thereof. The Notice of EGM together with the Proxy Form are enclosed with this Circular. YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES BEFORE VOTING ON THE RESOLUTIONS TO GIVE EFFECT TO THE PROPOSALS AT THE FORTHCOMING EGM. 2. THE PROPOSALS As at the LPD, the share capital of SCGM is RM132,586,423 (inclusive of the share premium of the Company of RM24,346,423) comprising 145,200,000 SCGM Shares. 2.1 PROPOSED BONUS ISSUE OF SHARES Basis and quantum The Proposed Bonus Issue of Shares entails an issuance of 48,400,000 Bonus Shares on the basis of 1 Bonus Share for every 3 existing SCGM Shares held by the Entitled Shareholders on the Entitlement Date. Fractional entitlements of the Bonus Shares arising from the Proposed Bonus Issue of Shares, if any, shall be disregarded and dealt with in such manner as the Board in its absolute discretion deem fit and expedient and in the best interest of the Company. 2

7 The Entitlement Date will be determined and announced at a later date by the Board upon receipt of all relevant approvals. The Proposed Bonus Issue of Shares will be implemented concurrently with the Proposed Bonus Issue of Warrants and not in stages over a period of time Capitalisation of Reserves The Proposed Bonus Issue of Shares shall be wholly capitalised from the share premium of the Company. An illustration of the proposed capitalisation of RM0.50 per Bonus Share under the Proposed Bonus Issue of Shares based on SCGM s latest audited financial statements for the FYE 2016 and the latest unaudited financial statements for the FPE 31 January 2017, at both Group and Company level are as follows: Audited as at 30 April 2016 Unaudited as at 31 January 2017 Group Company Group Company RM 000 Share premium 27,227 24,927 27,227 24,927 Less capitalisation for the Proposed Bonus Issue of Shares (24,200) (24,200) (24,200) (24,200) Less estimated expenses for the Proposals (200) (200) (200) (200) After the Proposals 2, , Pursuant to Paragraph 6.30(1) of the MMLR, a listed issuer intending to make a bonus issue of securities must ensure that the necessary reserves required for capitalisation of the bonus issue is unimpaired by losses on a consolidated basis, where applicable, based on the listed issuer s latest audited financial statements as well as its latest quarterly report. The Board confirms that based on SCGM s latest consolidated audited financial statements for the FYE 2016 and the latest unaudited quarterly report for the FPE 31 January 2017, SCGM has adequate reserves available to be capitalised for the Proposed Bonus Issue of Shares, and that the reserves are unimpaired by losses on a consolidated basis. Hence, the Company has complied with Paragraph 6.30(1) of the MMLR. The Board also confirms that the Proposed Bonus Issue of Shares and the implementation of the Proposed Bonus Issue of Shares is and will be in full compliance with the Companies Act, 2016 ( Act ) and Practice Note 1/2017 issued by the Companies Commission of Malaysia on 8 February 2017 for the purposes of sub-section 618(3) and (4) of the Act. Pursuant to Paragraph 6.30(3) of the MMLR, the Company has obtained a confirmation from the Reporting Accountants that the Company has adequate reserves for the capitalisation of the Proposed Bonus Issue of Shares based on the Company s latest unaudited financial statements for the FPE 31 January A copy of the Reporting Accountants letter on the adequacy of reserves in connection with the Proposed Bonus Issue of Shares is included in Appendix I of this Circular Ranking of the Bonus Shares The Bonus Shares will, upon allotment and issuance, rank equally in all respects with the then existing SCGM Shares, except for any entitlements given on an entitlement date prior to the date of allotment and issuance of the said Bonus Shares. 3

8 2.1.4 Listing and quotation for the Bonus Shares The approval from Bursa Securities was obtained vide its letter dated 13 June 2017 for the listing and quotation of the Bonus Shares on the Main Market of Bursa Securities. 2.2 Proposed Bonus Issue of Warrants Basis and quantum The Proposed Bonus Issue of Warrants entails an issuance of 19,360,000 Warrants on the basis of 2 Warrants for every 15 existing SCGM Shares held by the Entitled Shareholders on the Entitlement Date. Assuming all the 19,360,000 Warrants are exercised, a total of 19,360,000 new SCGM Shares will be issued therefrom. Fractional entitlements of the Warrants arising from the Proposed Bonus Issue of Warrants, if any, shall be dealt with in such manner as the Board shall in its absolute discretion deems fit and expedient, and to be in the best interest of the Company. The Proposed Bonus Issue of Warrants will be implemented concurrently with the Proposed Bonus Issue of Shares and not in stages over a period of time Basis of determining and justification for the exercise price of the Warrants The Warrants will be issued at no cost to the Entitled Shareholders. The exercise price of the Warrants will be determined and fixed by the Board at a later date after receipt of all relevant approvals but before the announcement of the Entitlement Date, after taking into consideration the following: (i) (ii) (iii) (iv) the Warrants will be issued at no cost to the Entitled Shareholders; trading and liquidity of SCGM Shares; theoretical ex-all price of SCGM Shares; and the 5D-VWAP of SCGM Shares and prevailing market conditions. An announcement will be made by the Board at a later date on the basis of arriving at the exercise price of the Warrants and justifications for the pricing as well as the quantum of discount applied. For illustrative purpose only, the exercise price of the Warrants is assumed to be at RM4.05, which represents a premium of approximately 29.39% to the theoretical ex-all price of SCGM Shares of RM3.13, which is calculated based on a market price of RM4.05 per Share, being the 5D-VWAP of SCGM Shares up to and including 28 April 2017, being the date of the announcement of the Proposals. The minimum exercise price shall be at least 20% premium to the theoretical ex-all price of SCGM Shares (calculated based on the 5-day VWAP of SCGM Shares immediately prior to the price fixing date) Ranking of the new SCGM Shares to be issued arising from the exercise of the Warrants The new SCGM Shares to be issued arising from the exercise of the Warrants will, upon allotment and issuance, rank equally in all respects with the existing SCGM Shares, except for any entitlements given on an entitlement date prior to the date of allotment of the said Shares. 4

9 2.2.4 Listing and quotation of the Warrants and the new SCGM Shares to be issued arising from the exercise of the Warrants The approval from Bursa Securities was obtained vide its letter dated 13 June 2017 for the admission of the Warrants to the official list of Bursa Securities as well as the listing of and quotation for the Warrants and the new SCGM Shares to be issued arising from the exercise of the Warrants on the Main Market of Bursa Securities Indicative salient terms of the Warrants Terms Issue size Form and denomination Tenure Exercise Rights Exercise Price Exercise Period Expiry Date Adjustment in the Exercise Price and/or the number of Warrants Status of the new SCGM Shares to be issued pursuant to the exercise of the Warrants Details : 19,360,000 Warrants : The Warrants will be issued in registered form and constituted by a Deed Poll. : 3 years from the date of issuance of the Warrants. : Each Warrant entitles the registered holder to subscribe for 1 new SCGM Share at the Exercise Price at any time during the Exercise Period, subject to the provisions of the Deed Poll. : The exercise price of the Warrants shall be determined and fixed by the Board and announced at a later date, after obtaining the relevant approvals but before the announcement of the Entitlement Date. Kindly refer to Section of this announcement for the basis of determining the exercise price of the Warrants. : The Warrants may be exercised any time during the tenure of the Warrants including and commencing from the issue date and ending at 5.00 p.m. on the Expiry Date. Any Warrants which have not then been exercised will lapse and every Warrant not exercised by then will cease to be valid for any purpose. : A date which falls on the day before the 3 rd anniversary of the issue date, provided that if such day falls on a day which is not a market day, then it shall be the market day immediately preceding the said non-market day. : Subject to the provisions of the Deed Poll, the Exercise Price and/or the number of unexercised Warrants held by each holder of Warrants shall be adjusted by the Board in consultation with an approved adviser appointed by the Company and certification by the auditors of SCGM in the event of alteration to the share capital of the Company. : The new SCGM Shares to be issued upon the exercise of the Warrants shall, upon allotment and issue, rank equally in all respects with the then existing SCGM Shares, except for any entitlements given on an entitlement date prior to the date of allotment of the said Shares. 5

10 Terms Modification of rights of Warrant holder Details : The Company may, from time to time, without the consent or sanction of the holders of the Warrants but in accordance with the Deed Poll, modify the Deed Poll, if such modification made does not materially prejudice the interests of the holders of the Warrants or is made to correct a manifest error or to comply with prevailing laws of Malaysia, rules of the Bursa Malaysia Depository Sdn Bhd, Securities Industry (Central Depositories) Act, 1991 and/or MMLR. Save as expressly provided in the Deed Poll and subject to the approval of any relevant authority, any modification, alteration or abrogation of the covenants or provisions contained in the Deed Poll proposed or agreed to by the Company must be sanctioned by special resolution of the holders of the Warrants, effected by a deed poll, executed by the Company and expressed to be supplemental and comply with the requirements of the Deed Poll. Rights of holders of Warrants Rights in the event of winding up, liquidation or an event of default : The holders of Warrants are not entitled to any voting rights in any general meeting of the Company or to participate in any distribution and/or offer of further securities in the Company until and unless such holder of Warrants are issued with new SCGM Shares arising from their exercise of the Warrants. : Where a resolution has been passed by the Company for a members voluntary winding-up or there is a compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with 1 or more companies then: (a) (b) for the purpose of such a winding-up, compromise or arrangement (other than consolidation, amalgamation or merger in which the Company is the continuing corporation) to which the holders of Warrants or some persons designated by them for such purposes by special resolution, shall be a party, the terms of such winding-up, compromise or arrangement shall be binding on all the holders of Warrants; and in any other case, every Warrant holder shall be entitled at any time within 6 weeks after the passing of such resolution for a members voluntary winding up of the Company or 6 weeks after the granting of the court order approving the compromise or arrangement, by irrevocable surrender of his Warrants together with payment of the relevant subscription monies, to elect to be treated as if he had immediately prior to the commencement of such winding-up, compromise or arrangement, exercised the subscription rights represented by such Warrants, to the extent specified in the exercise notice and be entitled to receive out of the assets of the Company which would be available in liquidation if he had on such date been the holder of the new SCGM Shares, to which he would have become entitled pursuant to such exercise; and the liquidator of the Company shall give effect to such election accordingly. Upon the expiry of the above 6 weeks, all exercise rights of the Warrants shall lapse and cease to be valid for any purpose. 6

11 Terms Board Lot Listing Transferability Governing Law Details : The Warrants are tradeable upon listing in board lots of 100 units carrying the right to subscribe for 100 new SCGM Shares at any time during the Exercise Period or such other denomination as may be prescribed by Bursa Securities. : The Warrants will be listed on the Main Market of Bursa Securities. : The Warrants are transferable by transfer prescribed by the rules of Bursa Malaysia Depository Sdn Bhd and in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991 and the rules of Bursa Malaysia Depository Sdn Bhd. : Laws of Malaysia. 3. UTILISATION OF PROCEEDS The Proposed Bonus Issue of Warrants is not expected to raise immediate funds for SCGM as the Warrants will be issued at no cost to the Entitled Shareholders. However, the gross proceeds to be raised from the exercise of the Warrants is dependent on the total number of Warrants exercised during the tenure of the Warrants as well as the exercise price of the Warrants, which will be determined and fixed at a later date. As such, the exact time frame for the utilisation of proceeds is not determinable at this juncture. For illustrative purpose only, the gross proceeds that is expected to be raised upon full exercise of the Warrants based on the indicative exercise price of RM4.05 per Warrant is approximately RM78.4 million. Such proceeds will be utilised as additional working capital, to repay bank borrowings and/or capital expenditure for the Group, as and when the need arises. As at the LPD, the Group has an outstanding bank borrowings of RM29.5 million. Assuming the proceeds of the Warrants are used to repay bank borrowings of RM29.5 million, this will save the Group RM1.3 million in annual interest based on an average interest rate of 4.39% per annum. Pending utilisation of the proceeds to be raised from the exercise of the Warrants, the proceeds may be placed in deposits with financial institutions or short-term money market instruments. The interest derived from the deposits with financial institutions or any gains arising from the short-term money market instruments will be used as additional working capital for the Group. 4. RATIONALE FOR THE PROPOSALS, 4.1 Proposed Bonus Issue of Shares After due consideration, the Board is of the view that the Proposed Bonus Issue of Shares is the most appropriate avenue of rewarding the existing shareholders of the Company while at the same time enhance the Company s capital base as the Proposed Bonus Issue of Shares will: (i) (ii) reward the existing shareholders of the Company for their continuous support; enlarge the number of SCGM Shares held by the Company s existing shareholders without affecting their percentage of equity interest; and 7

12 (iii) possibly encourage trading liquidity of SCGM Shares on Bursa Securities and greater participation by investors as well as potentially broadening the shareholder base of the Company. 4.2 Proposed Bonus Issue of Warrants After due consideration, the Board is of the view that the Proposed Bonus Issue of Warrants will: (i) (ii) (iii) (iv) reward the existing shareholders of the Company for their continuous support by enabling them to participate in convertible securities of the Company which are tradeable on Bursa Securities without incurring any cost; provide the existing shareholders of the Company with an opportunity to increase their equity participation in the Company at a predetermined price during the tenure of the Warrants; allow the existing shareholders of the Company to benefit from any potential capital appreciation of the Warrants; and help to strengthen the Company s capital base and shareholders funds as well as potentially provide additional funds for working capital, repayment of bank borrowings and/or capital expenditure for the Group, as and when the Warrants are exercised. 5. FINANCIAL EFFECTS OF THE PROPOSALS The effects of the Proposals on the issued share capital, earnings and earnings per Share, NA per Share and gearing, existing convertible securities and the substantial shareholders shareholdings of the Company, are set out below: 5.1 Issued share capital The pro forma effects of the Proposals on the issued share capital of SCGM are set out below: No. of Shares RM Issued share capital as at the LPD 145,200,000 (2) 132,586,423 To be issued pursuant to the Proposed Bonus Issue of Shares 48,400,000 (3) - 193,600, ,586,423 To be issued assuming full exercise of Warrants (1) 19,360,000 (4) 78,408,000 Enlarged issued share capital 212,960, ,994,423 Notes: (1) (2) Represents 10% of the enlarged number of issued shares of the Company after the completion of the Proposed Bonus Issue of Shares. Inclusive of the share premium of the Company of RM24,346,423. The movement of the share premium account as at 30 April 2016 up to the LPD are as follows: 8

13 Group Company RM RM As at 30 April ,227,367 24,927,367 Less expenses in relation to the private placement which was completed on 24 February 2017 (580,944) (580,944) As at LPD 26,646,423 24,346,423 (3) (4) Based on the proposed capitalisation of RM0.50 per Bonus Share, RM24.2 million of share premium will be capitalised. Calculated based on the indicative exercise price of the Warrants of RM4.05 per Warrant. 5.2 Earnings and earnings per Share The Proposals, which are expected to be implemented by the second half of 2017, are not expected to have any material effect on the earnings of SCGM Group for the FYE 30 April However, the earnings per Share of the SCGM Group may be diluted as a result of the issuance of the Bonus Shares and new SCGM Shares from the exercise of Warrants. 5.3 NA and gearing Based on the audited consolidated statement of financial position of SCGM as at 30 April 2016, the pro forma effects of the Proposals on the NA and gearing of the SCGM Group are as follows: I II III After II and Adjusted to After I assuming full As at 30 April 2016 subsequent events (1) and the Proposals exercise of Warrants RM 000 RM 000 RM 000 RM 000 Share capital 66, ,240 (2) 132,440 (4) 210,848 Share premium 27,227 (1) 26,646 (2) 2,246 2,246 Reverse acquisition reserve (28,227) (28,227) (28,227) (28,227) Discount on shares - - (13,552) - Warrants reserve - - (3) 13,552 - Retained profits 45,965 45,965 45,965 45,965 Shareholders funds/ NA 110, , , ,832 No. of Shares ( 000) 132, , , ,960 NA per Share (RM) Borrowings (RM 000) 6,121 6,121 6,121 6,121 Gearing (times) Notes: (1) Adjusted for the issuance of 13,200,000 SCGM Shares at an issue price of RM3.20 each under a private placement exercise, which was completed on 24 February 2017 and after deducting expenses of RM580,944 in relation to the private placement exercise. 9

14 (2) (3) (4) After the capitalisation of RM24.2 million pursuant to the Proposed Bonus Issue of Shares and after deducting estimated expenses of RM200,000 from the share premium account in relation to the Proposals. Assuming fair value of RM0.70 per Warrant calculated based on the Black-Scholes valuation model. After the issuance of 19,360,000 new SCGM Shares arising from the exercise of the Warrants at the indicative exercise price of RM4.05 per Warrant. 5.4 Existing convertible securities The Company does not have any convertible securities outstanding as at the LPD. The rest of this page is intentionally left blank 10

15 5.5 Substantial shareholders shareholdings The Proposals will not have any effect on the substantial shareholders percentage of shareholding in the Company as the Bonus Shares and Warrants will be allotted on a pro-rata basis to all shareholders of the Company. However, the number of SCGM Shares held by each substantial shareholder will increase proportionately as a result of the Proposed Bonus Issue of Shares and assuming full exercise of the Warrants. The effects of the Proposals on the substantial shareholders shareholdings of the Company are set out below: I II After Proposed Bonus Issue of Shares After I and full exercise of Warrants Existing as at the LPD Direct Indirect Direct Indirect Direct Indirect Substantial shareholders No. of Shares ( 000) % No. of Shares ( 000) % No. of Shares ( 000) % No. of Shares ( 000) % No. of Shares ( 000) % No. of Shares ( 000) % SCGM Lee Sdn Bhd 22, , , Dato' Sri Lee Hock Seng 13, (1) 22, , (1) 30, , (1) 33, Dato' Sri Lee Hock Chai 9, (1) 22, , (1) 30, , (1) 33, Dato' Sri Lee Hock Guan 9, (1) 22, , (1) 30, , (1) 33, Lee Hock Meng 8, (1) 22, , (1) 30, , (1) 33, Kumpulan Wang Persaraan (Diperbadankan) 6, (2) 1, , (2) 2, , (2) 2, Notes: (1) Deemed interested via his direct interest in SCGM Lee Sdn Bhd. (2) Deemed interested via Kumpulan Wang Persaraan (Diperbadankan) s Fund Manager. 11

16 6. INDUSTRY OVERVIEW AND PROSPECTS 6.1 Overview and prospects of the Malaysian economy Malaysia progressed further towards its vision of a high-income and advanced nation despite heightened uncertainties in the external environment. Global growth remains moderate, weighed down by volatility in the financial market, prolonged low commodity prices and slower growth in advanced economies. Given the degree of openness, these uncertainties, to a certain extent will impact the Malaysian economy through trade and financial channels. Against this backdrop, on 28 January 2016, the Government took pre-emptive measures to recalibrate the 2016 Budget to sustain economic growth and more importantly safeguard the wellbeing of the nation. With the addition of 11 new measures to the 2016 budget, coupled with the nation s strong economic fundamentals, gross domestic product ( GDP ) will remain on its growth trajectory, recording 4% to 4.5% in The programmes and measures introduced in the 2016 Budget to address cross-cutting issues have made significant progress, resulting in a GDP growth of 4.1% in the first 6 months of the year. On the demand side, private consumption and investment activities supported growth, while the supply side was driven by the services and manufacturing sectors. With better prospects for global growth and international trade, the Malaysian economy is projected to grow 4% to 5% in Growth will emanate mainly from domestic demand underpinned by strong economic fundamentals as well as supported by nationcentric and pro-growth measures in the 2017 Budget. (Source: Economic Report 2016/17, Ministry of Finance Malaysia) The Malaysian economy registered a strong growth of 5.6% during the first quarter of 2017 (Q1 2016: 4.0%) mainly supported by higher domestic demand. On the supply side, the growth was broad-based with all sectors registering positive growth. Domestic demand expanded at a faster pace of 7.7% (Q1 2016:3.4%) driven mainly by stronger private sector expenditure. Private consumption increased 6.6% (Q1 2016: 5.2%) supported by stable employment conditions and sustained wage growth, continuation of Bantuan Rakyat 1Malaysia, cash assistance of RM500 to civil servants as well as higher dividend paid out by major unit trusts. Income in the rural areas also experienced strong growth, with rubber and palm oil prices increasing by 92% and 53.3%, respectively. Major consumption indicators reflected the strong trend in household spending. Among others, sales of passenger cars grew 8.9%, sales of food (8.7%) and consumption credit disbursed (6.1%). Key segments which contributed to the higher growth in private consumption were food and non-alcoholic beverages and communication. Meanwhile, public consumption surged 7.5% (Q1 2016: 2.7%) largely due to higher expenditure on supplies and services, especially to further improve health and education services. The export-oriented industries advanced by 6.1% (Q1 2016: 3.7%), driven primarily by the electrical and electronics ( E&E ) cluster. The stronger performance of the E&E cluster was supported by firm demand for consumer-based electrical products as well as stronger growth in the electronics segment driven by continued uptick in global demand for semiconductors. The growth of the industry was also supported by higher production of chemicals and plastic products. The Malaysian economy is expected to remain on its growth trajectory in the second quarter of The growth will be supported primarily by domestic demand. Private sector expenditure will remain the key driver of growth attributed to strong household spending and investment activities. On the supply side, growth will be largely contributed by expansion in services and manufacturing sectors. Labour market is expected to remain stable while inflation continue to be manageable. (Source: Quarterly update on the Malaysian Economy 1 st Quarter 2017, Ministry of Finance) 12

17 6.2 Overview and prospects of the manufacturing sector The manufacturing sector grew at a faster pace of 5.6% during the first quarter of 2017 (Q1 2016: 4.6%), supported by stronger performance of export-oriented industries and continued expansion of domestic-oriented industries. Output of the sector increased 5.7% (Q1 2016: 4.3%) while sales rebounded and recorded a double-digit growth of 13.3% to RM186.5 billion (Q1 2016: -1.8%; RM164.7 billion). The capacity utilisation rate increased to 86.6% (Q1 2016: 76.4%). (Source: Quarterly update on the Malaysian Economy 1 st Quarter 2017, Ministry of Finance) 6.3 Overview and prospects of plastic products and packaging industry From being an importer of petrochemicals, Malaysia is today an exporter of major petrochemical products. A wide range of petrochemicals are produced in Malaysia such as olefins, polyolefins, aromatics, ethylene oxides, glycols, oxo-alcohols, acrylic acids, phthalic anhydride, acetic acid, styrene monomer, high impact polystyrene, ethyl benzene, vinyl chloride monomer and polyvinyl chloride and polybutylene terephthalate. These world scale plants have also contributed significantly to the development of local downstream plastic processing activities by providing a steady supply of feedstock material for the plastic industry. These factors have led the plastic products industry to become one of the most dynamic industries in Malaysia's manufacturing sector. The plastic industry can be divided into 4 sub-sectors, namely packaging sub-sector, E&E and automotive components subsector, consumer and industrial products sub-sector and others. The packaging sub-sector, both flexible and rigid (including bags, films, bottles and containers), remains the largest market for the plastic industry. The main production processes involved in the plastic producers industry are injection moulding, pipes and profiles extrusion and foam moulding. As at 2015, there are 1,837 plastic companies in operation, producing products ranging from common household items, packaging materials and conveyance articles to parts and components for the electrical and electronics, automotive, office automation, computer and telecommunications industries. The Malaysian plastics industry has been rated as among the most competitive in Asia. Globalisation poses both challenges and opportunities simultaneously for Malaysian plastic manufacturers. Therefore, it is imperative for Malaysian manufacturers to sustain their competitiveness, through improved technologies, enhanced skills and penetrating new markets in developed and developing economies. (Source: Petrochemical and Polymer Industry, Malaysian Investment Development Authority, extracted on 19 July 2016 from Prospects of the Group The continuing demand for thermo-form packaging both locally and overseas enabled the Group s revenue to rise 25.2% to RM133.5 million in FYE Further, the revenues from both the local and foreign markets charted double-digit growth. Local sales remained the Group's larger revenue contributor with RM70.6 million recorded in FYE 2016, growing by 23.0% from RM57.4 million a year ago. Export sales improved by 27.8% to RM62.9 million in FYE 2016 as compared to RM49.2 million previously. The Group s net profit for FYE 2016 grew by 30.3% to RM20.2 million compared to RM15.5 million previously. The year ahead is expected to be another promising journey, as SCGM builds on its extensive product range, wide distribution network and established reputation as a preferred supplier of high quality thermo-form food and beverages packaging. To this end, the Group have identified 3 key strategies that will take the Group a step higher in its growth story: 13

18 (i) Expanding further into local and export markets Having already made a mark into several states locally as well as overseas countries, the Group intends to broaden its reach even further. SCGM has identified East Malaysia as the next potential market in light of the anticipated economic development. The Group would seek similar opportunities and intensify its marketing efforts in Peninsular Malaysia and other countries in South East Asia to further boost the Group s clientele. (ii) Innovating new products SCGM has more than 30 years of experience in manufacturing thermo-form plastic packaging products. To date, the Group has developed more than 5,000 moulds across various product categories, with 52 designs registered with the Intellectual Property Office of Singapore and 62 designs registered with the Intellectual Property Corporation of Malaysia. Mindful of the constantly changing lifestyles of end users, the Group will continue its research and development initiatives to generate innovative and high quality products that meet evolving requirements. Among the products in development include degradable packaging, multi-coloured single-piece packaging, as well as new designs and sizes to provide customers with a wider range of products. (iii) Increasing production capacity The Group recognises that these endeavours to expand the customer base should be accompanied by similar efforts to increase the Group s manufacturing capacity in the long run. The Group has on February 2017 purchase 4 automatic punching machines, 2 press forming machines, 2 thermoforming machines, 3 extrusion machine, and 1 computer numerical control machine. Currently, the Group s production capacity is about 36.0 million kilograms ( kg ) per year. SCGM also intends to construct a new production facility, which is located 5 kilometres away from the Group s existing premises in Kulai, to sustain future growth. To this end, the Group has earmarked RM124.8 million in capital expenditure over the next three years for this purpose. Of this, RM11.8 million from internally generated funds and bank borrowings has been utilised for the purchase of three parcels of land totalling 7.8 hectares (or 19.2 acres) in Kulai, Johor, while the balance RM80.0 million and RM33.0 million would be allocated for the construction of the new building and purchase of the machinery respectively. The new 7.8 hectare factory in Kulai, would increase the production capabilities to 62.6 million kg per year from the current 36.0 million kg per year. The factory construction is expected to be completed in December (Source: Annual Report 2016 of SCGM and management of SCGM) Barring any unforeseen circumstances, the Board, after having considered all the relevant aspects including the abovementioned prospects as well as the outlook of the manufacturing industry and plastic packaging industry as set out in Sections 6.2 and 6.3 of this Circular, respectively, is of the opinion that the prospects for the Group in the immediate term will remain positive. (Source: Management of SCGM) 14

19 7. APPROVALS REQUIRED The Proposals are subject to the following approvals: (i) Bursa Securities, which was obtained vide its letter dated 13 June 2017, for the following: (a) admission to the Official List and the listing of and quotation for 19,360,000 Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants; (b) (c) listing of and quotation for 48,400,000 Bonus Shares to be issued pursuant to the Proposed Bonus Issue of Shares; and listing of and quotation for up to 19,360,000 new SCGM Shares to be issued pursuant to the exercise of Warrants on the Main Market of Bursa Securities; (ii) (iii) the shareholders of SCGM at the forthcoming EGM to be convened; and any other relevant authority, if required. The Proposed Bonus Issue of Shares and the Proposed Bonus Issue of Warrants are interconditional upon each other. However, the Proposals are not conditional upon any other proposals undertaken or to be undertaken by the Company. The voting on the resolutions pertaining to the Proposals at the EGM will be taken on a poll. 8. SHARE PRICE PERFORMANCE The monthly highest and lowest prices of SCGM Shares as traded on Bursa Securities for the past 12 months are as follows: High Low 2016 (RM) (RM) June July August September October November December January February March April May The last transacted price of SCGM Shares on the date preceding the announcement of the Proposals on 28 April 2017 was RM4.05 per SCGM Share. The last transacted price of SCGM Shares as at the LPD was RM4.24 per SCGM Share. (Source: Bursa Securities) 15

20 9. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors, major shareholders of the Company and/or persons connected with them have any interest, direct and/or indirect, in the Proposals, other than their respective entitlements as shareholders of the Company under the Proposals, the rights of which are also available to all other existing shareholders of the Company as at the Entitlement Date. 10. DIRECTORS RECOMMENDATION After having considered all aspects of the Proposals, the Board is of the opinion that the Proposals are in the best interest of the Company, and accordingly recommends that the shareholders vote in favour of the resolutions pertaining to the Proposals to be tabled at the forthcoming EGM of the Company. 11. ESTIMATED TIMEFRAME FOR COMPLETION The tentative timetable in relation to the Proposals is as follows: Date Events 7 July 2017 EGM to approve the Proposals Announcement on the exercise price of the Warrants Announcement on the Entitlement Date for the Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants End July 2017 Entitlement Date Early August 2017 Listing of and quotation for the Bonus Shares and Warrants on the Main Market of Bursa Securities Barring any unforeseen circumstances and subject to receipt of all relevant approvals, the Proposals are expected to be completed by the second half of OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION Save for the Proposals, there are no other proposals announced but pending implementation. 13. EGM An EGM, the notice of which is enclosed together with this Circular, will be held at Lot 3304, Batu 24 ½, Jalan Kulai Air Hitam, Kulai, Johor Darul Takzim on Friday, 7 July 2017 at a.m. or any adjournment thereof, for the purpose of considering and, if thought fit, passing the resolutions so as to give effect to the Proposals. If you are unable to attend and vote in person at the EGM, you may complete and return the relevant Proxy Form in accordance with the instructions printed thereon as soon as possible and in any event so as to arrive at the Registered Office of the Company at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, Kuala Lumpur, not later than 48 hours before the date and time fixed for the EGM or any adjournment thereof. The lodging of the Proxy Form will not, however, preclude you from attending the EGM and voting in person should you subsequently wish to do so. 16

21 14. FURTHER INFORMATION Please refer to the attached appendices for further information. Yours faithfully, for and on behalf of the Board of Directors of SCGM BHD DATO SRI LEE HOCK CHAI Managing Director 17

22 LETTER FROM THE REPORTING ACCOUNTANTS ON THE ADEQUACY OF RESERVES APPENDIX I 18

23 19

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26 APPENDIX II FURTHER INFORMATION 1. DIRECTORS' RESPONSIBILITY STATEMENT This Circular has been seen and approved by the Board and they individually and collectively accept full responsibility for the accuracy of the information given in this Circular and confirm that, after making all enquiries as were reasonable in the circumstances and to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading. 2. CONSENT AND DECLARATION 2.1 M&A Securities M&A Securities has given and has not subsequently withdrawn its written consent to the inclusion of its name and all references thereon in the form and context in which they appear in this Circular. M&A Securities has given its confirmation that no conflict of interest exists or is likely to exist in relation to its role as the Adviser in relation to the Proposals. 2.2 SJ Grant Thornton SJ Grant Thornton has given and has not subsequently withdrawn its written consent to the inclusion of its name and letter on the adequacy of the Company s reserves in relation to the Proposals in the form and context in which they appear in this Circular. SJ Grant Thornton has given its confirmation that no conflict of interest exists or is likely to exist in relation to its role as the Reporting Accountants in relation to the Proposed Bonus Issue of Shares. 3. MATERIAL LITIGATION As at the LPD, neither SCGM nor its subsidiary are engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and to the best of the Board s knowledge and belief, the Board is not aware of any proceedings, pending or threatened against the SCGM Group or of any facts likely to give rise to any proceeding which may materially and adversely affect the financial position or business of the SCGM Group. 4. MATERIAL COMMITMENT As at the LPD, the Board is not aware of any material commitment, incurred or known to be incurred, which may have a material impact on the results or financial position of the SCGM Group. 5. CONTINGENT LIABILITIES Save as disclosed below, as at the LPD, the Board is not aware of any contingent liabilities, incurred or known to be incurred, which upon becoming enforceable, may have a material impact on the results or financial position of the SCGM Group. 22