EDUSPEC HOLDINGS BERHAD ( EDUSPEC OR THE COMPANY )

EDUSPEC HOLDINGS BERHAD ( EDUSPEC OR THE COMPANY ) PROPOSED PRIVATE PLACEMENT OF UP TO 131,556,380 NEW ORDINARY SHARES IN EDUPSEC ( EDUSPEC SHARES ) ( PLACEMENT SHARES ) REPRESENTING UP TO TEN PERCENT (10%) OF THE TOTAL NUMBER OF ISSUED SHARES OF EDUSPEC ( PROPOSED PRIVATE PLACEMENT ) 1. INTRODUCTION On behalf of the Board of Directors of Eduspec ( Board ), Mercury Securities Sdn Bhd ( Mercury Securities ) wishes to announce that the Company proposes to undertake the Proposed Private Placement. Further details of the Proposed Private Placement are set out in the ensuing sections of this announcement. 2. DETAILS OF THE PROPOSED PRIVATE PLACEMENT The Proposed Private Placement shall be undertaken in accordance with the general mandate in relation to Sections 75 and 76 of the Companies Act, 2016 ( Act ) (previously Section 132D of the Companies Act, 1965) which was approved by the shareholders of Eduspec at the Annual General Meeting ( AGM ) of the Company held on 27 February 2017 whereby the Board has been authorised to issue new shares in Eduspec not exceeding ten percent (10%) of the total number of issued shares of the Company. The authority shall continue to be in force until the conclusion of the next AGM of the Company. 2.1 Placement Size As at 24 July 2017, being the latest practicable date prior to this announcement ( LPD ), the issued share capital of Eduspec is RM94,377,440 comprising 932,813,800 Eduspec Shares and 382,750,000 outstanding warrants 2013/2018 ( Warrants ). Accordingly, the Proposed Private Placement will entail the issuance of up to 131,556,380 Placement Shares, representing up to ten percent (10%) of the total number of issued shares of the Company. The actual number of Placement Shares to be issued pursuant to the Proposed Private Placement will depend on the total number of issued shares of the Company at any point in time, after receipt of all relevant approvals for the Proposed Private Placement. For illustrative purpose, assuming none of the Warrants are exercised prior to the implementation of the Proposed Private Placement ( Minimum Scenario ), 93,281,380 Placement Shares will be issued pursuant to the Proposed Private Placement. Alternatively, assuming all the Warrants are exercised prior to the implementation of the Proposed Private Placement ( Maximum Scenario ), 131,556,380 Placement Shares will be issued pursuant to the Proposed Private Placement. 2.2 Allocation to Placees The Placement Shares will be placed out to third party investor(s) ( Placee(s) ) to be identified at a later date, where such Placee(s) shall be person(s) who qualify under Schedules 6 and 7 of the Capital Markets and Services Act 2007 ( CMSA ). 1

In accordance with Rule 6.05(c) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Listing Requirements ), the Placement Shares will not be placed to the following parties: (i) (ii) the interested director, interested major shareholder, or interested chief executive of Eduspec, or interested person connected with such director, major shareholder or chief executive, unless approval of the Company s shareholders is obtained for the specific allotment; and nominee corporations, unless the names of the ultimate beneficiaries are disclosed. Subject to the prevailing market conditions, in the event that the Board is unable to identify sufficient Placee(s) to subscribe for the entire portion of the Placement Shares at one time, the Proposed Private Placement may be implemented in multiple tranches within six (6) months from the date of approval of Bursa Securities for the Proposed Private Placement, or any extended period as may be approved by Bursa Securities. The implementation of the placement arrangement in multiple tranches would provide flexibility to the Company to procure interested investors to subscribe for the Placement Shares. As such, there could potentially be several price fixing dates depending on the number of tranches and timing of implementation. 2.3 Basis of arriving at the issue price of the Placement Shares The issue price of the Placement Shares shall be determined and fixed by the Board at a later date, after obtaining approvals from the relevant authorities for the Proposed Private Placement ( Price Fixing Date ). Pursuant to Rule 6.05(a) of the Listing Requirements, the Placement Shares may be issued at a price of not more than ten percent (10%) discount to the five (5)-day volume weighted average market price ( VWAMP ) of Eduspec Shares immediately preceding the Price Fixing Date. For illustrative purposes, the Placement Shares are assumed to be issued at an indicative issue price of RM0.14 per Placement Share, which represents a discount of approximately 6.66% to the five (5)-day VWAMP of Eduspec Shares up to and including the LPD of RM0.15. 2.4 Ranking of the Placement Shares The Placement Shares shall, upon allotment and issuance, rank pari passu in all respects with the existing Eduspec Shares, save and except that the Placement Shares will not be entitled to any dividends, rights, allotments and/or any other forms of distribution that may be declared, made or paid to shareholders where the entitlement date of which precedes the date of allotment of the Placement Shares. 2.5 Listing of and quotation for the Placement Shares An application will be made to Bursa Securities for the listing of and quotation for the Placement Shares to be issued pursuant to the Proposed Private Placement on the ACE Market of Bursa Securities. 2

2.6 Utilisation of proceeds On 25 March 2016, the Company has obtained approval from the shareholders of Eduspec authorising the Board to issue new Eduspec Shares not exceeding ten percent (10%) of the issued share capital of the Company pursuant to Section 132D of the Companies Act, 1965 ( Previous Placement ). The Company has completed the Previous Placement on 24 July 2017 with the issuance of 84,801,200 new Eduspec Shares raising a total of RM20.67 million. As announced on 22 April 2016, the Company intends to raise between RM23.71 million and RM35.66 million under the then minimum scenario and maximum scenario, respectively. Based on the actual amount raised, there is a shortfall of approximately RM3.03 million and RM14.98 million under the minimum scenario and maximum scenario, respectively. At the AGM held on 27 February 2017, the Company has obtained a new mandate from the shareholders of Eduspec under Sections 75 and 76 of the Act for the issuance of new shares in Eduspec not exceeding ten percent (10%) of the total number of issued shares of the Company. The actual amount of gross proceeds to be raised from the Proposed Private Placement will depend on the actual issue price and the actual number of Placement Shares to be issued to the Placee(s). For illustrative purposes, based on the indicative issue price of RM0.14 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of RM13.06 million under the Minimum Scenario, which is up to approximately RM18.42 million. The proceeds of the Proposed Private Placement are expected to be utilised by Eduspec and its subsidiaries ( Eduspec Group or the Group ) in the following manner: Details of utilisation Migration of Group s current Information Technology ( IT ) learning and robotics classes and to localise the language curriculum for the Group s Science, Technology, Engineering and Mathematics ( STEM ) education using Robotics ( STEM Robotics ) and Computer Science for Schools Programme ( STEM CS ) (1) Minimum Scenario RM 000 Maximum Scenario RM 000 Timeframe for utilisation 6,000 6,000 Within twelve (12) months from the date of completion of the Proposed Private Placement Working capital requirements (2) 6,969 12,327 Within twelve (12) months from the date of completion of the Proposed Private Placement Estimated expenses for the Proposed Private Placement (3) Total 13,059 18,417 90 90 Within three (3) months from the date of completion of the Proposed Private Placement 3

Notes: (1) The Group intends to continue its plan for migration of Group s current IT learning and robotics classes and to localise the language curriculum for the Group s STEM education using STEM Robotics and STEM CS. The Group intends to allocate RM6.0 million of the proceeds from the Proposed Private Placement for the above programmes, details as follows: Minimum Scenario RM 000 Maximum Scenario RM 000 (a) Marketing and promotion 1,000 1,000 (b) Localisation for STEM curriculum 4,000 4,000 (c) Workforce hiring and training 1,000 1,000 Notes: 6,000 6,000 (a) (b) The Group intends to allocate RM1.0 million from the Proposed Private Placement for the purpose of marketing and promotion activities. The proceeds of RM4.0 million is to be used for the localisation of STEM curriculum which are currently in English to overseas markets such as Indonesia and Vietnam in their respective countries native language. In addition to language localisation, other components that are required to be customised include work such as content bridging to relate existing curriculums to the host country s educational system, provision of teachers slides, worksheet/workbook and the provision of Add-On-Course based on the current IT education requirements such as cyber security awareness components. As at the LPD, the Group has identified some resellers for the STEM programme in Indonesia and Vietnam who are working towards the adoption of the programme by the local schools. (c) The proceeds of RM1.0 million is to be used for the hiring and training of personnel to ensure effective delivery of STEM programmes. Workforce recruitment includes positions to support STEM focused operational requirement from back office to front line personnel such as STEM educators/teachers, service managers, system administrators, programme managers, software developers, marketing executives and support staff amongst others. Training educators and related supporting staff on STEM curriculum delivery and related disciplines are also essential to enable these personnel to support the effective delivery of STEM programmes. Barring unforeseen circumstances, the migration programme is expected to be completed by third (3 rd ) quarter of 2018. (2) The breakdown of the utilisation for working capital is as follows: Minimum Scenario RM 000 Maximum Scenario RM 000 (a) Banking facilities for bank guarantees, collateral for project financing 4,500 4,500 (b) Operational and product development expenses 2,469 7,827 6,969 12,327 4

Notes: (a) The Company is in the midst of securing banking facility of up to RM15.0 million for which the Company requires funding of RM4.5 million to serve as collateral for the banking facility. (b) The Group intends to use the allocated amount for operational and business development purposes which includes advertisement expenses as well as promotional activities. In particular, RM1.5 million will be allocated to Cloud Direct Sdn Bhd, a current associate company of Eduspec in which the Company holds thirty percent (30%) equity interest, to complete the remaining phases of the All-Schools project as follows: Phase 3 Social networking and membership services Phase 4 Payment and purchase services For information purposes, the estimated expenses of the All-Schools project are RM2.0 million and the Group had allocated RM0.5 million from the proceeds of Previous Placement for this purpose and has completed the first two (2) phases of the All-Schools project, which are Phase 1 Directory services & WeChat Messaging services and Phase 2 Student record information services in the past one (1) year. (3) The estimated expenses relating to the Proposed Private Placement comprise of professional fees, placement fees, fees payable to authorities and other incidental expenses in connection with the Proposed Private Placement. Any shortfall or excess in funds allocated for estimated expenses will be funded from or used for the working capital of the Eduspec Group. The gross proceeds from the Proposed Private Placement will first be allocated to the meet the shortfall. In the event of materialisation of the Maximum Scenario, the funds raised in excess of the shortfall will be used for working capital purposes. In the event of a variation in the actual gross proceeds raised due to the differences in the issue price and/or number of Placement Shares to be issued, the Company will vary the utilisation amount for working capital purposes accordingly. Similarly, should there be any unutilised amount from the proceeds raised on any of the above, the said funds will be channeled to be utilised for working capital requirements. Pending the utilisation of proceeds from the Proposed Private Placement, the said proceeds will be placed in interest-bearing deposit account(s) with financial institutions. The interest derived from the deposits with financial institutions will be used as additional working capital of the Eduspec Group. 3. RATIONALE AND JUSTIFICATION FOR THE PROPOSED PRIVATE PLACEMENT After due consideration of the various funds raising methods, the Board is of the view that the Proposed Private Placement is the most appropriate avenue of fund raising at this juncture after taking into consideration amongst others the following: (i) the Proposed Private Placement enables the Company to raise funds without incurring additional interest expense, thereby minimising any potential cash outflow in respect of interest servicing as compared to conventional bank borrowings and private debt securities; 5

(ii) (iii) the Proposed Private Placement provides the Company with the most expeditious and costeffective way of raising funds from the capital market, as compared to other forms of funds raising such as rights issues of shares, as the shareholders of Eduspec has approved the issuance of up to a maximum ten percent (10%) of the total number of issued shares of the Company during its last AGM; and the Proposed Private Placement will strengthen the Company s financial position and capital base and may potentially enhance the liquidity and marketability of Eduspec shares. The Proposed Private Placement is undertaken to raise funds in view of the shortfall between the total gross proceeds expected to be raised from the Previous Placement and the actual gross proceeds raised. The details of utilisation of proceeds are set out in Section 2.6 of this Announcement. 4. EFFECTS OF THE PROPOSED PRIVATE PLACEMENT 4.1 Issued share capital The proforma effects of the Proposed Private Placement on the issued share capital of the Company are as follows: Minimum Scenario No. of Eduspec Shares RM Maximum Scenario No. of Eduspec Shares Issued share capital as at the LPD 932,813,800 94,377,440 932,813,800 94,377,440 Upon full exercise of Warrants (1) - - 382,750,000 79,005,377 To be issued pursuant to the Proposed Private Placement (2) RM 932,813,800 94,377,440 1,315,563,800 173,382,817 93,281,380 13,059,393 131,556,380 18,417,893 Enlarged issued share capital 1,026,095,180 107,436,833 1,447,120,180 191,800,710 Notes: (1) After taking into consideration the exercise of 382,750,000 Warrants into new Eduspec Shares at an exercise price of RM0.18 per Warrant and the transfer of warrant reserve amounting to RM10,110,377 to the share capital of Eduspec. (2) Assuming the Placement Shares are issued at an indicative issue price of RM0.14 per Placement Share. [The rest of this page is intentionally left blank] 6

4.2 Net Asset ( NA ) per Share and gearing Based on the latest audited consolidated financial statements of Eduspec Group, the profoma effects of the Proposed Private Placement on the NA, NA per Share and gearing of the Company are as follows: Minimum Scenario Audited as at 30 September 2016 Adjusted for subsequent events (1) After the Proposed Private Placement RM 000 RM 000 RM 000 Share capital 90,851 94,377 107,437 (2) Share premium 32,713 33,525 33,525 Reserve acquisition reserve (18,570) (18,570) (18,570) Capital redemption reserve 547 547 547 Warrant reserve 10,110 10,110 10,110 Foreign exchange translation reserve 35 35 35 Employees share option reserve 2,784 - - Retained earnings 3,826 6,610 6,520 (3) Shareholders Funds / NA 122,296 126,634 139,604 No. of Shares ( 000) 908,513 932,814 1,026,095 NA per Share (RM) 0.13 0.14 0.14 Borrowings ( 000) 29,519 29,519 29,519 Gearing (times) 0.24 0.23 0.21 Notes: (1) Adjusted for the following events: (a) (b) the Company s employees share option scheme has expired on 17 January 2017; and the issuance of new Shares pursuant to the completed placement exercises as follows: Date of listing Number of placement shares Price 11 November 2016 7,380,000 RM0.21 23 February 2017 5,000,000 RM0.20 24 July 2017 11,921,200 RM0.15 (2) Assuming the Placement Shares are issued at an indicative issue price of RM0.14 per Placement Share. (3) After deducting estimated expenses of RM90,000 in relation to the Proposed Private Placement. 7

Maximum Scenario Audited as at 30 September 2016 Adjusted for subsequent events (1) Assuming full exercise of Warrants (2) After the Proposed Private Placement RM 000 RM 000 RM 000 RM 000 Share capital 90,851 94,377 173,382 191,800 (3) Share premium 32,713 33,525 33,525 33,525 Reserve acquisition reserve (18,570) (18,570) (18,570) (18,570) Capital redemption reserve 547 547 547 547 Warrant reserve 10,110 10,110 - - Foreign exchange translation reserve 35 35 35 35 Employees share option reserve 2,784 - - - Retained earnings 3,826 6,610 6,610 6,520 (5) Shareholders Funds / NA 122,296 126,634 195,529 213,857 No. of Shares ( 000) 908,513 932,814 1,315,564 1,447,120 NA per Share (RM) 0.13 0.14 0.15 0.15 Borrowings ( 000) 29,519 29,519 29,519 29,519 Gearing (times) 0.24 0.23 0.15 0.14 Notes: (1) Adjusted for the following events: (a) (b) the Company s employees share option scheme has expired on 17 January 2017; and the issuance of new Shares pursuant to the completed placement exercises as follows: Date of listing Number of placement shares Price 11 November 2016 7,380,000 RM0.21 23 February 2017 5,000,000 RM0.20 24 July 2017 11,921,200 RM0.15 (2) Assuming full exercise of 382,750,000 Warrants at an exercise price of RM0.18 and the transfer of warrant reserve amounting to RM10,110,377 to the share capital of Eduspec. (3) Assuming the Placement Shares are issued at an indicative issue price of RM0.14 per Placement Share. (4) After deducting estimated expenses of RM90,000 in relation to the Proposed Private Placement. 8

4.3 Substantial shareholders shareholdings The proforma effects of the Proposed Private Placement on the substantial shareholders shareholdings in the Company are as follows: Minimum Scenario Substantial Shareholders As at the LPD After the Proposed Private Placement Direct Indirect Direct Indirect Autonaire Sdn Bhd 90,727,381 9.726 - - 90,727,381 8.842 - - Areca Capital Sdn Bhd 97,983,500 10.504 - - 97,983,500 9.549 - - Victory Solutions (M) Sdn Bhd 85,717,764 9.189 - - 85,717,764 8.354 - - Victory Solutions Holdings Sdn Bhd 47,046,300 5.043 - - 47,046,300 4.585 - - Lim Een Hong 250,000 0.027 162,843,814 (1) 17.457 250,000 0.024 162,843,814 (1) 15.870 Yap Ai Lia - - 85,967,764 (2) 9.216 - - 85,967,764 (2) 8.378 Notes: (1) Deemed interested by virtue of his shareholdings in Victory Solutions (M) Sdn Bhd, Victory Solutions Holdings Sdn Bhd and First Insight Sdn Bhd. (2) Deemed interested by virtue of her shareholding in Victory Solutions (M) Sdn Bhd and her spouse, Lim Een Hong's direct shareholding in Eduspec. [The rest of this page is intentionally left blank] 9

Maximum Scenario Substantial Shareholders As at the LPD Assuming full exercise of Warrants Direct Indirect Direct Indirect Autonaire Sdn Bhd 90,727,381 9.726 - - 136,091,071 10.345 - - Areca Capital Sdn Bhd 97,983,500 10.504 - - 204,792,500 15.567 - - Victory Solutions (M) Sdn Bhd 85,717,764 9.189 - - 111,813,214 8.499 - - Victory Solutions Holdings Sdn Bhd 47,046,300 5.043 - - 65,765,300 4.999 - - Lim Een Hong 250,000 0.027 162,843,814 (1) 17.457 250,000 0.019 207,658,264 (1) 15.785 Yap Ai Lia - - 85,967,764 (2) 9.216 - - 112,063,214 (2) 8.518 Substantial Shareholders After the Proposed Private Placement Direct Indirect Autonaire Sdn Bhd 136,091,071 9.404 - - Areca Capital Sdn Bhd 204,792,500 14.152 - - Victory Solutions (M) Sdn Bhd 111,813,214 7.727 - - Victory Solutions Holdings Sdn Bhd 65,765,300 4.545 - - Lim Een Hong 250,000 0.017 207,658,264 (1) 14.350 Yap Ai Lia - - 112,063,214 (2) 7.744 Notes: (1) Deemed interested by virtue of his shareholdings in Victory Solutions (M) Sdn Bhd, Victory Solutions Holdings Sdn Bhd and First Insight Sdn Bhd. (2) Deemed interested by virtue of her shareholding in Victory Solutions (M) Sdn Bhd and her spouse, Lim Een Hong's direct shareholding in Eduspec. 10

4.4 Earnings and earnings per Share ( EPS ) The Proposed Private Placement is not expected to have any material effect on the consolidated earnings of the Group for the financial year ending 30 September 2017. However, the EPS of the Group may be diluted as a result of the increase in the number of Eduspec Shares in issue pursuant to the Proposed Private Placement. Nevertheless, the utilisation of proceeds from the Proposed Private Placement is expected to contribute positively to the future earnings of the Eduspec Group. 4.5 Convertible securities As at the LPD, Eduspec has 382,750,000 Warrants. The Proposed Private Placement will not have any effect on the existing convertible securities of Eduspec. 5. APPROVALS REQUIRED The Proposed Private Placement is subject to the following approvals being obtained: (a) (b) Bursa Securities for the listing of and quotation for the Placement Shares to be issued pursuant to the Proposed Private Placement; and any other relevant authority, if required. The Company has obtained the approval from its shareholders at its last AGM convened on 27 February 2017, whereby pursuant to Sections 75 and 76 of the Act (previously Section 132D of the Companies Act, 1965), the Board has been authorised to issue new shares in Eduspec not exceeding ten percent (10%) of the total number of issued shares of the Company. The Proposed Private Placement is not conditional upon any other corporate proposals undertaken or to be undertaken by the Company. 6. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSON(S) CONNECTED None of the directors and/or major shareholders and/or persons connected with them has any interest, either direct or indirect, in the Proposed Private Placement. 7. DIRECTORS STATEMENT Having considered all aspects of the Proposed Private Placement, the Board is of the opinion that the Proposed Private Placement is in the best interests of the Company. 8. PRINCIPAL ADVISER Mercury Securities has been appointed as the Principal Adviser for the Proposed Private Placement. 11

9. APPLICATION TO THE RELEVANT AUTHORITIES Barring any unforeseen circumstances, the application to Bursa Securities for the Proposed Private Placement is expected to be submitted within one (1) month from the date of this announcement. 10. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to all required approvals being obtained, the Proposed Private Placement is expected to be completed by the forth (4 th ) quarter of 2017. This announcement is dated 18 August 2017. 12